Breakout Session # 1009

1. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

2. Strategic Sourcing and eProcurement - Powerful Allies for Maximizing Savings Breakout Session # 1009 Neal Morris, MyFloridaMarketPlace Project Director, Florida Department of Management Services Paul M. Lavery, Associate Partner, Accenture April 28th, 2004 10:30 – 11:30 AM NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

3. A case study of the use of Strategic Sourcing and eProcurement at the State of Florida Thesis: • Strategic Sourcing practices coupled with sophisticated procurement technology creates a powerful, high-performing engine to identify efficiencies and get the most out of competitive events in public procurement. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

4. A case study of the use of Strategic Sourcing and eProcurement at the State of Florida Case Study: • The State of Florida has combined the use of strategic sourcing best practices with a new suite of eProcurement tools that enable public procurement specialists to develop solicitations that maximize value and enhance performance for the state as a whole. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

5. Agenda • Procurement Challenges Facing the State of Florida • Overview of MyFloridaMarketPlace • Application of eProcurement Tools to Strategic Sourcing • Results achieved through Strategic Sourcing • Benefits realized by the State of Florida NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

6. Procurement Challenges Prior to MyFloridaMarketPlace • Process Challenges • Manual processes slowed responsiveness and limited competition • Poor vendor performance monitoring in place • Paper based procurement process required significant manual handling of vendor responses and manual analysis • Manual keying in of response info to enable evaluation and award • Lack of bid collaboration • Significant space needed to store vendor responses and solicitations NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

7. Procurement Challenges Prior to MyFloridaMarketPlace • Organizational Challenges • State Purchasing contained resources across 21 different job titles that were not organized by category area, resulting in multiple resources handling similar categories • Inadequate communication between State Purchasing and Agencies / Political Subdivisions • Poorly defined or generic job descriptions in place NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

8. Procurement Challenges Prior to MyFloridaMarketPlace • Spend Management Visibility Challenges • Minimal enterprise-wide spend visibility in place • Poor to non-existent item level spend data available from State systems • Customized commodity code taxonomy that was not robust or consistently applied to facilitate spend analysis • No item level visibility into significant amount of Purchasing Card spending • Difficult to monitor compliance and manage contracts to maximize savings NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

9. Overview of MyFloridaMarketPlace • Aligned with the State’s Goals • Goals/Objectives: • Implement a single, statewide eProcurement solution enabling electronic buying and selling • Aggregate all Government spending into an efficient buying channel • Leverage new technology and capitalize on best practices • Enable and facilitate the One Florida Program • Generate savings through Strategic Sourcing and process efficiencies • Supporting the Governor’s Priorities: • More effective and efficient Government that harnesses the use of technology • Running Florida Government like a Business • Enterprise-wide Initiative • Private Sector Best Practice • Diversifying Florida’s Economy / One Florida • Performance-based Measurement and Accountability • Public / Private Partnerships NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

10. Overview of MyFloridaMarketPlace • As part of Governor Bush’s vision to create a more efficient and effective government, MyFloridaMarketPlace was designed to: • Streamline interactions between vendors and with state government agencies that purchase goods and services • Automate once laborious, manual processes • Increase enterprise-wide spend visibility NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

11. Overview of MyFloridaMarketPlace • Summary of the solution • Analysis Module • Data warehouse • Supports ad-hoc reporting • Supports export to Excel or other formats • Increased spend visibility • Vendor Registration Portal • Self-service Registration • Supports CMBE tracking • Supports centralized and decentralized corporate structures MyFlorida MarketPlace • Sourcing Module • Supports multiple RFx procurement methods • Supports reverse auctions • On-line bid posting • Electronic notifications • On-line bid submission • Buyer Module • Requisition & PO functionality • Catalog functionality • Automated workflow • Real-time Encumbrance • eQuote capability • Electronic PO dispatch • On-line receipt capability • Vendor Billing Module • Calculates transaction fees • Provides vendors with billing information • Supports web viewing of bill • Supports web payment of bill • Invoicing Module • Supports eInvoicing through PO flip and through cXML interfacing • Supports electronic matching • Automated workflow • Supports audit functions • Contracts Module • Establish master agreements • Automated workflow • Tracks contract accumulators NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

12. Overview of MyFloridaMarketPlace • Where we are today • Vendors Registered: • 36,737 vendors registered in MyFloridaMarketPlace • 11,908 (32%) of vendors registered are CMBE/MBE • 18,433 (50%) registered for eQuote • Live Agencies: • approximately 3,077 users across 10 agencies • 14,500 Purchase Orders issued for $144,656,000 • Sourcing: 44 formal bid events with 24 awarded • eQuote: 663 items awarded for a total of $1,029,392 (an average of $2,482 per quote) • Contracts/Catalogs: • 1,526 Contracts Loaded • 748 Catalogs Loaded • 60,254 SKUs Loaded NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

