Ohio Governor Announces Reforms to State Procurement Process

Department of Administrative Services to hire a chief procurement officer to oversee agency purchasing functions.

by / June 26, 2008

Photo: Ohio Gov. Ted Strickland

Ohio Gov. Ted Strickland yesterday signed two executive orders aimed at maximizing the state's purchasing power for cost savings and increasing the effectiveness of two programs that help grow Ohio's minority-owned and disadvantaged businesses.

"The initiatives announced today will greatly improve the way that the state conducts its business when purchasing goods and services," Strickland said. "Both executive orders are part of our continuing effort to reform government operations in a way that maintains our state's competitive advantage and attracts business to Ohio."

The first executive order reinforces the state's commitment to minority-owned and disadvantaged businesses by increasing participation in the Minority Business Enterprise (MBE) and Encouraging Diversity, Growth and Equity (EDGE) programs.

In this executive order, Strickland calls on each agency to appoint an equal employment opportunity officer and improve access to state contracts for MBE and EDGE vendors. Additionally, the executive order directs state agencies to track their spending with MBE and EDGE vendors through a scorecard system, set goals for improvement, and work closely with the Department of Administrative Services' Equal Opportunity Division, which oversees the programs and assists agencies with compliance.

"All businesses should have equal access to compete for and enter into state contracts," Strickland said. "While these programs exist to help bridge the economic gap for minorities and the disadvantaged, they ultimately create jobs and help small businesses grow and succeed."

Strickland also signed an executive order that outlines procurement reform efforts and directs all state agencies to work together for cost savings and efficiencies when purchasing supplies and services. In addition, the executive order directs the Department of Administrative Services to hire a chief procurement officer to oversee agency purchasing functions.

"By increasing collaboration among state agencies and ensuring accountability in our financial decisions, we will save money and allow government to run more efficiently," Strickland said.

State government spends $3.5 billion each year on supplies and services. By maximizing the state's purchasing power, state agencies are estimated to save between $34 million and $72 million annually -- not including the additional savings that may be realized by collaboration among higher education institutions as well as local governments.

The executive order also implements Think Ohio First practices, which will promote economic development by maximizing the use of Ohio businesses when agencies conduct purchases. Additionally, the executive order calls for making greater use of technology in tracking and performing purchases statewide.

In early 2007, Strickland launched Advantage Ohio, which addresses regulatory reform, procurement reform, adjudicative hearing reform, and expansion of the Ohio Business Gateway. The procurement executive order implements the second piece of the four-part initiative as well as recommendations from a procurement reform panel that was formed last year.

The Advantage Ohio Procurement Reform Panel, which included representatives from the public and private sectors, made seven recommendations for state government procurement reform: Create a center-led supply organization, maximize purchasing power through leverage, apply a consistent strategic sourcing process, attract and retain talented supply management professionals, set annual targets and report results of procurement efforts, maximize the use of information technology, and accomplish the objectives without comprising supplier diversity and the quality of goods and services.

"By implementing these recommendations, we will make the most effective use of state resources while continuing to provide quality services to the people of Ohio," Strickland said.

Executive Order 2008 - 12S

Enhancing the State's Procurement Process through the Establishment of "Think Ohio First" and other Procurement Best Practices

1. Ohio's State Agencies Are Major Purchasers of Supplies and Services. Collectively, various entities of the State's government purchase billions of dollars of supplies and services annually that facilitate the State's ability to provide needed services to Ohioans. The Office of Procurement

Services, within the Ohio Department of Administrative Services (ODAS), is the purchasing arm of state government and is responsible for establishing contracts for those myriad supplies and services in a cost-effective manner.

2. Coordination of State Purchasing Can Bring Cost Savings. While the majority of Ohio's cabinet agencies, boards and commissions (collectively the "State Agencies") purchase supplies and services through a coordinated effort that is managed by ODAS, there are still some State Agencies that procure supplies and services independent of the State's cooperative effort to minimize its spending and maximize its savings. If these independent purchases were coordinated through the State's larger procurement system, and other procurement best practices were adopted, then the State could realize substantial savings.

