1. Public Purchasing in Florida Purchasing Organization September 14, 2005 State Purchasing

2. 2 Public Purchasing in Florida Purchasing Organization - Agenda  Welcome / Session Overview  Challenges and Trends  Florida’s Back Office  Evolution of State Purchasing  State Purchasing’s Role  Questions  More Information

3. 3 Objectives Increase Understanding of … Challenges and trends in organizational theory, particularly government Organization of Florida government, particularly the “back office” Changes in State Purchasing over the past decade Organization, powers, purpose, and functions of State Purchasing

4. 4 Public Purchasing in Florida Purchasing Organization - Agenda  Welcome / Session Overview  Challenges and Trends  Florida’s Back Office  Evolution of State Purchasing  State Purchasing’s Role  Questions  More Information

5. 5 Ageless Challenges King of Prussia (1740) He did not altogether approve of the administrative system that he inherited. From the beginning he correctly identified it as a bureaucratic machine whose ministers and officials were far too restrictive and unimaginative, bogged down in minutiae, caring only for personal comforts and advancement, dissolute and corrupt, frequently no more than indolent, careless “idiots” whose irresponsible actions daily alienated subjects, who formed the true wealth of the kingdom.

6. 6 Ageless Challenges Sound Familiar? A hundred people can veto a project but no one person or office can move it forward

7. 7 Ageless Challenges So What’s the Solution? Should government be run like a business?

8. 8 Ageless Challenges Our Government System “We have consciously designed an inefficient government, to keep man free” – James Madison The cost of preventing tyranny was a fragmented, separated government system in which everyone seems to check everyone else

9. 9 Ageless Challenges J.H. Newman (1855) A government is [people’s] natural foe; they cannot do without it altogether, but they will have as little of it as they can. They will forbid the concentration of power; they will multiply its seats, complicate its acts, and make it safe by making it inefficient. They will take care that it is the worst- worked of all the many organizations which are found in their country. As despotisms tend to keep their subjects in ignorance, lest they should rebel, so will a free people maim and cripple their government, lest it should tyrannize.

10. 10 How Does this Apply to Purchasing? What Are Our Objectives? Economy (good prices)

11. 11 How Does this Apply to Purchasing? What Are Our Objectives? Economy (good prices) Openness Fairness Accountability

12. 12 Current Trends Doing Well Despite Constraints Government can be more businesslike. Separation of powers is no excuse for… –Shoddy quality –Low productivity –Inattention to result –Fiscal irresponsibility –Non-responsiveness

13. 13 Recent Developments Private Sector Practices and Influences In Search of Excellence: Lessons from America’s Best Run Companies (1982) Reinventing Government: How the Entrepreneurial Spirit Is Transforming the Public Sector (1992) Banishing Bureaucracy: The Five Strategies for Reinventing Government (1997) Good to Great: Why Some Companies Make the Leap and Others Don’t (2001)

14. 14 Recent Developments Federal Law Changes Government Performance and Results Act of 1993 National Performance Review, Reinventing Federal Procurement (1993) “Section 800 Panel,” Streamlining Defense Acquisition Laws: Report of the Advisory Law Panel (1993) Federal Acquisition Streamlining Act of 1994 Clinger-Cohen Act of 1996 Federal Acquisition Regulation (FAR) rewrite (1997) Federal Activities Inventory Reform (FAIR) Act of 1998 President’s Management Agenda (FY 02) Services Acquisition Reform Act of 2003

15. 15 FAR 1.102(b) Federal System Objectives (1)Satisfy the customer in terms of cost, quality, and timeliness of the delivered product or service by, for example – (i) Maximizing the use of commercial products and services; (ii) Using contractors who have a track record of successful past performance or who demonstrate a current superior ability to perform; and (iii) Promoting competition; (2) Minimize administrative operating costs; (3) Conduct business with integrity, fairness, and openness; and (4) Fulfill public policy objectives.

16. 16 Recent Federal Developments PMA Excerpts “Government likes to begin things – to declare grand new programs and causes. But good beginnings are not the measure of success. What matters in the end is completion. Performance. Results. Not just making promises, but making good on promises. “[T]here is an understandable temptation to ignore management reforms in favor of new policies and programs. However, what matters most is performance and results. In the long term, there are few items more urgent than ensuring that the federal government is well run and results oriented.”

17. 17 Recent Federal Developments PMA Excerpts Government should be: Citizen-centered, not bureaucracy-centered Results-oriented Market-based, actively promoting rather than stifling innovation through competition

18. 18 Public Purchasing in Florida Purchasing Organization - Agenda  Welcome / Session Overview  Challenges and Trends  Florida’s Back Office  Evolution of State Purchasing  State Purchasing’s Role  Questions  More Information

19. 19 Florida’s Back Office What Are We Talking About? Back Office (general management): the administrative staff of a company who do not have face-to-face contact with the company’s customers

20. 20 State Financial Information Fiscal Year Ended 6/30/03 $48.3 billion in expenses We’d be 25 th on the Fortune 500 list –Bank of America is just ahead of us –Just behind us are Pfizer, JP Morgan Chase, Time Warner, and Proctor & Gamble

21. 21 How Does Purchasing Fit?

