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The initial goal of strategic sourcing in Texas was to generate $15 million in savings through a wave of 10 sourcing projects. But after completing just the first four, the state has already achieved $28 million in recurring savings. Driving the effort is an internal consulting team that is learning an entirely new skill-set. The procurement of fleet vehicles exemplifies the success of a new approach to procurement in Texas.

The origins of strategic sourcing

Procurement reform in Texas began in a legislative session three years ago when the legislature decided to put responsibility for statewide procurement under the authority of Comptroller Susan Combs. In most states, procurement is a function that ultimately reports to the governor. Texas is unique among American states in that procurement reports to a row officer who is elected independently from the governor.

Chuks Amajor, director of the state's Strategic Sourcing Division, credits Combs with providing the necessary leadership to drive changes in state procurement. "The comptroller wanted to bring best practices to Texas," says Amajor.

Like many states, Texas sought to reduce costs and improve quality through strategic sourcing. Also like many states, Texas decided to engage a management consulting firm to guide the initiative. But there was a major distinction in how Texas approached the challenge: The state opted not to rely on an army of consultants freshly minted from business schools.

Instead, Combs had a vision for a consulting team made up of state employees, managed by someone from a management consulting firm. The approach would provide the state the benefit of a consulting firm's know-how and expertise while ensuring that the knowledge developed during the project would stay within the state procurement organization.

Six months into the project, the internal team had grasped the concept so well that Texas decided to make an even greater long-term commitment to strategic sourcing. Combs established a Strategic Sourcing Division, headed by Amajor, alongside the state purchasing office, to drive enterprise-wide sourcing initiatives. "We're trying to accomplish the same things that other states did, but at one-thirtieth the cost," says Amajor.

"It was a completely different dynamic than any of the sourcing projects I had worked on in other states," adds Amajor. "It was a great opportunity but also a daunting task. The 12 [internal team members] weren't [Microsoft] Excel savvy. They didn't have a firm grasp of strategic sourcing. We asked quite a bit from them. They had to work a ton of extra hours. But the amazing thing was that we found out that we could, in fact, do it. We could accomplish very similar results to what the outside consultants could do. But it is important to stress how much time and work they put into this," Amajor said.

Fleet procurement project

The Texas vehicle fleet procurement project was led by Manuel Perez, fleet category manager of the Texas Procurement and Support Services (TPASS) group and a veteran government procurement manager. The scope of the fleet procurement was vast, ranging from sedans to police cruisers to construction-grade heavy-duty trucks.

The first principle of strategic sourcing Amajor and Perez brought to the fleet procurement was standardization. In years past, when the state went out to bid for vehicles, the specification would name the vehicle's make and model (e.g., Ford Taurus) and then ask dealers to submit pricing for that specific vehicle. This procurement changed that practice. Instead, the state would present the functional requirements of the vehicle and allow dealers selling any manufacturer's vehicles to submit pricing. Rather than specifying a Ford Taurus, the state would designate a full-size sedan with specific performance requirements.

Amajor explains the benefits that describing requirements in terms of standards rather than brands brought to the state: "Coming up with standards that were not specific to a brand was a new approach. That is extremely important when it comes to achieving volume leverage. Before. if you had a Ford, Chevy and Honda version of a mid-size sedan, that was three different makes. If you were buying 100 mid-size vehicles, you'd be buying 33 of each. If you standardize, you can make a purchase for 100 vehicles from one dealer. One of the tenets of strategic sourcing is that if you can leverage your volume you almost always get a better price."