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									                       DEPARTMENT OF ADMINISTRATIVE SERVICES
                                Strategic Sourcing Project
                                      Meeting Minutes

     Meeting:        Strategic Sourcing Steering Committee Meeting Minutes

     Date:           September 5, 2003

     Time:           1:30 to 3:00 PM

     Location:       Executive Building, 155 Cottage St, Second Floor, Conf. Rm. A

     September 5th Agenda Items:

             1. Project Introduction                          Dugan Petty

             2. Strategic Sourcing Overview                   Gary Weeks

             3. RFP Update                                    Tim Walker

             4. Additional Information and Handouts           Nell Klumph

                        a. Project Executive Summary and RFP Phases
                        b. Communications Processes and Reporting Structures
                        c. Stakeholder/Steering Committee Agencies and Involvement

             5. Next Steps                              Dugan Petty

             6. Round Table

September 5th Handouts:

             1.   Agenda
             2.   Project Executive Summary Draft
             3.   Communications Process Draft
             4.   Steering Committee/Stakeholder Agencies Draft

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                                Strategic Sourcing Project
                                      Meeting Minutes

       September 5th Attendees: (Note: this list will be truncated in later minutes)

                        Strategic Sourcing Steering Committee Members
Name                        Agency                              Present   Absent   Attending Designee
Sue Acuff,                  Dept. of Corrections, Business &              ü        Bill Brown
Assistant Director          Finance Division                                       Nathan Allen
                            2575 Capitol Street NE
Major, Danny Bisgaard,      Oregon State Police                 ü
Budget Director             400 Public Service Bldg.
Bill Braly, Assistant       Dept. of Education,                 ü
Superintendent of           Office of Operations
Operations                  Public Service Bldg.
                            255 Capitol Street NE
Rob Cameron,                Oregon State Lottery                ü
Materials Management        Support Services
Manager                     500 Airport Road SE
Jim Carbone, Financial      DAS, Office of Business             ü
Services Manager            Administration (OBA)
                            155 Cottage Street NE
Kelly Freels, Manager       DAS, Budget and Management                    ü
                            Division, Budget Section
                            155 Cottage Street NE
Scott Harra,                Dept. of Consumer & Business        ü
Administrator               Services, Business Administration
                            350 Winter Street NE,
                            Room 300, Salem
Greg Hickman,               Employment Dept.                    ü                  Dan Hall
Deputy Director             875 Union Street NE
Nell Klumph, PMP            DAS, IRMD                           ü
E-Procurement/              Project Management Office
Strategic Sourcing          125 Ferry Street SE
Project Manager             Salem
Dianne Lancaster, Chief     DAS, PFSS, State Procurement        ü
Procurement Officer         Office,
                            1225 Ferry Street SE
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                              Strategic Sourcing Project
                                    Meeting Minutes

Name                      Agency                             Present   Absent   Attending Designee
John McGinn,             Dept. of Agriculture,               ü
Administrator            Administrative Services Division,
                         635 Capitol Street NE
Lydia Muniz,             Governor’s Office of Minority,      ü
Governor’s Advocate      Women and Emerging Small
                         155 Cottage Street NE
Karen Olson,             Oregon Youth Authority,             ü
Assistant Director       Business Services
                         530 Center Street NE
                         Ste 200, Salem
Dugan Petty,             DAS, Procurement, Fleet &           ü
Deputy Administrator     Surplus Services Division,
                         1225 Ferry Street SE,
Kathryn Ryan,            Oregon Dept. of Transportation                ü        Rob Rickard
Support Services Branch Support Services Branch
Manager                  455 Airport Road SE, Building K
Clyde Saiki,             Dept. of Human Services             ü                  Jeremy Emerson
Chief Administrative     Administrative Services Division
Officer                  500 Summer Street NE
Holly Schroeder,         Dept. of Environmental Quality,               ü
Administrator            Management Services Division,
                         811 SW Sixth Avenue,
Clark Seely,             Forestry Dept.                      ü
Assistant State Forester Administrative Services Division,
                         2600 State Street, Salem
Sherry Sheng, Deputy     Economic & Community                ü
Director                 Development Dept.,
                         775 Summer Street NE, Ste 200,
Tim Walker,              DAS, PFSS                           ü
Contracting Officer      State Procurement Office
                         1225 Ferry Street SE

