Evolution of Public Purchasing in Florida: Challenges and Trends

1. State Purchasing Public Purchasing in Florida Purchasing Organization September 14, 2005

2. Public Purchasing in Florida Purchasing Organization - Agenda • Welcome / Session Overview • Challenges and Trends • Florida’s Back Office • Evolution of State Purchasing • State Purchasing’s Role • Questions • More Information

3. Objectives Increase Understanding of … • Challenges and trends in organizational theory, particularly government • Organization of Florida government, particularly the “back office” • Changes in State Purchasing over the past decade • Organization, powers, purpose, and functions of State Purchasing

4. Public Purchasing in Florida Purchasing Organization - Agenda • Welcome / Session Overview • Challenges and Trends • Florida’s Back Office • Evolution of State Purchasing • State Purchasing’s Role • Questions • More Information

5. Ageless ChallengesKing of Prussia (1740) He did not altogether approve of the administrative system that he inherited. From the beginning he correctly identified it as a bureaucratic machine whose ministers and officials were far too restrictive and unimaginative, bogged down in minutiae, caring only for personal comforts and advancement, dissolute and corrupt, frequently no more than indolent, careless “idiots” whose irresponsible actions daily alienated subjects, who formed the true wealth of the kingdom.

6. Ageless Challenges Sound Familiar? A hundred people can veto a project but no one person or office can move it forward

7. Ageless ChallengesSo What’s the Solution? Should government be run like a business?

8. Ageless ChallengesOur Government System • “We have consciously designed an inefficient government, to keep man free” – James Madison • The cost of preventing tyranny was a fragmented, separated government system in which everyone seems to check everyone else

9. Ageless ChallengesJ.H. Newman (1855) A government is [people’s] natural foe; they cannot do without it altogether, but they will have as little of it as they can. They will forbid the concentration of power; they will multiply its seats, complicate its acts, and make it safe by making it inefficient. They will take care that it is the worst-worked of all the many organizations which are found in their country. As despotisms tend to keep their subjects in ignorance, lest they should rebel, so will a free people maim and cripple their government, lest it should tyrannize.

10. How Does this Apply to Purchasing?What Are Our Objectives? • Economy (good prices)

11. How Does this Apply to Purchasing?What Are Our Objectives? • Economy (good prices) • Openness • Fairness • Accountability

12. Current TrendsDoing Well Despite Constraints • Government can be more businesslike. Separation of powers is no excuse for… • Shoddy quality • Low productivity • Inattention to result • Fiscal irresponsibility • Non-responsiveness

13. Recent DevelopmentsPrivate Sector Practices and Influences • In Search of Excellence: Lessons from America’s Best Run Companies (1982) • Reinventing Government: How the Entrepreneurial Spirit Is Transforming the Public Sector (1992) • Banishing Bureaucracy: The Five Strategies for Reinventing Government (1997) • Good to Great: Why Some Companies Make the Leap and Others Don’t (2001)

14. Recent DevelopmentsFederal Law Changes • Government Performance and Results Act of 1993 • National Performance Review, Reinventing Federal Procurement (1993) • “Section 800 Panel,” Streamlining Defense Acquisition Laws: Report of the Advisory Law Panel (1993) • Federal Acquisition Streamlining Act of 1994 • Clinger-Cohen Act of 1996 • Federal Acquisition Regulation (FAR) rewrite (1997) • Federal Activities Inventory Reform (FAIR) Act of 1998 • President’s Management Agenda (FY 02) • Services Acquisition Reform Act of 2003

15. FAR 1.102(b)Federal System Objectives • Satisfy the customer in terms of cost, quality, and timeliness of the delivered product or service by, for example – (i) Maximizing the use of commercial products and services; (ii) Using contractors who have a track record of successful past performance or who demonstrate a current superior ability to perform; and (iii) Promoting competition; (2) Minimize administrative operating costs; (3) Conduct business with integrity, fairness, and openness; and (4) Fulfill public policy objectives.

16. Recent Federal DevelopmentsPMA Excerpts “Government likes to begin things – to declare grand new programs and causes. But good beginnings are not the measure of success. What matters in the end is completion. Performance. Results. Not just making promises, but making good on promises. “[T]here is an understandable temptation to ignore management reforms in favor of new policies and programs. However, what matters most is performance and results. In the long term, there are few items more urgent than ensuring that the federal government is well run and results oriented.”

