Savings Build When Local Governments Buy Together
UNIONTOWN, OH., April 8, 2010 --
Uniontown, OH. -- What if the governments of Northeast Ohio could collectively save enough money to hire 190 new classroom teachers or run a city the size of Fairview Park for a year just by shopping together at OfficeMax for paper clips, staplers and other routine supplies?
In theory, it could happen. Maybe it will. The big shopping cart is already rolling.
In practice, surprisingly few of the more than 850 cities, villages, townships, school and other districts in this region are actually taking advantage of such easy savings right now.
But that could be changing, in part because of what Bob Aber describes as “new thinking” that appears to be taking hold among area residents and the local officials they’re electing these days.
Aber and his colleagues at Sourcing Office (formerly NEOSO), a nonprofit dedicated to group purchasing and shared government services, are seasoned experts on the chasm that divides theory and practice when it comes to government collaboration.
Formed in the spirit of bringing smart-government idealism (shouldn’t we try to merge all these school districts and marry those little towns and villages?) down to nuts-and-bolts reality (what can we actually DO that won’t spill endless pools of legal, political and emotional blood?), Sourcing Office and Northeast Ohio now appear to be turning a corner, together.
The organization struggled with early financing. Its leaders learned the hard way which government line items were too volatile to tackle and which could yield dramatic bulk savings. They perfected the grunt work of competitive bidding and learned how to coax the best deals from hungry suppliers.
Now, five years in, Sourcing Office is poised to be fully self-sufficient by year’s end. “We’re excited about that,” Aber said. And you should be, too. Because an argument can be made that with an organization whose sole reason for being is saving taxpayer money, what’s good for Sourcing Office really is good for Northeast Ohio.
Today, the organization offers three bedrock procurement programs – already bid out and under contract – that government and other customers can simply adopt:
1. Comprehensive print management, including hardware and servicing for copying, printing, faxing, etc., with average savings so far of 23 percent a year. The supplier is ComDoc.
2. Electricity, through FirstEnergy Solutions, with average savings for larger users of 18 percent.
3. Office supplies, through OfficeMax, with average annual savings of 25 percent.
Just 13 months after securing the contract, Aber said, Sourcing Office is now procuring about $5 million a year in office supplies for its customers. But, he expects that figure to double or triple before year’s end because of burgeoning interest around the region. Even that would only begin to meet the potential. Using conservative estimates for the amount they spend each year on office supplies – and assuming the 25 percent savings rate would hold if they all banded together – local governments could save more than $10 million a year on office supplies alone. That’s a lot of money -- enough to more than double the teaching staff at the Bay Village City School District, by way of illustration, or cover the annual costs of running a city of 16,000.
You’ll be hearing more about all of this soon.
Beginning in May, Aber and his colleagues will be taking their show on the road for six months, scheduling public events in all 16 Northeast Ohio counties where their happy customers and suppliers can share stories about working together to save money.
The company also plans to roll out several new programs this summer – all built from customer suggestions – that include alternative energy sources, janitorial and sanitation supplies and temporary staffing services.
But the one with the most pizzazz, the one that might really make a budget-cutter’s mouth water, is called HR-in-a-Box. On paper, at least, it looks like a mother lode.
Every organization with employees has a menu of essentially identical back-office functions to perform, from payroll processing to benefits administration, and most governments still do these chores on their own, isolated in their individual silos. Consider for a moment the wisdom of having more than 800 tax-supported human resources departments separately doing essentially the same things day in and day out.
Add the fact that, as recession and economic malaise eat into tax revenues, these back office operations typically absorb the heaviest doses of layoffs, early retirements and buyouts because they tend to be furthest from the public eye. It won’t be long, Aber predicts, before most of them cease to function effectively at all.
It’s a real opportunity to take a page from the private sector and save taxpayers a bundle in the process, Aber says. And he expects the government response to the new offering to be robust because of the “new thinking” he’s been seeing.
The current crop of elected officials is “hands down” more attuned to collaborative possibilities than its predecessors, Aber said. In part, that’s because of the woeful economy. In part it’s because of steady regionalism talk in recent years. In part, it’s because “a lot of these people are coming from the private sector. They walk into an office and say, ‘Why do we do our own payroll? This is ridiculous. What private company does its own payroll?’”
At Sourcing Office, Aber said, “We don’t do payroll. We have no information technology staff; we outsource our entire IT. We don’t need a full time bookkeeper so we outsource that to someone who is here 10 hours a week, and she goes around to other organizations. In the private sector, if you can’t be the best at it, why do it? Why do you need to always have someone on staff to do a job just because you’ve got to have that job done?”
Not so long ago, government officials in Northeast Ohio were closed to such talk. They are much more open now, Aber said. He and his company are gambling that that new openness will be evident in customer response to HR-in-a-Box.
“We’ll know more in a few months.”
Bob Paynter is an award-winning journalist who is covering the EfficientGovNow competition and issues related to efficient, collaborative government for the Fund for Our Economic Future. To contact Bob Paynter or EfficientGovNow in general, please e-mail efficientgovnow@futurefundneo.org.
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