State Procurement Reform or Reengineering. What is it?
Procurement Reform or Reengineering is not a new concept. In the past few years, an increasing number of states have reformed or reengineered their procurement systems to improve efficiencies, increase transparency, ensure an open and fair procurement process, maximize the buying power of the state and generate savings. As an organization, the National Association of State Procurement Officials (NASPO) wishes to define and capture those efforts so that they may be easily shared with NASPO’s membership. The goal of the Procurement Reform Work Group, a subset of the Best Practices Committee, is to create a framework for defining procurement reform or reengineering, collecting data, and establishing knowledge-based tools and benchmarks that can speed up positive change within individual states.
This resource is a first step in the process of developing a criteria-based way of collecting and sharing procurement reform and reengineering efforts with NASPO members. It summarizes some of the recent or current efforts underway within state governments.
Procurement reform or reengineering encompasses many things. Instead of using dictionary definitions to describe the meanings of those terms, this resource treats them as the same for purposes of identifying overarching concepts. Some of those key concepts are framed in the following inquiries:
- Whether the change to the existing state procurement system is significant, such as an overhaul of state procurement law or the statutory establishment of a new vendor source selection method
- Whether the change makes the procurement process more transparent to internal customers, to vendors, to the public, or to all of them
- Whether the change revises the strategic role of the chief procurement officer, such as increasing or decreasing existing centralized authority
- Whether the change increases the availability or use of enterprise procurement systems
- Whether the change improves efficiency
- Whether the change increases procurement knowledge, including the collection of procurement and other fiscal data
- Whether the change enhances the professionalism of public procurement through training and certification requirements.
Overview of Some Recent or Current Reform Efforts
Reform measures can derive from many different directives or sources. Changes to procurement statutes, regulations and rules are an obvious source. New or revised internal procurement policies or human resource reform is another genesis for change.
Procurement reform may occur after a judicial decision, as a part of ethics reforms mandated by the state legislature or governor, or may be driven by outside oversight, influence or budget deficits.
Here are some examples:
- In Maryland, per Executive Order 01.01.2016.05, a Commission to Modernize State Procurement was formed to conduct a comprehensive review of Maryland’s procurement code and regulations. Maryland has a decentralized state procurement system with multiple control authorities. Some of the review areas include:
- Standardization of best practices and interpretation of the code across all agencies
- Reducing transaction costs for agencies by utilizing new technologies
- Development of a statewide procurement manual to provide guidance to state agencies when awarding contracts
- Development of statewide procurement training curriculum
- Recruitment and retention of quality procurement staff
- Training for suppliers
- Simplifying the current request for proposals (RFP) process and other measures to create efficiencies and make it easier for businesses to participate in the procurement process
- Standards to allow the state to use best value procurement
- Simplification of the Minority Business Enterprise certification process.
- In New Mexico, the governor formed a Procurement Reform Taskforce to review regulations and legislation to ensure an open and fair procurement process in the state. (Executive Order 2011-031)
- In Texas, Senate Bill 20 enacted in 2015 mandates a Centralized State Purchasing Study to look into the benefits of consolidating the purchasing function which is currently spread across 100 agencies. Other reform measures mandated by Senate Bill 20 include:
- Posting all contract solicitation documents to the centralized accounting and payroll system
- Verifying and documenting the use of a best value standard in state agency contracting and procurement
- Ethics training and additional requirements for the training, continuing education, and certification of state agency purchasing personnel
- Requirements to review vendor performance after certain contracts are completed or terminated and to report the results of the review to the comptroller
- Expanding authority to enter into a cooperative purchasing agreement
- Requirements for posting of certain contracts, enhancing contract and performance monitoring
- Requirement for agencies to develop and implement approval and reporting procedures for contracts with a value in excess of $1 million
- Requirement to verify compliance with state laws and policies and submit potential issues to deputy comptroller for contracts in excess of $5 million
- Requiring each applicable state agency to develop and comply with a purchasing accountability and risk analysis procedure
- Requirement for agencies to use the vendor performance tracking system when awarding contracts and to make the vendor performance tracking system available to the public
- Requiring vendor performance reports for all purchases and establishing an evaluation process to rate vendors on an A-F scale based on vendor performance reports.
- In Louisiana, the procurement reform seed was planted after the Office of State Procurement made a presentation to the Commissioner of Administration (COA) in FY 2012-13 that included improvement and cost savings opportunities. In response to substantial budget deficits faced by the new COA, a Government Efficiencies Management Support program to include all executive branch agencies and offices, including the Office of State Procurement was established. A feasibility study was commissioned in 2014 to continue these efforts and further explore efficiency opportunities.
