purchasing directors’ meeting july 10, 2003 3:30 p.m

Purchasing Directors’ Meeting

July 10, 20033:30 P.M.

State Purchasing

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Purchasing Directors’ Meeting Purchasing Directors’ Meeting July 8, 2003 Agenda July 8, 2003 Agenda

Welcome / Meeting Overview

Excellence in Contracting Audit Report

DMS/State Purchasing Mission

MyFloridaMarketPlace Overview

State Purchasing Reorganization

Strategic Sourcing

Operational Issues

Open Floor / New Issues

Next Meeting Location / Time

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Welcome / Overview of Today’s Session





Strategic Sourcing

Operational Issues




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• Propose legislative and administrative changes to address inadequacies and inconsistencies.

• DMS should accept and implement the leadership role required by Florida Statute– develop formal procedures for needs assessments, standard formats for

contracts – foster user groups to share best practices and common problems.

• Undertake a statewide training initiative, and include incentives to encourage professionalism and certification.

• Create a uniform vendor rating system to include links to websites, closeout evaluations, and a method for other agencies to access performance evaluations.

• Propose legislation to enact a law similar to the federal Truth in Negotiating Act. This will help level the playing field between state negotiators and private contractors.

Purchasing Directors’ Meeting Purchasing Directors’ Meeting Excellence In Contracting Audit Report Excellence In Contracting Audit Report

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Strategic Sourcing

Operational Issues



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DMS Mission

To become a customer focused agency providing effective and efficient services in order to better enable state agencies and employees to deliver the Governor’s priorities to the people of Florida.

State Purchasing Mission

To gladly deliver useful and innovative purchasing services in order to become a customer focused agency providing effective and efficient customer services.

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State Purchasing Mission Goals (Measures)

• Purchasing statutes and rules improved before May 2004

• Recruit at least four employees highly esteemed by their peers before October 2003, and reduce annual turnover by 50%

• Increase customer satisfaction by at least 15% before January 2004

• Successful delivery of innovative purchasing solution that reduces costs and saves time – MyFloridaMarketPlace adopted by all initial users before July 2004

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State Purchasing Mission Tasks

• Amend purchasing statutes• Amend purchasing rules• Improve contract management• Reorganize division• Deliver state term contracts that provide the right

commodities and services at lower cost• Consolidate purchasing into MFMP• Training for division• DMS customer satisfaction survey• Support Facilities’ ITNs

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Strategic Sourcing

Operational Issues



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The Really Big ContextWhat Has DMS Been Doing?

• I appoint you over nations and kingdoms to uproot and tear down, to destroy and overthrow, to build and to plant.

• There is a time for everything … a time to tear down and a time to build.

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Context of MyFloridaMarketPlaceModernization of State Management

Stand-alone legacy management information systems

• LAS/PBS (Budgeting)

• FLAIR (Accounting)

• COPES (Personnel and Payroll)

• SPURS (Purchasing)

• CMS (Cash Management)

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Context of MyFloridaMarketPlacePre-Modernization Challenges

• Lack of standards among subsystems

• Lack of complete and efficient integration

• Duplication of data input and maintenance

• Insufficient management information to support decision making

• Incomplete reporting capabilities

• Lack of single chart of accounts

• Complex external interfaces

• High maintenance and modification costs

• Inconsistent data

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Context of MyFloridaMarketPlaceOverview of Re-Engineering Initiatives

• Human Resources

– People First— Modernizing with the personnel system, leave and attendance and benefits management

• Purchasing

– MyFloridaMarketPlace — Integrating purchasing activities for all State buyers and for vendors doing business with the State

• Financial Management

– FLAIR Replacement — Will replace the legacy accounting and financial system with an integrated enterprise resource planning system

Florida has embarked on three major Enterprise Resource Planning efforts

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Context of MyFloridaMarketPlace Current Purchasing Systems

Vendor BidSystem

(Bidding)

SPURS(Purchasing)

FLAIR

SPURSView

(Reporting)

ManualProcess forMatching

Web-basedRegistration

ManualProcess for

Invoicing

Agencycontractsystem





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Overview of MyFloridaMarketPlace System Goals

FLAIR / FLAIRReplacement

RegistrationPurchasing

BiddingContractsInvoicingMatchingReporting

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Overview of MyFloridaMarketPlace Goals and Objectives

Goals and Objectives:

Implement a single, statewide eProcurement solution enabling

electronic buying and selling

Aggregate all Government spending into an efficient buying channel

Leverage new technology and capitalize on best practices

Enable and facilitate the One Florida Program

Generate savings through Strategic Sourcing and process efficiencies

Goals and Objectives:

Implement a single, statewide eProcurement solution enabling

electronic buying and selling

Aggregate all Government spending into an efficient buying channel

Leverage new technology and capitalize on best practices

Enable and facilitate the One Florida Program

Generate savings through Strategic Sourcing and process efficiencies

MyFloridaMarketPlace… Connecting Buyers and Vendors…

Expanding Opportunities…

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Overview of MyFloridaMarketPlace Supporting the Governor’s PrioritiesSupporting the Governor’s Priorities

More effective and efficient government that harnesses the use of

technology

Running government like a business when it makes sense to do so

• Enterprise-wide initiative

• Private sector best practice

Diversifying Florida’s economy / One Florida

Performance-based measurement and accountability

Public / private partnerships

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The project will be completed over four phases: Mobilization, Development, Deployment and Operations, all of which include specific milestones.