22. 22 Florida Financial Management Information System Purposes (§ 215.91, F.S.) Primary means by which state government managers acquire and disseminate the information needed to plan and account for the delivery of services to the citizens in a timely, efficient, and effective manner. Coordinate fiscal management information and information that supports state planning, policy development, management, evaluation, and performance monitoring. Primary information resource that provides accountability for public funds, resources, and activities.

23. 23 FFMIS Information Subsystems Planning and Budgeting (EOG) Accounting (DFS) Cash Management (DFS) Purchasing (DMS) Personnel (DMS)

24. 24 Pre-FFMIS Subsystem Challenges Lack of standards among subsystems Lack of complete and efficient integration Duplication of data input and maintenance Insufficient management information to support decision making Incomplete reporting capabilities Lack of single chart of accounts Complex external interfaces High maintenance and modification costs Inconsistent data

25. 25 FFMIS FFMIS Overview of Major Initiatives Human Resources – People First DMS working with Convergys/SAP to modernize the personnel system, leave and attendance and benefits management (http://dms.myflorida.com/workforce/people_first_initiative) Purchasing – MyFloridaMarketPlace DMS working with Accenture/Ariba to integrate purchasing activities for all State buyers and for vendors doing business with the State (http://marketplace.myflorida.com) Financial Management – Aspire DFS working with Bearing Point/PeopleSoft to replace the legacy accounting and financial system (FLAIR) with an integrated enterprise resource planning system (http://aspire.dfs.state.fl.us)

26. 26 Pre-FFMIS Pre-FFMIS Purchasing Systems Vendor Bid System (Bidding) SPURS (Purchasing) FLAIR SPURS View (Reporting) Manual Process for Matching Web-based Registration Manual Process for Invoicing Agency contract system Agency contract system Agency contract system Agency contract system Agency contract system

27. 27 FFMIS FFMIS Purchasing Subsystem Goals FLAIR / Aspire Registration Purchasing Bidding Contracts Invoicing Matching Reporting

28. 28 MyFloridaMarketPlace System Functions Vendor ToolsBuyer Tools MyFloridaMarketPlace Users Initial Users - Pilots Initial Users - Exec Agencies Eligible Users - Other State Agency State Term Contract Vendors Minority Businesses Agency/ Dept. Contract Vendors Eligible Users – Univ, City, County General Public Small Businesses Vendor search State term contract items Requisitions/Purchase orders Online workflow approvals Informal solicitation (quotes < $25,000) Sealed bids (ITN, ITB, RFx > $25,000, auctions, reverse auctions) Receipt of Goods P-Card Contract development and administration Reports Self registration E-mail notification of formal and informal solicitations Online quoting on informal solicitations (< $25,000) Online submission of sealed bids (> $25,000) Electronic purchase order receipt Electronic submission of invoices Catalog creation and updates for State term contracts Reports Business Support and Operations Buyer Help Desk Vendor Help Desk Strategic Sourcing Procurement Assistance Catalog Enablement Training and Education “I want to buy” “I want to sell” BuyersVendors

29. 29 Public Purchasing in Florida Purchasing Organization - Agenda  Welcome / Session Overview  Challenges and Trends  Florida’s Back Office  Evolution of State Purchasing  State Purchasing’s Role  Questions  More Information

30. 30 Evolution of State Purchasing What We Looked Like 10 Years Ago… 100 Employees Director’s Office Bureau of Standards Bureau of Procurement SPURS

31. 31 Evolution of State Purchasing What We DID 10 years ago… Spec-based contracts Contracted for agency specific goods & services Supported agency purchases through SPURS Utilized ITB as primary solicitation process Produced and distributed all information on paper

32. 32 Evolution of State Purchasing High Level Changes Affecting Us Internet Shrinking State Budget Administrative Transitions

33. 33 Evolution of State Purchasing What We Look Like Today… 41 Employees Director/Operations Two Bureaus of Buyers (state term contracts) MyFloridaMarketPlace State Purchasing Agreements (SPA)

34. 34 Evolution of State Purchasing Our Functions/Focus Points Today… No more paper! High-level strategic sourcing Training Customer Service Performance Objectives

35. 35 Public Purchasing in Florida Purchasing Organization - Agenda  Welcome / Session Overview  Challenges and Trends  Florida’s Back Office  Evolution of State Purchasing  State Purchasing’s Role  Questions  More Information

36. 36 State Purchasing Our Mission To deliver innovative, resource- saving purchasing services in order to provide effective program support to all state agencies.

