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Uncovering the ROI of E-Procurement

We understand that to justify the spend of an e-procurement system, every organization must first show the expected return on investment. To help uncover potential ROI for your organization, check out this e-procurement ROI calculator here, and read the City of Philadelphia case study below.

Philadelphia Evolves: How Technology is Driving Procurement Modernization

Philadelphia is big, but its annual $3.1 billion spend is even bigger than many residents may realize.

To ensure every dollar is maximized and better manage the 1,900 suppliers who bid on government solicitations, the city worked across all departments to evaluate processes, procedures and technology. These efforts led to a Home Rule Charter amendment being brought to voters.

The amendment passed, giving Philadelphia the ability to award contracts on factors other than just price, including quality, past performance, budget, schedule, and meeting or exceeding M/W/DSBE goals. Another important change was Philadelphia’s move to the BuySpeed e-procurement system.

City Saves on Purchases by Investing in its First E-bidding Platform 

Philadelphia has worked to make doing business with the city more efficient. It has dropped its antiquated paper procedures for its first-ever e-procurement system, and added processes that now make it easier for small, minority- and women-owned businesses to get a shot at the billions of dollars the city spends on goods and services each year.

To start, the city deployed the BuySpeed web-based procurement system from Periscope Holdings for online bidding. The system, since rebranded PHLContracts, is an easy-to-use digital platform that efficiently and intelligently automates the front-end supply chain management process. It is not only used to post solicitations across all categories and subsequently manage awarded contracts, but it also registers and manages suppliers. The highly configurable system also integrated nicely with a reverse auction service — which is projected to save the city nearly $1 million in the first year alone.

However, that’s not the only reason city leaders consider PHLContracts “the gateway to better business.”

Philadelphia also has seen a 200% participation increase in its supplier and internal stakeholder outreach events, which has resulted in a growing pool of qualified suppliers.

As a bonus, PHLContracts features a log of expiring contracts so that buyers can share upcoming bid opportunities with registered suppliers, which aids with recruitment of new suppliers and encourages increased participation in all solicitation categories. More than 2,800 suppliers are now competing for city contracts, many of which are local, women- and minority-owned businesses that previously found it difficult to find and qualify for City contracts opportunities. This new level of participation is not only increasing competition and driving down the cost of city goods and services, but it is giving a welcome boost to the local economy.

For example, when the public works unit rolled out its first bids on the new e-procurement platform in November 2016, they posted a bid solicitation that historically would receive only one response. Impressively, the department received three responses — a 300% increase in participation — just by using the more modern sourcing components that the PHLContracts system provides. Overall, the number of bidders for each public works contract has increased from 3.74 to 4.92, and all 55 city departments combined have seen a jump in the number of bid responses and, therefore, more price and quality competition.

E-Procurement Tool Fosters Supplier Performance Programs

At the same time, the e-procurement system has given Philadelphia the tools to re-energize its supplier performance program.

By July 2018, all city departments will have fully transitioned to PHLContracts, which means that the entire city government will have the tools to award contracts using best practices. The move to the new Best Value buying model is being implemented in a thoughtful and deliberate way through this calendar year and the next.

Instead of being forced to score suppliers using the traditional — and often limiting — best price structure, procurement officials can now choose suppliers based on more important factors, such as quality of work, on-time, on-budget, and diversity and inclusion goals.

Philadelphia’s public entities will be able to review “competitive sealed proposals” or conduct “competitive sealed negotiations” to ensure competency and value, and ultimately balance worth with cost, on an apples-to apples basis. This method still saves the city — and therefore taxpayers — a lot of money, but it delivers a much greater return on investment across the board.

Uncover the potential ROI for your organization by clicking to our ROI calculator here.

Brian Utley is the CEO of Periscope Holdings.