Posted: July 29, 2003
TALKING ABOUT DEMOCRATS
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
In the spirit of the DLC,
Iím here today to talk about a third way approach to balancing
budgets. Itís 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 Iíll describe
-- called strategic sourcing or leveraged purchasing power Ė is not
very complicated. Much of the Fortune 500 uses these techniques
regularly. But itís just now taking hold in state governments.
Itís incredible these
techniques have not been applied before Ė 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.
Letís face it. Most
governments simply donít 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 Ė ďI
think you can do better.Ē 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 Ėthat 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 Ė if the widget branch of
company X needs 10,000 sheets of paper a day, and the billing
department needs 20,000 sheets, the companyís central purchasing
department 30,000 at a great volume discount.
The problem is Ė 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 thatís 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 weíre buying $50 million of PCís 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. . . .
Hereís 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 thatís a great message to
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