3. Appointment of Procurement Officers. In order to ensure that the State Agencies are coordinating their state purchasing through the Office of Procurement Services and are making the most financially prudent purchase decisions, I hereby order the Director of ODAS to appoint an Ohio Chief Procurement Officer (OCPO), who will oversee the coordination of all of the State's procurement efforts. I also hereby order each State Agency to appoint a Procurement Officer (Agency Procurement Officers) who will report to the OCPO regarding each State Agency's procurement activities in order to facilitate efficient purchasing functions. The Director of ODAS will report to me on the status of hiring the OCPO every three months, beginning September 25, 2008, until the OCPO is selected. All Agency Procurement Officers shall be appointed by no later than July 25, 2008.

4. Duties of the OCPO and State Agency Procurement Officers. The OCPO and Agency Procurement Officers will also be responsible for ensuring that the State is undertaking procurement best practices by:

a. creating a center-led supply organization across state government;

b. maximizing state government's purchasing power by leveraging its spending;

c. applying a consistent strategic sourcing process that will allow the State to standardize its purchasing process in order to obtain the best prices for services and supplies;

d. attracting, developing, and retaining a talented corps of supply management professionals;

e. setting annual targets to determine whether the State is making progress towards its procurement performance goals by reporting results and applying a strict and consistent process for determining real cost savings;

f. maximizing use of information technology for procurement to reduce processing time, reduce transactional cost, and increase supplier leverage;

g. implementing, to the extent possible, the detailed best practices recommendations of the Advantage Ohio Procurement Reform Working Group analyzing our state procurement practices; and

h. accomplishing the above objectives without compromising product quality, customer service, or supplier diversity objectives.

5. Additional Responsibilities of Agency Procurement Officers. In addition to the foregoing responsibilities, Agency Procurement Officers will also be responsible for:

a. serving as their State Agencies' procurement contacts;

b. communicating needs for supplies and services to the OCPO;

c. ensuring that procurement personnel are properly certified and trained;

d. maximizing competition and minimizing waivers of competitive selection;

e. implementing the "Think Ohio First" procurement practices described in Paragraph Ten of this Order;

f. coordinating with the Chief Ethics Officers to ensure that all contracts are awarded according to applicable Ohio Ethics Laws and Executive Order 2007-01S;

g. paying vendors promptly and taking advantage of prompt payment discounts;

h. disseminating best practices information to individuals involved in procurement; and

i. producing and verifying data and reports as requested.

6. Collaboration with the Chancellor to Identify Opportunities to Coordinate Purchases. I further order the Chancellor of the University System of Ohio to work collaboratively with the OCPO to identify opportunities for coordination of purchasing among the University System entities and other State Agencies.

7. Creation of a State Procurement Web Portal. An essential element of ensuring the orderly distribution of information regarding the procurement process is the development of a centralized point of communication that is available not only to vendors, but to the State Agencies and other stakeholders in the procurement process. As such, I hereby order ODAS to undertake the work necessary to establish the Ohio Business Gateway as the State's central web portal for procurement by April 1, 2009. I further order all State Agencies that purchase supplies or services to post all state contract opportunities exceeding $25,000, and all of their current contracts exceeding $25,000, on the Ohio Business Gateway procurement portal, within ninety (90) days of its establishment.

8. Transfer of Information Technology Procurement Functions. In an effort to facilitate the creation of the web portal for procurement services, I order the State Chief Information Officer to transition the information technology procurement functions currently performed within the Office of Information Technology to the OCPO by no later than July 25, 2008.

9. The State Must Have a Tangible Method of Identifying Actual Savings that Are Achieved through Procurement Best Practices. To the extent that strategic sourcing contracts provide State Agencies with lower costs for supplies and services, the State must ensure that these lower contract costs translate into real savings at the state level. Consequently, I hereby order the OCPO and the Office of Budget and Management (OBM) to work collaboratively to identify any savings that are achieved through the State's more streamlined procurement process and to summarize those savings in a report that will be submitted to the Director of ODAS on a quarterly basis, beginning April 15, 2009.

