In the past few blogs we’ve thrown a lot at you. Ultimately, we want to show you how these principles can be applied to government agencies. And, based on current government organization successes, and our own internal experience, we believe that these concepts can help government agencies get the most bang out of the taxpayer’s buck.

So, how exactly can these concepts help government agencies?

Overall, organizations that apply these concepts can reduce costs by an average of 10-15% on a one-time basis and 5-7.5% per year on an ongoing basis (not accounting for the premiums associated with new products or services and inflation).

This table provides some idea of the improvement in metrics that have been achieved by organizations that successfully implement Smarter Spending principles, including our own.

Many government organizations are already taking promising first steps in applying Smarter Spending principles.  In past blog posts, we’ve discussed successes at Los Angeles Metropolitan Transit Authority, the U.S. Air Force, State of North Carolina, and the State of New York. Now, many government officials are starting to identify with the key underlying tenet of Smarter Spending, doing more with less. Here are a couple of examples:

• The U.S. Secretary of Defense, Robert Gates, stated in a January 2011 memo, “… is imperative for this Department to eliminate wasteful, excessive, and unneeded spending. Indeed, to do everything we can to make every defense dollar count.”
• The U.S. Undersecretary of Defense for Acquisition, Dr. Ashton Carter, stated in a September 2010 memo, “To put it bluntly: we have a continuing responsibility to procure the critical goods and services our forces need in the years ahead, but we will not have ever-increasing budgets to pay for them.  We must therefore strive to achieve what economists call productivity growth: in simple terms, to DO MORE WITHOUT MORE.”

While all government agencies want to save money, there is not a one-size fits all approach. And the challenge for leaders like Gates and Carter are to make these changes while maintaining the latitude to invest in strategic initiatives.

So, where to start?

We recommend that public agencies first focus on the low hanging fruit – best practices that will lead to rapid cost reductions. These savings can then be re-purposed to fund longer term transformations. Some of this low hanging fruit includes investing in:  

• Spend Analytics
• Total Cost Analysis
• Internal Demand and Demand Management
• Leakage Elimination
• Strategic Sourcing

Smarter Spending Can Yield Super Savings

Obviously, some of these principles will require organizational changes that will take time to fully mature. Transforming procurement policies is not an overnight process. But, there is no doubt that significant savings can be realized in a reasonable timeframe by adopting these fundamental changes and implementing them.

At the end of the day, the demand and the need for our government to tighten its belt is serious. Smarter Spending is one way to get the job done. These principles and approaches have proven to deliver significant savings that not only achieve near-term fiscal improvements, but also long term savings. At IBM, we brought our own company back from near-bankruptcy by utilizing some of these very principles.

Your organization can do the same.

Christopher Bock is an Associate Partner and Service Area Leader on the Public Sector Team at IBM Global Business Services. A graduate of the Department of the Navy’s Acquisition Intern Program in Contracting, Mr. Bock is a seasoned procurement professional with nearly twenty years of experience in the field.

Mr. Bock is acknowledged as a thought leader in the procurement field, and has been recognized repeatedly for excellence in project delivery. He currently leads IBM’s Public Sector Procurement Consulting Services team, solving client challenges across the industry. Mr. Bock earned his undergraduate degree in business from James Madison University in 1992, and a Master of Business Administration degree from The George Washington University in 1996.

Chris Bock (christopher.bock@us.ibm.com)

Scott Padelsky is a Senior Managing Consultant on the Public Sector Procurement Team at IBM Global Business Services. As an IBMer, Mr. Padelsky is an accomplished consultant in the areas of procurement strategy, strategic sourcing, and eProcurement. Mr. Padelsky has over 15 years experience working for two companies recognized for thought leadership in supply chain and procurement, IBM and Intel Corporation. Mr. Padelsky earned an undergraduate degree in Finance from Arizona State University in 1999 and a Masters in Business Administration from the University of California, Irvine, in 2005.

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