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State Procurement Practices

State Procurement Practices is a report published by the
Senate Advisory Commission on Cost Control in State Government, April 1996.
 

Introduction
Findings
Recommendations
Savings
How to Order Entire Report

INTRODUCTION

California is one of the high technology centers of the world but one could not tell that by examining how the State’s business is conducted. Instead, the Task Force that worked on this study was shocked to find that we cannot even determine the total expenditures for acquisition of goods and services by division, department, or agency in the State of California.

The State Controller, who pays all claims through the Controller’s Disbursements System, cannot determine the dollar volume by individual vendor, the products purchased, or the price paid.
Technology exists today to efficiently link millions of computers to transfer and analyze data. For example, when one’s credit card is read electronically for a purchase anywhere in America, or practically anywhere in the world, the customer’s balance and available credit is analyzed instantly and the transaction is approved (or declined) immediately. Through this advanced technology unusual buying patterns can be detected to quickly catch a fraud in progress.
For example, General Motors Corporation (GM) requires all vendors and contractors to transact business electronically. GM will not accept bids or payment requests on paper. Only electronic transactions are allowed. GM and its suppliers save millions of dollars annually by using modern technology.
The State is buried in a blizzard of paperwork in most of its operations, including the procurement process. The State requirements for a paper audit trail for all expenditures is analogous to treating medical problems by bleeding the patient -- the system is that out of date. Experienced professionals in the procurement process have estimated that the State pays at least 25% too much for what it buys.
The State should also analyze purchases to ensure that the taxpayers get the best value for their hard-earned dollars. Lowest price does not automatically mean best value.

FINDINGS

  1. The most shocking finding of this study is the dearth of data in the procurement of goods and services.
  2. There is no effective vision or integrated plan for future procurement.
  3. The volume of paper generated in procurement, payroll and other expenses prevents summarization and analysis of information.
  4. The state pays too much for goods and services.
  5. Performance improvements are neither measured nor rewarded. It is impossible to determine cost savings from new innovative ideas.
  6. In spite of the $1.1 billion annual operating costs, the information systems for the various state agencies cannot communicate with each other or provide common data to permit summarization at the state level.
  7. There is no focus on utilization of warehouse space nor the material and supplies stored within them.
  8. Common sense has been legislated away in the myriad of laws and codes that drive away many qualified vendors and add to procurement costs. Compliance is the focus rather than obtaining the best value for the state.

We are in a position to act now to change this sad state of affairs with The Electronic Commerce Act of 1996. California taxpayers have a right to expect government to make judicious use of their hard-earned dollars and squeeze a dollars’ worth of value out of every dollar spent. With that in mind, the Commission has made several recommendations to bring to your attention that are further detailed in the report.

RECOMMENDATIONS

  1. An Executive Planning Committee should be responsible for coordinating long-range strategic planning.
  2. The Controller’s Disbursement System should be replaced with a new Procurement System with Electronic Data Interchange. Replacing paper-based systems can save California $1 billion per year.
  3. We must centralize the responsibility and accountability for all the State’s procurement functions.
  4. All development projects enhancing or expanding the many computer applications being used in the agencies should be frozen pending the completion of a statewide strategic plan.
  5. Procurement officials should be certified by the National Association of Purchasing Managers as Certified Purchasing Managers.
  6. The conflicting body of legislative and administrative codes must be streamlined to restore common sense-based Best Value Concepts.

SAVINGS

The Commission finds that the State can save billions annually if these recommendations are implemented properly. The costs of implementing a major statewide computer system are estimated to be $250 million for software and hardware. A precise estimate of savings is difficult, if not impossible, because of the lack of procurement information. The commission still finds this lack of information incredible, but true.
Whether your first priority is reducing the state tax burden or providing government services, this program is a step in the right direction. This can be a true bipartisan effort to bring California into the 21st century.

HOW TO ORDER A COPY OF THE ENTIRE REPORT

859-S

Copies of this report, "State Procurement Practices", may be purchased for $3.75 per copy
(includes shipping and handling), plus current California sales tax. 
Senate Publications (LINK IS BROKEN ON MAIN SITE)
1020 N Street, Room B-53 
Sacramento, CA 95814 
(916) 327-2155 
Make checks payable to SENATE RULES COMMITTEE 
Please include Senate Publication Number 859-S when ordering.