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Contract 2002 2006 2007Phase/Activity Month Oct*-Dec Jan-Mar Apr-JunJul-SepOct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-DecJan-Dec Jan-Oct

Mobilization Phase 1- Program Establishment- StaffingDevelopment Phase 4-10- Conference Room Pilot - Confirm Requirements

- Launch Vendor Reg. Portal

Deployment Phase 6-22

- Transition from SPURS 22

20052003 2004

Operations Phase 23 61-

- Pilot Implementation (DMS&DOT) 10

- Bring on Additional Users 22

- Online Contract / Catalog Loading 8

Initial Users Live- 18

Overview of MyFloridaMarketPlace Project TimelineProject Timeline

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Overview of MyFloridaMarketPlace Key Dates in Near Past and FutureKey Dates in Near Past and Future

March 31, 2003: Vendors began registering in the system via the Vendor Registration module

April 28, 2003: Pilot Agencies (DOT, DMS, STO) began loading contracts

June 2, 2003: Pilot Agencies (DOT, DMS, STO) began entering Blanket Purchase Orders

July 1, 2003: New rules effective (60A-1.030, -1.031, -1.032)

July 1, 2003: Go Live with Transaction Processing for Pilot Agencies (DOT, DMS, STO)

September 1, 2003: Begin rollout to remaining agencies

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As of 7/8/2003…

13,304 vendors are registered

DOT, DMS, and STO have created 295 requisitions

13 POs have been transmitted to vendors

DMS has issued ITN (7/9/03)

Overview of MyFloridaMarketPlace Update on Go-LiveUpdate on Go-Live

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Overview of MyFloridaMarketPlace Overview of MyFloridaMarketPlace System Functions System Functions

Vendor ToolsBuyer Tools

MyFloridaMarketPlace UsersInitial Users -

Pilots

Initial Users - Exec Agencies

Eligible Users - Other State Agency

State Term Contract Vendors

Minority Businesses

Agency/ Dept. Contract Vendors

Eligible Users – Univ, City, County

General Public

Small Businesses

• Vendor search

• State term contract items

• Requisitions/Purchase orders

• Online workflow approvals

• Informal solicitation (quotes < $25,000)

• Sealed bids (ITN, ITB, RFx > $25,000, auctions, reverse auctions)

• Receipt of Goods

• P-Card

• Contract development and administration

• Reports

• Self registration

• E-mail notification of formal and informal solicitations

• Online quoting on informal solicitations (< $25,000)

• Online submission of sealed bids (> $25,000)

• Electronic purchase order receipt

• Electronic submission of invoices

• Catalog creation and updates for State term contracts

• Reports

Business Support and Operations• Buyer Help Desk

• Vendor Help Desk

• Strategic Sourcing

• Procurement Assistance

• Catalog Enablement

• Training and Education

“I want to buy” “I want to sell”

Buyers Vendors

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Vendor Registration – Allows vendors to register and maintain their vendor information in the system. The vendor may also register for CMBE certification within the Vendor Registration System

Requisitioning – Online creation of requisition from an online catalog or contract. Supports submitting electronic quotes to vendors and allowing vendors to respond to the quote online.

Bidding – Online submission of solicitations to vendors. Vendors will respond to their bids online and the agency may evaluate the responses online as well.

Contract tracking – Online tracking of contracts including available balance, contract term, contract pricing, etc.

Invoice reconciliation – Online matching of invoice, purchase order, receipt, and/or contract. The discrepancies will be identified and routed to the agency for review

Reporting – Customized reporting capabilities providing the agencies with spend visibility, contract compliance, etc.

Overview of MyFloridaMarketPlaceOverview of MyFloridaMarketPlaceSystem FunctionsSystem Functions

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Overview of MyFloridaMarketPlaceOverview of MyFloridaMarketPlaceSystem BenefitsSystem Benefits

• “E-procurement can deliver more than just lower prices. Indeed, the net impact of its other characteristic deliverables – better productivity, faster processing, greater visibility, the elimination of maverick, or unplanned, ad hoc buying – can have a much higher ROI than what can be achieved by shaving a few pennies off price.”

• “Better productivity in the buying department [allows] buyers to do what they ought to do – buy better, not shuffle paper. …[Purchasing agents’] jobs used to be transaction-based. Now they are performing a higher value role.”

CIO Magazine, 6/15/03

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Strategic Sourcing

Operational Issues



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Work Completed Through Feb. 2003 –

– Key Findings –

Validated As-Is structure and headcount Reviewed As-Is job titles and pay grades Reviewed As-Is job descriptions Confirmed State vs. Outsourcing To-Be

roles & responsibilities Determined evaluation criteria & weights* Completed spend and STC analysis and

factored to organization structure Based on spend & vendors, benchmarked

for appropriate organization sizing Conducted 23 Agency interviews Developed, profiled, and scored multiple

To-Be organization structure options* Discussed and refined leading option* Developed To-Be job descriptions Prepared implementation plan

• Organization lacks vision, strategy, leadership and direction; is reactive

• Over the last 2-4 years have gotten way off the best practices path and instilled practices that detract value (e.g., STCs without best pricing; 1-year only contracts)

• On average, personnel are not capable past tactical activities; are unresponsive

• Significantly overstaffed vs. benchmarks

* Work completed via Workshops with State & DMS Departmental Purchasing involvement.

