David C. Wyld on Tail Spend in the Public Sector: Technology, Outsourcing, and Procurement

David C. Wyld, professor and founder of the Reverse Auction Research Center, has been writing some insightful pieces for Spend Matters on the GSA’s new reverse auctions platform. Earlier this month, he penned a report on tail spend in the federal government for the IBM Center for the Business of Government. In between his day job at Southeastern Louisiana University and contributing posts to this blog, David found the time to answer a number of probing questions from Jason Busch on tail spend in the public sector.

Jason Busch: In looking at the primary data and secondary research that went into your analysis, what jumps out the most about tail spend in the public sector?

David Wyld: Any time you are dealing with federal procurement, you are dealing with federal agencies that are some of the largest - and best - buying organizations in the world. And in point of fact, the Department of Defense (DoD) is the biggest of them all. That means that you are dealing with very large numbers, and, coming at it with an “outside the Washington Beltway” perspective, you can still get numbed by the fact that you’re working with hundreds of billions of dollars of acquisitions annually.

One point in regards to the data. I must say that even after a decade of working with federal agencies and private sector firms working with the government (both as suppliers and as partnering service providers), this was my first experience working with the main federal acquisition database - the Federal Procurement Data System (FPDS). I was surprised and a bit taken aback by how, despite all of the push for more openness and transparency in the federal government, the database was so difficult to work with. In networking with other analysts and researchers, this seems to be a common complaint. So, if the Feds want to open up the data to the public and to the for-profit sector - who would likely be able to do amazing things with ALL THAT DATA - I’d say making the FPDS more easily accessible and analyzable to the granular level should be a top priority in Washington.

JB: How would you contrast the public sector opportunity to tackle tail spend with the private sector?

DW: I’d say that it’s a far, far greater opportunity at present. This is virgin territory. Tail spend is simply not yet in the vernacular of public sector procurement, at the national, state, or even local levels. So, there’s a need to create an understanding of the whole concept of tail spend and the value of tail spend management. I hope this freely-available report, which does get far, far more attention because it comes from an IBM-sponsored institute that sponsors practical research to help make government more efficient, will play a big role in doing just that.

JB: What are unique challenges (and/or opportunities) to address tail spend in the public sector compared with the private sector?

DW: I think there are two primary challenges here. The first is in messaging. When you look at tail spend as the “unmanaged portion” of an organization’s spend, that is acceptable terminology for a company. However, in the public sector, acquisition leaders think that they have ALL of their spend under management. So, you have to be clear that tail spend management is not intended to be a finger-pointing or after-action debriefing to find fault with past actions (and yet, for every $15,000 ice sculpture and $70,000 team building exercise that comes to light, the media will find fault with poor acquisition oversight).

The second challenge is in regards to the question of where are the incentives for tackling the issue. A buzz phrase in the federal sector for the past several years has been “to do more without more.” Thus, acquisition leaders are hard-pressed to ask their workforce (who were largely short-staffed and without raises even before the recent furloughs coming from sequestration) to attack tail spend on top of their normal priorities. And to top it off, as we have seen with other process improvement and cost saving efforts, there’s a relatively perverse incentive process - or lack thereof - in place in government today. Every voter and taxpayer - Democrats and Republicans alike - wants government to be more efficient. Yet the fact is that when efforts to reduce acquisition costs do bear fruit, the common response has been for agency leaders to reduce funding by the same amount achieved by such an effort. So, while there’s a macro-push when it comes to holding down costs, for the agency, for the acquisition area, and even down to the individual procurement professionals, there’s little to no incentive to do so.

JB: What is the optimal role of technology (if at all) in addressing tail spend?

DW: Again, this is more a matter of mindset and thinking, as opposed to a tech issue. We need to make policy-makers and procurement executives alike aware that through better tail spend management, we can produce significant savings - even just by looking at the “low-hanging fruit” in the tail spend area.

JB: Is this an area public sector organizations should consider outsourcing or working with a third-party on?

DW: Absolutely! That’s one of the central things that this report suggests, as just like in the private sector, the first move in addressing an organization’s tail spend should be to “call in the professionals” to conduct a thorough spend analysis. Now like I said earlier, the intricacies of federal acquisition reporting doesn’t make this an easy task. However, it is absolutely necessary and can be done. What I did in this research report was present global estimates of the size of the tail spend for every Cabinet-level agency in the federal government and the potential savings that could be achieved through a tail spend management effort. While these projections may stimulate interest - and perhaps pressure - for agencies to undertake a true tail spend management efforts, acquisition leaders will have to engage outside specialists both to conduct the spend analysis to pinpoint their particular tail spend management issues and to develop strategies to maximize savings in those areas.

Check back next week for the second part of the interview with David C. Wyld. You can also read his previous guest posts on the GSA's reverse auctions platform and join the conversation in the comments section:

A Close Look at GSA’s New Reverse Auction Platform

GSA’s Reverse Auction Platform: How Important is the Absence of a Market-Maker in the GSA Model?

GSA’s New Reverse Auction Platform: Can Vendors Trust a Self-Managed System?

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Voices (2)

  1. kris colby:

    In the words of the great Louis Armstrong, what a wonderful world it would be… Great thoughts, Dr. Wyld!

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