Case Study

Talking It Out: Leveraging Collaborative Contract Negotiations to Reduce Costs for a Federal Agency

Censeo brought an innovative approach to a large federal department, successfully mitigating a software vendor’s near-monopoly position and saving the department tens of millions of dollars

$24M

in savings over three years

40%

savings on in-scope spending

$58M

in savings over 10 years

Situation

The client was an extensive customer of the software vendor, with its products serving as the key underlying technology in many of the department’s mission critical systems. Despite a large amount of spending ($40M in FY14), the client had not thought strategically about how that money was being spent. With a recently established strategic sourcing office and their largest existing agreement expiring in under a year, the client sought to bring in outside advice and strategic sourcing expertise to assess their spending.

Approach

The three general phases of the project were due diligence, agreement formulation, and contract execution. Censeo played an instrumental role in all three phases:

  • In the due diligence phase, a comprehensive spend analysis, market analysis, and acquisition strategy were each developed. These provided critical understanding of past trends and how best to move forward.
  • The agreement formulation phase involved close collaboration with the vendor and the end users of its products within the department to identify future demand and assemble a general agreement framework. A new approach used to engage end users proved to be tremendously successful, and has laid the groundwork for future agreements to benefit from this approach.
  • The final contract execution phase involved gathering funding, assembling documentation and formally conducting the acquisition.

Results

The project saved the client tens of millions of dollars while greatly improving the manner in which the client procures products from the vendor. Specifically, a multiple-year BPA was established, competitively awarded to a single reseller, through which all purchases will be made going forward. In addition to offering pricing that was previously not available to the department, the BPA greatly reduced the overhead involved in conducting acquisitions for all future purchases. Additionally, a licensing agreement was established that provided access to core products to the entire department, saving millions of dollars compared to the status quo licensing approach.

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