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                                  Strategic Sourcing Project
                                        Meeting Minutes

Name                         Agency                                 Present     Absent     Attending Designee
Mark Williams                Dept. of Justice                       ü
                             General Counsel Division
                             1162 Court Street NE,
Jean Straight                Secretary of State                     ü                      Jeffrey Morgan
                             State Capitol

Additional Attendees:

Gary Weeks, Director
Department of Administrative Services
155 Cottage Street, Salem

Cindy Becker, Assistant Director
Department of Administrative Services
155 Cottage Street, Salem

Meeting Minutes Detail

Agenda Item:          Project Introduction – Dugan Petty


Dugan Petty introduced himself and thanked everyone for taking time out of their busy schedules to
attend. Dugan asked the attendees to introduce themselves and identify their agency affiliation. Upon
completion of this exercise, Dugan briefly reviewed the agenda items and then provided a synopsis on
the strategic sourcing project.

Strategic sourcing is often referred to in the private sector as spend management. In the last 15 years,
the concept has been widely used in the private sector, but not much in the public sector. The private
sector has seen it improve its bottom line. Several strategic sourcing consultants have approached
Oregon and other states, such as Delaware, Florida, Pennsylvania and other public jurisdictions. Earlier
this year, DAS began looking into strategic sourcing and interviewed several experienced consultants in
this field. As a result, a Request for Proposal (RFP) was issued this past May. The RFP covers a two-
part plan, consisting of the following:

   •   Phase One: Three general participants in Phase One, Oregon state government, Higher
       Education and the State of Washington. Consultant will look at Oregon Executive Branch
       expenditure levels; how much, by whom and at what price. At the end of this phase, the
       consultant will show; which categories may provide the most opportunity for cost savings,
       recommend supply-chain improvements, and recommend improvements for purchasing
       processes across state agencies. The consultant presents the plan and the Strategic Sourcing
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                                          Meeting Minutes
        Steering Committee determines those categories that will provide the most substantial savings to
        be pursued.
   •    Phase Two: This process will be conducted as an ethical business process, using good business
        practices. During this phase sourcing teams facilitated, advised and coached by the Consultant
        will procure, or “source” items or services within the selected categories to arrive at savings over
        current procurement approaches. One element is critical, a trusted third-party will be hired to
        evaluate and validate the consultant’s recommendations. The consultant must documented hard
        savings and the “Trusted Third-Party will review and validate the savings.
   •    In addition to savings from the various sourcing categories, we also expect to achieve efficiencies
        in our operations by reviewing each categories supply chain and improving efficiencies within the
        complete supply chain, looking at our statewide procurement practices, and finally transferring
        knowledge, so we can sustain these activities over the long run.

Dugan explained that because the base period for savings is this biennium, the sooner the
implementation takes place, the sooner savings may be achieved.

Dugan also described the three roles of the steering committee to be:
          1. Learn about strategic sourcing and facilitate information flow
          2. Decision makers reviewing the consultant recommendation and deciding what
             recommendations to adopt, and
          3. Overseeing and monitoring the implementation of recommendations.

Action Item(s):


Decision Point(s):


Agenda Item:           Strategic Sourcing Overview: – Gary Weeks


Gary Weeks explained that he talked to Dugan and Nell Klumph yesterday regarding strategic sourcing.
Gary said he wished to impress how important this project is in the Governor’s plan. He said that the
Governor’s charge is to have agencies be accountable, and improve the performance of their agencies.
This project is an opportunity to show the public the State can do better. Our efforts will be looked at
very carefully to make sure it is worthwhile and other agencies; the legislature and the media will be
interested in this project. Gary said this is the State’s first accountability project initiative, and as Dugan
had said, this is not a new concept in the private sector. It has been found that companies that
undertake this process claim they can save 10% to 13%. He explained that even a savings of 10% to
the State, is a true savings.

