More Budget Plays

In states and cities around the country, elected officials are looking for budget solutions to counter soaring deficits and shrinking revenues. With crucial services at stake and often new security threats as well, citizens expect officials to make government do more with fewer resources. There is no easy solution, but a number of New Democrats are easing budget shortfalls by first taking a closer look at the way government makes its own purchases. With a sharp eye for reducing government waste and an underlying desire to get more bang for their buck, these innovators are introducing smarter methods to cut costs in government procurement.

One of the most successful methods is a modernized reverse auction. Governments have traditionally cut costs with reverse auctions by requiring vendors to bid against each other to provide large-scale services or do big government projects, like road construction or building maintenance. Innovators realized, however, that it is the little things used widely -- computer equipment, cell phones, furniture, office supplies -- that add up, so they are introducing this competitive pricing method to many more areas of government procurement.

"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." -- Delaware State Treasurer Jack Markell

In Delaware, Gov. Ruth Ann Minner and State Treasurer Jack Markell cut costs using reverse auctions conducted online. The competition compels providers to offer both lower prices and better services tailored more specifically to the public's needs. In the case of something as simple as trash liners, the state saved $94,000 on a single contract.

Another simple but still challenging cost-cutting procurement method is bulk purchasing. Delaware has demonstrated how highly organized leaders can reduce costs by combining the purchases of multiple state agencies, thereby increasing the volume and giving potential suppliers more incentive to cut their prices and win contracts from the state. To organize the purchasing needs of disparate agencies and more efficiently track spending and savings, Delaware requires that agencies detail the requests for proposals they disseminate to potential suppliers and that suppliers more fully report the services they supply. Bulk purchasing also makes it easier for officials to employ "multiple round bids," a process in which the state uses its purchasing heft to pressure vendors to lower their original selling price. Officials estimate that Delaware has saved approximately $6 million each year due to these efforts.

North Carolina Gov. Mike Easley's administration has also developed an online procurement system that offers transparency and efficiency. As of April 2008, the system has been utlized to make state government purchases totalling more than eleven million dollars, from more than 58,000 vendors.

Resources For Action

North Carolina E-Procurement at Work
http://www.ncgov.com/eprocurement/asp/
section/ep_index.asp

Additional Reading

Idea of the Week: Smart State Buying, Democratic Leadership Council, May 16, 2003
www.dlc.org/ndol_ci.cfm?contentid=251700
&kaid=131&subid=192

Jack Markell, "State Seeing Millions in Savings on Purchases," Delaware State News, April 25, 2003
www.dlc.org/ndol_ci.cfm?contentid=251540
&kaid=106&subid=122

Eileen Smith Dallabrida, "Uncle Sam's Club: State Government Uses Group Purchasing for Big Savings," Delaware Business, November/December 2002
http://www.state.de.us/treasure/uncle_sam_club.shtml

Contacts

Hon. Jack Markell
Delaware State Treasurer
Thomas Collins Building
2nd Floor, Suite 4
540 South DuPont Highway
Dover, DE 19901
(302) 744-1000
(302) 739-5635 (fax)
jmarkell@comcast.net

Paul Weinstein
Progressive Policy Institute
600 Pennsylvania Avenue, SE, Suite 400
Washington, DC 20003
(202) 547-0001
(202) 544-5014 (fax)
pweinstein@ppionline.org