Purchasing division looks for savings to help with budget
During Nevada’s budget crisis, all eyes have been focused on the reductions forced on major state programs because of the economy.
At least one state agency, however, has benefited from those economic troubles. Greg Smith, head of the Purchasing Division, says they are seeing significant savings in a variety of areas as they negotiate contracts and ask for bids for everything from cell phones to janitorial services to consultants.
Renegotiating contracts, he said, is just one of the strategies purchasing and every other state agency is using to cut costs. But he objected to the misconception that those savings initiatives began when the recession hit.
“This is what we do,” he said. “We didn’t just start two years ago when the economy went off a cliff.”
He said it’s difficult to quantify the savings generated because it comes not on a grand scale, but in much smaller pieces at each agency.
It may be a new and lower contract that saves a couple of pennies on a ballpoint pen or box of paper clips, light bulbs and other items agencies need. But those pennies add up to real savings when you consider, for example, how many thousands of pens agencies go through in a year.
Smith and his deputy Kimberlee Tarter said one benefit from the recession is that businessmen facing tough times have been willing to renegotiate existing contracts with the state to keep the business. Smith said businesses understand that the state just doesn’t have the money.
“What we’ve been able to do is say, ‘Do you want a smaller contract or no contract at all?'” said Smith. “What we were able to offer is a one- or two-year extension on their contract.”
For many businessmen, it’s worth taking a small reduction to get a guarantee they’ll continue to have the business into the future.
“We did that with the cell phone contracts,” said Tarter.
A number of agencies have had success convincing their landlords to reduce prices. One example is Home and Community Based Services, which convinced its landlord to take a 50-cent reduction to $1 per square foot in trade for extending the lease through 2015.
Likewise, Mental Health and Developmental Services won a roughly 30-cent reduction in its square foot rate for a three-year lease extension to 2013.
Similar negotiations have been taking place throughout dozens of agencies for not only rent rates but a variety of services.
Renegotiated rental car contracts, he said, are all more than
20 percent lower than the previous contract, as are the contracts for copiers. The office supply contracts range from 22 percent to
30 percent below the previous contracts.
Smith said one of the biggest savings generators is the Western States Contracting Alliance, which pools the clout of numerous states to get better rates. WSCA works out contracts that all of its members – 15 western states – can use for everything from body armor for public safety agencies to copiers and even infant formula. WSCA has more than two dozen different contracts for governmental entities to take advantage of.
“When we all band together for collective bids, we get substantial savings,” he said.
For example, Smith said 47 states and “thousands of political subdivisions” take advantage of the computer contracts with Dell and HP.
“The cell phone contract is the largest,” he said, adding that Nevada was the lead state in developing that contract.
He said 37 states use the industrial supplies contract developed for WSCA by his staff.
“That has saved Nevada substantial amounts of money,” he said.
Nevada also is the lead state in developing the copier contract, carpet, tile and flooring and fire suppression services contracts.
Smith is head of both WSCA and president of the National Association of State Procurement Officials. The two organizations, he said, help all the states keep well informed what’s happening elsewhere.
“It keeps the vendors from playing the kind of games they were able to do in the old days,” he said.
Another way of saving the state money is auditing the use of those contracts to make sure Nevada gets the prices it is supposed to. He said Chartwell Cost Recovery Auditors is completing a review of the state’s office supplies contracts. Auditors have added up thousands of tiny errors in charges for pens, paper and other office supplies. When the process is completed, he said Nevada will get checks totaling $500,000 or more.
He said another effort is changing the behavior of state workers and officials. He said tough times will mean reducing the choices agencies have. Instead of being able to choose, for example, between two dozen different pens, maybe the choices get narrowed to a half-dozen or so and the state gets a volume discount.
“We have to do more with less,” he said.
One bad habit which particularly bothers him, Smith said, is not booking airline tickets in advance. He said a flight between Reno and Las Vegas on Southwest costs the state $59 each way if booked 30 days in advance. Booked the day before, he said it’s $158 each way.
“Most people do that with their own money,” he said. “Why wouldn’t they do that with the state’s money?”
Smith said well written, clearly understandable bid documents and contracts result in savings.
He said with many of those contracts in the millions of dollars, hundreds of thousands of dollars can be saved.
The division is responsible for all purchases of supplies, materials and equipment worth $5,000 and higher. It also has jurisdiction over all contracts for services worth $100,000 and higher. It manages the purchasing of “about $150 million in stuff” and upward of $300 million in services every year, he said.