July 30, 2012 By Steve Ressler
It’s August and the air conditioning just stopped working. You’re sweating profusely, your kids are screaming and you have no idea how to fix it. It costs $500 to repair, $1,000 for a basic new one and $5,000 for the deluxe version. What do you do?
You haven’t gotten a raise in three years, you just added $1,000 in monthly day-care costs and your car is making noises. Sound familiar?
Many Americans face this situation daily, and local governments face the equivalent with their budgets — existing infrastructure needs repair; new projects and requirements keep growing; and revenue is flat to decreasing.
So what do you do? One answer is to use the strategies of personal finance.
Think of your personal buying habits. In life, sometimes your budget shrinks — you lose your job, change to a lower-paying industry or add a new expense. But you make changes — you take fewer vacations, buy generic products, delay purchases and shop at Target instead of Nordstrom. You may seek out independent job opportunities and focus on optimizing what you already own, such as refashioning old clothes and rediscovering hidden gems in your closet, instead of buying new clothes. In addition, you become smarter about new purchases; you get more quotes and really understand what’s needed when getting something repaired.
So why don’t we do the same in government? As agencies are met with flat and shrinking budgets, they should take an individual budgetary approach and optimize how they are buying and using resources:
1. Maximize what you already own — Just like going through your closet and finding some great clothes you bought and forgot, do the same by going through your inventory. With most software licenses, you already have access to amazing things that you probably aren’t using. Many of these licenses could be combined to create new solutions.
2. Get more quotes — When money is tight, you wouldn’t buy a new air conditioner for your home based on one quote, right? Governments also should get multiple quotes and promote their RFPs instead of merely posting them. Work with vendors like Onvia and Deltek to ensure your local procurement is distributed nationally. Make sure the best candidates know about your RFP and encourage them to apply. And just like you would negotiate when buying an air conditioner, negotiate with applicants.
3. Reduce the barriers — If you asked five air conditioner repairmen to fill out 20 different forms to win your business, guess what — no one would do it. Part of the reason it is hard to get into government procurement is that it’s expensive. Each state and local government has different rules and regulations, and meeting them costs lots of money. Each requirement also adds more cost — companies spend thousands of dollars just for potential to win the business. If we reduce the barriers to requirements, it allows contractors to offer lower prices and more competition.
4. Prioritize — When the budget is tight at home, priorities are necessary. That vacation to Disney World gets pushed to next year as the air conditioner becomes the priority. The same is true with local government — agencies must prioritize the nice-to-haves versus the essentials. Also, look for replacements — downscale the Disney World trip to a local amusement park. The large enterprise system may be met with a nimbler, simpler service.
As funds shrink, government should embrace the same budgeting techniques we use at home — when the budget is low, you make changes. You stretch each dollar, maximize what you already own and look for sales. And sometimes you still buy a new air conditioner because it’s worth the long-term investment.
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