Posted: July 29, 2003

State Treasurer Jack A. Markell participated as an honorary co-chair during a two-day meeting of the Democratic Leadership Council's "National Conversation," a gathering of centrist Democrats held Sunday and Monday in Philadelphia.

Markell welcomed about 350 officials, including governors, members of Congress, mayors, state officers and legislators, and local officials, during a "Roll Call of the States." He also served on a panel, which also included U.S. Rep. Thomas R. Carper, on "America's Party: A Report from the Front Lines" and gave a presentation on "Better Bottom Line: Budget Cuts that Make Government Better."

Here are excerpts from Markell's remarks:

In the spirit of the DLC, I’m here today to talk about a third way approach to balancing budgets.  It’s an approach that allows states to reduce the magnitude of tax increases and service cuts that virtually all of us are implementing these days. 

The idea that I’ll describe -- called strategic sourcing or leveraged purchasing power – is not very complicated.  Much of the Fortune 500 uses these techniques regularly.  But it’s just now taking hold in state governments. 

It’s incredible these techniques have not been applied before – because it represents low hanging fruit in the deficit wars.  Let me tell you about how it works in theory and about our results in Delaware. 

Let’s face it.  Most governments simply don’t exploit their size or leverage to the benefit of taxpayers when it comes to purchasing. 

The typical purchasing practice in any state government is 1) a decide to buy something, 2) issue a Request For Proposal, 3) a thousand people individually submit bids in sealed envelopes, and then 4)  pick the lowest price. At no point do these vendors ever directly compete with each other on price, and at no point do most governments go back and say – “I think you can do better.” What if we could change that? 

Ours is a radically different way of thinking about how and what government buys and, in some cases, how much. At its heart, Leveraged Purchasing Power is about making our state and local governments live by the same principles as the average families or successful small businesses when it comes to what we buy.  

Families know the value of buying in bulk –that a six-pack of Diet Coke costs a lot less than buying individual cans. Businesses are able to drive even better prices by leveraging their millions of dollars of collective muscle to maximize their own savings potential – if the widget branch of company X needs 10,000 sheets of paper a day, and the billing department needs 20,000 sheets, the company’s central purchasing department 30,000 at a great volume discount.  

The problem is – incredibly - governments do not always act that way. Problems with object codes, or agencies not buying on-contract, or individual state employees making individual purchases from a Staples catalog combine to ensure that most governments do not come close to getting the best deal for their volume.   

So the first piece of the strategy is bulk purchasing.  But that’s just a small component of what we do. 

A closely related piece is to make sure we give vendors better visibility into the total buying opportunity.  If we’re buying $50 million of PC’s from IBM and $25 million from Dell, you can be sure both will sharpen their pencils for a $75 million opportunity. . . .

Eighteen months ago, we started a program called Partners in Procurement to adopt some of the business-best practices and bring some more common sense into how the state spends its money. . . . And instead of just taking the lowest first offer, we injected more competition into the process so the people who want to sell to the state have to provide much better prices and service. . . .  

Here’s the bottom line:  even in good times, but especially now, we have an obligation to run government efficiently. In Delaware, thanks to the leadership of our Governor and the support of our legislature,  we can look our citizens in the eye and how them how we have transferred millions of dollars from vendors to taxpayers.  And that’s a great message to tell.  

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