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N = CRP + 23 Interviews

– Subset of Interview Questions – – Other Themes of Opportunities –• What services does State Purchasing

provide to you? How well do they provide these services (i.e., what is and isn’t working)?

• What other services would you like to see State Purchasing provide?

• Involvement / input from Agencies• Interaction with Agencies• Communication with Agencies• Assistance / support• Services rec’d are less value than 1%

fees• Unavailable• Unresponsive• Inconsistent (answers, guidelines,

procedures, processes, interpretations)• VBS cumbersome and inefficient• Slow on single-source exception reviews• Legal unresponsive and “liberal”• Purchasing expertise• Training• Leadership

DMS obtained input from the CRP and multiple agency interviews. A number of opportunity themes for State Purchasing emerged.

– STC Themes of Opportunities –• Inconsistent competitive value• Unresponsive to new STC opportunities• Slow renewals• Overuse of contract extensions• New RFQ requirement on STCs makes

them redundant (provides bid list only)• Inconsistent and poorly written contracts

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The workshop process led to evaluation criteria and weights, which State Purchasing used to develop and evaluate the organization design alternatives.

ID Criteria Weight

A Aggregated purchasing power & consolidated supply base 21

B Responsive to OneFlorida & furthering CMBE * 16

C Drives use of State Term Contracts 13

D Closes the communication gap 13

E Exploits procurement technology 12

F Builds relationships with agencies, eligible users & vendors

9

G Focus on speed to value / efficiency 8

H Clear policy, procedures and rules ownership 8

Total 100%

N = 9 * CMBE – Certified Minority Business Enterprise

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INTERIM To-Be Organization Structure Director

State Purchasing

Chief of StatePurchasing Operations

Administrative Assistant

Bureau Chief ofCommodities (A)

Purchasing ManagerDMS Dept. Purchasing


Operations Manager -Governance

(Policy, Procedures,Legislation, Bid Room)

Operations Manager -Finance (Revenue,

Budget, LBR, Audits,P-Card, Metrics)

Operations Manager -Records (Retention,

Public Inquires,Contracts, PEC)

Operations Manager -IT (Software,

Hardware, Help Desk,Web Site, Training)

Operations Manager -Customer & Vendor

Satisfaction (CMBEs,Surveys, Disputes)


Purchasing Specialist

Purchasing Operations

Purchasing Specialist -Secretary's Office,Legislative Affairs,& Communications

Purchasing Specialist -Retirement, DSGI

& Fleet

OperationsSpecialist - IT

Purchasing Specialist -Facilities &

Construction

Special Projects& Transition Team

Supervisor

Special ProjectsTeam Members

Purchasing Analyst- Automotive, Marine

& Filters

Purchasing Analyst- Energy &

Transportation Services


Purchasing Analyst- Insurance, Travel& Law Enforcement

Purchasing Analyst- Medical, Traffic

Supplies, & PRIDE &RESPECT Coordination


Purchasing Analyst- Commercial Printing& State / Agency Print

Shop Coordination

Purchasing Analyst- Professional Services(Consulting, HR, Legal

& Misc. Services)

Bureau Chief ofCommodities (B)



Purchasing Analyst- Computers, Computer

Supplies & PrincipleTechnology

Purchasing Analyst- Telecommunications

Equipment


Purchasing Analyst- Office Equipment &Supplies, & Audio &Visual Equipment

Purchasing Analyst- Food & Service Items,Furn. & Floor Covering,

& Library Materials


Purchasing Analyst- MRO & Equipment(Floor Maintenance,HVAC, Ice Making)

Purchasing Analyst- Equipment (Lawn,Park & Playground,

Appliances, Industrial)

Transition TeamMembers

SPURS Team

OperationsSpecialist - VBS

DMS Dept. Purchasing

DMS Administration

SNAPS Team

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Strategic Sourcing

Operational Issues



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Strategic Sourcing Objectives

Leverage State-Wide Volume

Obtain Best Prices & Value

Obtain State-Wide Savings

Increase Demand / Volume on STCs

Identify New STC Opportunities

Reduce State-Wide Supply Base

Manage Compliance

Strategic sourcing is a proactive process to leverage demand and select vendors that offer the best value.

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Strategic Sourcing Benefits

– Agency –– State – – Vendors –

• Leveraged savings• Reduced supply base• STC compliance

management• Increased spend

visibility• Data capture for future

leveraging• Reduced transactional

workload• Increased vendor

compliance with transaction fee collection

• Best price STCs to leverage

• No additional purchasing effort required – vendors, contracts, pricing, and service levels “ready to go” on most contracts

• Users “release” – reduced transactional workload

• Increased time to spend on Agency- unique needs

• Increased volume• Reduced rework (e.g., no

more STC events followed by Agency events for same goods / services)

• Lowered cost of doing business with the State

• Increased visibility into demand over time

• Longer-term contracts• More ROI in State business

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Strategic Sourcing Methodology

Source: Accenture Best Practices

Fast Track to Value

Validate & Profile

Category

Conduct Industry Analysis

Build Total Cost of

Ownership Model

Develop Category Strategy

Conduct Supplier Analysis

Build Supplier Selection Decision

MatrixConduct Auctions

Complete Prepare Fact-

Based Negotiation “Packages”

