The Measure of Our Success: The Challenge and Opportunity of State Procurement Measures

1. The Measure of Our Success: The Challenge and Opportunity of State Procurement Measures NASPO Annual Meeting August 30, 2005

2. Directions from the NASPO Board • Appoint a small, nimble committee to oversee the project. • As its initial task, survey our membership asking them what performance measures they use currently. • Second, prepare a paper to address the history and practices of benchmarking as well as its benefits and pitfalls. With that backdrop, the survey results will be the focus of the report to advise the membership of the performance measures being utilized now by our membership. Target = 2005 Annual Meeting.

3. Directions from the NASPO Board • Third, utilize the information collected from the membership as well as industry practices to identify and recommend a limited number of common performance measures that we might all use to benchmark our programs. Target = December 31, 2005. • Fourth, once the benchmarking measures are determined, survey the membership regarding those benchmarking measures. For states that choose to participate, the results will be compiled in summary, anonymous fashion reporting only the statistical summary, without state names. Target = June 2006.

4. Directions from the NASPO Board • Fifth, the survey will be refreshed biannually as part of the Survey of the States. Unlike the remainder of the data collected for the Survey of the State, this performance data will not be for publication.

5. The Committee • Vern Jones, Alaska • Doug Richins, Utah • Fred Springer, Florida • Kent Allen, Minnesota • Mike Smith, Illinois • Voight Shealy, South Carolina • With AMR participants, Matt Trail and Michelle Sisler

6. The Brief - • The Measure of Our Success: The Challenge and Opportunity of State Procurement Measures • Primary author, Michelle Sisler, AMR • Reviewed and approved by the committee

7. What is benchmarking? • Benchmarking is a process used in strategic management that allows you to evaluate and compare actual performance against targets or set goals throughout the cycle of a process to determine where improvement is needed. • For state procurement directors, benchmarking is a key task in becoming a procurement performance leader.

8. What is benchmarking? • In practice, benchmarking usually encompasses: • regularly measuring and comparing quantitative and qualitative aspects of performance (functions or processes) across time and/or between similar entities.

9. Characteristics of a "Good" Performance Measure • Easily understood by prospective bidder, departments and the general public • Focused on the results or desired changes and defined with a specific goal or level of performance expected • Well-defined and considers both the quantitative (how much?) and the qualitative (how well?) aspects of a service • Developed by engaging as many stakeholders as possible as early in the process as possible • Developed with a written definition and well-defined calculation on how data will be reported • Realistic in terms of available resources, funding and timeliness and recognizes externalities beyond the control of the system • Source: Commonwealth of Massachusetts, Operational Services Division (2005)

10. SMART • Specific • Measurable • Attainable • Results oriented • Time bound

11. Types of Performance Measures • Inputs (i.e., requisitions processed), • Outputs (i.e., solicitations processed), • Outcomes (i.e., percent of state term contract savings).

12. Why Benchmark? • For many states, it is becoming mandatory. Federal Reforms (i.e. A-76) and individual state legislation require most procurement programs to measure performance. • Provide a compelling argument for improving and implementing changes • Provide a strong marketing tool to encourage public support of state government. • Aid state procurement offices in preventing both internal and external outsourcing.

13. "I think we're measuring the wrong things - and taking a lots of time and resources to do it. What we need to do is figure out what's really important to our success and measure that." -- anonymous Purchasing Director (NY)

14. Benchmarking Methods • Internal Benchmarking - comparing between different departments of the same state or between functions within one department • Competitive Benchmarking - comparison between different states or more specifically, state procurement departments • Functional/Generic Benchmarking - compares the state’s practices with others considered to be best practices

15. Top Chief Procurement Officers Measures • Price negotiations • Creating leverage through combining volumes • Past-delivery performance • Monitoring of delivery performance • Requirements that suppliers have a credible quality and stress continual improvement • Department budget versus actual expenditures • Source: 1997 CAPS Research, Measures of Purchasing Effectiveness

16. Top CEO Measures • Quality of purchased items • Key supplier problems that could affect supply • Supplier delivery performance • Internal customer satisfaction • Purchase inventory dollars • Purchase cost savings • Source: 1997 CAPS Research, Measures of Purchasing Effectiveness

17. Question to be Answered • Should we benchmark what we want to benchmark for our own purposes or seek input from our CEO's and others on what they think we should benchmark?

18. Benchmarking as a Four Phase Process • Phase One - Planning • Identify customers • Identify resources • Determine the purpose of the information to be used • Determine the timeline • Determine the costs • Determine what will be benchmarked

19. Benchmarking as a Four Phase Process • Phase Two – Collecting • Create a data collection plan • First collect internal data to create a baseline to help develop the final set of measures • Research potential partners • Establish uniform collection methods

20. Benchmarking as a Four Phase Process • Phase Three – Analyze • Review and study the data • Produce a gap analysis • Identify key performance indicators • Identify opportunities for improvement • Develop improvement actions

21. Benchmarking as a Four Phase Process • Phase Four - Adapting • Monitor results and progress for continued success and identification of future opportunities • Report results and progress • Continue to gather resources when necessary • Recalibrate the measure

22. The Pitfalls • Inadequate preparation • Developing either overly simplistic (measuring the obvious) or overly complex (making the process so difficult and resource-intensive that it never gets done or never gets used). • Comparing “apples to oranges.” • Faulty interpretation of benchmarking data or, worse, the use of benchmarking data for other ends (political, “gotcha” games, etc). • Inadequate follow-through

23. Toward Common Measures • NASPO’s survey suggests that the following are just some of the processes and indicators currently being measured and benchmarked by the states: • Efficiency of the procurement process • Technical or system development • Professional development • Cost savings/cost avoidance • Economic growth and development

24. Efficiency of the Procurement Process • Processing Time for RFP, IFB, RFQ’s, etc. • Number of Commodity, Technical and Professional Service Contracts Developed/year • State Contract Lapses • Customer Satisfaction • Protest Activity

25. Technical or System Development • Website or Electronic System Functionality • Innovation – Actions Taken, Rules Promulgated to Improve Performance • Rate of Reverse Auction • Online Registered Vendors • Online Bid Responses • Contracts with Online Pricing and Ordering Capabilities

26. Professional Development • Training and Development Hours • Number of Certified Staff

27. Cost Savings/Cost Avoidance • Multi-State Contract Savings • Multiple Award Contract Savings • State Agency Usage of State-Wide Contracts • Revenue per Employee in Office Supplies and Surplus Operations • Price Benchmarking • Negotiated Savings - Offered Price vs. Negotiated Price • State P-Card Rebate and Volume of P-Card Spend

28. Economic Growth and Development • Minority and Small Business Outreach • Environmentally Preferable Contracting • Redistribution Activities (% returned to state agencies) • Customer Base Growth • Registered Vendors

29. Next Step • Utilize the information collected from the membership as well as industry practices to identify and recommend a limited number of common performance measures that we might all use to benchmark our programs. Target = December 31, 2005.

30. Conclusion: Benchmarking and the Value of Public Procurement • One of the strategic tasks for today’s public procurement officer is helping both government and citizens understand that public procurement is not a cost center, but rather, a revenue and value center for the enterprise.