17. Recent Federal DevelopmentsPMA Excerpts Government should be: • Citizen-centered, not bureaucracy-centered • Results-oriented • Market-based, actively promoting rather than stifling innovation through competition

18. Public Purchasing in Florida Purchasing Organization - Agenda • Welcome / Session Overview • Challenges and Trends • Florida’s Back Office • Evolution of State Purchasing • State Purchasing’s Role • Questions • More Information

19. Florida’s Back OfficeWhat Are We Talking About? Back Office (general management): the administrative staff of a company who do not have face-to-face contact with the company’s customers

20. State Financial InformationFiscal Year Ended 6/30/03 • $48.3 billion in expenses • We’d be 25th on the Fortune 500 list • Bank of America is just ahead of us • Just behind us are Pfizer, JP Morgan Chase, Time Warner, and Proctor & Gamble

21. How Does Purchasing Fit?

22. Florida Financial Management Information SystemPurposes (§ 215.91, F.S.) • Primary means by which state government managers acquire and disseminate the information needed to plan and account for the delivery of services to the citizens in a timely, efficient, and effective manner. • Coordinate fiscal management information and information that supports state planning, policy development, management, evaluation, and performance monitoring. • Primary information resource that provides accountability for public funds, resources, and activities.

23. FFMISInformation Subsystems • Planning and Budgeting (EOG) • Accounting (DFS) • Cash Management (DFS) • Purchasing (DMS) • Personnel (DMS)

24. Pre-FFMIS Subsystem Challenges • Lack of standards among subsystems • Lack of complete and efficient integration • Duplication of data input and maintenance • Insufficient management information to support decision making • Incomplete reporting capabilities • Lack of single chart of accounts • Complex external interfaces • High maintenance and modification costs • Inconsistent data

25. FFMISOverview of Major Initiatives Human Resources – People First DMS working with Convergys/SAP to modernize the personnel system, leave and attendance and benefits management (http://dms.myflorida.com/workforce/people_first_initiative) Purchasing – MyFloridaMarketPlace DMS working with Accenture/Ariba to integrate purchasing activities for all State buyers and for vendors doing business with the State (http://marketplace.myflorida.com) Financial Management – Aspire DFS working with Bearing Point/PeopleSoft to replace the legacy accounting and financial system (FLAIR) with an integrated enterprise resource planning system (http://aspire.dfs.state.fl.us)

26. Pre-FFMISPurchasing Systems Manual Vendor Bid Agency Process for System contract Matching system (Bidding) Agency contract SPURS system View SPURS Web-based (Reporting) Registration (Purchasing) Agency contract system Agency Manual contract Process for system FLAIR Invoicing Agency contract system

27. Registration Purchasing Bidding Contracts Invoicing Matching Reporting FFMISPurchasing Subsystem Goals FLAIR / Aspire

28. MyFloridaMarketPlace System Functions Initial Users - Pilots Eligible Users - Other State Agency State Term Contract Vendors Minority Businesses MyFloridaMarketPlace Users Initial Users - Exec Agencies Eligible Users – Univ, City, County Agency/ Dept. Contract Vendors Small Businesses General Public Buyers Vendors Buyer Tools Vendor Tools • Vendor search • State term contract items • Requisitions/Purchase orders • Online workflow approvals • Informal solicitation (quotes < $25,000) • Sealed bids (ITN, ITB, RFx > $25,000, auctions, reverse auctions) • Receipt of Goods • P-Card • Contract development and administration • Reports • Self registration • E-mail notification of formal and informal solicitations • Online quoting on informal solicitations (< $25,000) • Online submission of sealed bids (> $25,000) • Electronic purchase order receipt • Electronic submission of invoices • Catalog creation and updates for State term contracts • Reports “I want to buy” “I want to sell” Business Support and Operations • Buyer Help Desk • Vendor Help Desk • Strategic Sourcing • Procurement Assistance • Catalog Enablement • Training and Education

29. Public Purchasing in Florida Purchasing Organization - Agenda • Welcome / Session Overview • Challenges and Trends • Florida’s Back Office • Evolution of State Purchasing • State Purchasing’s Role • Questions • More Information

30. Evolution of State PurchasingWhat We Looked Like 10 Years Ago… • 100 Employees • Director’s Office • Bureau of Standards • Bureau of Procurement • SPURS

31. Evolution of State Purchasing What We DID 10 years ago… • Spec-based contracts • Contracted for agency specific goods & services • Supported agency purchases through SPURS • Utilized ITB as primary solicitation process • Produced and distributed all information on paper

32. Evolution of State Purchasing High Level Changes Affecting Us • Internet • Shrinking State Budget • Administrative Transitions

33. Evolution of State Purchasing What We Look Like Today… • 41 Employees • Director/Operations • Two Bureaus of Buyers (state term contracts) • MyFloridaMarketPlace • State Purchasing Agreements (SPA)

34. Evolution of State Purchasing Our Functions/Focus Points Today… • No more paper! • High-level strategic sourcing • Training • Customer Service • Performance Objectives

35. Public Purchasing in Florida Purchasing Organization - Agenda • Welcome / Session Overview • Challenges and Trends • Florida’s Back Office • Evolution of State Purchasing • State Purchasing’s Role • Questions • More Information

36. State Purchasing Our Mission To deliver innovative, resource-saving purchasing services in order to provide effective program support to all state agencies.