Negotiate Value

Propositions

Category Profile

Industry Profile

TCO Model

Category Strategy

Value Propositions

Benefits Realization

Develop

Measure Results & Trends

High-Level Data

Collection & Analysis

Fast Track to Value

Segment Purchases

Validate & Profile

Category


Build Total Cost of

Ownership Model


Conduct Supplier Analysis

Build Supplier Selection Decision


Complete Prepare Fact-

Based Negotiation “Packages”

Negotiate Value

Propositions

Auctions

FormCross-

Functional Sourcing

Teams

Develop


High-Data

Collection & Analysis

Fast Track to Value

Segment Purchases

Validate & Profile

Category


Build Total Cost of

Ownership Model


Conduct Vendor Analysis

Build Vendor

Selection Decision


Complete ITB/ITN/

RFQ/RFP

Develop Value

Proposition Around Options

Make Award

Decision

In-ScopeCategories

CFSTs(Cross-FunctionalSourcing Teams)

Selection Decision Matrix

ITB/ITN/RFQ/RFP

Continual Vendor

Improvement

Profile Internally & Externally

Develop Strategy

Screen Suppliers &

Selection Factors

Conduct Auctions &

Shape & Negotiate

Value Propositions

Implement AgreementsAssess

Opportunities


Develop Strategy

Screen Suppliers &

Selection Factors

Conduct Auctions &

Shape & Negotiate

Value Propositions

Kick-Off &

Profile Internally

& Externally

Develop Strategy

Develop Selection Factors &

Screen Vendors

Conduct Competitive

Event

Prepare Value

Proposition & Award

Implement Agreements

Kick-Off & Assess

Opportunities

-

FormCross-

Functional Sourcing

Teams

Develop Vendors


ToolsAriba ContractsAriba Analysis

Ariba Sourcing

Ariba Sourcing

Ariba Contracts

Ariba Analysis

Award Decision (ITA)

Ariba Analysis

Typical Deliverables

Key Worksteps

- and / or -

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Spend Analysis Overview

FLAIR Spend was Analyzed &

“Sourceable” Spend Identified & Categorized

Total Spend

$7,966 MM

$1,601 MM

$5,757 MM

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

Out of Scope Agencies (e.g. universities)

Out of Scope Categories (e.g. travel advances)

$1 MM$39 MM

Vendors’ Spend < $2500

$567 MM

Non-Sourceable Vendors (e.g., Municipal govt, schools, etc)

Sourceable Spend

Total Spend

$7,966 MM

$1,601 MM

$5,757 MM

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000



$1 MM$39 MM


$567 MM


Sourceable Spend

$7,966 MM

$1,601 MM

$5,757 MM

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000



$1 MM$39 MM


$567 MM


Sourceable Spend

Spend was Segmented by

Benefit Potential & Ease of

Implementation

Ease ofImplementation

Benefit Potential

Difficult

Easy

HighLow

4

2 1

3

• # of Agencies• # of STCs• STC Penetration %• Competitive Demand• Vendors = 80% Spend• Sourceability

• Sourceable Spend• Savings Potential

•Food Services - $0.09

•Other Construction - $0.7

•Medical Equip. - $2

•Agricultural Supplies - $18

•Structures - $1,671

•Building & Fixed Equip. - $44

•Engineering Svcs. - $585

•Motor Vehicles – Other - $3 •Motor Vehicles – Passenger - $33

•Other Prof. Svcs.-$11

•Temp. Employment - $16

•Property Svcs.- $5

•Building/Const. Material-$23

•Medical Svcs. - $75

•IT Software-$23

•Janitorial Supplies & Services-$24

•Office Machinery-$14

•Fuel-$21•Financial & Insurance-$90

•Utilities-$71

•Legal-$48

•Other Rental Equip.-$3

•Printing-$20•Advertising-$98

•Travel-$21

Wave 1Wave 2Wave 3

Consolidated

Categories were Mapped to 9 Waves of 3

Categories Each

Sourcing Business Model was Developed from Savings

Goals

ProfessionalServices

$2,450MM

FLAIR FY2001-02 Sourceable Spend$5,757MM

Construction$1,937MM

IT & Telecom$399MM

Medical$261MM

FacilitiesMgmt.

