For government procurement teams, budget is king. Everything they do is centered around having the funds approved to make specific purchases or enter into contracts – whether those approvals are calculated into the year’s budget, part of the general operational budget, or approved in addition to yearly spend.
As a procurement professional, you probably think it’s easy to know whether you’re meeting your agency’s budget. The number is clear, and as long as you are under that number, you’re fine.
But what if you could do more than just meet the budget? Could you stretch that budget farther and have room for more projects each year?
Let’s look at some ways to ensure that your agency is not only meeting your annual budget, but also using those funds efficiently.
Comprehensive Planning and Forecasting
Agencies with limited funding should be forecasting the next year’s needs and projects early, way before the budget is being decided. Look at not only improvement projects that need to be started, but also at general maintenance, and understand that current inflation rates may mean costs go up in the next year.
Look at what is needed – and why – to determine necessity versus nice-to-have, and perform market research to understand market conditions, prices, and potential suppliers. Then develop cost estimates based on that research as well as historical data.
There are several ways to improve the procurement process as well. One thing to consider when determining your budget for the upcoming year is whether to make an investment in software and technology to help you better manage your projects, your vendors, and your costs. eProcurement software can help you reach a wider contractor audience, with new vendors potentially offering lower bids to win new business.
Another option is to centralize your procurement processes with other related agencies. Consolidating teams and processes can help eliminate duplicate work and let you better leverage collective buying power.
Competitive Bidding and Tendering
One of the best ways to ensure you’re meeting your budget is to build detailed, comprehensive RFPs to solicit competitive bids. This not only ensures transparency and fairness in the procurement process, but also helps you establish clear criteria for evaluating bids, focusing on both costs and quality. A detailed RFP will help weed out the unqualified vendors and eliminate surprise change orders once the contract has been awarded and work has been started.
Posting your bids in multiple places – going beyond the standard public media announcements or direct mail and setting up an online bid portal that all agencies can access and bid through – can help you get more quotes and ensure competitive pricing. It can also save you the time, money, and hassle of the traditional bid announcement, evaluation, and in-person award process.
Contract Management
Another option to save costs is to negotiate long-term contracts or strategic partnerships with trusted suppliers that you will be using repeatedly. Strong relationships with reliable vendors help you maintain stable pricing, preferential rates, and better terms over the course of several years while providing vendors a source of steady, dependable work.
Regular performance monitoring and auditing is key to ensuring these long-term vendors are meeting performance goals and complying with contract terms and federal or state regulations.
Budget Tracking and Technology
This step might seem obvious, but it can often fall by the wayside as procurement teams get in the weeds of releasing solicitations and awarding contracts. Implementing a robust financial tracking system that regularly monitors expenditures in real time can help take some of the burden off your team. These systems can also analyze the work against the budget to identify variance and give you a warning when you’re deviating from the budget.
The data analytics provided by today’s Enterprise Resource Planning (ERP) software systems can help you analyze spending patterns and easily identify cost-saving opportunities.
eProcurement systems can help you streamline the solicitation build and release process, as well as give you better evaluation techniques and improve communication with bidders. Lean procurement principles can help streamline procurement processes and eliminate waste by automating repetitive tasks and improving accuracy.
And inventory management systems – as well as regular inventory audits – can help you reduce holding costs, avoid excess inventory, and identify and eliminate obsolete and redundant stock.
Risk Management and Contingency Planning
It’s always a good idea to assess the potential risks associated with a project – such as price volatility, supply chain disruptions, and health and safety emergencies – and build a contingency budget or mitigation strategies to help manage these unexpected costs or emergencies.
Strong eProcurement systems will help you manage certifications and insurance for your open projects to ensure you’re covered in the event of an emergency and that you’re complying with applicable policies, regulations, and bet practices to avoid legal and financial penalties.
Cost clauses can also help you control spend. Verbiage that lets you regularly review and renegotiate contracts to align with current market conditions, as well as control clauses that allow you to limit price increases, are becoming increasing common in today’s more volatile economic market.
Additional Cost-Saving Considerations
Sustainability is rapidly becoming an important consideration in procurement, both among constituents and among government leaders. Sustainable procurement can mean several things, however. It can mean opting for energy-efficient products and services to reduce long-term costs, awarding projects to ecofriendly vendors who use sustainable products or provide earth-friendly services, or even working towards waste reduction and associated disposal costs. It can also mean moving to paper-free office operations by implementing more technology into the procurement process.
Outsourcing may be one way to help cut down on one-off procurement costs, as well. Non-core activities can be outsourced to specialized providers, or your team can collaborate with other government entities to piggyback contracts, share services, and reduce expenses.
Working with other departments and teams can help align procurement activities with organizational goals and budgets as well as bringing diverse perspectives to identify new cost-saving opportunities. And engaging industry experts and advisors can help agencies stay informed about best practices and trends.
All these things can help ensure you’re saving taxpayers money and stretch your budget as far as possible to meet the needs of your constituents. But perhaps the best cost-saving measure of all is to put forth a strong solicitation that helps you complete projects that are high quality, require less maintenance, and will better the lives of the people you serve.
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