CGI’s Spend Management Strategy Brings Big Savings to the State of Delaware

“CGI has a comprehensive strategic sourcing offering. The PRISM® initially helped us understand what we purchased, and is now providing critical visibility to monitor our contract compliance.”

Gloria Homer, Former Secretary of Administrative Services,
State of Delaware

With budgets being increasingly tightened and elected officials striving to ensure that citizens’ tax dollars are efficiently managed and spent, state governments in the U.S. are looking for ways to do more with less money. In partnership with CGI’s Spend Management Solutions Practice, Delaware State Treasurer Jack Markell spearheaded an innovative initiative for Governor Ruth Minner that reengineered the way the state buys goods.

The Challenge
To prevent a fiscal crisis across state government, Delaware needed an innovative approach to save the tax dollars of its citizens. CGI presented an alternative to raising taxes and cutting staff. It proposed that Delaware allow it to study how the state was buying goods and services and determine ways to coordinate purchases through cooperation among the various state entities. The increased organization and buying power would streamline processes, increase efficiency, and most importantly, save money.

CGI’s multi-phase spend management initiative for Delaware would cover spend assessment and analysis, strategic sourcing implementation, knowledge transfer, and compliance and savings monitoring system implementation.

Of course, the very nature of the project posed challenges, as the state lacked the necessary process, tools and technology to implement the solution. Also, as it was the first state to adopt spend management techniques, it also needed a comprehensive training program for its procurement professionals to allow them to continue to apply best practices in spend management.

In addition, CGI recognized that with so many state agencies accustomed to selecting and managing their own suppliers, it would be crucial to have everyone on board for this important initiative.

The Strategy
CGI began by conducting a state-wide spend and process assessment and analysis. With a focus on identifying opportunities for savings, it examined the purchasing methods, procurement policies, codes and procedures, cost of contracts for purchased goods and services, the procurement department’s organization, and the opportunity to expand the knowledge base of purchasing professionals. The study spanned 23 state agencies, four universities, and 19 K-12 school districts.

CGI’s proprietary expense segmentation PRISM® software was a key tool that Delaware needed to effectively manage its procurement. PRISM® makes spending visible across the state’s agencies, school districts, and higher education institutions. Using its proprietary mapping algorithms, PRISM® aggregates raw financial data from the state’s multiple financial systems and converts it into actionable purchasing information. The software allowed the state’s Contract Officers to identify areas of opportunity for contract consolidation across all of the various state agencies on an as-needed basis.

“For states, like many big businesses, it can be difficult to find areas where spending overlaps. However, with PRISM®, if four different agencies each have their own contract with the same supplier, we can immediately identify that and put all four agencies and their volume into one larger contract with better pricing and terms,” stated State Treasurer Jack Markell.

After the assessment and analysis phase, CGI implemented strategic sourcing for 25 categories, including Computer Hardware, Cellular Telephones, Defibrillators, Electrical Supplies, Laboratory Supplies, Furniture, Temporary Labor, Municipal Lease, AP Review, IT Professional Services, Residential Treatment Services, Refuse Disposal, and Ammunition.

In addition, CGI implemented its compliance and savings monitoring system to track actual savings on a monthly basis and to identify and eliminate non-compliance. The application, which uses some of the PRISM® technology, allowed the state to identify maverick purchasing and enforce contract compliance. As part of the project, CGI trained the state’s procurement staff on how to perform the monitoring function independently. “CGI has a comprehensive strategic sourcing offering,” stated Gloria Homer, former Secretary of Administrative Services for the State of Delaware. “The PRISM® initially helped us understand what we purchased, and is now providing critical visibility to monitor our contract compliance.”

The Technology

• CGI PRISM® software

The Results
During the project, CGI created $20 million (13.5%) in savings across the participating agencies, K-12 school districts and universities. The company also helped to implement several procedural and policy recommendations, including a new legislation that would allow auctions in state procurement and standardized reporting required of all contracted suppliers to accurately track pricing and purchases.

Delaware has internalized many of the procedural changes proposed and managed initially by CGI. By applying techniques learned during the knowledge transfer process, Delaware’s contract officers saved an additional $3.4 million on their own in the months following the project completion. They have been empowered to monitor savings results from their procurements, and the state now includes savings targets in its procurements. Both of these were CGI recommendations. Delaware has also passed legislation to allow for auctions to be used in procurement.

Through its communications program, CGI helped ensure that Delaware’s many agencies understood the value of the initiative and complied with the innovative new program. The work in Delaware led many other states to adopt similar programs to save taxpayer dollars and to cope with their budget crisis.

CGI’s work in Delaware has won several awards, including the 2003 Outstanding Program Award from the National Association of State Chief Administrators. The National Institute of Governmental Purchasing (NIGP) honored Delaware’s “Partner$ in Procurement” project as the “Top Innovation by a State Government.” In addition, the University of Pennsylvania’s Graduate School of Government recognized CGI’s work in Delaware as part of its Distinguished Lecture Series, calling it “an innovative approach to helping states better meet their budget needs.”

“Delaware is now saving on hundreds of items that the state regularly purchases and setting an example for other states across the country to follow,” stated Mr. Markell. “Delaware’s program demonstrates that states can live by the principles that have governed business practices for years.”