"Given our current fiscal crisis, we need to take full advantage of California's purchasing power to get the best service and the best products for the best price," Schwarzenegger said. "We will save millions of dollars just by being smarter about how we buy things."
Strategic sourcing is a way to achieve significant savings by streamlining procurement activities by consolidating, renegotiating and automating contracts. California currently spends more than $4 billion annually on goods and services. By consolidating purchasing power in one entity, instead of hundreds of separate state departments, boards and commissions, the state may realize savings of up to 15 percent per year on everything from laser printers to pharmaceuticals.
The Department of General Services in conjunction with the California Performance Review has awarded a three-year contract to American Management Systems (AMS), a strategic management firm with significant expertise in leveraged purchasing. Working with the Department of General Services, AMS will determine what goods and services are currently required by state agencies, and consolidate those purchases to achieve high-volume discounts and flexibility from vendors. AMS will also train state staff on the use of strategic purchasing techniques.
"The governor's plan to bring a focused strategy to the purchase of goods and services and to streamline the procurement process is an important step in government regaining the trust of California's taxpayers," said Chon Gutierrez Co-Executive Director of the California Performance Review.
Strategic sourcing has been used by other states and by many large corporations with significant success. As an example of how this process will change the procurement process in California: Each year the state purchases tires for the CHP, the Department of Forestry and other state vehicles, utilizing multiple contracts. Under the governor's plan, the state will use a limited number of contracts enabling the state to receive the lowest possible price for tires.
The contractor will be paid based on a percentage of the actual savings achieved by the state.