$300MM

Office Equip.& Services$175MM

Utilities andFuel

$91MM

Food(Products

and Services)$85MM

Vehicles &Equip. Rental

$38MM

Travel$21MM

IndependentContractor-NEC*

$1,360MM

Engineering$585MM

Consulting$214MM

Advertising$98MM

Financial &Insurance$90MM

Legal$48MM

Prof. Dev.$28MM

Structures$1,671MM

ConstructionServices$199MM

Equipment$44MM

Building Material$23MM

Other$1MM

Telecom$153MM

IT Services$150MM

IT Hardware$73MM

IT Software$23MM

MRO Services$185MM

MRO Material$87MM

Janitorial$24MM

Property Services$5MM

Medical Supplies$183MM

Medical Services$75MM

Furniture andEquipment

$72MM

Postage andFreight$35MM

Office Supplies$33MM

Printing$20MM

Copy Equip.$14MM

Utilities$71MM

Fuel$21MM

Food Products$67MM

AgricutureSupplies$18MM

PassengerVehicles$33MM

Other Vehicles$3MM

Rented Equip.$2MM

Temp. Labor andOther

$26MM

MedicalEquipment

$3MM

Level 1 Super

Category

Level 2 Category

Wav

e

Spend Category Originally Identified Spend for Pilot and

Initial User Agencies Compliance %

Estimated Sourceable Spend

Potential Annual Savings % from

Sourceable Spend

Estimated Potential Savings

FY2003-04 FY2004-05 FY2005-06 FY2006-07 FY2007-08

1 Office Supplies $ 33,028,259 89% $ 29,489,796 10% 2,890,000$ 2,047,083$ 2,890,000$ 2,890,000$ 481,667$ -$

1 Printing $ 20,322,758 80% $ 16,319,174 13% 2,133,900$ 1,155,863$ 2,133,900$ 2,133,900$ 711,300$ -$

1 MRO Material $ 87,108,798 32% $ 28,000,000 5% 1,344,000$ 840,000$ 1,344,000$ 1,344,000$ 336,000$ -$

2 MRO Services $ 184,511,919 70% $ 129,158,343 8% 9,686,876$ 1,210,859$ 9,686,876$ 9,686,876$ 7,265,157$ -$

2 IT Hardware $ 73,344,149 80% $ 58,675,319 9% 5,390,000$ 673,750$ 5,390,000$ 5,390,000$ 4,042,500$ -$

2 Travel $ 20,560,895 100% $ 20,560,895 7% 1,439,263$ 179,908$ 1,439,263$ 1,439,263$ 1,079,447$ -$

3 Telecom $ 152,691,544 75% $ 114,518,658 11% 12,826,000$ -$ 8,016,250$ 12,826,000$ 12,826,000$ 3,206,500$

3 Furniture And Equipment $ 72,086,215 60% $ 43,251,729 6% 2,775,000$ -$ 1,734,375$ 2,775,000$ 2,775,000$ 693,750$

3 Office Machinery $ 14,271,115 90% $ 12,844,004 8% 998,000$ -$ 623,750$ 998,000$ 998,000$ 249,500$

4 Motor Vehicles - Passenger $ 32,514,967 80% $ 26,011,973 8% 2,080,958$ -$ 260,120$ 2,080,958$ 2,080,958$ 1,560,718$

4 Motor Vehicles - Other $ 2,965,577 80% $ 2,372,461 8% 189,797$ -$ 23,725$ 189,797$ 189,797$ 142,348$

4 Food Products $ 67,379,747 29% $ 19,337,987 10% 1,933,799$ -$ 241,725$ 1,933,799$ 1,933,799$ 1,450,349$

4 Medical Supplies $ 182,870,285 10% $ 17,500,000 10% 1,750,000$ -$ 218,750$ 1,750,000$ 1,750,000$ 1,312,500$

5 Financial & Insurance $ 89,919,017 70% 62,943,312$ 4% 2,517,732$ -$ -$ 1,573,583$ 2,517,732$ 2,517,732$

5 Building And Fixed Equipment $ 44,034,058 60% 26,420,435$ 10% 2,642,043$ -$ -$ 1,651,277$ 2,642,043$ 2,642,043$

5 IT Software $ 23,167,469 30% 6,950,241$ 10% 695,024$ -$ -$ 434,390$ 695,024$ 695,024$

6 Medical Services $ 75,071,935 60% 45,043,161$ 5% 2,252,158$ -$ -$ 281,520$ 2,252,158$ 2,252,158$

6 Postage & Freight $ 35,381,999 35% 12,206,790$ 6% 732,407$ -$ -$ 91,551$ 732,407$ 732,407$

6 Janitorial Supplies & Services $ 23,861,491 55% 13,123,820$ 8% 1,049,906$ -$ -$ 131,238$ 1,049,906$ 1,049,906$

7 Advertising $ 97,557,990 60% 58,534,794$ 4% 2,341,392$ -$ -$ -$ 1,463,370$ 2,341,392$

7 Temporary Employment Services $ 15,614,795 60% 9,368,877$ 10% 936,888$ -$ -$ -$ 585,555$ 936,888$

7 Fuel $ 20,754,101 80% 16,603,280$ 6% 996,197$ -$ -$ -$ 622,623$ 996,197$

8 Construction Services $ 198,972,579 20% 39,794,516$ 6% 2,387,671$ -$ -$ -$ 298,459$ 2,387,671$

8 Legal $ 47,692,521 40% 19,077,008$ 4% 763,080$ -$ -$ -$ 95,385$ 763,080$

8 Building & Construction Material $ 22,671,688 60% 13,603,013$ 6% 816,181$ -$ -$ -$ 102,023$ 816,181$

9 Agricultural Supplies $ 17,606,785 60% 10,564,071$ 6% 633,844$ -$ -$ -$ -$ 396,153$

9 Professional Development $ 27,945,992 20% 5,589,198$ 6% 335,352$ -$ -$ -$ -$ 209,595$

9 Other Professional Services $ 10,785,905 60% 6,471,543$ 4% 258,862$ -$ -$ -$ -$ 161,789$

Other Categories $ 4,062,462,307 0% $ 6,018,307 $ 316,805 -$ -$ -$ -$ -$

Total 5,757,156,857$ 15% 870,352,705$ 7% 65,113,134$ 6,107,463$ 34,002,733$ 49,601,151$ 49,526,309$ 27,513,881$ Cumulative Total 6,107,463$ 40,110,196$ 89,711,346$ 139,237,656$ 166,751,536$

