Using the NIGP Code for analysis

Article Tools

• Bookmark

Advertisement

Most Popular News

• Where teleworking is headed in 2012
• Increased use of purchasing cards in government likely in 2012
• Affordable kiosks ensure ADA compliance in government facilities

Know before you buy or sell. Get your truck's value instantly online.

Find Your Truck Now

*To see the actual values, you must purchase a subscription or a single-vehicle lookup.

When determining how to correlate spend with risk, the NIGP Code plays a natural role. By using the NIGP Code to track spend data, we have a mechanism to group procurement spend in order to build discrete market baskets for analysis. Your organization may roll up spend by 5-digit code or at the 3-digit level. Either way, it provides an excellent grouping mechanism. Once bundled, the risk factors can be applied to determine the relative risk associated with the market basket, as depicted in the second diagram:

Procurement strategies

With each quadrant, the goals and objectives are different, with the strategies for execution and metric for success also being different.

• Strategic Security: Ensure supply through long-term contracts, potential inventory holdings, identification of alternative products and use of price indexes.

• Strategic Critical: Manage supplier through detailed market and supplier knowledge, use of purchase price and cost analysis (are you paying a fair price?), and contingency planning for supplier or product/service replacement.

• Tactical Acquisition: Minimize attention through the use of P-cards, blanket agreements, delegated authority and supplier website ordering.

• Tactical Savings (or cost reduction): Drive lower costs through short-term contracts, framework agreements (where terms and conditions are negotiated with contracts being issued for work/products as needed), in-depth market knowledge and flexibility in the products and services requested.

Each organization is unique, and what constitutes high-risk procurement for one may not be so for others. In addition, risk profiles and procurement volumes can/will change over time, thus requiring periodic review. It does require more effort than watching the morning weather, but the benefits of missing an avoidable procurement storm will certainly help brighten your day.

Sources:
Bartolini, A., Aberdeen Group, "Open the CPO's Agenda 2009; Smart Strategies for Tough Times," April 2009.
Porter, D., PMMS Consulting Group, "Procurement Strategy Guidance," November 2003.

John Walters is the president of NIGP Code Services at Periscope Holdings, the custodian of the NIGP Code on behalf of NIGP. Walters has been involved in public procurement since 1997 and has served as a consultant, trainer and speaker. Contact him at john@nigp.com.