With contributions from James Gibney
In July 2013, Cristina Chaplain, Director of Acquisition and Sourcing Management at the Government Accountability Office (GAO), provided findings to the Senate Committee on Homeland Security and Government Affairs that commercial firms experience 4% to 15% in savings through improved procurement practices of products and services. Extrapolating this into the public sector –she stated that “a savings rate of 10% of total federal procurement spending would represent more than $50 billion annually.” Yes, that is $50 billion in savings per year. What is as significant as the size of the potential savings is the ability of the government to actually realize these savings.
Given the ripeness of this topic, Capgemini is hosting, with FedBid, a panel, The Future of Procurement – Transformation, Collaboration and Innovation, in Washington DC on November 21st with the following panelists: Adrian Penka – Leader of Capgemini’s Global Procurement Transformation CoE and lead author of the 2012/2013 CPO Study; John Ely – Former Executive Director for Procurement for U.S. Customs and Border Protection; and Gregg Brandyberry – Former CPO for GlaxoSmithKline. If you are in DC and would like to attend – please register here.
The panelists will go into more detail on procurement trends – however my initial thoughts on why the federal government can actually realize $50 billion in strategic sourcing savings are:
Factor 1: It is proven. The sequestration ‘shock’ that Federal Agencies experienced in 2013 are similar to what the private sector faced in 2007. The private sector firms that have survived the last 6 years have learned how to reduce their procurement costs while still meeting their customer needs. A down economy has forced firms to truly adopt and develop efficient strategies, processes, and tools. Akin to going last in an obstacle course, the Federal Government can take the path that works while understanding the risks.
Factor 2: It stays clear of politics – and cutting programs. Many large-scale savings initiatives of this magnitude center around cutting programs – which invariably results in political deadlocks in today’s environment. Strategic sourcing, by its nature, is not about cutting the end-services but instead about finding more efficient ways to provide these services.
Factor 3: The ‘barriers’ to execute are low. The proven strategies that have been honed in the commercial world have been largely data-driven and therefore had high barriers to entry in the past to public sector organizations. However, in the last few years government agencies have started to transform their organizations – ie. the public sector has become part of the ‘big data and analytics’ movement. One of the benefits of turning this corner should be using this data to become more efficient in procurement of goods and services.