ADVANCING ONE FLORIDA IN THE AGE OF STRATEGIC SOURCING Windell Paige, Director, Office of Supplier Diversity (OSD)Russ Rothman, CPPO, FCPM, Chief Purchasing Operations OfficerFlorida Government Conference, Sept. 22, 2004

Advancing One Florida in the Age of Strategic SourcingThe Associated General Contractors CaseStrategic Sourcing of State Term ContractsPre-sourcing steps related to diversitySourcing stepsPost award contractor submittalsReview, discussion, and contracting steps

The Associated General Contractors CaseBackgroundOutcomeImpact 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.

OutcomeThe Court declared s. 287.09451 Florida Statutes to be unconstitutional.The parties entered into a settlement agreement.

Impact on promoting diversityThe settlement addressed constructionThe State may conduct outreach to small & minority businessesThe State may conduct programs to educate business owners on State processesThe State may not require contractors to enter into any contract or subcontract on the basis of race or genderThe State may continue to require information on minority and women owned contractor participation

Strategic Sourcing of State Term ContractsWhat it is

CMBE Participation

Strategic Sourcing of State Term ContractsState Term Contracts share of state purchasing dollarsStrategic sourcing definedExperience 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 definedTHE 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 GOVERNORS 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 pricingSome STCs have gone to MBEs, e.g. some IT Consulting, Maintenance Repair and Operating Items (MRO), Law Enforcement and Medical SuppliesSome 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 SourcingEnhance competition & achieve economies of scale Combine, consolidate, aggregate for volume pricingReduce supplier baseWhere appropriate, establish longer term contracts.

Steps in Strategic SourcingEstablish 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 SourcingPerform 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 groupingPossible number of awardsContract lengthPrice re-determination policyType of solicitation (RFI, ITB, RFP, ITN, reverse auction)Basis of award, e.g. weights, non-price factors, points.

Steps in Strategic SourcingConduct the competitive solicitationEvaluate the responsesAward the contractEstimate savings.

Steps in Strategic SourcingCommunicate results to the contract users.Manage use of contract to minimize maverick spendingMeasure savings through life of contract

Steps in Strategic SourcingCollect 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 DiversityAdd solicitation language related to supplier diversity and other state objectivesProvide draft solicitation to OSD for suggestions and/or identification of potential W/MBE suppliers

Solicitation LanguageFollowing award, contractors are to submit plans addressing five state objectives:One FloridaEnvironmental ConsiderationsDrug Free WorkplacePurchases from a nonprofit agency for the blind or for the severely handicapped The use of prison industries in offering the items of bid.

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

One FloridaEquity 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 FloridaContractor 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 StepsAdvertise the solicitationDirectly notify W/MBEs when the solicitation is launchedConduct vendor trainingProvide a question periodConduct a pre-proposal conference

Post Award Contractor SubmittalsFollowing contract award, the State Purchasing contract manager will contact the awarded vendors to solicit their State Objectives plansAwarded contractors will submit plans within 30 days.

Reviewing Contractor ProposalsReview and become familiar with the plans submittedConsider the goals/intent in the referenced statute or other referenced source document.Consider past experience in the same type of procurement.Consider the Contractors representations.Resources: Purchasing systems, Office of Supplier DiversityDetermine 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 discussState 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/expectationsOSD will contact contractor to discuss One Florida plan and provide assistanceOSD will forward final One Florida plans to State Purchasing

Review, discussion, and contracting stepsState Purchasing will amend state term contracts as appropriate to incorporate contractor plans on State Objectives

Monitoring performanceState 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.

Any handouts? Check with Legal. Windell discuss?Need to clarify examples with analystsMake copies of scorecardDistribute a copy of the STC State Objectives language