Although this is only recent to the public sector, he thinks there are opportunities. He further said that he
expects there will be some savings and possibly significant savings. The Committee has the ability to
help in this endeavor. The members of this Committee were selected for who they are and what they

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                                         Meeting Minutes
bring to the table. He said that it is really important for everyone to attend, not send someone else and if
you can’t commit to tell him now. He asked the Committee members to be candid with him and the
Committee. Give us your information. If you believe the project is going down the wrong path, tell us.
We want to take advantage of your experience and what you know. Stay Engaged. He said it has to be
a cohesive effort. He commented that there would be some who will not be satisfied and look at it as just
State government and not how the new process will impact their agency. Gary further explained that as
Committee members they might be called on to provide consultant-asked information. He asked that
these requests be received as a way to do business in a more effectively and cost savings manner. He
further said that he hopes everyone would provide some consistent positive feedback to their agency
staff, and other agencies. The Committee is involved in something that has never been done before in
Oregon. It is a unique effort, not without risk or without work, but a great exciting opportunity. This is an
opportunity to work with high caliber individuals, with the secondary benefit to learn from the questions
they pose. He suggested utilizing the experience and integrating into one’s own agencies, to ask those
questions in their own operations.

Open Discussion

 Scott Hara (DCBS) asked, “How wide is the door to the consultants’? Dugan responded that
consultants were given the guidelines within the RFP. Secondly, they are also asked, that while they’re
here, to take a look at; how the State does its buying, look at the supply-chain and possibly re-engineer
the supply chain review, to do purchasing practice review and a multi-level review.

Cindy Becker (DAS Assistant Director) stated that she thinks this is very exciting, but ultimately, it means
a change of behavior and this means change in the way we do business. She said the extent of success
is how the Committee helps to communicate this. She said she doesn’t want agencies to think we are
doing this to them. So, it depends on what the Committee can do to help communicate the importance of
this project. She explained that it may be unpopular when agencies can’t buy as they have in the past.

John McGinn (Dept. of Agriculture) asked what kind of rewards and incentives will there be to help
people change their behavior in this Project?

Cindy Becker responded that the Committee must help people understand the context in which the State
is going into the next biennium; if the State finds better ways to do business, it can help avoid cuts to our
programs in areas that we would want to avoid, identified cost savings will be unscheduled. ”Gary
Weeks interjected, stating, “How does the Committee stress some of the positives”. Gary said he has
had conversations with the legislature about how to reward state managers that spend well. He said that
there is some interest and he wants to pursue it, but first we must provide the savings to the Governor.
Gary said that it is already known that in the 2005-07 biennium there will be a $1 billion operating cost
increase, so the incentive is to keep State government alive.

Dugan Petty added that if we do this right, the outcome will benefit all. He this is an opportunity to
establish credibility with the public.

Action Item(s):

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                                        Meeting Minutes

Decision Point(s):

Agenda Item: RFP Update: – Tim Walker


Tim Walker, Contracting Officer, (DAS, State Procurement Office) explained that nine RFPs were
received, with eight of the proposals meeting requirements. Tim said the evaluators are trying to finish
their reviews by Sept. 26th, however, depending on the findings; it may take a week or two longer. Cindy
Becker interjected, stating that the evaluation and final selection selection must occur by the end of

RFP Evaluators:

   Ø    Bill Brown, Dept. of Corrections
   Ø    Rob Cameron, Lottery
   Ø    Cheryl Nordhagen, Dept. of Human Services
   Ø    Dianne Lancaster, Dept. of Administrative Services
   Ø    Chris Mahoney, Higher Education
   Ø    John McGinn, Dept. of Agriculture
   Ø    Rob Rickard, Dept. of Transportation

RFPs Accepted:

   Ø    Accenture
   Ø    AT Kearney
   Ø    Deloitte Consulting
   Ø    Denali Consulting
   Ø    Huron Consulting
   Ø    McKinsey & Company
   Ø    Silver Oak Solutions
   Ø    Strategic Sourcing Solutions

Action Item(s):

Tim will work with the Evaluation Committee, and provide assistance to move forward with the schedule.

