Blueprint for Change: Georgia’s Procurement Transformation

This is an excerpt of the original article. It was written for the November 2010 edition of Supply Chain Management Review. The full article is available to current subscribers.

November 2010

Grace under pressure. Anyone working as a supply chain professional over the last couple of years knows what that phrase is all about. With the economy only recently beginning to rouse itself from the doldrums, supply chain folks are still being asked to find “just a few more” areas where costs can be cut. For a while there, the cost-cutting pressures were unrelenting. But for the most part—as our Annual Global Survey of Supply Chain Progress in this issue confirms—the supply chain came through. One of the key findings from this year’s survey is that absent the supply chain’s ability to control costs and streamline operations, companies…

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Today, with the worst recession since the Great Depression challenging our states, counties and municipalities—indeed our very nation—the singular importance of realizing the full value of taxpayer funds needs no explanation. On every dollar rests government’s ability to provide crucial services that shape the communities we call home.

As a record number of Americans struggle financially, there’s no escaping this truth or the direct link between the taxpayers’ financial well being and the fiscal health of the agencies that serve them. Nearly all state governments face record budget shortfalls as revenues decrease and many citizens find themselves in greater need of services than ever before. It’s a situation shared by counties and municipalities nationwide. The State of Georgia is no exception. For fiscal year 2008, the state budget was $20.5 billion. In fiscal year 2012, that budget will decrease to $16 billion in the absence of additional federal stimulus dollars.

The course of action for governments during tough times has, historically, been rather limited. Spending cuts save money, but necessitate layoffs, furloughs, the shuttering of agencies and the cessation of services. Likewise, running a budget deficit entails risks and is a temporary remedy. It is not a solution as most states, including Georgia, must have a balanced budget each fiscal year as provided for in their state constitution.

There is, however, another approach that is notably absent in government and needed today like never before: procurement reform. While no one can pinpoint the full extent of the money lost, it’s almost cliché that government’s spending practices are in need of a wakeup call. The $500 hammers and acts of misappropriation of funds make the headlines, but they don’t compare with the amount of money lost every day because of how public-sector procurement is typically conducted.

While strategic procurement techniques are taken for granted in the private sector, their application in government remains rudimentary. Purchasing—the one function that directly addresses how public funds are used—remains a paper-pushing exercise at nearly every level of government. Constrained by a complex web of obsolete purchasing laws and earmarks, it bears strikingly little resemblance to the powerful financial strategy many companies use to drive bottom-line results. The Procurement Transformation is the State of Georgia’s effort to change that.

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