ADVANCING ONE FLORIDA IN THE AGE OF STRATEGIC SOURCING

Windell Paige, Director, Office of Supplier Diversity (OSD)

Russ Rothman, CPPO, FCPM, Chief Purchasing Operations Officer

Florida Government Conference, Sept. 22, 2004

Advancing One Florida in the Age of Strategic Sourcing The Associated General Contractors Case Strategic Sourcing of State Term

Contracts Pre-sourcing steps related to diversity Sourcing steps Post award contractor submittals Review, discussion, and contracting steps

The Associated General Contractors Case

Background Outcome Impact on promoting diversity

Background

Associated General Contractors and South Florida Chapter of AGC brought suit in Federal District Court in 2003 contending that the CMBE numeric goals in s.287.09451 FS were a violation of the Equal Protection Clause of the Fourteenth Amendment of the Constitution, instituting race and gender preferences.

Outcome

The Court declared s. 287.09451 Florida Statutes to be unconstitutional.

The parties entered into a settlement agreement.

Impact on promoting diversity The settlement addressed construction The State may conduct outreach to small &

minority businesses The State may conduct programs to educate

business owners on State processes The State may not require contractors to enter

into any contract or subcontract on the basis of race or gender

The State may continue to require information on minority and women owned contractor participation

Strategic Sourcing of State Term Contracts

What it is

CMBE Participation

Strategic Sourcing of State Term Contracts

State Term Contracts share of state purchasing dollars

Strategic sourcing defined Experience with Certified Minority

Business Enterprises

State Term Contracts (STCs) Share of State Purchasing Dollars

Last year, State Term Contracts accounted for $417 million of the total $1.2 billion in purchase orders issued, which is one third of total purchase order spending.

Strategic sourcing defined

THE OBJECTIVE: DRIVE DOWN THE COST OF PURCHASED COMMODITIES AND SERVICES AS A STRATEGY FOR IMPROVING THE FINANCIAL HEALTH OF THE STATE, AND FREEING RESOURCES TO BE APPLIED TOWARD ACHIEVING THE GOVERNOR’S OBJECTIVES.

SOMETIMES REFERRED TO AS “SPEND MANAGEMENT.”

Experience with Certified Minority Business Enterprises (MBEs) Most larger state term contracts have gone to

larger suppliers with better pricing Some STCs have gone to MBEs, e.g. some IT

Consulting, Maintenance Repair and Operating Items (MRO), Law Enforcement and Medical Supplies

Some non-W/MBE firms use W/MBE suppliers and subs

Steps in Strategic Sourcing

Identify the largest expenditures for commodities and services.

Collect data from the state accounting and purchasing systems.

Steps in Strategic Sourcing

Establish an order for moving forward on the various spending categories based upon estimates of potential savings and ease of achievement.

First strategic sourcings launched, office supplies and MRO.

Steps in Strategic Sourcing

Enhance competition & achieve economies of scale

a) Combine, consolidate, aggregate for volume pricing

b) Reduce supplier base

c) Where appropriate, establish longer term contracts.

Steps in Strategic Sourcing

Establish a team of purchasing experts and large users of the items of contract for each strategic sourcing effort.

Perform “internal profile,” i.e. Analyze needs based on past experience and discussion of plans and trends. Use data bases, surveys, discussions.

Steps in Strategic Sourcing

Perform “external profile,” i.e. analyze market forces, trends and players based on past experience, market information from the web & other sources, and surveys of and discussions with current vendors.

Steps in Strategic SourcingDevelop sourcing strategy.• Items and grouping• Possible number of awards• Contract length• Price re-determination policy• Type of solicitation (RFI, ITB,

RFP, ITN, reverse auction)• Basis of award, e.g. weights,

non-price factors, points.

Steps in Strategic Sourcing

Conduct the competitive solicitation

Evaluate the responses Award the contract Estimate savings.

Steps in Strategic Sourcing

Communicate results to the contract users.

Manage use of contract to minimize “maverick” spending

Measure savings through life of contract

Steps in Strategic Sourcing

Collect usage data through life of contract for use in next round of strategic sourcing (data to be used in next round of spend analysis and internal & external profiles)

Pre-sourcing Steps Related to Diversity

Add solicitation language related to supplier diversity and other state objectives

Provide draft solicitation to OSD for suggestions and/or identification of potential W/MBE suppliers

Solicitation Language

Following award, contractors are to submit plans addressing five state objectives:

1. One Florida

2. Environmental Considerations

3. Drug Free Workplace

4. Purchases from a nonprofit agency for the blind or for the severely handicapped

5. The use of prison industries in offering the items of bid.

One Florida

The Contractor shall submit documentation addressing the Governor’s One Florida Initiative and describing the efforts being made to encourage the participation of small and minority and women-owned businesses

One Florida

Equity in Contracting documentation should identify any participation by diverse contractors and suppliers as prime contractors, sub-contractors, vendors, resellers, distributors, or such other participation as the parties may agree.

One Florida

Contractor shall report spending with certified and other minority business enterprises quarterly and include the amount paid to each minority vendor on behalf of each purchasing agency

Sourcing Steps

Advertise the solicitation Directly notify W/MBEs when the

solicitation is launched Conduct vendor training Provide a question period Conduct a pre-proposal conference

Post Award Contractor Submittals Following contract award, the State

Purchasing contract manager will contact the awarded vendors to solicit their State Objectives plans

Awarded contractors will submit plans within 30 days.

Reviewing Contractor Proposals Review and become familiar with the plans

submitted Consider the goals/intent in the referenced

statute or other referenced source document. Consider past experience in the same type of

procurement. Consider the Contractor’s representations. Resources: Purchasing systems, Office of

Supplier Diversity Determine reasonableness of the proposed

plan

Review, Discussion, and Contracting Steps State Purchasing contract managers

will review plans on Drug Free Workplace, PRIDE, RESPECT and Recycling issues, and contact vendors as appropriate to discuss

State Purchasing contract managers will forward contractor One Florida plans to OSD

Review, discussion, and contracting steps OSD will review market conditions and

establish One Florida goals/expectations

OSD will contact contractor to discuss One Florida plan and provide assistance

OSD will forward final One Florida plans to State Purchasing

Review, discussion, and contracting steps

State Purchasing will amend state term contracts as appropriate to incorporate contractor plans on State Objectives

Monitoring performance

State Purchasing contract managers will collect quarterly contractor performance reports related to the One Florida Initiative, and submit them to OSD for collection of W/MBE spending data.