CGI’s Spend Management Strategy pays dividends for the Commonwealth of Virginia

“We are introducing and applying successful private sector practices to ensure that our citizens get a better value for their tax dollars.”

Sandra Bowen, Secretary of Administration,
Commonwealth of Virginia

Faced with declining revenues and a budget shortfall at the beginning of his administration, Governor Mark Warner faced a fiscal crisis in the Commonwealth of Virginia. Coming from a strong business background, Governor Warner wanted to show his constituents that the Commonwealth was pursuing every possible avenue to drive down costs while preserving programs. Instead of cutting programs and services, Governor Warner adopted the practices of a well-run business to solve the fiscal crisis of the Commonwealth. A key strategy within this initiative was maximizing Virginia’s purchasing power through the “Virginia Partners in Procurement” project and CGI’s Leveraged Purchasing Power® (LPP®).

The Challenge
Virginia Partners in Procurement was built upon the knowledge that successful business enterprises would never allow multiple departments or divisions to purchase an identical product at varying prices from the same vendor. Yet, state governments often operate in violation of this principle, largely because agencies and institutions purchase as independent entities.

A few years earlier, the Commonwealth of Virginia and CGI had introduced the eVA electronic procurement system. While the tool was widely considered to be the most successful such system in the nation, Virginia realized that it was just part of the overall solution to sound spend management. Access to data on best in class contracts and optimal supplier sets would help maximize the benefits of eVA.

Because of its size and scope, the Virginia state government had the market power of a Fortune 100 company but had not taken full advantage of the discounts that vendors offer to clients with large demand for the vendors’ goods and services.

Governor Warner recognized that there was a cost savings opportunity available by collaborating across the Commonwealth to combine agency, local government, and higher education spending. CGI partnered with the senior staff in the Department of General Services and contract officers to launch this pioneering project. The goal of the project was to achieve best-in-class pricing and service quality by utilizing advanced contracting technologies and processes.

The project involved numerous stakeholders, including 171 state agencies and institutions of higher education and Fairfax County. This level of cooperation maximized the buying power of Virginia throughout the strategic sourcing implementation.

CGI needed to perform a spend assessment and analysis for Virginia, followed by implementation of strategic sourcing for some of the Commonwealth’s key categories of spending. It also needed to create and implement a compliance and monitoring system. And finally, for the project to succeed, CGI recognized it would have to put a great deal of focus on knowledge transfer to ensure that the procurement staff gained the necessary process expertise and knowledge to apply CGI’s techniques to their existing workstreams.

The Strategy
CGI kicked off the Partners in Procurement project with an assessment and analysis of Virginia’s spending. It proposed a strategic procurement plan to implement the sourcing (categories, timing and key participants). Upon approval of the plan, CGI executed a comprehensive procurement sourcing strategy for each category. Categories addressed included Office Supplies, Paper, Computer Hardware, Software, MRO Supplies, Janitorial Supplies, Temporary Workers, Uniforms, Lab Supplies, Printers and Other PC Accessories, Enterprise Storage, Storage Media, School Buses, Heavy Trucks, Off-Road Equipment, and Travel. The savings achieved were not only generated by improved pricing but also involved transforming the procurement practices to seek best value – a combination of price, quality and service levels. Supply chain cost reduction opportunities were also taken into consideration.

CGI also assessed the Commonwealth’s procurement code and existing procedures and provided an analysis on how to enhance existing procurement processes by applying the best practices learned from both corporate and public sector organizations. Several new supply chain and procedural improvements were instituted. For example, CGI used new procurement approaches that resulted in greater return from procurement negotiations.

Next, CGI designed and implemented a contract compliance and savings monitoring system that was instrumental in securing vendor fee collections, which Virginia used to fund its spend management efforts. The benchmarking system highlighted actual vs. projected spending and savings for each category so that Virginia could take steps to re-direct agencies to preferred statewide contracts.

On the knowledge transfer front, the CGI team developed and delivered a 12-module customized training program for the Commonwealth’s procurement professionals. The knowledge transfer empowered Virginia to conduct a third wave of strategic sourcing on its own after CGI’s project ended.

As strong communication was critical to the success of the statewide project success, CGI created a marketing strategy program to promote new contract advantages. This program was implemented in two steps: e-mails announcing new contracts were sent statewide, including cabinet and administration offices, and contract details (by supplier) were sent to offices highlighting contract price improvements, information on suppliers’ SWAM (small, women, and minority-owned business) status and a tutorial on how to access new contracts. The marketing effort measurably increased awareness and the usage of new contracts. For example, Computer Hardware buying on new contracts was 248% of the expected implementation rate in the third month of implementation.

The Technology

• CGI PRISM® software
• CGI Compliance and Savings tool

The Results
The team achieved 12% savings on an annual baseline of $309 million. Also, the team introduced new procurement practices to the state that brought best practices to the procurement function. CGI also helped change purchasing behavior by driving volume to Virginia’s eVA e-procurement system. This system helped lower Virginia’s cost to serve. In turn, vendors could pass their savings on to Virginia, and Virginia could closely monitor compliance. More employees are using approved contracts as a result of CGI’s strategic sourcing implementation and communications/marketing efforts.

CGI’s knowledge transfer sessions allowed Virginia’s procurement professionals to apply and leverage best-in-class sourcing techniques immediately. The team also trained procurement personnel to take over the compliance and savings benchmarking function to ensure that savings were effectively monitored even after CGI’s engagement ended.

An online reverse auction for storage media resulted in savings of 30%; the process and results were lauded in the journal InfoWeek. CGI’s efficiency analysis and savings creation work received special recognition from the Progressive Policy Institute and the Democratic Leadership Council.