Michigan was found to have the best procurement practice © Getty Images/iStockphoto
Michigan was found to have the best procurement practice © Getty Images/iStockphoto

The US states that are best at public procurement

3 September 2019

State governments within the US are adopting a more modern approach to buying, with increasing use of data and analytics, solutions-based contracts and closer relationships with vendors, a report has found.

The Governing Institute’s 2019 survey, 5 Trends That Are Reshaping How Governments Buy, looked at factors such as contract management and effective implementation of technology within the purchasing policies of 29 states.

The top five states that were considered to demonstrate best practice were Michigan, Georgia, Massachusetts, Ohio and New York.

Overall table-topper Michigan uses strategic sourcing, category management, best-value procurement and agile development methodology to speed up procurement cycles, reduce costs and increase innovation, along with a comprehensive contract monitoring plan.

Five main trends are helping to reshape procurement operations across the states.

These are the increasing use of data and analytics, states becoming more mature in applying best-value strategies, the adoption of solutions-based contracts, new types of contracting vehicles and the forging of closer relationships with suppliers.

Two-thirds of survey respondents said the use of data and analytics was critical to procurement success and nearly 70% have implemented some method to capture use and spending data.

A further 17% expect to implement data capture capabilities within the next 12-18 months. Florida and Michigan were examples of states that conduct extensive market research using vendor forums, meetings with market research firms and internal subject matter experts to define objectives and understand the latest vendor offerings.

“Along with having one of the nation’s strongest policies on pre-sourcing market research, Florida uses an array of technology tools to gather industry and market information, including the state’s MyFloridaMarketPlace e-procurement system and vendor information portal,” added the report.

It said this system included a reporting tool that captures spend and utilisation data and provides analysis and customer reporting to support better negotiations, clearer specifications and improved procurement outcomes.

Georgia paid close attention to the data gathered in state procurement audits to educate procurement professionals and agency procurement offices about shortcomings and develop ways to address them.

More than 90% of states have rules in place to support a greater focus on value, up from 71% in 2015.

This is partially driven by a rise in complex, non-commodity procurements, such as IT services, where expertise and service capabilities are as important as cost when evaluating solutions, as well as a desire among states to take advantage of market changes.

“Traditional procurement processes don’t work in an era of startups and rapid technology evolution,” said Chris Hughes, chief procurement officer for the state of Utah, which began using an innovative best-value approach several years ago.

“Our state has what I would consider to be one of the best entrepreneur communities in the nation, but we were finding those innovators did not want to work with government,” he said.

“Now with our best-value approach vendors can find a solicitation, review it and respond in less than an hour.”

Alaska is also using a sourcing process that awards contracts based on vendor expertise, in addition to cost.

Ohio is among states to adopt solution-based contracts, which focus on the problem an agency wants to solve, rather than prescribing how to solve it.

In Ohio solution-based awards accounted for 50-74% of its contracts in the past year and contract terms and conditions are specific to unique categories so criteria that define success for IT projects, for example, are clear.

The report noted that the days when states discouraged direct communications between procurement offices and vendors to avoid the appearance of bias are disappearing.

“As long as proper controls are in place, states are shedding their reluctance to communicate closely with vendors,” said the report.

“These communications come in a variety of forms, with some states establishing units devoted to vendor outreach and communication and organising annual procurement conferences and opportunity fairs.”

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