Measuring savings and demonstrating the value of procurement North Florida NIGP Chapter

How is your department measured by your bosses today How is your department measured by your bosses today? For most, it’s how much you cost…

It’s time to change that measurement to “What value did you add?”

How many more parks can we put in neighborhoods How many more parks can we put in neighborhoods? How many more books are in the school library?

The shifting focus of procurement Helpers and Guardians Implement Process and Policy Proactive and Strategic Did we add value? How much value did we add and how did we do it? Did we add more value than we cost? What’s our next priority? Process and Speed KPIs How many POs did we cut? How quickly did we get our RFPs done? Few if Any KPIs How many RFPs did we run? Did we follow the law?

What are the competing forces? Value for Money, Cost Reduction, Cost Elimination, Best Value Local spend, Diversity spend, Green spend, Sustainable Procurement Legal Compliance, Transparency, Open Government, Fair Competition, Procurement Code

Bottom line: there iS A NEED TO DO MORE WITH LESS When other departments cut costs, they usually cut services in one way or another Procurement teams have the capability to cut costs without compromising the quality of services to your constituents.

Do you ever really save money if it just goes back into the pot to be spent on other things? Or do you avoid costs? Or do you deliver revenue? PRESENTATION INFORMATION IN FOOTER 12/11/2018

Who in this room records their savings and efficiencies today Who in this room records their savings and efficiencies today? How do you do it?

If not, why not? Fear? Standards? Culture? Compare?

Why should you measure your value? Demonstrate value internally / speak the language of your managers Justify/extend your strategic influence in your organization Demonstrate value to elected officials Provide transparency to the general public Identify best practice Recognize achievement

THERE IS NO DEFINITIVE GUIDE ON WHAT TO REPORT Was Procurement involved? What would have happened otherwise? Is it consistent and will it stand up to review?

Why am I here talking about measuring savings?

For the benefit of its members, NIGP and the Board of Directors now provides National Agency Members with a tool for capturing and reporting the value that procurement professionals bring to their agencies every day. The tool is called Measure.

What is measure? Online tools to record savings and produce reports in a standardized way. Cloud based Simple interface Scalable Standardized WHAT IS MEASURE? Free to NIGP National Agency Members

Projector RFP Structure of measure Cost Savings Added Value Measure contains Projects and Efficiencies. Multiple Efficiencies can fit under one Project. Or you can use a 1 Project to 1 Efficiency approach. Projector RFP Cost Savings Added Value Process Savings

How do you eat an elephant How do you eat an elephant? Start with simple, easy to calculate and easily defensible savings…

Office furniture example In January of 2010, the agency acquires a new building to use as a staff training and meeting facility. The fit out of the new facility requires 300 conference room style chairs. The price for a conference room chair is $100 per chair on their current contract, In February, the procurement team initiates and electronic bidding process to 300 conference room chairs for the new facility. The process ends, the supplier is chosen, and the chairs are purchased in March 2010. The winning supplier’s price was $80 per chair.

Sale of surplus and pcard rebate The procurement team at the county runs an online surplus auction once per month. In January, the auction netted $9,239. The procurement team puts a purchasing card program in place. During FY2014, the rebate to the public utility nets $34,302

CAFETERIA FOOD PRICE RISE In May 2011, a school district is informed by it’s main food vendor that due to a number of factors, the average price per student lunch will go from $1.25 to $1.50, beginning in the next school year. The district serves an average of 720,000 meals per year. The procurement team gets involved at this point and through negotiations, changes to the menu and other manipulations manages to reduce the per meal cost to $1.35. While the cost of meals was due to go up to $1.50, the procurement team’s involvement resulted in a $0.15 per meal reduction in the cost of student meals. The total savings equals $108,000. Why is this a savings instead of a price increase?

Rental vehicle agreement In July 2011, the organization’s contract for rental cars is about to expire. This organization utilizes approximately 500 rental days per year. The average price per day for rental vehicles on the previous contract was $52.50, equating to approximately $26,250 per annum. Through a new competitive process, the organization reduces its average daily rental fee to $45.00. Assuming that the number of rental days does not increase or decrease substantially, the organization could report an estimated annual savings of $3,750. What else could happen to change the savings value?

Categories of savings and efficiencies Added Value Cost Avoidance Sustainable Procurement Process Re-engineering Price Reduction Risk Reduction Revenue Generation

Sub-categories Added Value Cost Avoidance Revenue Generation Special Drawings Additional Items/Services Modification/Re-specification Lease/Hire/Financing Alternative Solution Cost Avoidance Avoiding price increase during existing arrangements Marketplace awareness Suppliers sponsorship/income Use of consortia or other collaborative agreements Elimination of Purchase Request Revenue Generation

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www.nigp.org/measure Registration Electronic registration behind NIGP member wall 1 Full license per agency (Data Input and Reporting) Up to 9 Data Input licenses per agency (dependent on Agency Category) Additional licenses are available.

For more information Set up and Training Spikes Cavell (800) 990 0228 ext. 200 Additional Licenses: (800) 990 0228 ext. 100 Additional NIGP Agency Members NIGP Customer Care (800) 367 6447 What is a saving and is it cashable? Best practice guidance documents are being developed, however it is best to discuss these conventions within your own organization. There are a number of training and support documents available for Measure with examples. NIGP website login issues:

conclusion You are uniquely positioned in your organization to make an impact on the bottom line without compromising service. Start recording your contribution – it doesn’t have to be a burden. Demonstrate your value internally, upwards and externally.

And there’s even an award for using it

DON’T FORGET WHY YOU ARE LOOKING FOR SAVINGS

For more information For more information about how the Observatory could help your agency to analyze your spend to find savings, manage maverick buying & identify cooperative purchasing opportunities, please contact : Chris Frydrych (571) 313 – 5257 ext 109 chris.frydrych@spikescavell.com

Measuring savings and demonstrating the value of procurement Central Florida NIGP Chapter July 24, 2015