Spend Analysis Beyond Savings Bill Ward, Procurement Administrator, Maryland Motor Vehicle Administration Jonathan White, Business Development, Spikes Cavell Analytic, Inc.

Outline Spend 101 Recap Spend 201 Recap Spend 301 Material

101 Recap

201 Recap

301 Topics Communicating With Departments Communicating Upwards Better Budgeting Local/Small/Minority Business Spend Line Item Analysis Compliance

First - A Test

Winner Winner Chicken Dinner Divide you into groups and answer two questions about each of the following: 1.Super Bowl 2.World Series 3.Stanley Cup 4.NCAA Men’s Basketball Which two teams played and what was the final score or win/loss total in the series?

Winner Winner Chicken Dinner What is your score?

Winner Winner Chicken Dinner 1.Super Bowl Denver vs Carolina – 24 to 10 2.World Series KC Royals vs NY Mets – Stanley Cup Penguins vs Sharks – NCAA Men’s Basketball Villanova vs NC – 77-74

Winner Winner Chicken Dinner

Communicating & Engaging Through Departmental Reviews

Department Reviews “I look at it as a vehicle to begin that one on one conversation with your department about their spending history, future needs and opportunities to help them accomplish their goals. We can show them how we go about supporting them in their mission through our procurement activities.”

Make A Compelling Presentation Know the audience Keep it simple Stick with the facts Use pictures/graphs to make the point Show what was accomplished by Procurement for the End User Department Follow up with to survey to garner feed back Make “baby step” recommendations Make adjustments

Departmental Review Focus Spending patterns that provide clear reporting on the overall spend; Suppliers used during the period; Identifies savings/time opportunities and Maverick spend; Offering new solutions to historic issues; A potential win for the department and the procurement staff.

Department A Brief Period July 15- June 16 Total Spend $14M Cost Avoidance $197,500 (Mkt) $423,700 (Bdgt) Bids & Contracts 175 Quotes 17 IFBs 1 RFP 25 Renewals Reqs & POs 468 Reqs 326 POs 15 BPOs

Department A Brief Contracts Contract Spend $4,800,000 Total Category A = $$$ - % Category B = $$$ - % Category C = $$$ - % Category D = $$$ - % Company A = $$$ - % Company B = $$$ - % Month A = $$$ - % Contracts In Place Departmental Contracts Specific Contract A $$$ Specific Contract B $$$ Seasonal Contract C $$ Multiuse Contracts Window Cleaning $$$ Cooperative Contracts Truck Purchase $$$

Department A Brief Solicitations Conducted RFP Computer Programming Consultant -$ IFB Janitorial Services - $$$ IFB Landscaping Services -$$$ IFB Vehicles Purchase - $$$ IFB Multifunctional Devices $$$ IFB Office Furniture Replacement $$$ Cost Avoidance is $$$$

Department A Brief Non Contract Spend Spend $7,300,000 Total Company A* $$$$ Company B $$$$ Company C $$$$ Potential for Contract – existing Tool Rental Agreement Classification Category A $$$$ Category B $$$$ Category C $$$$ Could run RFP to bring spend in Category B into a contract

Department A Brief Credit Card Transactions Overview 18 Cardholders 1086 Transactions Monthly Averages: $158, spent $105, per card $1, per transaction 60 Transactions per card Cost Avoidance: $78, Opportunities for more in Concrete, Asphalt, Rock

Top Spend By Supplier For Period SupplierTOTAL $pendContract I tems Non Contract Items P Card Grainger $400, , , ,000 Office Max $170,000 75, , ,000 Staples $40, , ,000 $610, ,000240,00045,000 To Contract 15% Grainger$18,750$3,750 Office Max $12,000 15% $2,250 Staples$5,250$750 Savings $567,250 $42,750$36,000$6,750

Leave Something Behind

Communicating Upwards

What value do bring to your organization? Audience Participation

Make A Compelling Presentation Know the audience Keep it simple Stick with the facts Use pictures/graphs to make the point Show what was accomplished by Procurement for the organization Follow up with to survey to garner feed back Make “baby step” recommendations Make adjustments

Activity and Outcome We did A, B & C this year… Which resulted in X, Y & Z… Next year we plan to do 1, 2 & 3.

Organization Y Brief Period July 15- June 16 Spend $278.3M Suppliers 4,202 Transactions 81,392 Bids & Contracts 600 Quotes 47 IFBs 29 RFPs 67 Renewals Reqs & POs 2,468 Reqs 1,326 POs 22 BPOs

Organization Y Brief In FY 2016, the procurement team delivered $7,108,656 net value to the city. This is the equivalent of providing iPads to 18,756 students throughout the city.

Organization Y Brief Spend Under Mgmt: FY 2015 Actual = 38% FY 2016 Goal = 50% pCard Spend: FY 2015 Actual = 8.32% FY 2016 Goal = 9.5% Cost Avoidance Savings FY 2015 Actual = $1.1m FY 2016 Goal = $1.8m IT Spend Reduction FY 2015 Actual = -2.1% FY 2016 Goal = -3.8%

Better Budgeting

IT Spend = GLs & Actual

Support the Budgeting Process There’s often a wide gap between how much is spent, on what, using GL codes compared with the results of a spend analysis project Demonstrate value and insight of the procurement team by supporting the budgeting process by comparing real spend data to actual, or at least showing significant discrepancies

Support the Budgeting Process

Local/Small/Minority Business Spend

Small Business Spend?

Local Spend?

Using Data To Set Policy Set the baseline for any small, local or minority based spend program. Understand what was and was not bought from small, local or minority businesses Engage with small, local and minority businesses – direct contacts, outreach days, notifications Monitor progress towards goals

Small Business By Category

Local Spend Over Time

Minority Spend

Line Item Comparisons

Are these the same?

E7270 $1,541$1,684$1,827$2,312 $1,079$1,179$1,149$1,619 Differences: Memory, Processor, Graphics

Comparing Prices Price benchmarking is difficult because of the number of variables involved in each transaction: How many ordered Inconsistent “Unit of Issue” Part number discrepancies Shipping included or not One part number, multiple configurations

Methods Item to Item Exact matches Alternates and Substitutes Contract to Item Exact Matches Contract to Contract Exact Matches Alternates and Substitutes

Methods

Compliance

Use Data to Monitor Compliance Create watch lists to cover: Departments with lots of transactions close to transaction thresholds Suppliers or categories approaching competitive thresholds pCard transaction categories which might be “legal” but not advisable

Transaction Values

Suppliers Close to Threshold

Questionable pCard

Recap Communicating With Departments Communicating Upwards Better Budgeting Local/Small/Minority Business Spend Line Item Analysis Compliance

Questions ?

In Summary Get data together and transform it so that you trust it (Spend 101) Find some quick win savings and efficiency opportunities (Spend 201) Extend the use of that data to influence your organization, budget better, be socially responsible, compare prices and manage compliance.

Find Bill Ward on NSite For more information about how spend analytics can help your agency find savings, manage maverick buying & identify cooperative purchasing opportunities, please contact : Chris Frydrych or Colin Jones For More Information