37. 37 State Purchasing DMS Purpose and Powers 287.032, F.S. Purpose of the department (1) To promote efficiency, economy, and the conservation of energy and to effect coordination in the purchase of commodities and contractual services for the state. (2) To provide uniform commodity and contractual service procurement policies, rules, procedures, and forms for use by agencies and eligible users. 287.042, F.S. Power, duties, and functions

38. 38 State Purchasing DMS/Agency Relationship 287.042, F.S. Power, duties, and functions –(1)(a) To contract for … all commodities and contractual services required by any agency under this chapter –(6)(a) To govern the purchase by any agency of any commodity or contractual service and to establish standards and specifications for any commodity. –(6)(b) Except for the purchase of insurance, [DMS] may delegate to agencies the authority for the procurement of and contracting for commodities or contractual services. Rule 60A-1.002(d) – Conditional delegation of authority to agencies (except insurance)

39. 39 Putting Procurement in Context Lifecycle of Spend Planning & Analysis SourceContractReq’nOrder Interact & Receive InvoicePayment Capture company-wide spend Adequate data integrity Identify & monitor savings Measure ROI of procurement Fulfill reporting requirements Standardized sourcing processes Deep commodity & market knowledge Disseminate best practices Optimal pricing & terms Decrease time and cost of complex negotiation Facilitate multiple collaboration across the organization Apply negotiated pricing & terms Track supplier performance ratings Track rebate and volume agreement compliance Manage contract renewals Minimize cost to track and transmit orders to suppliers Enforce compliance with contract pricing Minimize time and cost to requisition, approve, receive & reconcile invoices Automate payment and link P.O. to payment authorization in one record (Ariba Buyer) Capture early payment discounts Timely capture of payments information

40. 40 Putting Procurement in Context The Sourcing Process Fast Track to Value Validate & Profile Category Conduct Industry Analysis Build Total Cost of Ownership Model Develop Category Strategy Conduct Supplier Analysis Build Supplier Selection Decision Matrix Conduct Auctions Complete Prepare Fact- Based Negotiation “Packages” Negotiate Value Propositions Category Profile Industry Profile TCO Model Category Strategy Value Propositions Benefits Realization Develop Measure Results & Trends High-Level Data Collection & Analysis Fast Track to Value Segment Purchases Validate & Profile Category Conduct Industry Analysis Build Total Cost of Ownership Model Develop Category Strategy Conduct Supplier Analysis Build Supplier Selection Decision Matrix Conduct Auctions Complete Prepare Fact- Based Negotiation “Packages” Negotiate Value Propositions Auctions Form Cross- Functional Sourcing Teams Develop Measure Results & Trends High- Data Collection & Analysis Fast Track to Value Segment Purchases Validate & Profile Category Conduct Industry Analysis Build Total Cost of Ownership Model Develop Category Strategy Conduct Vendor Analysis Build Vendor Selection Decision Matrix Conduct Auctions Complete ITB/ITN/ RFQ/RFP Develop Value Proposition Around Options Make Award Decision In-Scope Categories CFSTs (Cross-Functional Sourcing Teams) Selection Decision Matrix ITB/ITN/RFQ/RFP Continual Vendor Improvement Profile Internally & Externally Develop Strategy Screen Suppliers & Selection Factors Conduct Auctions & Shape & Negotiate Value Propositions Implement Agreements Assess Opportunities Profile Internally & Externally Develop Strategy Screen Suppliers & Selection Factors Conduct Auctions & Shape & Negotiate Value Propositions Kick-Off & Profile Internally & Externally Develop Strategy Develop Selection Factors & Screen Vendors Conduct Competitive Event Prepare Value Proposition & Award Implement Agreements Kick-Off & Assess Opportunities - Form Cross- Functional Sourcing Teams Develop Vendors Measure Results & Trends Award Decision (ITA) Typical Deliverables Key Worksteps - and / or -

41. 41 State Purchasing State Purchasing Strategic Sourcing/State Term Contracts Leverage State- Wide Volume Obtain Best Prices & Value Obtain State- Wide Savings Increase Demand / Volume on STCs Identify New STC Opportunities Reduce State- Wide Supply Base Manage Compliance Strategic sourcing is a proactive process to leverage demand and select vendors that offer the best value.

42. 42 Business Case Gate 1 Procurement Gate 2Gate 3Gate 4 Change Management Contract Management Post Implementation Governor’s Center for Efficient Government Project Gate Management Process (Pre-7/05) Stage 1Stage 4Stage 5Stage 3Stage 2 Monitor Current Projects New Projects

43. 43 Public Purchasing in Florida Purchasing Organization - Agenda  Welcome / Session Overview  Challenges and Trends  Florida’s Back Office  Evolution of State Purchasing  State Purchasing’s Role  Questions  More Information

44. 44 Public Purchasing in Florida Purchasing Organization - Agenda  Welcome / Session Overview  Challenges and Trends  Florida’s Back Office  Evolution of State Purchasing  State Purchasing’s Role  Questions  More Information

45. 45 More Information State Purchasing’s website: http://dms.myflorida.com/purchasing