10. Implementation of "Think Ohio First" Procurement Practices. The purchase of supplies and services from Ohio companies promotes economic development and stability within the State by stimulating trade and industry growth while providing jobs to Ohioans. The State is committed to making purchases from Ohio companies when the opportunities arise and are appropriate based on the State's needs and will work to ensure that Ohio companies are given the opportunity to compete for state procurement business. Accordingly, I hereby order all State Agencies to implement and adhere to the following "Think Ohio First" practices when contemplating what supplies and services are needed by the State and what vendors could fulfill those needs. In implementing "Think Ohio First" strategies, the State will undertake the following initiatives:

a. Inclusion of Ohio Companies in the Procurement Process. State Agencies should proactively search for Ohio companies to fulfill their supplies and services needs. Ohio companies should be included on solicitation lists for purchases that require informal vendor quotes, to the extent that Ohio companies exist in a particular business area.

b. Utilization of State Procurement Programs Benefiting Ohioans. State governmental entities should adhere to procurement practices that maximize the volume of purchases that are made through the following "Think Ohio First" programs presently benefiting Ohioans:

i. Encouraging Diversity, Growth and Equity ("EDGE"), which requires agencies to make good faith efforts to do business with Ohio companies that are socially and economically disadvantaged;

ii. Minority Business Enterprise (MBE), which directs business to minority-owned Ohio companies;

iii. Office of Procurement from Community Rehabilitation Programs (OPCRP), which directs business to Ohio companies that employ people with work-limiting disabilities;

iv. Rehabilitation Services Commission, Bureau of Services for the Visually Impaired (BSVI), which directs business to Ohio companies that employ people with visual impairments;

v. Ohio Penal Industries (OPI), which provides employment opportunities that focus on providing skills through practical training for Ohioans in correctional institutions;

vi. The Small Business Development Center, within the Ohio Department
of Development, which serves women business owners by providing
them with information on procurement and marketing, as well as a
directory of businesses owned by women according to industry and

vii. Buy Ohio, which requires agencies to apply a price preference to
Ohio companies under certain conditions.

c. Accountability for Utilizing "Think Ohio First" Programs. In order to ensure that the State is actively engaging Ohio businesses in the State's procurement process, inclusion and utilization of existing State programs that maximize the volume of purchases that benefit Ohio businesses will be an element of a scorecard that will be developed by ODAS.

d. Coordination of State Resources to Facilitate "Think Ohio First." State agencies with primary responsibility for the above "Think Ohio First" programs should coordinate efforts to educate other State Agencies, regarding opportunities available through these programs.

11. Tracking "Think Ohio First" Purchasing. In order for "Think Ohio First" to succeed, accurate data must be compiled about companies doing business with the State. Accordingly, I hereby order ODAS to use its information technology resources to create a purchasing scorecard to measure and track the portion of overall purchases that state governmental entities make from Ohio businesses. ODAS should ensure that this scorecard is created by January 1, 2009, updated quarterly thereafter and posted on the Ohio Business Gateway procurement web portal.

12. Annual Review of "Think Ohio First" Programs. Ohio should ensure that contracts issued under "Think Ohio First" programs that alter the normal competitive bidding process provide measurable and intended socio-economic benefits for Ohioans, while also providing quality supplies and services to the State. Accordingly, I hereby order ODAS, the Ohio Rehabilitative Services Commission, and the Ohio Department of Rehabilitation and Correction to review annually their "Think Ohio First" programs to assess whether those programs are meeting socio-economic goals and agency expectations in the areas of quality assurance, responsiveness, and value. This review shall occur beginning June 30, 2008, and every June 30 thereafter, and each agency shall provide a report detailing its results to the State Chief Procurement Officer by October 1 of each year. This report shall also be sent to the Controlling Board President and its members.

