In the wake of Hurricane Katrina, the rebuilding of New Orleans made it more important than ever for the city to modernize its cumbersome and inefficient paper-based purchasing process. Thanks to the Web-based BuySpeed e-procurement system, the city was able to accomplish that – saving more than $1.25 million along the way.

Since being implemented in 2006, BuySpeed has helped the city cut its processing time by 80 percent and increase its purchase orders by fivefold, even after staff cuts.

BuySpeed, which is a product of Periscope Holdings, integrates with the city’s Microsoft Dynamics-GP general ledger system, and combines Web requisitioning, electronic approvals, contract purchases and electronic purchase-order delivery to reduce purchase cycle time citywide.

BuySpeed also gives the city self-service vendor registration and secure bid management, which reduce costs and improve the efficiency of the competitive bidding process.

Electronic receipt and invoice entry close the procurement loop by automating the entire “procure-topayment” cycle.

The city’s initial investment in BuySpeed was $256,200, which included software and professional services for implementation and consulting. The initial cost of the BuySpeed system, when compared to the actual cost savings gained, delivered a 4:1 return on the city’s investment.

“BuySpeed was clearly the best solution we evaluated,” said Andrée Cohen, purchasing administrator for the city of New Orleans. “None of the other solutions came close to demonstrating the range of e-procurement functionality offered by Periscope, let alone Web-based.”

Paper-based process created headaches

In 1997, the city of New Orleans implemented a mainframe financial management system but elected not to implement any electronic purchasing functions. Instead, city staff manually processed and documented procurements. The lack of automation for purchasing processes created a range of problems for the city, including:

No automated vendor management. The city had no automated process for registering and maintaining vendor information, which made it very difficult for departments to effectively source purchases. City staff received paper bid applications and manually input this information into the vendor database. The database contained duplicate vendor records and did not include city-required DBE certification and other retrievable vendor information.

Time-consuming formal bidding. The purchasing staff spent a considerable amount of time documenting every step of the bidding process, including:

• Bid development and release.
• Written vendor notifications.
• Advertising.
• Tabulation.
• Document approval.
• Document security and management.
• Recommendation of award and contract.

Inefficient requisitioning. The city’s Department of Purchasing was responsible for processing requisitions originating from departments citywide. Staff initiated these in the mainframe financial system but system limitations meant:

• Requisition status was not available during the approval process.
• Staff members had no ability to attach documents to the mainframe financial system.
• Data could not be automatically transferred onto bid and purchase-order (PO) documents.
• Document tracking and reporting were not automated.
• Links to awarded POs were not available.

Inability to access purchasing information. No centralized repository existed for those procurements in the process of negotiation or for those executed by the city. As a result, two different departments could have had completely separate bids or requests for proposal (RFPs) released for identical products or services with different vendors and contract terms. This increased costs for both goods purchased and contract management. Without a tightly integrated purchasing process, departments had insufficient information about purchases and document workflow. Consequently, the city had limited capabilities to know how and where its departments were actually spending funds.

High administrative costs. Manual processes require very costly resources – people. In 2005, the city carried a staff of nine full-time buyers and three full-time administrators to support citywide purchasing. The city charter required purchasing staff to secure competitive pricing for all purchases. Louisiana State Public Bid Law requirements imposed varying rules based on the type of procurement and its total estimated price. On average, the staff hours required to issue each purchase order cost the city $80 and – in some cases – exceeded the cost of goods purchased.

Problems compounded by Katrina

Hurricane Katrina struck New Orleans on Aug. 29, 2005. More than 80 percent of the city remained under water for two weeks, and the city’s infrastructure was decimated.

The drinking water system was contaminated, gas lines were filled with salt water (corroding copper gas pipes) and power lines all across the community were down. Streets were unnavigable – except by boat – and hundreds of roads sustained severe damage because of their extensive exposure to saltwater. Katrina damaged or destroyed more than 100,000 homes and left 50,000 vehicles submerged.

The situation was exacerbated by Hurricane Rita re-flooding parts of the city when it made landfall on Sept. 24, about three weeks following Katrina.

After Katrina’s devastation, the New Orleans population was cut by more than half – to approximately 220,000 – and the city struggled to rebuild. Performance of many city services – including purchasing – became nearly impossible because of the loss of staff and resources such as computers, phones and available office space. Of the 12 staff members working in the Department of Purchasing prior to the hurricane, only three returned during the days immediately following Katrina.

More pressure than ever was put on the city’s purchasing process after this natural disaster. Hundreds of construction and capital improvement projects needed funding and management by the city as part of its rebuilding effort. The engineering and logistical challenges to support this required a substantial level of management, control and the coordination of thousands of suppliers and contractors.

The city needed to perform efficiently and respond rapidly to this crisis to bring order to the chaos left in the hurricane’s wake, and to handle the increased requisitions necessary to rebuild the community’s severely damaged infrastructure.

The additional demands placed on the city’s purchasing system included the need to:

Manage increased spending. Spending and procurement activity would continue to increase over the coming months and years as New Orleans’ rebuilding effort progressed. This activity could not be managed using the existing infrastructure.