Case Study

Smooth Sailing: Navigating Budget Cuts through Strategic Sourcing

With major budget cuts looming, a large government Department needed to cut costs quickly without affecting their ability to operate. They turned to Censeo to help them identify inefficiencies and implement cost reduction initiatives.

Censeo led the strategy development, planning, and implementation of a department-wide cost improvement initiative at a mid-size agency. Championed by the Deputy Secretary and managed by the CFO’s office, the cost improvement program was identified as one of the Department’s key initiatives for addressing ongoing budget cuts and improving effectiveness.

$75M

saved to date

20+

categories sourced

30%

small business participation increase in some categories

[The Department] was able to leverage existing purchasing power to achieve significant cost savings. It is wise spending decisions like these that will enable [the Department] to focus resources on our primary mission: serving the American public and supporting businesses as they innovate, grow, and create jobs here at home. – Former Department CIO

Situation

Facing budget cuts, a federal Department launched an agency-wide initiative, led by each internal bureau’s CFO and coordinated by department management, to reduce administrative costs. From the start, the project faced numerous challenges, including disparate internal bureaus, decentralized purchasing organizations and processes, and very little visibility into what the Department had been spending on various purchasing categories. Censeo helped the Department identify huge variations in price and products being purchased, and discovered that, by default, the Department was purchasing more sophisticated products than users required for their work.

Approach

Censeo performed a robust financial and spend assessment across the entire Department. Conducted in just eight weeks, the assessment resulted in identified savings opportunities totaling more than $50 million. Censeo identified and vetted these opportunities using a combination of rigorous analysis and deep understanding of change management and organizational improvement best practices in the federal environment.

Upon completion of the spend assessment, Censeo and the Department worked together to kick off an initial wave of strategic sourcing, including categories such as Cellular Services, Print Management, Small Package Delivery, and Office Supplies, which began generating significant near-term savings in a matter of months. Soon after, the team began the next wave, including the sourcing of PCs & Accessories, Word Processing and Desktop Publishing Software, Fleet, Real Property, Network Equipment, and Cellular Devices. Several more waves have followed, resulting in significant cost reduction for the Department.

Finally, as part of Censeo’s commitment to helping the Department develop an internal capability for strategic sourcing and category management, Censeo built a business case for in-house strategic sourcing capability and recommended an organizational structure based on extensive experience and research in this area. Since then, the Department has established a strategic vendor management/performance management office.

Results

Censeo has successfully helped the Department accomplish the following:

  • Capture more than $75 million in savings to date, exceeding savings targets;
  • Implement a PCs contract that saved the Department millions, improved delivery times, and reduced administrative complexity, while also becoming the federal blueprint for sourcing PCs;
  • Increase small business utilization by 30%;
  • Operate a robust strategic vendor management capability with the intent to institutionalize sourcing within the Department. This Department has been cited by OMB and the White House as the model for running strategic sourcing initiatives;
  • Source numerous IT categories, including software vendors, network equipment, and mobility/telecommunications;
  • Develop Department-wide awareness and education plans to increase adoption; and
  • Continue to identify opportunities for strategic sourcing and broader cost reduction by leveraging a comprehensive fact-base and business case analysis for each opportunity.

 

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