The ability to see and interact with spend categories across all commodities and services on federal contracts provides the opportunity to make a better purchasing decision, drive strategic goals and objectives, and reduce friction in the purchasing process.
However, what we see today in government are varying processes and systems that do not provide a single platform to buy items and services from all spend categories. Nor do we see an effort to implement one application and approach to streamlining that process, so government procurement teams have a one-stop shop for everything they buy.
The government procurement process is complex and has many gates, which helps to ensure taxpayer dollars are being spent lawfully and responsibly. What does not have to be complex is the point of requisition, meaning having access to all spend categories and their contract line-items before a purchase decision is made is critical to ensuring the commodity or service was procured from the right contract and at the right contract price. And the contract and price do not have to be limited to specific categories of spend.
Every category of spend comes with its own unique challenges but breaking down those barriers can provide the visibility into each one at different levels. For example, we see a lot of approval workflows and barriers for capital equipment that slow down the process and add days – if not weeks – to process. And some of those barriers are there for a specific reason. However, if you could eliminate or at least reduce some of the friction in that process by providing access to the various contracts that are in place for capital equipment, some steps could be eliminated, making the process more efficient and more compliant to a contract.
We will look at some basic concepts that can help mitigate the challenges with specific commodities of spend that typically lack the visibility needed to affect change.
Applying Supply Chain Discipline
Acquisition and supply chain teams need to work closely from the start to help apply supply chain discipline to purchasing activities across some of the most difficult spend categories – such as pharma, purchased services, minor equipment, and labor.
The discipline starts with knowing how the items or services will be purchased by the agencies authorized to purchase off the contract. If the teams that are charged with making the purchase(s) are not informed of the new contract or have no way of knowing what is on the contract and which price has been negotiated, then there is a high probability that the spend against this contract will never reach its full potential. And if the strategy is “the vendor will figure it out for us,” then the results will be whatever the vendor wants and not what you negotiated.
This is not to say that vendors do not want to do the right thing – but not considering how government purchasing agents gain access to the items or services on the new agreement ultimately affects the amount of spend against the agreement. Also, any chance of realizing a rebate or volume commit discount threshold will be lost or take a lot longer to achieve.
Another issue is that with some of these complex spend categories, such as capital or minor equipment, the order is placed with the vendor before the supply chain is aware, so they are reacting to an urgent or rush request and lack the time needed to do proper research to make sure the purchase is made from the right contract and at the right price.
These transactions are typically noncompliant to the preferred contract and, in some cases, do not account for critical accessories or maintenance agreements that should come with the equipment, which can further delay the order or installation and, ultimately, impact patient care and outcomes.
When supply chain and acquisition teams work together before, during, and after an agreement is put in place, the results can produce positive outcomes in patient care and improved financial outcomes for the agency. And it is important to keep in mind that the supply chain is responsible to consider the impact for purchasing decisions – risk, supplier diversity, sustainability, compliance, and service levels – and not just price.
The value that the supply chain team can bring to the acquisition process will make the transition from award to the operationalizing of the contract faster and more efficient, and help to drive the strategic goals of the agency. It will also bring structure to the most difficult spend categories. And it will make the task of tying a contract ID to the request line easier to analyze.
The collaboration between these teams can also increase contract utilization and compliance and provide more leverage at the negotiating table when the contract is up for renewal. And finally, some actions to take to mitigate the complexity of the spend categories and gain some traction in managing them closer are: identify your high-leverage spend categories and match them to approved and efficient purchasing pathways; increase the stakeholder collaboration and engage early to direct activity to preferred sources and aggressively analyze the impact; and be a trusted advisor and subject-matter expert to the value analysis team by providing product evaluation and supporting data to help optimize the evaluation timeline.
Broadening the span of control – which is one of the six priorities of the high-reliability supply chain – across all spend categories will increase the visibility of these commodities and services and, ultimately, help reduce costs and drive spend to the most preferred contracts and be a catalyst for other collaboration efforts in the organization.
About the Author
Ted Dagnal is the Vice President of Government Strategy at Prodigo Solutions responsible for all public sector initiatives and programs. Ted has been shaping supply chain best practices in the commercial healthcare industry for more than 20 years, working with some of the largest health and research systems in the country. He is passionate about bringing industry lessons learned, as well as more than 20 years of leadership service as a former U.S. Army officer, to actively help government clients transform and secure their supply chains and data in a federal environment.
Ted is leading the effort to rationalize the Supply Chain Master Catalog for the Department of Veterans Affairs to improve their data quality, enrich item attribute information, and improve contract utilization. He also led the FedRAMP authorization and ATO approval process for Prodigo’s Marketplace platform at VA.