37. State PurchasingDMS Purpose and Powers 287.032, F.S. Purpose of the department (1) To promote efficiency, economy, and the conservation of energy and to effect coordination in the purchase of commodities and contractual services for the state. (2) To provide uniform commodity and contractual service procurement policies, rules, procedures, and forms for use by agencies and eligible users. 287.042, F.S.Power, duties, and functions

38. State PurchasingDMS/Agency Relationship • 287.042, F.S.Power, duties, and functions • (1)(a) To contract for … all commodities and contractual services required by any agency under this chapter • (6)(a) To govern the purchase by any agency of any commodity or contractual service and to establish standards and specifications for any commodity. • (6)(b) Except for the purchase of insurance, [DMS] may delegate to agencies the authority for the procurement of and contracting for commodities or contractual services. • Rule 60A-1.002(d) – Conditional delegation of authority to agencies (except insurance)

39. Putting Procurement in Context Lifecycle of Spend • Minimize cost to track and transmit orders to suppliers • Capture company-wide spend • Adequate data integrity • Identify & monitor savings • Measure ROI of procurement • Fulfill reporting requirements • Apply negotiated pricing & terms • Track supplier performance ratings • Track rebate and volume agreement compliance • Manage contract renewals • Capture early payment discounts • Timely capture of payments information Planning & Analysis Source Contract Req’n Order Interact & Receive Invoice Payment • Standardized sourcing processes • Deep commodity & market knowledge • Disseminate best practices • Optimal pricing & terms • Decrease time and cost of complex negotiation • Facilitate multiple collaboration across the organization • Enforce compliance with contract pricing • Minimize time and cost to requisition, approve, receive & reconcile invoices • Automate payment and link P.O. to payment authorization in one record (Ariba Buyer)

40. Develop Selection Factors & Screen Vendors Profile Internally & Externally Prepare Value Proposition & Award Kick - - Off Screen Screen Shape & Shape & Conduct Competitive Event Kick-Off & Assess Opportunities Profile Profile Conduct Conduct Develop Strategy Implement Agreements Develop Develop & Suppliers & Suppliers & Negotiate Negotiate Implement Internally & Internally & Auctions & Auctions & Strategy Strategy Selection Selection Assess Value Value Agreements Externally Externally Opportunities Factors Factors Propositions Propositions Putting Procurement in ContextThe Sourcing Process Develop Value Proposition Around Options Prepare Fact Prepare Fact - - Level High High - - Fast Track to Value Fast Track to Value Fast Track to Value Measure Measure Measure Based Based Data Data Complete Complete Complete Results Results Results Negotiation Negotiation Collection & Collection & ITB/ITN/ RFQ/RFP & Trends & Trends & Trends Build Build Build “Packages” “Packages” Analysis Analysis Build Total Build Total Build Total Validate & Validate & Validate & Supplier Supplier Vendor Key Worksteps - and / or - Cost of Cost of Cost of Profile Profile Profile Selection Selection Selection Ownership Ownership Ownership Segment Segment Make Award Decision Category Category Category Decision Decision Decision Negotiate Negotiate Model Model Model Purchases Purchases Develop Develop Develop Vendors Matrix Matrix Matrix Value Value Conduct Conduct Conduct Propositions Propositions Form Form Auctions Auctions Auctions Conduct Conduct Conduct Develop Develop Develop Conduct Conduct Conduct Cross- Cross - Industry Industry Industry Category Category Category Supplier Supplier Vendor Functional Functional Analysis Analysis Analysis Strategy Strategy Strategy Analysis Analysis Analysis Sourcing Sourcing Teams Teams Value Propositions Benefits Category Profile TCO Model In-Scope Categories Selection Decision Matrix ITB/ITN/RFQ/RFP Typical Deliverables Realization Industry Profile Category Continual Vendor Improvement Strategy Auctions Award Decision (ITA) CFSTs (Cross-Functional Sourcing Teams)

41. Leverage State-Wide Volume Obtain Best Prices & Value Obtain State-Wide Savings Reduce State-Wide Supply Base Identify New STC Opportunities Increase Demand / Volume on STCs Manage Compliance State PurchasingStrategic Sourcing/State Term Contracts Strategic sourcing is a proactive process to leverage demand and select vendors that offer the best value.

42. Governor’s Center for Efficient GovernmentProject Gate Management Process (Pre-7/05) Current Projects Gate 1 Gate 2 Gate 3 Gate 4 Business Case Procurement Contract Management Change Management Post Implementation Monitor Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 New Projects

43. Public Purchasing in Florida Purchasing Organization - Agenda • Welcome / Session Overview • Challenges and Trends • Florida’s Back Office • Evolution of State Purchasing • State Purchasing’s Role • Questions • More Information

44. Public Purchasing in Florida Purchasing Organization - Agenda • Welcome / Session Overview • Challenges and Trends • Florida’s Back Office • Evolution of State Purchasing • State Purchasing’s Role • Questions • More Information

45. More Information State Purchasing’s website: http://dms.myflorida.com/purchasing