VAGP Spring Conference, March 2012 Presented by Keith Gagnon, MBA, CPPO, VCO Director of Procurement Virginia Community College System

Develop/deploy metrics Use same metrics over time Look for trends in the metrics Identify Key Performance Indicators (KPI) important to your procurement unit

Total procurement expenditure (total spend) Spend per department Spend per commodity Total number of procurement transactions Total number of vendors Average spend per vendors Average spend per transaction Number of vendors accounting for 80% of spend

Procurement Cycle Time Time from initial request until PO/Contract issued Delivery Time Time from order to delivery Buyer Productivity Number of purchases per buyer per month Spend volume per buyer per month (year, week)

Protest Rate % of protested transactions Compliance Rate % of compliant transactions (Procurement Regulations) Through audit results

Internal Customer Satisfaction Surveys, etc. Supplier Performance Delivery (% on time) Quality Service Through surveys

SWaM Percentage As percent of total spend Green Procurement Number of green products substituted for traditional products Economic Impact Total spend with local vendors Percent of spent with local vendors

Lets call it cost avoidance Why??? Savings can be taken back and added into another budget area Savings is bookable Scenario I gave my son $25 to get himself a hat. He came back from the store and said, I got a great deal. The hat I wanted is regularly $40, and I got it on sale for $20. I saved you 20 bucks! I said Good job, now give me back what you saved. He handed me $5?!?! How do we calculate cost avoidance?

Scenario: You award a contract through an IFB for 1,000 widgets at a cost of $100 per widget ($100,000 total) Budget for purchase was $135,000 Last year you paid $115,000 for 1,000 widgets Average bid price was $110 per widget eVA data shows $130 average price per widget for all eVA widget orders in past 12 months You paid $125 per widget for a spot purchase of 10 widgets in between contracts How much have you saved? (You have 5 minutes)

1,000 widgets at a cost of $100 per widget ($100,000 total) Budget for purchase was $135,000 $35,000 What if budget calculation wasnt a good one? Or, what if the budget was only $90,000? Last year you paid $115,000 for 1,000 widgets $15,000 What about inflation? Average bid price was $110 per widget $10,000 Would this method ever show negative? eVA data shows $130 average price per widget for all eVA widget orders in past 12 months $30,000 What if many of these orders were for small quantities? You paid $125 per widget for a spot purchase of 10 widgets in between contracts $25,000 Again, what about the different quantities?

Probably somewhere between $10,000 and $35,000 Suggestions: Use some method, maybe even more than one, to estimate cost avoidance Express a range for calculated cost avoidance Use high, low, mid Support your argument with reason, statistics, trends, etc.

How do I determine if a price is Fair and Reasonable? Competitive procurement -presumed Comparison to previous price paid Comparison to price for similar goods/services Market basket data Timeliness Cost analysis (component cost, cost elements)

Keith Gagnon Director of Procurement Virginia Community College System