July 13, 2011

State Procurement Oversight

The Senate Cost Control Commission (SCCC) has fostered changes that have lead to
more effective and efficient management of the State procurement system, while
supporting changes to the State’s information technology and fiscal tracking systems
inherent in the system.

Background

The Commission created the Procurement Subcommittee in 2005 in an effort to bring
private sector innovation in procurement to state government’s financial management
system.

The main goal of the subcommittee was to provide recommendations and oversight to
the Department of General Services (DGS), and all other purchasing entities within
state government, to enhance the prospect of utilizing strategic sourcing as a
procurement process. Strategic sourcing continuously improves and re-evaluates the
2 purchasing activities of an organization to leverage purchasing power and other costsaving
measures within the procurement system.

In 2005, a California Strategic Sourcing Initiative was included in the Governor’s
2004/2005 budget, as a result of the recommendations from the Governor’s California
Performance Review, which incorporated information and recommendations from the
Cost Control Commission’s 1996 report on “Procurement Practices”.

The main barrier faced by DGS in accomplishing strategic sourcing was a lack of data
on what the state was purchasing. At the time the state did not accurately collect data
on who purchased, what quantities, name of vendors, pricing or usage of the goods
and services purchased with public money. There was no purchasing and inventory
records history to leverage buying power in order to obtain the lowest prices from
suppliers. At that time, the state did not utilize “strategic sourcing” of any type.

The Cost Control Commission’s 1996 report on “Procurement Practices”
recommended that DGS employ strategic sourcing and estimated that the state could
save 25% on its purchases. The Commission under the direction of the chairman at
that time former Legislative Analyst A. Alan Post, transmitted the SCCC findings to
state agencies and requested compliance with those recommendations. He also
requested that the Senate be provided an update of the progress with regards to those
recommendations.

DGS was then given a directive by the Administration to streamline its procurement
practices in order to reduce its spending. The Commission developed a template by
which it would monitor the progress DGS was making to accomplish this goal by
requiring the following:

• Contract Savings
• Purchasing Data Base
• Electronic Ordering System
• Training Requirements
• Performance Measures

The Commission also advised DGS to update their Strategic Procurement Business
Plan, in order to further the implementation of private sector innovation in the area of
strategic sourcing.

DGS was in the process of establishing the California Procurement & Contracting
Academy during this same period, and the Commission recommended contracting with
a higher education institution to provide the training. As a result, DGS entered into an
agreement with CSU Hayward to achieve that goal.

In September 2008 the Commission subcommittee met with DGS and received the
revised plans for an eProcurement program which would help facilitate strategic
sourcing. The Commission recommended that the system be made available to all
3 departments regardless of their reliance on DGS’s purchasing authority. DGS would
provide full procurement functionality for a statewide pilot program in 2009.

In June 2004, the SCCC published a brief report, titled “Technology and Efficiency in
Managing California Government” calling for revamping the State’s information
technology system. Concurrently, the state chief information officer stated similar
goals. Following this, the Little Hoover Commission wrote a publication going into more
detail, recommending the centralizing, consolidation and integration of IT functions in
the state. This consolidation was integral to the future DGS implementation of strategic
sourcing. The SCCC also backed the implementation of FI$CAL due to its role in
supporting the strategic sourcing initiative.

DGS announced the eProcurement (a strategic sourcing component) system would be
on line 3/16/09. The California Highway Patrol, the Department of Transportation and
the Department of Consumer Affairs would be included with DGS in a roll-out of the
program. By June 30, 2009, other agencies and departments would be using the
system to manage procurement with full implementation to follow.

As the system continues to be implemented, the Senate Advisory Commission on Cost
Control in State Government will keep abreast of this critical initiative it has fostered.