|At a Glance|
Procurement methods used by government fleets include:
Government fleets buy everything from nuts and bolts to multi-million dollar pieces of off-road equipment — and everything in between. They may purchase car parts, fuel, sophisticated fleet software systems, and private-sector services such as vendor repair management. Using the best available techniques and strategies to buy what they need is critical for cost savings and improving the quality of the goods and services fleets purchase.
Government procurement comes with a set of challenges, some of which are unique to public-sector spending, which primarily revolves around preserving the public trust. The money government fleet entities spend belongs to the taxpayers; purchasing agents are accountable to them as well as supervisors in the workplace.
The list of stakeholders in any public procurement is long and includes citizens, the media, and all branches of government, including lawmakers and participating vendors. That’s a lot of interests for which to be accountable. In most government purchasing, information is made available to the public and motives are regularly questioned.
A lot of local, state, or even federal procurement laws and policies are restrictive to prevent abuse. Sometimes the layers of rules and regulations make it challenging for buyers and sellers and increase the resources needed to participate. Citizens might be surprised to find out how much it costs a vendor in staff time and money just to compete for government contracts. Since frequently there can be only one winner in a bid process, the risk is high a participating vendor’s investment in preparing a bid may not be returned.
|Values & Guiding Principles of Procurement|
In 2010, the National Institute of Governmental Purchasing established its Values and Guiding Principles of Public Procurement. Some of the primary principles are:
Seeking “Best Practice Contracts”
According to Mike Smith, vice president of Government Sourcing Solutions (GSS), “While the fundamental principles of public sector procurement are consistent across the country, strategies and methodologies to achieve results can be as diverse as the government fleet entities that utilize them.”
GSS is a consulting firm that helps state and local governments reduce costs and drive efficiencies through best practice contracts and innovative approaches to procurement. GSS seeks out best practice contracts for commonly procured goods and services, including those related to fleet operations. These contracts are evaluated to determine the elements that make them a “best practice” approach to procuring a particular product or service. GSS then shares these contracts with governmental entities, demonstrating the savings and efficiencies that could be gained should the government decide to adopt the contract.
What does GSS look for in a best practice contract? “We look for agreements that are not only attractive from a price point but that are also flexible enough to meet the objectives, goals, and administrative policies of multiple government organizations,” Smith said, adding that an ideal best practice contract could offer 10-20% savings over the rest of the field.
Smith went on to discuss some trends occurring in fleet procurement across public-sector organizations today.
The foundation of government fleet procurement, and all government procurement for that matter, is competitive selection. Traditionally, government fleets, often through a central procurement office, will procure needed goods and services through the development, release, and evaluation of a solicitation (e.g., a request for proposal). While a significant portion of fleet needs are still procured in this manner, today’s government fleet and procurement officials are using various approaches, methods, and technologies in order to satisfy their needs.
1 - Cooperative Purchasing
As the demand on fleet managers continues to grow and as governments continue to struggle with budgets and reduced staffing levels, officials more and more are looking to cooperative purchasing as a means to acquire needed goods and services. Cooperative purchasing is a competitive selection process that leverages the buying power of numerous government organizations.
“The benefits to coop purchasing are numerous. By adopting a cooperative contract, fleet managers can often reduce costs, enhance efficiencies, and implement new contracts in the fraction of the time it would take to conduct a traditional solicitation,” Smith said.
How does cooperative purchasing help reduce costs? Coop contracts are designed to be used by multiple public sector organizations. They are often flexible and can be customized to meet the needs of all types and sizes of governmental entities. Suppliers who participate in these types of contracts can be very aggressive with their pricing offers, knowing there is potential for significant volume. Leverage buying combined with flexibility can lead to savings when compared to a traditional single-unit solicitation approach. Further, because cooperative contracts can be adopted relatively quickly, staffing resources can be deployed to other projects.
There are a number of national consortiums and cooperative purchasing organizations that offer a variety of contracts for use by public sector entities, including several fleet-related agreements. These include:
● National Joint Powers Alliance (NJPA) – www.njpacoop.org
● National IPA – www.nationalipa.org
● U.S. Communities – www.uscommunities.org
● National Association of State Procurement Officials (NASPO) – www.naspo.org
● Western States Contracting Alliance (WSCA) – www.wsca.org
● National Purchasing Partners (NPP) – www.mynpp.com
Several formal regional cooperative organizations exist as well and are actively seeking participation by governments in their areas.