- In New York, the most recent procurement reform began after a 2013 report by a state commission that studied spending and government efficiency in New York State. The recommended changes were first enacted in the 2013-14 executive budget. These recommendations focused on:
- modernizing state government, efficiency, effectiveness and accountability
- restructuring state government through rightsizing and consolidation of state facilities
- reducing costing and improving service; focusing on core mission and implementation
- building a culture of performance and accountability through the state’s first statewide performance management system.
As a result, New York undertook a statewide Real Estate consolidation, restructured the Office of Information Technology by centralizing all Information Technology staff from 62 agencies into one, created the Business Services Center centralizing all business office and Human Resources functions into one agency, and began a centralized procurement reform program.
The most common changes implemented by states as a part of their procurement reform are described next:
- Legislative changes, modernizing procurement codes and statutes. Eliminating procurement exemption for agencies and expanding applicability of the procurement code and oversight by the central procurement office over state agencies.
- Eliminating procurement exemptions for some agencies (Arizona)
- Merger/consolidation of multiple entities into one single procurement office (Washington, Louisiana)
- Consolidation of procurement chapter laws into one single statute (Washington, Louisiana)
- Recent changes in New York State finance law and executive orders included the creation of the chief procurement officer role, an Office of the Service Disabled Veteran-Owned Business (with certification processes and specific percentages for set-asides) and higher goals for purchases from certified minority and women-owned businesses.
- Centralized procurement authority. Centralizing the procurement function and oversight into one agency; elevating the CPO role in the hierarchy of the executive branch.
- Transferred oversight of procurement officer positions in individual agencies from agency heads to the director of the Arizona Department of Administration (employees remained physically located at their respective agencies.)
- Established a centralized procurement attorney office to ensure consistent interpretation and application of the law vs. different legal counsel in procurement units/separate agencies.
- District of Columbia: Elevated the CPO position to cabinet member status (2008 reform). The CPO Office of Contracting and Procurement reports directly to the mayor and the city administrator.
- Merged the previously separate purchasing and professional services contracting offices within the state’s Division of Administration placing all authority, duties and responsibilities under the Office of State Procurement, a new centralized purchasing agency. The consolidation initiative included eliminating the director of the Office of Contractual Review (professional services contracts) position and centralizing the function and staffing of executive branch state agency procurement offices into the Office of State Procurement.
- Centralized the IT office staff and re-engineered the IT procurement process to combine and/or standardize software, hardware and maintenance requirements which resulted in millions of dollars in savings during the first year.
- New York: Established an officially-titled CPO role, appointed by the governor.
- Pennsylvania: Implemented a shared services/centralized procurement model (2004-2005). With this model, the Department of General Services gained responsibility for all enterprise-wide procurements and many agency specific contracts.
- Tennessee: Centralized state-wide professional services.
- Policies to improve competition
- Implementing new sole source/non-competitive procurement policies to clarify appropriate use of emergency and sole source purchases. Some states, such as Maine, introduced new procedures to improve competition and allow non-competitive contracts only with justification and signature by the agency head, and with the approval of the CPO. The justifications are also publicly posted on the website of Maine’s central procurement office, allowing other stakeholders an opportunity to comment.
- Review and approval of sole source procurements and emergency contracts by the central procurement office. For example, through the 2013 reform, Washington required approval by the central procurement office of sole source contracts and review of emergency contracts.
- Strategic sourcing strategies, such as the ones implemented in Louisiana by cross-functional teams, as a part of the reform initiative, resulted in improved specifications, increased competition, and increased cost savings and efficiencies.
- Transparency measures. Implementing changes such as posting all public procurement information online and providing more visibility into state expenditures make the procurement process more transparent to internal and external customers and the public. A few examples are provided below:
- Implementing integrated eProcurement systems (Arizona, District of Columbia)
- Online posting of bidding/proposal opportunities
- Maintaining publicly-available and searchable lists of all contracts (Washington)
- Posting procurement spend data publicly (For example, OhioCheckbook.com – online system that provides a checkbook-level look at expenditures by agency and expense category, type, code)
- Reporting requirements for contracts (Arkansas, Washington, Louisiana)
- Establishing open portal initiatives (Delaware)
Reengineering Procurement Processes. Gaining Efficiencies through Procurement Reform
State agencies and suppliers often complain that the procurement process is too time-consuming or that there is a lack of standardized practices. Many states have taken measures to address that by automating their processes, reducing the complexity of their laws and regulations, or introducing training programs for procurement professionals and vendors.
