Trends and Pathways… what’s the direction of Purchasing for cities and counties? Tammy Rimes Vice President, Government Sourcing Solutions Former Purchasing Agent, City of San Diego

History of Purchasing Written on a red clay tablet, found in Syria, the earliest procurement was an order for “50 jars of fragrant smooth oil for 600 small weight in grain” In colonial US, printing was one of a first services contracted out In 1778, the Continental Congress approved the appointment of purchasing commissionaires, who made 2% commission on the value of their disbursements in support of the Continental army. In 1779, due to excessive costs and possibilities of fraud, the purchasing officers were placed on salary. In 1704, the first significant procurement was for a group of six large frigates for the new U.S. Navy. Bad experiences with procurement procedure led to the1795 Purveyor of Public Supplies Act. Misconducts and abuses in federal procurement led to an Act Concerning Public Contracts of 1808, prohibiting members of Congress from benefiting from government contracts and the Procurement Act of 1809, requiring competition in government procurement.

◦ In 1914, the Rockefeller Foundation funded a series of intensive studies regarding problems of public administration. In 1919, a 275-page book, Principles of Government Purchasing, was published ◦ New public procurement professional associations such as the National Institute of Governmental Purchasing, Inc. (NIGP) and the National Associations of State Procurement Officers (NASPO); formal training programs developed with certifications. ◦ The “Uniform Commercial Code” (UCC) and completed it in the fall of ◦ In 1979, the American Bar Association (ABA) issued The Model Procurement Code History of Purchasing

Purchasing…what’s the big deal? Globally, estimates of the financial activities of government procurement managers are believed to be in the order of 10% – 30 % of GNP Local government expenditures are about six times more than the federal government purchase expenditures, and as their purchase thresholds are much smaller, the impact of procurement actions can be enormous. Public procurement can be used as an important tool for achieving economic and social objectives Procurement officials can provide important information to policy makers, and have unique insight into the organization

Decentralized purchasing leads to wide variance in pricing Across all facilities, Δ = 46.3% At same facility, Δ = 21.6% 5 Decentralized purchasing leads to wide variance in pricing

Cities,Counties and Local government – the Current Environment Small businesses have grown and more entreprenueal businesses were started during the recession More companies interested in govt business Governments tend to lag about a year or two behind sales tax receipts which are on the rise Purchasing teams have been reduced through budget cuts Continuing challenges to meet employee pension/medical commitments Pressure to save money, buy local, and purchase green…all at the same time! Everything is PUBLIC INFORMATION!

Trend 1 – Cooperative Purchasing Nearly every state, city, school district, higher education institution can “piggyback” on another government’s contract ◦ Same aggressive pricing ◦ Terms and conditions can be “localized” such as Minimum Compensation Ordinance, Healthcare Accountability Ordinance and Disadvantage Business Enterprise ◦ Endorsed by American Bar Association and every public procurement association ◦ Savings can begin in weeks / minimal staff resources National Cooperatives available and vary Choose the vendor, find the contract for special circumstances “Bake Off” scenario

8 Cooperative Purchasing – Case Study Four office suppliers – four national cooperatives Compare 12 categories – Price, On-line ordering, Green products, diversity, quarterly reviews, auditability Retail stores, recycled toner and paper, account management, Reports, delivery and transition Side by side analysis with final ranking Moved to new office supplier after the City of San Diego; had been with the previous one for almost 16 years.

Trend 2 – Social Goals More cities/counties/local governments are implementing social goals as part of their contracts: Diversity or local presence standards for additional points Minimum living wages or health benefits Equal benefits for same-sex or domestic partners Increased requirements for recycling or purchasing green or recycled products

What is local? What is local? “Big box” companies also have a local presence – have them provide those numbers – employees and property taxes Most companies can provide reports on recycled /green purchasing – have them do it as part of their contracts “Buy Local” has lots of meanings…find out if the company whom you already do business can partner with a local business for parts of their service – delivery, manufacturers, etc. Local sometimes means the price is higher

Trend 3 – Increasingly Political Move to Strong Mayoral forms of government for cities, or more interaction by Boards and Councils in Purchasing Everyone knows how to do Purchasing! Increased transparency and audits; headlines with the few bad apples or perception issues based on nothing! More protests on construction bids Overturning Purchasing’s recommendation during routine award presentations

Squeaky Wheel gets the contract! Large County - local vendor visiting each Board member and pressuring the use of local vendors. Board overturned Purchasing’s recommendation toward a higher priced local provider. Mid-size city in CA – went through bake off on office suppliers, came forward with recommendation, and were overruled when local vendor complained at the podium Large CA city – local DBE complaining about large recent award, and contract will be reopened and explored by City Council only months after awarding Construction protests are delaying and suspending projects across the state, and not necessarily for legal reasons

Trend 4 – Reduced team/resources Budget cuts through the recession have reduced Purchasing team numbers Old adage “do more with less” is lived every work day Little to no money for staff training or development The workload has remained the same or increased Retiring workforce and historical knowledge gone No one in the “real” world knows what a CPPO or a CPPB is!

NIGP - Standardization of Profession NIGP - Standardization of Profession

Eprocurement Systems On-line Surplus Auctions Just In Time Delivery On-line ordering directly from vendors Use of P-Cards Trend 5 – Automation

New Way of doing Business Case Study: University of California system “Working Smarter” initiative Equipment Maintenance contracts – money spent every year, but not really managed. Invisible expense 26% direct savings can be achieved; same level of service Little change for customers; use local vendors for service In first year, UCSF pilot study generated $257,000 of potentially $3 million in annual cost reductions. The conservative system wide estimate of potential savings is $30 million. 27 States and nearly half the universities across the nation now use this solution. 16

Case Study: School system with new building Nationally awarded cooperative contract for furniture Represent and support 27 manufacturers LEED certified One point of contact for order, design, installation – one purchase order instead of multiple Modular to stand alone – premium to budget Will remove and dispose of old furniture, if needed REBATE! New Way of doing Business

Final note – Are you having any fun?

Go forth and Procure! “Enthusiasm is one of the most powerful engines of success. When you do a thing, do it with all your might. Put your whole soul into it. Stamp it with your own personality. Be active, be energetic, be enthusiastic and faithful, and you will accomplish your objective. Nothing great was ever achieved without enthusiasm.” Ralph Waldo Emerson “Don’t tell yourself no…the whole world will be telling you no. Give yourself a “yes” and go for it! Tammy Rimes

I would love to be a resource – Need an new idea? Printing Maintenance, Repair and Operations Mailing Equipment eProcurement Systems IT Staff Augmentation Online Surplus Auctions Office supplies Janitorial supplies Equipment Maintenance Furniture Auto Parts 20