Estimated Potential Savings by Fiscal Year

Wav

e

Spend Category Originally Identified Spend for Pilot and

Initial User Agencies Compliance %

Estimated Sourceable Spend

Potential Annual Savings % from

Sourceable Spend

Estimated Potential Savings

FY2003-04 FY2004-05 FY2005-06 FY2006-07 FY2007-08

1 Office Supplies $ 33,028,259 89% $ 29,489,796 10% 2,890,000$ 2,047,083$ 2,890,000$ 2,890,000$ 481,667$ -$

1 Printing $ 20,322,758 80% $ 16,319,174 13% 2,133,900$ 1,155,863$ 2,133,900$ 2,133,900$ 711,300$ -$

1 MRO Material $ 87,108,798 32% $ 28,000,000 5% 1,344,000$ 840,000$ 1,344,000$ 1,344,000$ 336,000$ -$

2 MRO Services $ 184,511,919 70% $ 129,158,343 8% 9,686,876$ 1,210,859$ 9,686,876$ 9,686,876$ 7,265,157$ -$

2 IT Hardware $ 73,344,149 80% $ 58,675,319 9% 5,390,000$ 673,750$ 5,390,000$ 5,390,000$ 4,042,500$ -$

2 Travel $ 20,560,895 100% $ 20,560,895 7% 1,439,263$ 179,908$ 1,439,263$ 1,439,263$ 1,079,447$ -$

3 Telecom $ 152,691,544 75% $ 114,518,658 11% 12,826,000$ -$ 8,016,250$ 12,826,000$ 12,826,000$ 3,206,500$

3 Furniture And Equipment $ 72,086,215 60% $ 43,251,729 6% 2,775,000$ -$ 1,734,375$ 2,775,000$ 2,775,000$ 693,750$

3 Office Machinery $ 14,271,115 90% $ 12,844,004 8% 998,000$ -$ 623,750$ 998,000$ 998,000$ 249,500$

4 Motor Vehicles - Passenger $ 32,514,967 80% $ 26,011,973 8% 2,080,958$ -$ 260,120$ 2,080,958$ 2,080,958$ 1,560,718$

4 Motor Vehicles - Other $ 2,965,577 80% $ 2,372,461 8% 189,797$ -$ 23,725$ 189,797$ 189,797$ 142,348$

4 Food Products $ 67,379,747 29% $ 19,337,987 10% 1,933,799$ -$ 241,725$ 1,933,799$ 1,933,799$ 1,450,349$

4 Medical Supplies $ 182,870,285 10% $ 17,500,000 10% 1,750,000$ -$ 218,750$ 1,750,000$ 1,750,000$ 1,312,500$

5 Financial & Insurance $ 89,919,017 70% 62,943,312$ 4% 2,517,732$ -$ -$ 1,573,583$ 2,517,732$ 2,517,732$

5 Building And Fixed Equipment $ 44,034,058 60% 26,420,435$ 10% 2,642,043$ -$ -$ 1,651,277$ 2,642,043$ 2,642,043$

5 IT Software $ 23,167,469 30% 6,950,241$ 10% 695,024$ -$ -$ 434,390$ 695,024$ 695,024$

6 Medical Services $ 75,071,935 60% 45,043,161$ 5% 2,252,158$ -$ -$ 281,520$ 2,252,158$ 2,252,158$

6 Postage & Freight $ 35,381,999 35% 12,206,790$ 6% 732,407$ -$ -$ 91,551$ 732,407$ 732,407$

6 Janitorial Supplies & Services $ 23,861,491 55% 13,123,820$ 8% 1,049,906$ -$ -$ 131,238$ 1,049,906$ 1,049,906$

7 Advertising $ 97,557,990 60% 58,534,794$ 4% 2,341,392$ -$ -$ -$ 1,463,370$ 2,341,392$

7 Temporary Employment Services $ 15,614,795 60% 9,368,877$ 10% 936,888$ -$ -$ -$ 585,555$ 936,888$

7 Fuel $ 20,754,101 80% 16,603,280$ 6% 996,197$ -$ -$ -$ 622,623$ 996,197$

8 Construction Services $ 198,972,579 20% 39,794,516$ 6% 2,387,671$ -$ -$ -$ 298,459$ 2,387,671$

8 Legal $ 47,692,521 40% 19,077,008$ 4% 763,080$ -$ -$ -$ 95,385$ 763,080$

8 Building & Construction Material $ 22,671,688 60% 13,603,013$ 6% 816,181$ -$ -$ -$ 102,023$ 816,181$

9 Agricultural Supplies $ 17,606,785 60% 10,564,071$ 6% 633,844$ -$ -$ -$ -$ 396,153$

9 Professional Development $ 27,945,992 20% 5,589,198$ 6% 335,352$ -$ -$ -$ -$ 209,595$

9 Other Professional Services $ 10,785,905 60% 6,471,543$ 4% 258,862$ -$ -$ -$ -$ 161,789$

Other Categories $ 4,062,462,307 0% $ 6,018,307 $ 316,805 -$ -$ -$ -$ -$

Total 5,757,156,857$ 15% 870,352,705$ 7% 65,113,134$ 6,107,463$ 34,002,733$ 49,601,151$ 49,526,309$ 27,513,881$ Cumulative Total 6,107,463$ 40,110,196$ 89,711,346$ 139,237,656$ 166,751,536$

Estimated Potential Savings by Fiscal Year

– Compliance % Considerations –

• # Agencies using commodity

• # of STCs in existence

• Existence of Agency agreements

• STC penetration %

• Assessment of STC attractiveness

• Catalog complexity

• Assessment of DMS expertise

• Degree of P-Card leakage

• Nature of commodity (e.g., OEM)