Cooperative purchasing continues to be a growing trend. Some government fleets look to cooperatives as a matter of practice. Others look at the cooperative option for only select goods and services. Some are actively involved in the development and management of cooperative contracts. Regardless of their level of participation, most public-sector entities have the ability to participate in the cooperative purchasing process. Smith said, “State, city, and county governments have a wide array of laws, rules, and policies which govern their use of different procurement approaches. Some governments are given a lot of latitude and can easily ‘piggyback’ on contracts established by other governments and/or by consortiums such as those noted above. Others may require involvement in the development of the original solicitation in order to be able to participate once a contract is established and executed.”
Are there disadvantages to using a cooperative purchasing approach? Depending on the product or service in question, cooperative contracts may sometimes not meet specific small or diverse business objectives. However, those managing the cooperative processes are starting to take these elements into account and are incorporating policies around diverse business and environmental sustainability into their solicitations.
Smith points out that several years ago, cooperative contracts were mostly commodity-based. In recent years, however, the cooperative approach is being used for many services as well.
Vendors stand to reap substantial benefits through the use of cooperative agreements. Smith said, “Vendors spend significant staff time and costresponding to government fleet solicitations. When they can consolidate their response efforts, they save time, money, and resources."
2 - Strategic Sourcing
Strategic sourcing is an approach to procurement that is being utilized by numerous governments across the country. Quite simply, it is buying smarter and re-evaluating procurement processes. Smith said, “A key to strategic sourcing is to gather as much knowledge about a market, a product, or a service as you possibly can. The insights gained from this research will help fleet managers develop sound procurement strategies and achieve better results.”
Strategic sourcing benefits entities whether they are following a conventional competitive selection process or using a cooperative purchasing approach.
Knowing the spending patterns and needs of the fleet are keys to getting good value in contracts. Smith advises fleets to ask themselves, “Are our specifications current and still required? Is there a better way to procure the specific good or service? How are other fleets buying this item? How has the industry changed since we last procured this product or service, and how might it evolve in the coming years?”
An example of a strategic sourcing principle would be bundling like items into one contract rather than multiple contracts (e.g., auto parts). Under this scenario, the government has fewer contracts to manage and can receive better pricing due to greater volume. Other principles include extended contract terms (the longer the commitment, the more aggressive vendors may be with their pricing), delivery terms (does the fleet need to receive a shipment every day?), specification revisions to reflect lower cost materials without jeopardizing quality, etc.
3 - Technology
Governments are using technology to help improve the quality of their procurement operations. As an extension, fleet operations benefit as well. Solutions such as e-procurement are hitting their stride. Smith said, “Over the years, most government organizations have implemented financial systems to help create purchase orders and pay bills. Most have also implemented some type of front-end procurement system (i.e., a solicitation posting system). Oftentimes, however, the weakest link in these systems tends to be in the middle of the process. After a contract is in place, it is sometimes difficult to make sure stakeholders and end users are aware of it, can easily find it, and readily use it.”
E-procurement solutions can fill this gap by providing a catalog-based approach to ordering and a system to manage contracts. Through these systems, fleet buyers can easily find the products and services they need in a very user-friendly environment.
“E-procurement systems can interface with financial systems. Contract usage is automatically tracked in incredible detail. This approach helps eliminate maverick spend primarily because it makes buying off of competitively bid contracts simple and convenient,” Smith said. The data captured is a powerful tool in developing specifications for the next generation of contracts. Powerful search engines streamline the process of finding fleet goods and services available on contract.
Other technologies such as cloud computing and social media sites including facebook and Twitter are making their way into the procurement process. Electronic signatures and reducing or eliminating paper are also part of the technology revolution taking place in government today.
Just like “V Cards” are replacing paper business cards, brick and mortar vendor and trade organization shows in some instances are now being conducted virtually on the Web. Virtual conferences save vendors’ and prospective customers’ time and money, which is particularly important when government travel budgets are down.
4 - Public/Private Partnerships
While not historically a popular approach to government procurement, state and local entities are increasingly considering outsourcing select services in an effort to reduce costs and focus their resources on the mission of government. “This is becoming a growing trend and one that both procurement and fleet leaders will need to deal with in the coming years,” Smith said.
While strategies and methodologies may change over time, values such as integrity, transparency, and fairness are still at the core of public sector procurement organizations. Keeping these values in mind, Smith said, “Fleet leaders are encouraged to partner with procurement officials in identifying new and innovative approaches to acquiring needed goods and services.”
About the Author:
Barbara Bonansinga is a public service administrator, Division of Vehicles, at the State of Illinois. She is president of the National Conference of State Fleet Administrators (NCSFA) and a member of the Government Fleet Advisory Board.