13. I signed this Executive Order on June 25, 2008 in Columbus, Ohio and it will not expire unless it is rescinded.

Executive Order 2008 - 13S

Increasing Participation in the Minority Business Enterprise and Encouraging Diversity, Growth and Equity Programs

1. Administration of Ohio's Minority Business Enterprise and Encouraging Diversity Growth and Equity Programs. The State is committed to improving the number of minority-owned companies that do business with the State of Ohio by facilitating and improving access to government contracts for services. The State believes that facilitating this access is not only the right thing to do, but will foster an environment in which all Ohio businesses have access to enter and compete fairly in the procurement process. Ohio law has recognized the value of an equally-accessible procurement process by requiring the Ohio Department of Administrative Services (ODAS), through its Equal Opportunity Division (EOD), to be responsible for supporting the development of minority-owned, as well as socially and economically disadvantaged businesses by providing guidance and information to executive agencies, board, and commissions (collectively "State Agencies") regarding the Minority Business Enterprise (MBE) and Encouraging Diversity Growth and Equity (EDGE) Programs.

2. Implementation of Strategies to Increase Participation in MBE and EDGE Programs. In order to ensure that the State is in compliance with the law regarding the inclusion of minority-owned, and socially and economically disadvantaged businesses in Ohio's procurement process, I hereby order all State Agencies to implement and adhere to the following measures in order to improve the effectiveness of the MBE and EDGE Programs:

a. By July 25, 2008, State Agencies will appoint an EEO Officer who will be responsible for monitoring compliance with Ohio law regarding the MBE and EDGE Programs and for reporting compliance or non-compliance for their respective agencies to EOD. The EEO Officer will also be responsible for:

i. analyzing spending on goods, services, and construction projects for the EEO Officer's respective State Agency and determining missed opportunities for the inclusion of certified MBE and EDGE vendors;

ii. analyzing the State Agencies' spending with EDGE vendors, as well as EDGE vendor availability by regions of the State so that ODAS may determine the appropriate EDGE goal for each contract;

iii. reporting MBE or EDGE enrollment for all contracts issued by each State Agency to EOD;

iv. implementing a scorecard system, that will be developed by EOD, which tracks each State Agency's MBE and EDGE Program expenditures;

v. implementing the outreach and training plan, that will be developed by EOD, to ensure State Agencies' compliance with MBE and EDGE Program requirements;

vi. attending semiannual training conducted by EOD on MBE and EDGE Program requirements;

vii. participating in an annual compliance review conducted by EOD and implementing recommendations made by EOD as a result of the review process.

b. By August 25, 2008, State Agencies will ensure that all contracts for the purchase of goods and services contain language that:

i. prohibits contractors and subcontractors from engaging in discriminatory employment practices;

ii. certifies that contractors and subcontractors are in compliance with all applicable federal and state laws, as well as rules and regulations governing fair labor and employment practices;

iii. encourages contractors and subcontractors to purchase goods and services from certified MBE and EDGE vendors.

c. State Agencies should not issue EDGE waivers without undertaking the following process:

i. having all EDGE waivers reviewed by the State Agency's designated Procurement Officer, in collaboration with its EEO Officer, who will certify that each EDGE waiver issued by the State Agency is compliant with criteria for granting an EDGE waiver;

ii. submitting quarterly reports to EOD that lists each EDGE waiver granted by the agency;

iii. permitting EOD to complete its review of each State Agency's quarterly reports and to conduct period audits of each State Agency's administration of the EDGE waiver process.

d. Where EOD determines that a State Agency has not properly administered the issuance of EDGE waivers, subsequent EDGE waivers should not be issued by an Agency without the authorization and approval of EOD. However, EOD may release a State Agency from the approval process once EOD has determined that an Agency has the ability to consistently administer the waiver process.

3. Annual Report Regarding Progress in MBE and EDGE Initiatives. Beginning October 1, 2008 and every October 1 thereafter, the Deputy Director of EOD shall submit a written report to me, the President of the Senate, the Minority Leader of the Senate, the Speaker of the House of Representatives, and the Minority Leader of the House of Representatives describing the State Agencies' progress in advancing the MBE and EDGE Programs, as well as any initiatives that are implemented to increase the number of certified MBE and EDGE vendors doing business with the State.

4. I signed this Executive Order on June 25, 2008 in Columbus, Ohio and it will not expire unless it is rescinded.

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