April 8, 2008 By Merrill Douglas
n Texas, as we all know, everything is bigger - that includes the state's collective purchasing power. In fiscal 2007, public organizations that bought IT products through the state's cooperative contracts spent $993 million.
When a buyer negotiates with vendors, that kind of volume means power. "Our perspective is that Texas is a Fortune 500 company, and we expect pricing based on that," said Cindy Reed, the deputy executive director of operations and statewide technology sourcing for the Texas Department of Information Resources (DIR).
Reed's office drives a hard bargain, she said. "But we're never satisfied. We're trying to do better."
One tool the DIR uses to advance its pursuit of better pricing is the Planned Procurement Schedule (PPS), an electronic spreadsheet state agencies use to report planned IT purchases.
Launched in 2006, the PPS initiative remains a work in progress, though it's already yielding benefits. If the DIR achieves its next goal - collecting PPS data from nonstate public entities that buy through state contracts - Texas officials hope for even more leverage at the bargaining table.
The DIR created the PPS in response to HB 1516, a comprehensive IT consolidation bill passed by the Texas Legislature in 2005. The law requires the DIR to negotiate prices for IT commodities based on aggregate demand, and for state agencies to buy through the contracts the DIR negotiates unless an agency obtains a formal exemption.
Agencies complete the PPS biannually by indicating the IT purchases they plan to make during the next four quarters. By collecting and assembling the data, the DIR can predict when vendors will see demand for certain products and what the volume will be.
The DIR developed the PPS with four goals in mind. The first was to use the data to discover when different agencies planned to buy the same products and combine those purchases to achieve volume discounts. "The theory is that if we had five agencies wanting to buy computers at the same time, we could aggregate that under our contract and drive an even better price than what we have on our contract," Reed said.
A related goal was to assemble numbers the DIR could use in contract negotiations. Rather than simply assert that Texas should receive volume pricing because it's a large buyer, procurement officials could refer to the actual size of the buys that government agencies planned to make.
A third goal was to improve the mix of products included in state IT contracts. "If we saw 50 agencies were going to buy surveillance cameras in the next six months, and we didn't have surveillance cameras on our contracts, then that would give us a lead time - an opportunity to get out in front and put those contracts in place," Reed said.
Finally the DIR hoped to attract new customers. Although all state agencies must purchase IT products through the DIR state contracts, their purchases represent only about 25 percent of the money spent through those contracts.
Three-fourths of the expenditures come from nonstate public entities - cities, counties, K-12 school districts and institutions of higher learning. "We have approximately 4,400 eligible customers," Reed said. "About 150 of those are state agencies."
Nonstate entities don't have to use the contracts, but many do take advantage of the prices the state negotiates. DIR officials hope to attract even more of those voluntary customers.
Some Is Good, More Is Better
DIR officials also would like to convince those nonstate customers to submit the PPS in order to bring their planned purchases to bear during negotiations. "If you look at our block purchases, some of the largest are outside state agencies," said Dave Ballinger, manager of the DIR's Supply Chain Support Office. "If a state agency buying 500 units of a product is
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