Wednesday, April 22, 2009

Contracting Strategies in a Difficult Economy

In these difficult economic times, here are a half-dozen contracting strategies that public agencies may consider pursuing in order to save money:
  1. Consolidate Services. Public agencies in the same geographic area could consolidate services provided by each agency. By consolidating services provided by two or more agencies, there should be savings in either contract or staff costs, or both.

  2. Piggybacking. Public agencies could take greater advantage of already solicited contracts by other agencies, a practice often known as "piggybacking." Check your state laws on this to ensure you can do this. Often, there is a requirement that the agency whose solicitation and contract you are using went through at least as stringent of a selection process as you would be required to go through.

  3. Consolidate Purchases. A variation of piggybacking involves various agencies banding together to solicit for goods and services, taking advantage of cost savings that may accrue from larger volume purchases.

  4. Negotiating. Many public agencies are paying closer attention to negotiating better financial terms with vendors, especially consultants, whose prices are normally subject to negotiations. Hourly rates, overhead and profit, mark-ups are some of the area where cost savings may be obtained.

  5. Non-Renewal of Contracts. Some public agencies are choosing not to renew multi-year contracts and are going out to bid now in hopes of obtaining lower prices that will last through a new multi-year contract.

  6. Credit Cards. As contracting and procurement staff become victims of budget cuts in agencies, delegation of purchasing and contracting authority through government issued credit cards (P Cards or Procurement Cards) may become more desirable. There are clearly risks involved with the use of such credit cards, especially if there is not sufficient systems in place to guard against abuse.
These difficult economic times call for creativity in how to manage and do more with less resources.

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