Public Spend: A Look at 4 Value Levers for Public Procurement

It’s time to check in with Public Spend Forum, a sister site, to see what’s happening in public procurement. This week, we’ll focus on an article that offers some in-depth tips on four value levers for public spend.

PSF offers a simple list — and then a lot of detail about each item. Here are the highlights:

1. Price-based levers: “Pricing levers go beyond negotiating the best price and also include increasing spend covered by negotiated contracts. If no one uses a negotiated contract, of course no value is created.”
2. Total cost levers: “Moving beyond price and the focus on getting a better ‘deal,’ total cost is about looking more broadly at all costs related to procuring and managing a product or service.”
3. Demand management levers: These are “really just about making sure we don’t buy something we don’t need.”
4. Supply base levers: “While the previous procurement value lever areas can yield significant benefits in achieving desired procurement outcomes if implemented rigorously, supply base levers provide additional opportunities when applicable.” It then lists examples like supplier development, leveraging supplier innovation through collaboration and restructuring the supply base.

“Each of these (four levers) is based on decades of proven practices by the world’s leading organizations,” the article states. “And as we go down the list, each increases in complexity and difficulty in implementation. After briefly introducing each, we’ll dive deeply into them, teasing out their contributions toward procurement goals.”

The article then really explores the first item: price-based levers.

To achieve good pricing outcomes and value, read more to get the required background about using these key techniques for price-based levers:

1. Maximize spend covered by negotiated contracts
2. Collaborate across the enterprise for common requirements
3. Ensure rigorous competition
4. Leverage reverse auctions
5. Set multi-year target commitments
6. Optimize timing of the acquisition

For the full Public Spend Forum article, go here. And for a look at GovShop, the online tool to find, research and connect with private sector suppliers, go here.