Implementation of statewide hosted e-procurement system also extends low-cost access to local governments
ProcureAZ has created a true “one-stop shop” forin Arizona with implementation of a statewide gateway that has the potential to centralize public sector purchasing for all of Arizona. The state expects the new software system to generate between 5 and 20 percent in savings on the $6 billion state spend, with savings created at the state and local levels. Statewide implementation of the all-in-one BuySpeed e-procurement system by Periscope Holdings earned Arizona the NIGP 2011 Innovation Award, which is presented to governmental agencies that have a great vision for public service and drive that vision through innovation.
Some 120 Arizona state agencies are mandated to use the new system, and 550 or so local governments in Arizona also access the system via the Internet to find contract information on 20,000 registered state vendors. Local governments also may leverage the full functionality of the system if they choose. “We are marketing it more and more to them,” said Jean A. Clark, Arizona's state procurement administrator. “We are seeing the benefits at the state level, and interest is growing at the local level.” Arizona paid for a statewide license of the BuySpeed eProcurement software, which is available via a hosted website and can be used by any local government in Arizona.
The statewide software license is being paid for by a 1 percent administrative fee embedded in the pricing of any purchases made by local governments through the state. (The $995 yearly fee local governments previously paid to use state contracts was eliminated.) During the the next five years, proceeds of that 1 percent fee will pay for the system (possibly in three years). The state will receive the additional revenue from local governments' use of the system after the software license fee is recouped.
Functionality includes state contract/catalog search and ordering, sourcing and solicitation, vendor management, contract management, requisition and purchase orders, invoice and receipt, and integration into the financial system. The software also enables reverse auctions, which have already saved money for the state. (See “Total Transparency in Real Time,” Go Pro, June/July 2001, page 46). Real-time interface with Arizona's financial system eliminates double data entry, replaces paper W-9 processing, reduces staff needed to manually check budget/account code validation, provides immediate notification of errors in accounting transactions, and makes real-time accounting and financial information available for all users.
For local governments, the system provides one site for them to view state contracts and vendors, and they can also use it for vendor registration and solicitation. Counties, cities, universities and school districts may access the program. The advent of the new system has increased the number of local governments participating in state contracts by about 44 percent.
The new system increases procurement transparency in that any citizen can log in and see how much money statewide has been spent with any vendor (fiscal year-to-date). State procurement managers can look at the system to see all the solicitations and quotes being issued for Arizona. “I get visibility into all my spend, my agency contracts and my statewide spend,” said Clark. She can also identify on-contract and off-contract expenditures (to analyze compliance), track processing times from requisition to purchase order, and access other performance metrics. She can see, for example, if a single consultant is being paid two different rates under different contracts for basically the same work.
The system brings opportunities to light to aggregate spend among multiple agencies for greater service. Procurement managers can easily report on commodity spend using NIGP five-digit codes. Full transparency allows procurement to analyze spend patterns strategically and target opportunities for sourcing. The business intelligence module creates standard reports and offers ad hoc capabilities, internally and externally, to allow the state procurement office to respond to legislative and executive requests more easily.
To supply the system, Periscope Holdings partnered with CGI Group, which helped to implement the system, hosts the outsourced software, and provided consultants to help with the transition.
The system is much more efficient than the previous processes involving paper requisitions, routed physically through various budget checks, followed by price verification and issue of the purchase order. Now the approval process is handled electronically, and the vendor receives an electronic order. “The number of requisitions coming into the office decreased by 70 percent,” said Clark. “We didn't add any value in processing that paper. Now we can focus on ways that we can add value.”
The new efficiencies came just in time, considering that Arizona's procurement staff was cut by half in the last several years because of state budget cuts and retirements.
When Arizona realized the need to modernize state procurement in 2009, the state faced a $1.4 billion budget deficit. There was no ability to view purchasing activities across state agencies, and individual agencies managed purchasing manually or with agency-specific systems. There was no way to track and analyze spend by vendor, no vendor performance history and minimal collaboration with local agencies. Prior to implementation, vendors received orders from state agencies in a variety of manners. Some purchase orders were emailed, but many were sent hard-copy through U.S. mail. Agencies managed solicitations manually or through disparate websites.
Contract for the new system was awarded in April 2009, and phase one of the system (including a single web-based portal for vendor registration, sourcing and contract/catalog ordering) went live in less than 100 days. Phase two began roll-out in October 2010 and all agencies are now live.
ProcureAZ has provided an opportunity for the state to reexamine how the procurement function was managed across the state. Before installing the system, Arizona procurement reviewed its business processes and did a “gap analysis” to identify how processes should be changed and what was needed in the software application. The process unveiled some process inconsistencies, which have since been standardized. Policy and process decisions were made to bring everyone in line. “We are now doing better business that is more in line with policy,” said Clark. For example, the system now pre-encumbers funds to ensure they are are available.
A core team of about 10 was involved in transitioning to the new system, including representatives of procurement, finance and accounting departments and other agencies. This team reviewed the application and evaluated the processes. Of the state's procurement staff of about 22 employees, three people continue to work on the application, testing upgrades and new functionality, providing help desk support to the vendor community, controlling system access and providing training on the application.
Making the transition was a learning experience for Clark and her team. What did they learn? “You need to have a vision,” she said. “You need to understand what you're trying to accomplish and you need the right people to help you get there. There are challenges, but you need to have perseverance.”
Benefits of the system
The system has helped Arizona achieve the following:
- More vendor competition. Easy access to the system has raised the number of vendors participating.
- More small business participation, because easy access using the portal helps to level the playing field. It's also now easier to target small businesses for purchases of less than $50,000.
- Lower costs. The system has provided a 30 percent cost reduction on the statewide office supply contract. A reverse auction saved 5.2 percent on a heavy duty chainsaw contract. An additional 1.5 percent rebate was paid by a maintenance repair operations supplier based on sales volume.
- More efficiency. Time required for staff to manually track vendors is eliminated.
- Faster cycle times, which have decreased by about 50 percent, from 4 days to 2.3 days.
- More coop purchasing, thanks to the more robust search engine.
Albert Hall Award
Jean Clark, FNIGP, C.P.M., CPPO, CPPB, CPM, was also honored at NIGP Forum this year with the Albert H. Hall Memorial Award, the Institute's highest honor. The award honors Clark's legendary ability to focus on opportunities that capitalize on professionalism, relationships, service, leadership, commitment and finding a purpose. Clark was cited for taking risks and making a difference. Progress always involved risks throughout her illustrious career in state and local government, which included stints working in Peoria, Ariz., the State Department of Health Services as well as the state Department of Administration Procurement Office.
Clark credits “peer pressure” with pushing her to earn her first procurement certification. “I was doing it because someone else was,” she said. That first certification led to involvement in the local NIGP chapter as a way of networking and supporting the profession. “I saw the possibilities of things we could do at the local level to improve and support professionals. If I saw something that could be improved, I had a hard time letting it be. I wanted to put the effort into it to support the organization.” Clark also acknowledges an early mentor, Wayne Casper, then state procurement administrator for Arizona.
NIGP is currently accepting submissions for the 2012 Innovations Award. For more information, visit www.nigp.org/2012InnovationsAward.
About the author
Larry Anderson is the editor of Go Pro.