Decision Point(s):


                                                   Page 7
                                   Strategic Sourcing Project
                                         Meeting Minutes

Agenda Item: Additional Information and Handouts: – Nell Klumph


Nell Klumph, Strategic Sourcing Project Manager, (DAS, IRMD) stated that some draft information was
developed for the Committee’s use and preceded to distribute the material. Nell also mentioned that the
material would be provided electronically. She said the Executive Summary profiles the project in high-
level project phases, which will be fine-tuned as additional information is made available. . As for review
and collection of data, she explained that the first State systems to be reviewed would be the Statewide
Financial Management Application (SFMA), the Data Mart, and ADPICS. Additional transactional
information necessary for the analysis may only be in the agencies repository, but we will first review the
centralized system and conduct a gap analysis for what is needed from the agencies. Every state
agency provided different levels of data to SFMA, and the consultants will start there. Jean Straight
(Secretary of State) also advised that contract information and processes (not part of SFMA), was of
great interest to the Legislature during their SOS Legislative review. And that this project should also
review that information as well

Nell explained communication is critical with this high-level project and short timeframe. She explained
Level One and Level Two communications, as described in the handout, and welcomed the Steering
Committee to ask for additional (Level Two) communications if they were so interested. She further
explained that the Steering Committee would have a three to four hour basic monthly commitment. She
discussed the Project Executive Summary handout and said she will be working on the Project Charter.
She further explained that the material is only a brief overview and she will provide more information in
later meetings. Nell stressed that agencies (Steering Committee representatives and other agencies as
well, can review the reports, provide input and be part of the process. Dugan added that the consultants
will be pulling together a lot of different data.

Action Item(s):

Nell will provide electronic copies of the handouts, and asked the Steering Committee members to send
any suggestions or edits. Nell will also work on the draft of the Project Charter, and will provide an
updated draft (incorporating these draft handouts), in the Project Charter.

Decision Point(s):


                                                    Page 8
                                   Strategic Sourcing Project
                                         Meeting Minutes
Agenda Item: Next Steps – Dugan Petty


Dugan outlined the next steps and included a brief description of the various parts of the project
    1. Decide a permanent meeting schedule date.
    2. Project charter for review before next meeting.
    3. Proposal Evaluation Committee recommendations for next meeting.
    4. Contract negotiations to begin as soon as an award is made.
    5. Presentation by selected contractor.
    6. Phase 1 information gathering and opportunity assessment.
    7. Phase 1 report 120 days from contract NTP.
    8. Implementation decisions to be discussed and adopted by the Steering Committee.
    9. Form sourcing teams for approved categories to be sourced.
    10. Sourcing category implementations.

General Discussion

Dianne Lancaster, Chief Procurement Officer (DAS, PFSS, State Procurement Office [SPO]) stated that
strategic sourcing would change the SPO from a fundamental basis. She said she has reviewed all the
proposals and they are world-class, providing great innovative ideas. Dianne mentioned that she spent
many hours including her weekend on the review process, and it has taken approximately 40 hours for
her to review these proposals.

Rob Cameron, Materials Management Manger, (Oregon State Lottery) said that he also has spent about
40 hours on the proposal evaluation process.

A Committee Member asked about the Trusted Third Party contracting process. Dugan Petty explained
that Tim Walker is working on that portion of the project. He said the successful Trusted Third Party
consultant would likely be a Certified Public Accountant (CPA) with auditing background. Dugan advised
he worked with Audit Staff from the Secretary of State Office to discuss auditor criteria for the proposal.

Dugan said the performance period for the opportunity assessment during phase 1 is 120 days and the
Committee should have its report for review by January/February.

Steering Committee Schedule

Dugan asked if the third Thursday of the month, from 1:30 p.m. to 3 p.m. would be an acceptable
monthly arrangement, the group agreed. He further clarified that only September’s meeting will be held
on the fourth Thursday, September 25th. Future meetings will take place on October 16th, November
20th, and December 18th. All meetings, except December 18th, (which is TBD), will be held at the
Executive Bldg., Conference Room A.

He said that he anticipates that once the consultant reports are received, a couple of half-day sessions
will also be needed.

Action Item(s):

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                                  Strategic Sourcing Project
                                        Meeting Minutes

The Evaluation Committee was encouraged to focus on reviewing the proposals.

Decision Point(s):

The next meeting will be on Thursday, September 25th, to go over the progress of the Evaluation
Committee. Subsequent meetings will be on the third Thursday of each month.

The meeting concluded at 3:15.

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