When researching software solutions to help streamline and digitalize your operations, it’s important to be able to convey how that purchase will save your agency money and time. The budget is the bottom line for any public agency, and any extraneous spending must be justified.
Proving your desired software purchase’s return on investment (ROI) means demonstrating the tangible – and intangible – benefits that the system will bring to your organization. By providing concrete calculations to your budget approvers, you can help accelerate the approval and purchasing process for your new software.
Want to calculate the ROI of an eProcurement solution on your agency's bottom line? Check out the PlanetBids ROI Calculator.
Quantitative Measures
Quantitative measures are those that can be backed up by hard numbers. These are often the most effective in proving a meaningful ROI to stakeholders who can be skeptical of the necessity of a new expenditure.
Cost Savings
The most obvious figure to bring to the table is how your software purchase will help your agency save costs elsewhere in your operations. For procurement teams, these costs are straightforward.
For an eProcurement software system such as PlanetBids, first calculate the costs of your typical bid without an eProcurement system. These costs include researching past solicitations, building new solicitations or RFPs from scratch, releasing and advertising the solicitation, accessing new vendors and managing existing vendors and subcontractors, managing insurance and certifications, hosting in-person pre-bid and evaluation meetings, evaluating and awarding the bid, and managing vendor performance. It also includes processing purchase orders and invoices and the cost of storing project paperwork for the required number of years after completion.
Track the savings achieved through bulk purchasing and negotiated discounts with frequently used vendors and subcontractors or by awarding multiple bids at one time or over a period of several years.
Then Calculate savings from the reduction in manual errors and associated costs due to insurance expirations, compliance failures, emergency operations, and bid protests.
Often, your desired software vendor’s sales and implementation teams will be happy to help you calculate these costs and give you insights into exactly where – and how – the software solution can save your agency money.
Process Efficiency
Often overlooked but still key to calculating savings, the streamlining of repetitive or tedious manual processes can quickly affect your bottom line.
Measure the time taken to complete procurement processes (e.g., from solicitation or requisition creation to order to completion) before and after implementation. Then work with your sales team to quantify the reduction in the number of manual tasks and the associated time they take, as well as the associated labor cost savings by automating those processes.
Supplier Management
Many eProcurement systems can help you monitor supplier performance and spot ways to improve in the field, as well as identify subcontractors who outperform the competition or vendors that should no longer be used.
By monitoring performance metrics like on-time delivery and quality and calculating savings from negotiating better terms or discounts with frequently used vendors, you can demonstrate significant savings for future projects.
Inventory Management
If applicable to your agency, some eProcurement solutions can also help you reduce costs by better managing inventory in holding and purchases that are made regularly. With better demand forecasting and just-in-time ordering, you can save money by reducing overstock and stockout situations.
Qualitative Measures
While quantitative measures are easily demonstrated, there are some savings that are harder to measure exactly. Nevertheless, these are important variables that can affect an agency over time by improving employee retention, bid and project efficiency, and better managing taxpayer funds to provide maximum stakeholder benefit.
Transparency and Compliance
In many government and public agencies, compliance with standards and regulations is just as important as securing the lowest bid – if not more so. An agency that can demonstrate a return on investment due to improved compliance, easier audit processes with to a clear and automated audit trail, and enhanced adherence to procurement policies and regulations can often sway decision makers to spend money on a software purchase.
Improved Decision Making
Data analytics are always helpful in proving consequential ROI, and the promise of showcasing those analytics in the future can be intriguing. Highlight the value of making more data-driven decisions in purchasing and procurement using the advanced analytics and reporting features of your new software, and demonstrate how better insights into supplier performance will lead to strategic project improvements in the coming years.
User Satisfaction
Will your team like the system? How long will it take them to start using it? These are key questions often posed by budget approvers and, very often, objections to adopting a new software solution. By gathering feedback from existing users – either by talking to other agencies or by asking specific questions from your software supplier – you can tackle these objections head on.
Showcase the impact of user training and adoption on overall procurement efficiency, underscoring the length of time training and implementation will take relative to the benefits that will be realized once the system is up and running.
Case studies and industry standard benchmarks can also help you prove ROI. Comparing your performance metrics with industry benchmarks and the performance of peer organizations that have implemented eProcurement systems can help you demonstrate potential benefits and savings.
Pilot implementation programs that allow you to run concurrent solicitation processes both by traditional means and through the software can give you concrete proof of time and cost savings as well.
Reporting and Documentation
Even after your stakeholders have approved your software purchase and you have implemented your new system, it is important to continue reporting on your investment’s impact on the agency’s procurement processes to ensure contract renewal for years to come.
Conduct detailed before and after analysis that compares key performance indicators (KPIs) both before and after the implementation of the system, as well as cost-benefit analysis that provides both direct financial and indirect benefits, to ensure your ROI is as expected.
Ongoing monitoring and evaluation is also important to ensure that you are happy with the system over time and to allow continuous improvement and sustained ROI. Establish feedback loops to capture and act on user feedback and further enhance the system’s value.
These steps are important to demonstrating that the purchase was worth the money to your stakeholders. They can also give you leverage in future budget negotiations by showcasing your willingness to do due diligence in researching and selecting the best solutions.
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