- Streamlining procurement processes. Many states have recently changed their statutory requirements for formal and informal bids. For example:
- New Mexico – formal bid threshold raised to $60,000 from $20,000.
- Nevada – formal bid threshold raised to $50,000 from $25,000.
- Implementing innovative tools and practices to gain efficiencies in statewide service delivery
- Lean practices: Some states have used the Lean Six Sigma processes (or other similar processes) to improve quality of services, identify inefficiencies, implement changes to reduce contracting cycle time, and provide transparency into roadblocks within processes. (Louisiana, Washington Department of Enterprise Services’ Lean Culture, New York’s Office of General Services)
- Louisiana has developed an in-house, statewide application, PROACT, which facilitates efficiency in delivery, review, and communication relative to procurement documents. The application is a web-based electronic workflow system serving as a vehicle to submit electronic documents based on purchase indicators. It also tracks status and progress of purchases or contracts, allows for a reporting dashboard of work progress, triggers work with emails, allows end-user to know status of request, enables expedited return of incorrect or incomplete submittals, and allows for comments/blogging between the central office buyer/reviewer and agency personnel.
- New York Executive Order 4 established an interagency committee to study and create green specifications for a variety of commodities and services and mandates state agencies to acquire environmentally-preferable or sustainable products when available.
- Implementing integrated eProcurement systems to automate procurement and contract administration processes. Greater use of electronic procurement systems has been a key feature of every major state procurement reform initiative in the last few years.
- Louisiana’s replacement of multiple e-procurement systems with one centralized system for centralized procurement and contracting needs at the central procurement office and executive branch agencies statewide has improved reporting capabilities, streamlined processes, and standardized forms and terms and conditions.
- As a result of a shared services effort, New York has implemented a State Financial System for all agencies and is working to make centralized contract price lists available through an integrated eMarketPlace system administered by the centralized procurement office.
- Rolling out state certification or training program for procurement professionals as a part of the procurement reform to elevate the profession and ensure that consistent practices are followed.
- New York hosts an annual statewide Purchasing Forum, a three-day training event for agency purchasers and contractors with typical attendance reaching 1,300 individuals. Other programs include a bi-weekly training program for purchasing staff credited to the individual’s statewide learning management system training history. In 2016 New York also implemented a procurement roadshow bringing procurement training to every region of the state.
- In Washington all agency employees who develop, manage, or execute contracts are required by statute to receive training and/or certification.
- Creation of vendor training programs
- Delaware: Operates two regular in-person vendor training programs, “How to Do Business with the State” and “School District Supply Chain.” Further enhancements being developed include webinar and on-line presentations delivered through the state’s library network.
- Louisiana: An internal policy is under development by the central procurement office to create new or improve existing internal training programs for procurement staff, agency requisitioners and contract monitors, and vendors. The plan includes a certification process that also identifies supply chain management training provided by the continuing education department of a local university as a requirement of central procurement staff certification.
- New York: A customer services outreach team performs training at more than 30 events throughout the year. This includes vendor (and authorized contract user) training around the state at various events (Procurement Technical Assistance Center, IT Vendor forums, business council, towns, counties, etc.)
Final Questions for State Central Procurement Officials
While the purpose of this guide is to provide ideas and information by which states can look at procurement reform and reengineering around the country, perhaps to determine which concepts may be applicable within their own states, it is not meant to be an all-inclusive list of ideas, nor does it go into great depth on the background, implementation or results of the various concepts. It is here that the state procurement officials may need to do some individualized research. When an interesting or potential concept is found, it may be beneficial to reach out to the specific state procurement office and ask a few questions:
- What was the impetus for the actions? What was the background story that led you to move in this direction?
- What was the process you went through to move this forward?
- What has been the implementation plan?
- What results have you seen?
- What were some challenges that you had to overcome to implement the procurement reform measures?
- If you were to start over again, what would you do differently?
- Do you consider this to be a success?
- What are you using to measure your success?
As noted at the beginning of this guide, this summary is a first step. We hope that it will serve as a starting resource for all NASPO members and their stakeholders in an effort to understand the drivers for procurement reform. We also hope that it starts to define some common measures implemented by state central procurement offices across the country.
Here are a few additional NASPO resources: