Agencies urged to conduct to extensive analyses of purchases

The Transportation and Justice departments do not collect the procurement information that would allow them to save money when buying goods and services, while other agencies and departments have developed systems that save millions in procurement dollars.

The Government Accountability Office recommended in a Sept. 16 report (GAO-04-870) that federal agencies fully adopt private sector methods of analyzing their procurement practices. According to the watchdog agency, the Veterans Affairs, Health and Human Services and Agriculture departments already have conducted so-called "spend analyses," resulting in reductions in the costs of purchasing goods and services.

Veterans Affairs saved $394 million in 2003 using spend analysis for pharmaceutical purchases and another $82 million on high-technology purchases such as ultrasound machines. HHS will save about $9.5 million a year for office and custodial supplies and Agriculture saved $1.8 million by negotiating an agreement with suppliers for office supplies in 2000.

Spend analysis is a tool that companies use to leverage buying power by acquiring information about buyers, suppliers and money spent on procurement. Key processes in implementing spend analyses include compiling financial data from accounts payable, internal and external systems, organizing the data, and finding ways to cut costs by streamlining operations and trimming the number of suppliers.

Officials at Justice began talking about eliminating duplication and cutting agency costs in February 2004, but it is too early to know whether that would include analysis of Justice's spending trends, officials told the GAO.

Some areas of Justice were consolidated, making them more efficient, including litigation support services, jail detention space services and prison system medical supplies, but GAO found that the department lacks an acquisition or financial management system that would allow it to collect spending data for the department's $5 billion in annual purchases.

Transportation officials told GAO auditors that they plan to use spend analysis to reduce procurement costs, but do not have the capability now. In written comments to a draft of GAO's report, a senior procurement executive said the agency would like more funding to help them complete spend analyses.

Because the Transportation and Justice departments do not use spend analysis, GAO recommended that they "step up the process of gaining knowledge of their spending" by implementing the best practices of top companies. Specifically, GAO recommended:

  • Assessing practices such as the purchase card system to spot opportunities to leverage buying power.
  • Finding out whether the current systems are adequate to support a strategic approach to procurement.
Because Veterans Affairs, HHS and Agriculture already have structures for spend analysis, GAO recommended that they go further in "emulating the best practices of leading companies" by developing more strategic approaches to acquiring goods and services, such as:
  • Including spending data tracking in Veterans Affairs' 2006 automated spend analysis system for medical supplies and equipment.
  • Identifying steps needed in HHS to adopt a more strategic approach to acquiring goods and services.
  • Assessing whether Agriculture's temporary electronic marketplace subcommittee provides sufficient structure and processes for analyzing spending trends.
Senate Governmental Affairs Chairwoman Susan Collins, R-Maine, said on Monday that the experience of the private sector shows that spend analysis is a powerful tool for tracking "scarce procurement dollars." It gives agencies a road map to get control of supply and service spending, Collins added.

"With almost $11 billion in contract spending and another $1 billion in purchase card spending each year, the Department of Transportation and the Department of Justice should consider adopting the type of spend analysis best practices GAO has identified to get more 'bang for the buck' with taxpayers' dollars," Collins said.

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