The Price is Right: How The Clearing Helped a Large Federal Agency Create a Modern Purchasing System

Often a solution to an issue seems obvious, but the path to get there is complex. In the case of a large federal agency, leaders knew a fragmented purchasing structure and inconsistent contracts meant they were unintentionally overpaying for many goods and services. However, the agency’s myriad of divisions and departments made deploying a solution to this seemingly simple problem difficult. 

Read on to learn how The Clearing helped agency leaders harness the power of their purchasing data to tell a story of savings as they created a modern acquisition program that drove increased value for the federal government and the American people.

The Situation

Every organization needs office supplies, software licenses, and professional services; however, few need them at the scale of a large government agency serving the American public. Adding to that scale, large federal agencies are complex, operating across divisions and geographical locations. As a result, despite the large amounts of supplies and services being procured, efficiencies and economies of scale aren’t always realized. That was the case with our client, a quintessential, multi-faceted large federal agency.

To better understand the bulk purchasing issues faced by our client, here is a simple example. Every division in the agency typically needed similar supplies. In this case, consider paperclips. Because paperclips were being purchased under different contracts by different buyers in different divisions, the agency wasn’t paying the same price across the board. Now, imagine the same pricing discrepancy was occurring with a larger ticket item like IT systems. Depending on the item, the agency was potentially leaving significant savings on the table.

Within the agency, forward-thinking leaders recognized the opportunity to save and effectively maximize the organization’s purchasing power, creating better value for the government. They identified the need for people to work together to communicate and identify common needs, leverage that data to get a clearer view of purchasing and pricing patterns, and use that new data to negotiate with vendors to receive the best terms, conditions, and prices for the products and services needed. This proactivity led to the agency partnering with  The Clearing to help create and implement a smart, agency-wide purchasing system.

How We Did It

On its surface, implementing an agency-wide purchasing system appeared straightforward. The challenge, however, was that without historical data to leverage or broad buy-in from leadership to purchasing managers – even the best system would not be successful. To make the process straightforward, The Clearing team began a discovery phase focused on listening to and enlisting stakeholders while gathering available purchasing data.

During the listening sessions, The Clearing team used Power Mapping to evaluate the agency’s stakeholder landscape. This approach helped us understand the formal and informal networks that would influence the success of an agency-wide purchasing program. Given the agency’s size, its networks were complex and spanned groups of different sizes and purchasing authority. Creating a Power Map enabled the team to identify a critical piece of the puzzle: the groups with the largest buying power had the most to gain from achieving better value in purchasing. Thanks to their buying power, these groups typically had more advantageous purchasing contracts than smaller agency divisions. Enlisting these large groups as advocates and analyzing their existing contracts helped our team lay the groundwork for a purchasing program that would benefit every operating unit regardless of their scale.

Combined, the Power Mapping and data collection process allowed our team to identify pain points and concerns, secure buy-in, and begin to answer the “why” and “what” questions coming from different parts of the organization. For example, when someone asked why an organization-wide purchasing was important or what kind of savings it could drive, project stakeholders could share data such as this:

From copy paper to software licenses, the data made the case for standardizing purchasing clear. The graphic above is only the tip of the iceberg. As part of building the program and compiling data, more than 97,000 contracts were reviewed, marking the first time all of the organization’s contracting data was available in a single database.

This data facilitated two critical plan components:

• Education and buy-in. The Clearing used historical and current purchasing data to develop clear, compelling communication materials to educate agency employees on the case for centralized purchasing, including the benefits of negotiating collectively, potential savings, process simplification, and overall efficiency.
• Program mechanics. The Clearing helped the agency evaluate terms and pricing to determine optimal conditions, consolidate contracts to realize savings, and create an easy-to-follow program using familiar tools to drive program adoption and make purchasing a quicker, more intuitive process for agency team members.

Upon execution, this holistic approach to transformation management achieved the agency’s goal of changing purchasing behavior and realizing more value for the federal government and the American people.

The Impact

Now that the program is fully functioning, the agency is well on its way to meeting cost savings and driving greater value for the American public. In addition, through the extensive data analysis undertaken during this initiative, the agency also has key performance indicators to gauge program success.

• Through price analysis, the agency has clear parameters for acceptable prices across a range of goods and services
• In addition to pricing guidance, the agency has clear acquisition terms to extract maximum value from purchasing contracts
• The agency will be able to measure ongoing success by the number of contracts these new parameters and terms are built into and the resultant year-over-year savings

If you’re thinking about strategic change or organizational transformation, The Clearing can help. Reach out anytime – we would love to hear what’s on your mind.