– Savings % Considerations –

• Sourceable spend

• Vendors = 80% spend

• Marketplace competitiveness

• Sourceability

• Assessment of spend and vendor consolidation in existence today

• Range of savings %s obtained at other private and public companies

• Over 100 ACN Procurement clients

– Office Supplies

– MRO Supplies

– Printing

– Straw Modeled

– Built Into Model

– Being Finalized

– Wave 1 –

– Waves 2+ –

23 Agency Interviews Conducted

WavesReflect Agency Input & DMS Feedback


Develop Strategy

Screen Suppliers &

Selection Factors

Conduct Auctions &

Shape & Negotiate

Value Propositions


Opportunities


Develop Strategy

Screen Suppliers &

Selection Factors

Conduct Auctions &

Shape & Negotiate

Value Propositions

Kick-Off &

Profile Internally

& Externally

Develop Strategy


Screen Vendors

Conduct Competitive

Event

Prepare Value

Proposition & Award


Kick-Off & Assess

Opportunities

- Profile Internally & Externally

Develop Strategy

Screen Suppliers &

Selection Factors

Conduct Auctions &

Shape & Negotiate

Value Propositions


Opportunities


Develop Strategy

Screen Suppliers &

Selection Factors

Conduct Auctions &

Shape & Negotiate

Value Propositions

Kick-Off &

Profile Internally

& Externally

Develop Strategy


Screen Vendors

Conduct Competitive

Event

Prepare Value

Proposition & Award


Kick-Off & Assess

Opportunities

-

34

Top Agency Users

3rd Tier Agency Users

2nd Tier Agency Users

Category Team Core Members

Data & SMEs to Category Team

Benefit From STC

Agency Participation on Category Teams

35

Strategic Sourcing Wave 1


Develop Strategy

Screen Suppliers &

Selection Factors

Conduct Auctions &

Shape & Negotiate

Value Propositions


Opportunities


Develop Strategy

Screen Suppliers &

Selection Factors

Conduct Auctions &

Shape & Negotiate

Value Propositions

Kick-Off &

Profile Internally

& Externally

Develop Strategy


Screen Vendors

Conduct Competitive

Event

Prepare Value

Proposition & Award


Kick-Off & Assess

Opportunities

- Profile Internally & Externally

Develop Strategy

Screen Suppliers &

Selection Factors

Conduct Auctions &

Shape & Negotiate

Value Propositions


Opportunities


Develop Strategy

Screen Suppliers &

Selection Factors

Conduct Auctions &

Shape & Negotiate

Value Propositions

Kick-Off &

Profile Internally

& Externally

Develop Strategy


Screen Vendors

Conduct Competitive

Event

Prepare Value

Proposition & Award


Kick-Off & Assess

Opportunities

-

Office Supplies

• DMS Lead – Tom Butler• Sourcing Event – Auction • Target STC Date – Oct. 2003

MROSupplies

• DMS Lead – David Comer• Sourcing Event – ITB • Target STC Date – Oct. 2003

Printing

• DMS Lead – Charles Day• Sourcing Event – RFP • Target STC Date – Nov. 2003

36







Strategic Sourcing

Operational Issues



37

Purchasing Directors’ Meeting Purchasing Directors’ Meeting Operational Issues Operational Issues

• IT Consulting Contracts

• Single Source Applications

• Commodity Codes

• Microsoft Settlement

38

Operational IssuesOperational IssuesIT Consulting ContractsIT Consulting Contracts

• Potential Y2K crisis led to change in consulting procurement practices, away from time-consuming formal competitive bid process and toward prompt, non-exclusive, pre-qualification process

• Led to audits, both in-house and by others, criticizing number of contracts (70), lack of competition, inadequate terms, and confusion of use. See Audit of State Term Procedures for Acquiring IT Consultant Services (DMS IG Report No. 2000-118); Selected State Agencies’ IT Consultant Procurement Practices (AG Report No. 02-050 Oct. 2001); IT Consultant Services Contract Audit (EOG IG Report Sep. 2001)

• DMS Purchasing memoranda provided interim guidance. See Multiple Award State Term Contracts, Memo. No. 5 (00/01) (Oct. 5, 2000); State Term Contracts for Information Technology Consulting Services, Memo. No. 1 (00/01) (rev. Sep. 5, 2000). Interim statutory fix validated request for quotes (RFQ) process in May 2001

39


• In October 2001, DMS and STO began review of best IT procurement practices. First (prototype) new solicitation was IT Hardware contract in June 2002. Detailed review done of federal experience procuring IT services (federal spend went from $8 billion in 1997 to $17 billion in 2001).

• DMS worked with STO and DCF resources (purchasing and technology) to develop new formal competitive solicitation documents (RFP). Expect to release before September 1, 2003.

• Effective July 1, 2003, State Purchasing has ceased the old method of awarding IT Consulting contracts. For those in queue, applicant must have done everything necessary by June 30, otherwise its application will be denied and its recourse will be to bid new contract (or contract directly with user agency).

• New contract will follow federal schedule model – unassailably, a best practice. Number of contractors will decrease significantly.

