David C. Wyld on Tail Spend in the Public Sector: Best Practices, Case Examples, and Globalization

Continuing on with Jason’s interview with David Wyld, professor and founder of the Reverse Auction Research Center, on tail spend in the federal government. In July, David wrote a report on this topic for the IBM Center for the Business of Government. Also read the first half of this interview here.

Jason Busch: If the decision is made to tackle tail spend and keep it in house, what are your top recommendations for putting a program in place?

David Wyld: I’d say that based on the private sector experiences to date with tail spend management and the context of governmental acquisition today, this is definitely one area to bring in private sector specialists.

JB: What are some the best practices and case examples you've seen in government to date for tail spend?

DW: Again, all of this is so new that there really aren’t examples right now that are specifically the outgrowth of tail spend management efforts, because we’re just today creating an awareness of what tail spend is and how it can be better managed in the public sector setting. I’d hope though that within 6-12 months, we’ll actually be talking about progress and action on this, so stay tuned!

JB: Where do you think are public sector agencies and departments are in relation to other markets (e.g, UK) in this area?

DW: I think that just as with the tail spend management idea “going global” in the private sector, we will see the same thing happen in the public sector. In the UK-market specifically, I’d point your readers to a fascinating white paper issued by Opera Solutions. In Procurement Optimisation: Realising Savings for Local UK Governments, they looked at the benefits of greater awareness and emphasis on tail spend management in local governments in the United Kingdom. They did a really good job, and their projections for municipalities in the UK are just as applicable to cities stateside.

JB: In conducting the research, what surprised you the most?

DW: The levels of tail spend that are present in government. While the 80/20 rule may hold true in much of the private sector (with 80% core spending and 20% tail spending), my numbers showed that we’re really more like 60/40 in the federal government. And what is scary is that for state and local governments, based on the estimation framework developed as part of this research effort, we may really be talking more like a 50/50 split between what is spend under management and that “other” that makes up this mass of unmanaged spend - though government folks don’t like that term!

JB: What's in the study that we shouldn't miss (and haven't talked about yet)?

DW: I’d say that unlike about 98% of academic studies, don’t skip the Appendix! In it, we give the tail spend savings estimates for each federal agency, and for the public and policy makers, these are headline-making projections. And finally, like we emphasized in the report, the savings calculation methodology we developed is far more conservative than the projections - and experience - of leading private sector organizations. So really, we’re just scratching the surface on the savings that better, more proactive tail spend management efforts can produce over the next few years. And in today’s budgetary times, no government, no agency, and really, no individual government executive should bypass the chance to generate savings through a proven best practice like tail spend management. Again, I just hope that this report will serve to spark awareness and larger conversation on tail spend not just in the federal government, but in government at all levels.

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