13. Application of eProcurement Tools to Strategic Sourcing • The MyFloridaMarketPlace eProcurement Tools: • Enabled greater spend visibility • Enabled electronic responses • Enabled electronic and automatic bid tabulation • Enabled additional sourcing methods like reverse auctions • Enabled electronic contract management • Improved Sourcing business processes NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

14. State of Florida Benefits from Strategic Sourcing Best Practices and State-of-the-art Tools • The State’s major spend categories were assessed for the estimated potential for strategic sourcing savings and the relative ease of achieving the estimated savings. • Assessment factors included • Total spend • Current number of vendors • Number of affected agencies • Available savings benchmarks • Expiration dates of contracts NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

15. State of Florida Benefits from Strategic Sourcing Best Practices and State-of-the-Art Tools • The result of this assessment was an initial prioritized sequence of twenty-seven categories of potential strategic sourcing opportunities, grouped into nine waves of three each. • Each wave was estimated to require six to nine months to complete. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

16. State of Florida Benefits from Strategic Sourcing Best Practices and State-of-the-Art Tools • Wave One • First wave was launched in early 2003 and included: • Office Consumables • MRO Materials • Wave is completed and resulted in new state term contracts generating identified price reduction savings of 32% and 13% respectively. • Between the two categories, over $7.7 million of annual price reduction potential savings were identified. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

17. State of Florida Benefits from Strategic Sourcing Best Practices and State-of-the-Art Tools • Wave Two • Second wave was launched in November 2003 with cross-agency teams focusing on: • Facility Services • Uniforms & Officiers’ Equipment • Medical Supplies • All three of these categories represent opportunities to create new State Term Contracts to leverage the State’s aggregated volume to reduce total costs and streamline procurement processes. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

18. Application of eProcurement Tools to Strategic Sourcing • Office Consumables Example: • Strategic Sourcing and MyFloridaMarketPlace technologies were used to procure office supplies • The State of Florida conducted a reverse auction for the Office Consumables contract • The State of Florida secured a Term contract that enabled government agencies, public schools, universities, community colleges, and local governments to purchase supplies at an identified savings of 32% or approximately $18.2 million over three years NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

19. Strategic Sourcing Benefits Realized by the State of Florida • The Office Consumables reverse auction generated identified savings of $16.8 million Note: MM = Million NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

20. Total Estimated Strategic Sourcing Benefits • Estimated Cumulative Benefits Profile (first 3 waves) Strategic Sourcing Benefits • ‘Capture’ all State spending in one place • Leverage State’s buying power and proactively negotiate • Reduction in costs by 2-10% for addressable spend 1 1 Forrester Research 2001 survey of 30 State and Local Governments estimates a 5-15% commodity cost savings through using aggregated information to negotiate volume discounts. AMR Research Study 2002 found 10-25% savings in direct and indirect goods and services while slashing sourcing times. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

21. Additional Benefits Realized by the State of Florida • MyFloridaMarketPlace helps further the State’s goals of becoming a high performance government organization • Cost and time savings • Improved compliance • Increased spend visibility • Improved contract visibility and contract management capabilities • Shift of contract managers’ efforts away from managing processes and towards their core business NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

22. Process Savings Benefits Realized by the State of Florida • Automated transaction workflow (purchase orders, approval processes, and invoicing) • Streamline business processes eliminating unnecessary steps • Drive process efficiencies at the State and Agency level estimated at up to 50% 1 1 Aberdeen 2001 study found eProcurement resulted in a 73% reduction in purchasing transaction costs, in addition to a 70-80% reduction in purchase order processing cycles. Forrester Research 2001 survey of 30 State and Local Governments estimates a savings of greater than 50%. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

23. Additional Benefits Realized by the State of Florida • Additional Benefits Realized by State Agencies Include: • Better availability of purchasing information • Enhanced communication • Increased information in support of bid challenges • Reduced cost of goods and services • Reduced paperwork • Reduced overhead and processing costs • Faster order processing time • Improved consistency of operations • More choices for buyers NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

24. Conclusion • Strategic Sourcing best practices combined with State-of-the-Art eProcurement Tools are producing measurable benefits to the State in just over six months of production • At the time of publication, eleven agencies representing over 3000 users are: • Issuing over 500 purchase orders a week via fax or email • Over $100 million worth of orders being processed electronically since going live last July • Over $7 million in annual savings identified from first two categories in Wave one, combined with the increased access to data and less time waiting for approvals • Agencies are seeing benefits from the implementation of MyFloridaMarketPlace in a variety of fronts (process efficiencies, improved pricing, automated workflow, reduced paper, etc.) • “We love it” NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

25. Questions? NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”