40


• Transition period will require adjustment

• Some contracts are expiring between now and September 1 and will not be renewed

– Unisys Corporation 7/17/03– Motorola 7/22/03– Gulf Computers, Inc. 7/23/04– United Consulting Systems, Inc. 8/04/03– Advanced Data Solutions, Inc.8/14/03– Bearing Point, Inc. 8/18/03– Anteon International Corp. 8/26/03– I.S. Consulting 8/27/03– Xerox Corp 8/27/03– Digital Fusion 8/27/03

41




• Commodity Codes


42

Operational IssuesSingle Source Processing - Problems

• Single source purchases over Category Four ($150,000) require review and approval by DMS following agency posting of the single source description on the Vendor Bid System (VBS) (see sections 120.57(3) and 287.057(5)(c), FS)

• Agency Feedback

– The process is slow– Uncertain as to content to post on VBS, both in the single

source description posting and the single source notice of intended decision following DMS approval

– Uncertain as to the content of the Exceptional Purchase Request submitted to State Purchasing

43

Operational IssuesSingle Source Processing - Solutions

State Purchasing proposes the following for comment:

• To speed up the process, we will accept single source requests via email at [email protected]. Attach signed and scanned Exceptional Purchase Request forms and supporting documents. We will return approvals by email if you provide an email address.

• To reduce uncertainty as to content, we are furnishing suggested formats for the Exceptional Purchase Request for a single source purchase, and for the Vendor Bid System before-and-after postings. When posting please use an “SS” prefix to distinguish from competitive solicitations. We are investigating the cost of a posted list separate from competitive solicitations, and will keep you informed on that possibility.

• You may use these suggested formats now.

• Please also feel free to suggest changes, and email them to [email protected]. If changes are incorporated, revised formats with the changes will be distributed to the agency purchasing directors.

44

Operational IssuesSingle Source Processing - Solutions

Suggested Content for form PUR 7006 (Exceptional Purchase Request)

• The following documents are attached to this request for DMS approval of a single source purchase:(1) A copy of the advertisement in the Vendor Bid System, including posting start and end date.(2) A copy of the Single Source Description (including complete justification) posted in the attached or equivalent format on the Vendor Bid System with the advertisement, including start and end dates in accordance with s. 287.057(5)(c), FS.

• Responses received from other vendors during advertisement of the single source description: __ No __ Yes.If yes, attach copies of vendor responses, and any written reply by the agency, with written explanation of the agency’s decision to continue with a single source acquisition.

• Registration with Department of State (sunbiz.org)___ Copy of Dept of State registration attached.___ Copy of Dept of State registration not attached. Agency understands DMS will verify registration if copy is not attached, and reject single source purchase if vendor has not complied with statutory requirement for corporate registration (ref. Ch. 607 FS).

• Registration in MyFloridaMarketPlace: ___ Yes ___ No If “No” cite administrative rule authority for failure to register:

45




• Commodity Codes


46

Operational IssuesCommodity Codes - Uses

Commodity Codes are used …

… to code purchases and solicitations for vendor selection and miscellaneous search and reporting purposes.

… in vendor registration to facilitate buyer searches for vendors of specific commodities and services.

… in vendor email notice registration in order for vendors to be notified of marketing opportunities (formal competitive solicitations, quotes, single source descriptions)

… in determining where we are spending our dollars, to facilitate order consolidation/aggregation, determine bid thresholds, receive quantity discounts, strategic sourcing, etc.

47

Operational IssuesCommodity Codes - Problems

• Some newer items/technologies/services have not been coded.

• The definitions of some coding classifications and/or groups do not include all the appropriate items.

• Some classes, e.g., 973 for professional services and 991 for technical services, include vastly different types of services, some of which, e.g., medical related and construction related, might better be broken out into new classes.

• Commodity codes are difficult for vendors and buyers to search on the State Purchasing web site, because they are essentially scrolling through a condensed list (classes), and must open a sub-list (groups) to look for specific products.

48

Operational IssuesCommodity Codes - Solutions

• Add/delete items to existing classes and groups

• Add/delete groups to existing classes

• Add new classes with appropriate groups, perhaps removed from over-broad classes

• Explore the possibility of a word search capability for vendor registration in MFMP and solicitation/single source coding in VBS

49

Operational IssuesCommodity Codes – Next Steps

YOUR HELP IS NEEDED

• Email Ron Brown at [email protected] with your suggestions related to “SOLUTIONS” above, and any other related improvements you’d like to suggest

• Be prepared to discuss proposed changes with Ron or his designee

50




• Commodity Codes


51

Operational IssuesMicrosoft Settlement

• Agency OGC and CIO should review information at www.microsoftproductssettlement.com/florida

• Settlement provides vouchers worth $5 for each license of certain MS products

• Claims for vouchers must be postmarked by December 24, 2003

• “Opt out” deadline is October 13, 2003

• “Fairness hearing” scheduled November 24, 2004

• Suggested that DMS and STO coordinate Enterprise response

52







Strategic Sourcing

Operational Issues



53







Strategic Sourcing

Operational Issues



54

Next Meeting: Time / LocationNext Meeting: Time / Location

Determine Frequency of Meetings

Monthly? August 7

Bi-Monthly? September 11

Quarterly? October 9

3:30 p.m. – 4:30 p.m.

State Purchasing, Room 301 (or call in)

purchasing directors’ meeting july 10, 2003 3:30 p.m

Documents

innovative purchasing

accenture llp

directors meeting excellence

agendathis information

state agencies

efficient customer services

state negotiators

directors meetingjuly