New State Procurement Office Claims Savings of $113 Million

While the head of Tennessee’s newly centralized procurement system provided examples to legislators of savings to taxpayers last week, declaring they collectively total $113 million to day, state Rep. Jeremy Faison offered another example that didn’t sound so good.
Chief Procurement Officer Mike Perry’s examples included a dozen “ballpoint stick pens” that previously cost the state $1.55 for a box of a dozen versus 47 cents today and a ream of paper, previously $3.10, now $2.77.
Office supplies counted for $8 million of the projected $113 million in savings, a figure that includes comparing new multiyear contracts with old ones as well as some one-time purchases. The biggest projected savings, $33 million, was on Oracle software through “strategic sourcing,” which involves negotiating with current contract holders.
In the latter case, the vendor initially said that new software needed to bring TennCare computers into compliance with new provisions of federal law would cost $39 million, Perry said. After the negotiation, the price was $6 million.

More savings will come, Perry predicted, as things fall into place in the months ahead. And the Central Procurement Office is now making the state government savings system available to cities and counties, too, which could lead to even more substantial volume discounts.
But Faison, R-Cosby, a member of the Fiscal Review Committee that heard Perry’s briefing, had another example drawn from talking with officials at Mountain View Youth Development Center, which houses juvenile offenders in Jefferson County.
“They used to go down to a local hardware store and buy a lock for $6,” he told Perry. “After this bill (enacting the new system), they can’t do that. … It costs $60.”
Faison said this led him to wonder if the state, in some cases, may be “spending tons and tons more taxpayer money under the new system.”
The new system, based on laws enacted by the Legislature in 2010 and 2011 and taking effect last year, generally calls for items bought by multiple government entities to be obtained through the same contract. The Central Procurement Office also coordinates personal services contracts and handles negotiations with the goal of holding down costs to taxpayers.
Perry said he was not aware of the Mountain View lock situation, but would look into it.
But he noted that state facilities can now buy up to $5,000 worth of a items locally without a bid or going through the system, which does save time and money in many cases and a move is afoot to raise the threshold to $10,000.
And products that don’t generate $50,000 in demand from government generally need not go through the new system. Apparently, the state does buy a lot of locks generally and Faison said in an interview that Mountain View may pass the $5,000 threshold itself and, if so, the increase to $10,000 may help.
For now, though, the lawmaker said the requirement of going through the system not only appears to cost more, but it takes more time — two or three weeks for the paperwork involved.
State Comptroller Justin Wilson pushed for enactment of a new centralized state purchasing system. Told of Faison’s example of a potential situation where costs were actually increased instead of lowers, he said, “That could be true. It’s not perfect.”
“It’s a new system. It’s got new people. We have our problems,” Wilson said. “I suspect it needs a lot of refining.
“But on balance, having the Procurement Office in Tennessee means things are more fair, more balanced and more efficient than they were four years ago,” he said.
The Procurement Office now has 78 users signed up for its “SmartShop” online shopping center, that allows users to tap into the state rate on about 1,000 contracts for various products.
The program recently was made available to city and county governments, though apparently many were unaware of it.
Margret Maharry, executive director of the Tennessee Municipal League, said she had not known of the program until Perry’s presentation to the legislators.
Hugh Holt, chief purchasing officer for Knox Count, serves on the procurement office’s advisory council. He said the state system overall seems sound and bringing in local governments for volume purchases is a welcome option.
“We’re definitely on board,” he said, though Knox County and Knoxville are not yet on the “SmartShop” list.
Still, Holt said the state operation is “just another tool in the toolbox of ways to keep down costs for taxpayers.”
Knox County already participates in purchasing cooperatives designed to lower prices through volume purchases, he said. These include the U.S. Communities Purchasing Cooperative, The International Purchasing Association and the National Joint Powers Alliance.
The legislation creating the new system was drafted in large part by Wilson and his staff and sponsored by two members of the Fiscal Review Committee, Republican Sen. Bill Ketron of Murfreesboro and Democratic Rep; Charles Curtiss of Sparta.
It has the governor appointing a chief procurement officer — Perry currently is holding the position on an “interim” basis following the resignation in April of Haslam’s initial appointee, Jessica Robertson, who took a similar job in Indiana — who is overseen by a three-member Procurement Commission. The members are the state comptroller, state finance commissioner and the commissioner of the Department of General Services.

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