NEW YORK STATE PROCUREMENT TRANSFORMATION PROJECT:
STRATEGIC SOURCING |
| A Message from RoAnn Destito, OGS Commissioner |
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Since taking office, Governor Cuomo has committed his administration to implementing enterprise-wide changes that will utilize modern business practices in running New York State government. New Yorkers need a government in which they can take pride, and this comprehensive overhaul of operations will help accomplish that goal. One cornerstone of this bold new direction is the strategic sourcing initiative that will harness the buying power of the state in a way that has never been done before. Work is already underway and it is clear that the changes will benefit the bottom line, those who do business with the state, and our citizens. To learn more about strategic sourcing, please review the strategic sourcing frequently asked questions below.
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| Information Technology Vendor Communication |
Members of the Information Technology (IT) vendor community who would like to discuss IT procurement issues, should review a document recently posted in the New York State Contract Reporter and click on the link that says Transforming New York's Information Technology Environment. Questions regarding IT procurement should be directed to nysvendors@budget.ny.org
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| FREQUENTLY ASKED QUESTIONS |
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What is the NYS Procurement Transformation Project? |
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Governor Cuomo asked the Division of the Budget to identify opportunities for enterprise-wide efforts to reduce spending and increase efficiencies across the State. Reducing the cost of purchased goods and services is a key factor in this effort. The Division of the Budget issued an RFP to engage a firm experienced in strategic sourcing and other procurement-related activities and contracted with Accenture to assist the State in identifying and adopting leading procurement practices to achieve savings. |
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What is strategic sourcing? |
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Strategic sourcing is a procurement approach that utilizes a structured, market-based process to gather data, conduct quantitative analysis and apply expert qualitative judgments to secure the best value in purchasing. Each sourcing project is unique, depending on the good or service and while the primary goal is to achieve cost savings, a total cost of ownership (TCO) methodology is applied which takes into consideration other factors. Savings are achieved by identifying and establishing the best ways to use goods or services, and by leveraging the State's substantial buying power.
To date, Accenture has made significant progress in reviewing the State's procurement function and benchmarking it against leading industry practices. Additionally, Accenture has analyzed 12 months of State spending on goods and services. Over the next 12 to 24 months, Accenture will be working closely with a team of State staff to implement two to four waves of strategic sourcing projects. Each sourcing project will focus on a specific category of goods or services. |
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How is strategic sourcing different from conventional purchasing? |
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Strategic sourcing and the TCO methodology expand on traditional sourcing by taking into account additional cost and quality factors in order to secure contracts which best fit the particular needs of the State. A strategic sourcing project includes the development of a category strategy to identify usage patterns and needs, including best practices. The category is then sourced with the intent of best meeting the needs identified. The TCO methodology examines a broad spectrum of cost drivers, including, but not limited to: useful life, transportation and maintenance costs, energy efficiencies, etc. which may be incorporated in the evaluation of the good or service being procured. |
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Why is the State undertaking a strategic sourcing effort? |
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Governor Cuomo is working to lower the cost of government services and increase efficiencies throughout state operations. As part of this enterprise-wide initiative, it is imperative that the State ensures that its procurement practices result in the purchase of the best goods and services for the best value. While current centralized State procurement contracts offer discounts, the State has the ability to further leverage its buying power. Strategic sourcing has been used across the public and private sectors as a tool to reduce costs and better manage spending. |
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How has strategic sourcing made a difference in other states? |
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A number of state governments have recently undergone similar strategic sourcing programs, including Pennsylvania, Florida and Iowa. For example, using strategic sourcing, Pennsylvania has saved $370 million (source: 2009-2010 Report on State Performance, published by Pennsylvania, page 145). Additionally, Pennsylvania-based firms did better under strategic sourcing, with 35 percent of all strategically sourced vendors being Pennsylvania-based businesses, compared to 29 percent pre-strategic sourcing. Minority and Women Business Enterprises also fared well under the strategic sourcing initiative; with 20 percent of the annual spend for the initial strategically sourced contracts going to MWBE firms, compared to less than 10 percent for non-strategically sourced contracts. While the number of small business vendors under contract with the Commonwealth has decreased under strategic sourcing, many of these vendors did relatively little business (under $1,000 annually) with the Commonwealth, and therefore may not have been substantially impacted by this change. |
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What is in scope for the strategic sourcing project? |
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In order to fully examine all potential savings and spend management opportunities, Accenture, in partnership with the Division of the Budget and State agency staff, will continue to review and analyze third party spend within Executive State agencies. This spending will continue to be categorized by good or service and prioritized for strategic sourcing implementation based on savings potential, ease of implementation, and other factors such as statutory limitations. While the Executive Agencies are the primary focus of this effort, other entities will be able to utilize the procurement vehicles to the extent authorized by statute. |
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Who will be working on the strategic sourcing project? |
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A team of State agency staff will work side-by-side with Accenture to execute each strategic sourcing project. Accenture will transfer knowledge to the State agency staff selected for the strategic sourcing team to ensure that the State has the necessary knowledge and expertise to use the strategic sourcing methodology long after the Accenture engagement concludes. |
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Who will oversee the strategic sourcing team? |
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The State and Accenture strategic sourcing team members will report to the Executive Chamber through the Division of the Budget, and be housed within the Office of General Services. |
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Is input from the supplier community being gathered? |
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The Procurement Transformation project sent an online survey to selected high-spend suppliers who currently contract with the State to gather their impressions and feedback on doing business with the State. The project will continue to engage the supplier community throughout the process. |
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How will suppliers be chosen under strategic sourcing? |
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All suppliers will be chosen through procurement processes permissible by State Finance Law and other relevant statutes. |
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How are Minority, Women-Owned Business Enterprises (MWBE) and small businesses being considered? |
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Strategic sourcing and increased MWBE and small business participation are not mutually exclusive activities. In fact, MWBE and other small business strategies will be key considerations in this initiative. The project will work with participating State agencies to help them increase MWBE and small business participation in line with the current State goals, while achieving savings through strategic sourcing efforts. |
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How are Preferred Sources being considered or affected? |
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Preferred Sources will continue to be given preference in the procurement process as defined within State Finance Law. |
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What will happen to existing contracts? |
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For goods and services that are targeted for strategic sourcing, existing contracts will be allowed to expire. This will be done in a way as to not lose coverage for State agencies and other users, but option years and long-term renewals will not be exercised during this process. Each sourcing project will be sourced competitively, and the new awarded supplier(s) will become required sources. During the sourcing process, however, agencies may continue to buy from existing suppliers as necessary. |
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How will State agency staff purchase goods and services during the strategic sourcing effort? |
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Purchases that are necessary for the mission of the agency will continue. However, for goods and services that are targeted for strategic sourcing, any purchases that can be delayed until a new agreement is in place should be postponed until that time. |
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How is Accenture getting paid? |
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After conducting a competitive procurement, the Division of the Budget contracted with Accenture to assist the State in identifying and adopting leading procurement practices to achieve savings. The agreement between DOB and Accenture is a deliverable-based contract that requires payment to Accenture based on work completed and accepted by the State. Payment is calculated using Accenture hours worked and hourly rates, up to a capped payment level. Accenture's payment is not based on a percentage of savings achieved. |
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Who can I contact if I have additional questions? |
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All questions concerning Information Technology (IT) contracts and requests for IT vendor meetings should be sent directly to nysvendors@budget.ny.gov. All other questions or comments should be sent to NYSProcurement@budget.state.ny.us |
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