Procurement transformationfor a U.S. State Government

In the first half of 2004, a task force was created by the state governor with the aim of making it the best managed state in the country by 2007 and, in the process, significantly reduce costs.

Challenge
The task force concluded that the procurement infrastructure was the largest potential source of savings. It identified the need to improve analysis of statewide spending and buying habits, negotiations of contracts, and other innovative procurement strategies to ensure the state obtained the best value for taxpayers.

Approach
The state's Department of Administrative Services partnered with A.T. Kearney on the initiative, and we led the state’s efforts across three major areas:

1. Capacity Building, which involved an assessment of the current organization structure and people capabilities, followed by the development and implementation of specific recommendations
2. Spend Management, for which we evaluated over 120+ state agencies and universities and more than $25 billion in total statewide expenditures. The team developed a comprehensive spend cube that identified where, how and with whom the state spent more than $3 billion in sourceable spend, and then developed a plan to target savings in several “waves”
3. Strategic Sourcing, for which the team implemented a strategic sourcing “wave” plan, which is on track to achieve the target savings. In parallel, the team is providing detailed skills training to state procurement personnel to ensure this process is sustainable

Results
The Procurement Transformation Initiative is on track to achieve the targeted $135 million in annual contract savings.

In addition, the recommendations identified as part of the Capacity Building assessment are being fully implemented by the state. These recommendations will allow the state to build upon its existing capabilities and transform into an even more capable organization.