NASPO honors innovative state procurement programs
The National Association of State Procurement Officials (NASPO) has presented its annual George Cronin Award for Procurement Excellence to three cutting-edge state purchasing programs.
Oregon’s Department of Administrative Services State Procurement Office has received the 2009 Gold Cronin Award for Procurement Excellence for its Information Technology Managed Service Provider (IT MSP) for Hourly and Project Based Services program.
Oregon created the IT MSP initiative in 2005; it was the first of its kind in the U.S. Through it, the state contracted with a vendor to manage a pool of IT professionals that are available to state agencies for temporary work on either an hourly basis or for short-term projects. Through the IT MSP, agencies can access a pool of IT subcontractors and subconsultants at standard rates, saving time and money.
The service provider sets and monitors rates and provides online systems that streamline the contracting process, allows deliverable approvals and payment of invoices, notifies targeted businesses of opportunities, and collects performance data. The rate management strategy has reduced state costs for temporary IT projects by about 25 percent.
Dianne Lancaster, chief procurement officer for Oregon’s DAS State Services Division, told Government Product News: “In the realm of state public procurement, achieving the NASPO Cronin Gold award is a tremendous honor. The award is recognition by our peers of hard work and innovation that brings value to the whole group of states. This is because the criteria for the award isn’t just about a single state’s innovative work, it is also about the ability for other states to replicate the good idea. The innovation must be repeatable — it must bring value to all. When that value is recognized by our peers, there is no higher honor.”
Lancaster is serving as the 2009-2010 president of NASPO; she took office at Lexington, Ky.-based NASPO’s annual meeting in Lake Tahoe, Nev., last month.
NASPO presented the Silver 2009 Cronin Award for Procurement Excellence to Pennsylvania’s Department of General Services (DGS) for its Energy Strategy. As part of its award-winning energy initiative, DGS developed and implemented a total review of appropriate plans for various energy markets: liquid fuels, natural gas, electricity, green renewable energy and coal. The DGS’ strategy addresses an energy market shift from demand driven to supply driven and the projected price increases resulting from the removal of rate caps on electricity because of deregulation.
The DGS developed 10-year contracts with pre-qualified suppliers so it has flexibility to respond to market conditions. Specific approaches the DGS is using include:
- Locking in liquid fuel prices on the commodity futures market,
- Receiving electronic quotes for natural gas with both fixed and variable pricing options,
- Purchasing directly from the electric grid membership, and
- Coordinating electricity use reductions during peak periods.
Since January 2004, the Pennsylvania DGS’ Energy Strategy has generated $18.9 million in cost savings for natural gas and $1.4 million for electricity, totaling $20.3 million. In fiscal year 2009, the strategy provided a savings of $4.5 million on anthracite and bituminous coal expenditures. In addition, DGS procured green renewable energy credits equal to a growing percentage of the state’s total energy use. In fiscal year 2008, green renewable energy use equaled 30 percent. For fiscal year 2009, the percentage should rise to 40 percent, and in FY 2010 it should reach 50 percent.
New York state’s Office of General Services (OGS) won the Cronin 2009 Bronze Award for its developmental work on a fixed price aggregate natural gas contract. The initiative targeted the state’s Albany-based, dual-fuel steam facilities that provide the Empire State Plaza and Harriman Office campus with heating and cooling. The daily cost avoidance of using natural gas rather than oil saved the state $35,000 per day during the 2008-09 heating season, resulting in a savings of $1.5 million.
The Albany dual burning facilities have historically bid for an interruptible supply of natural gas, with oil as the backup during periods of unavailability. In response to increasing oil prices, OGS requested bids for either an interruptible or guaranteed supply of natural gas, with the intention of awarding the contract to the bidder who offered the best advantage to the state. Following an analysis of market trends and prices offered, the state awarded contracts that use indexed pricing and commit to a firm supply.
The contracting strategy is expected to provide avoided-cost savings of $6.1 million over the contract; or $60,000 per day in the first year and $76,000 per day in the second year based on assumed interruptions of gas for 45 days per year. The avoided cost is based on forecasted market conditions at the time of award and the differential of cost between natural gas and heating oil.
Nine states received Honorable Mentions as part of the 2009 Cronin awards program; several states received Honorable Mentions for more than one procurement initiative.
The Cronin awards program seeks to recognize outstanding public procurement initiatives and promote their adoption throughout the states. Submissions were judged against criteria including innovation, transferability, service improvement, uniqueness and originality, demonstrable cost-reduction, and the involvement of using agencies. A total of 17 submissions were received for the 2009 Cronin competition.