Connecting state and local government leaders
In a guest article, the executive director of the National Association of State Procurement Officials shares how one state’s contracting improvements brought significant savings that materialized in multiple ways.
LEXINGTON, Ky. — It may sound quaint and old fashioned to some, but for state procurement officials, purchasing radios is a current and vexing problem. State entities use radios and radio networks today for many reasons, including critical emergency services, expending millions of taxpayer dollars annually to procure radio technologies.
Even in the modern age of cell phones and social networks, you wouldn’t want a firefighter texting the stationhouse if you were involved in some type of emergency.
However, buying radios and the associated equipment is a challenge for procurement departments, who must balance the needs and wants of the users—police, fire and transportation, to name a few—and the complexity of the products against the ever-present need to keep costs as low as possible.
This is exactly the situation the state of Tennessee’s Central Procurement Office found itself in several years ago, when it had multiple, short-term contracts for various types of radios and maintenance agreements at fixed, and potentially non-competitive prices. Making matters worse, the contracts were limited and generally unable to keep pace with the dynamic radio market.
So, Tennessee officials created a new procurement process for radios that included several areas of innovation:
- Three basic radios and maintenance contracts were consolidated into a single comprehensive contract covering all radio equipment, associated services, maintenance, infrastructure and test equipment;
- Both manufacturers and dealers were allowed to offer product lines, thereby improving pricing through competition, while also ensuring end-user needs were met through -expanding the product lines offered;
- A second-tier bidding process allowed contracted vendors to compete on specific orders as needs were identified;
- A flexible contract vehicle meant that new technologies or innovation in the radio market need not result in contract amendments;
- Contract management issues were improved through the development of new key performance indicators (KPIs);
- Asset management issues were improved through a new vendor-supported asset tagging program; and
- Significant contract savings were achieved, including an 11 percent discount over previous pricing, and additional discounts through continual pricing negotiations.
These changes were accomplished due to the procurement staff’s recognition that more vendor engagement was needed if this contract was to maintain its utility over multiple years. The central procurement office established a broad-based stakeholder committee and ensured vendor input in the development of the specifications. The meetings that ensued with the vendor community were crucial in avoiding too-narrow specifications, maximizing vendor participation and competition, while still allowing agencies to meet their needs.
Broad vendor participation helped isolate true sole-source needs—something not uncommon in the radio space—from simple end-user preference. The second-tier bidding process helps ensure that the detailed requirements inherent in each unique purchasing event are viewed by the entire vendor community, driving competition and lowering prices.
As a result of this process, many key service issues were resolved, as well. For example, one of the most important KPIs is the Warranty Expiration Report, which gives contract users a quarterly status update on when warranties, whether basic or extended, expire.
Through these contract improvements, significant savings materialized in multiple ways. Tennessee has saved nearly $2.4 million to date due to additional negotiations on large dollar purchases allowed by the contract. Similarly, among “apples to apples” product comparisons, the contract has yielded an 11 percent reduction on historical prices and contract structural improvements have resulted in dramatic time reductions associated with contract use.
The innovations employed by the state of Tennessee were honored recently by the National Association of State Procurement Officials (NASPO), as the Gold Award Winner in its George Cronin Awards for Procurement Excellence.
For more information about the Cronin Awards, to see previous winners and to enter your state’s innovative procurement practice in the competition, visit NASPO.
DeLaine Bender is the Executive Director of the National Association of State Procurement Officials, which is based in Lexington, Kentucky.