Showing the Value of Procurement: The Sequel. Showing the Value of Procurement: The Sequel.

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Presentation transcript:

Showing the Value of Procurement: The Sequel

Showing the Value of Procurement: The Sequel

Showing the Value of Procurement: The Sequel

NIGP Research Purpose of Reporting Savings Communicate the Value of Procurement Evaluate Performance Justify Budget

What is Measured? Non-ROI ROI

New Trends in Non-ROI Spend

New Trends in Non-ROI Spend

New Trends in Non-ROI Spend

New Trends in Non-ROI Customer Focus

Showing Value - ROI Competitive Sealed Bidding Competitive Negotiations Revenue-Generating Contracts Other Activities

Budget - 45% Highest Bid - 36% Previous Price - 17% Average Bids - 31% GSA, etc. - 15%

Other Methods IFB Savings Award Price v. Retail or wholesale price Independent estimate Price submitted by requestor Price paid by other governments

Award Price v. Market Price Award Price v. Initial Proposed Price Added Value - i.e. Warranties

Recovery for Non-Performance Negotiating Contract Increases Specs / Scope Review Negotiating Non-Competitive Contracts Negotiating Renewals / Extensions

Recovery for Non-Performance Negotiating Contract Increases Specs / Scope Review Negotiating Non-Competitive Contracts Negotiating Renewals / Extensions

“The CFO’s View of Procurement” Aberdeen Group November 2007

“The CFO’s View of Procurement” Aberdeen Group November 2007

3 Tiers of Savings IDENTIFIED IMPLEMENTED BOOKED

11.9% 9.4% 3.2%

Collaboration Automation Spend data

Collaboration Automation Spend data

> 70% 30-70% < 30%

Best-in-Class - > 70% Industry Average % Laggard - Less than 30%

Best-in-Class Excellent process and Efficiency Superior process innovation aptitude Superior negotiation and contracting skills Superior general business acumen Superior supply market knowledge Strong technology acumen

Best-in-Class Excellent process and Efficiency Superior process innovation aptitude Superior negotiation and contracting skills Superior general business acumen Superior supply market knowledge Strong technology acumen

Top 10 Private Sector Procurement Measures

A Case Study

13 Agreed-Upon Measures 1.Additional Value Received 2.Improved Terms 3.Audit Savings 4.Price Reductions – Contract to Contract 5.Buyer Innovation / New Ideas 6.Price Reductions – Requisition to PO 7.Cost Avoidance – Contract CPI Increases

13 Agreed-Upon Measures 8.Revised Specification Initiatives 9.Elimination of Purchase Requests 10.Revenue Increases 11.Energy Contract Savings 12.Rebates Negotiated and Received 13.Improved Business Processes

$1,170,555

Action Steps