Strategies for the downturn

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Here is a sampling of ways procurement strategies are contributing during this economic downturn:

• Cooperative purchasing. Rockland County, N.Y., is the lead agency in a regional purchasing cooperative involving 36 agencies that has saved 10 percent a year on a $1 million contract for copy paper. The group is looking toward similar contracts on industrial supplies and automotive supplies. The Port of Portland is in the process of executing a $2.5 million furniture acquisition using a cooperative contract.

• Renegotiating contracts. The Port of Portland was successful in achieving a project cost reduction of 24 percent over a proposed contract price through negotiations. Rockland County has eliminated Consumer Price Index increases from labor-related contracts and Producer Price Index increases when buying transit buses. "We do a lot of contracts with option years, and we use them as leverage to avoid increases in rates," Brennan says. "Vendors agree rather than risk losing the contract." Tucson's contract management program uses renewal periods as opportunities to reduce contract scopes; to consider alternative, less-expensive products; or to lower prices.

• Reassigning internal resources. In Cape May County, the emphasis is on internal cooperation to share limited resources; for example, if fleet maintenance is outsourced, how can those people be transferred to other departments? After analyzing vehicle utilization, is there an opportunity to transfer or share the vehicles in another department? "Procurement is a strategic player in those discussions," Grant says.

• Increasing oversight. Tucson has established an Expenditure Oversight Team to monitor purchases, and a citywide "Budget 911" Web site and phone number enable employees and citizens to call in their own cost-cutting suggestions, which are evaluated for possible implementation. At the start of the downturn, the department created a "Procurement Extreme Makeover" document that provided city managers with an overview of the changes the department has made over the years, demonstrating ongoing efforts to be efficient. A list of "Hard Cost-Saving Ideas and Suggestions" outlined more than 20 cost-saving and revenue-generating ideas for the department and other functions within the city.

• Streamlining electronic work flow. Rockland County is looking to streamline vendor paperwork requirements. "We are flow-charting every step in the process to determine if it adds value, whether we can eliminate it or whether we can do it in a different way," Brennan says. Rockland County is focusing first on streamlining paper requirements for Worker's Comp insurance and eliminating unused e-procurement contracts. In Fort Lauderdale, the latest initiative is to automate the processing of purchase orders as they go from procurement to finance. "Purchase orders flow to me electronically," Buffington says. "But after I issue the PO, they go in hard copy to finance because the system isn't automated. The economic downturn has made us more cognizant of correcting such inefficiencies. I now have the support of the city manager to implement an automated system."

• Using P-cards for efficiency and to track spending. Tucson and other localities use the P-card program to generate spend reports to quickly identify unnecessary spending patterns and to drive more payments to the card, thus saving precious staff time. In the Washington State Department of Transportation, the P-card program has saved about $8 million by streamlining the procure-to-pay process and has generated about $800,000 in rebates.

• More training for staff. Don Buffum, director, procurement and contracts, Mississippi State University, sees education and certification of his professional procurement staff as way to help offset economic problems. "Certified procurement professionals can better maximize the use of our limited resources," Buffum says.

The politics of recession

"Procurement is now politically correct here," says Grant of Cape May County. "Now, administratively, they want us to review everything. I have never been more in demand than since this turn in the economy."

Bobbi Matthews, manager, administrative services, the Port of Portland (Ore.), has also seen an increase in management interest in where the Port is spending money and how contracts are awarded and managed. "Increased transparency is the word of the day locally and nationally," she says. "We have increased the amount of information provided to our governing body on contract transactions, which takes about 20 percent longer for our staff to produce. We are also looking at revising our policy on the thresholds for taking things to our Commission for approval, which would result in an increase in items requiring approval." The Port of Portland expects to receive federal stimulus funds for two port projects that would have otherwise been deferred.

Businesses in the Tucson community, and everywhere, are being hard-hit by this economy, and when they are affected, their elected officials are going to hear about it, Gillespie says. "So naturally, there is an increased interest in what the organization is doing to address these concerns, including what volume of city expenditures are made with local businesses," she said.

Adding to the procurement challenges are the transparency and reporting requirements of federal stimulus funding. "Stimulus funds equal a lot more work," says Brennan of Rockland County. "We have to hire consultants. On the back end, the requirements for reporting and transparency are very labor-intensive." The stimulus funds will also require additional solicitations with very short time spans (projects to be completed in 18 to 36 months). Many procurement departments are facing the added burden with fewer personnel, which rules out the usual strategy of "throwing extra people" at an emergency situation. Also, downsized staffs are less likely to include seasoned employees with institutional knowledge because they are more likely to have taken early retirement.

No stimulus money is planned to offset the extra operating expenses involved in using the money. Instead, the money is targeted to projects that create additional jobs, such as construction projects, and the applications ask how many jobs will be created. "They should have put aside some money to help pay for training for procurement personnel or to increase staffing," Brennan comments.

Larry Anderson is editor of Go Pro.

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