In her recent budget address to the Delaware General Assembly, Governor Minner explained the need to cut expenses and raise revenues in order to fix a $300 million structural deficit.
The Governor's decision to reengineer existing programs is important because it can save the state money will also improving state government.
Over the last year, the state has become a leader in government re-engineering. One area is managing its cost of purchased goods. Other states, including Virginia, are aware of Delaware's early successes and are following our lead.
What is this procurement reform effort all about? Quite simply, it's about paying less for goods of equal quality. Wouldn't your family make a similar decision?
Just a few months into the effort, the state has realized actual savings of more than $1 million on purchases of $6 million. We expect annual savings of several million dollars per year across 14 categories, including office supplies, personal computers, uniforms, lab supplies and copiers. These savings result not from purchasing goods of lower quality but rather from negotiating more favorable rates for goods of the same quality and better coordinating the purchasing across the state's many agencies and school districts. In fact, in many cases, we are purchasing the same products, but for less money.
We often end up using the same suppliers. Governor Minner is committed to using Delaware vendors, as well as women- and minority-owned businesses whenever possible. In fact, of the 14 categories we have completed, six involved incumbent in-state suppliers, with nine Delaware vendors in all. In these categories, Delaware suppliers will continue to represent a similar portion of sales to the state.
In the case of cellular phones, for example, the state will save approximately $600,000 per year (more than 40% of our spending). We have reduced the number of rate plans from more than 80 to fewer than 30 and we also negotiated lower rates. There is no loss of coverage or quality and there has been no change in supplier.
How has the state improved its purchasing? It's not rocket science, but it's also not by doing business as usual. We're following practices used in the private sector.
Combining the purchases of state agencies is but one component of the state's program. Obviously, buying in bulk can save money because it allows suppliers to increase their discounts, but there is far more to our approach. For example, we have augmented the universe of qualified suppliers in order to increase competition in the bidding process.
In addition to moving to highly detailed requests for proposal, we have expanded and improved the reporting requirements of the suppliers, which will allow us more effectively to monitor and track spending and saving. It will also help the state develop optimal specifications for bidding in the future.
We also have migrated to "multiple round bids". That means we don't necessarily accept the first bids that vendors make. After analyzing the data, we ask them to reconsider their pricing in the state's favor and provide volume rebates and other kinds of discounts. When appropriate, we also will capitalize on new technologies to conduct reverse on-line auctions, where vendors bid against each other to win the state's business. In the case of trash liners, the state saved an incremental 8% on purchases of about $300,000 annually thanks to a reverse auction. And that's for a product that gets thrown right into the garbage!
The next phase of procurement reform is managing demand through the enforcement of "right specifications". That means purchasers of personal computers will have a limited set of configurations from which to choose. Unless their job demands it, expensive bells and whistles will not be allowed. Similar opportunities exist in the area of furniture and office supplies, among many others.
"Doing more with less" has been a frequent call of government reform experts throughout the country. Here in Delaware, we're actually doing it. As the Governor noted in her budget address, she is committed to working on ways to make government as effective and efficient as possible. Delaware is on the right track and setting an example for other states across the nation.
