Chicago Public Schools (CPS) Get Creative With Strategic Sourcing

Last week, the Chicago Tribune published an insightful piece of reporting highlighting how Chicago Public Schools (CPS) have identified almost $50 million in savings from procurement and total cost management strategies led by a new CPO with a private sector background. It’s a great success story because hard dollar savings can go back into the CPS budget to improve educational programming — or to reduce the growing overall funding deficit each year.

According to the story, “A day before the expected release of a budget that must address a gaping deficit, Chicago Public Schools said it has found ways to save nearly $144 million, a third of that through a more aggressive purchasing strategy and technology upgrades … The district said a procurement officer who started in March and came from the private sector led efforts to renegotiate contracts and work with other city agencies to secure lower prices. Also instituted were cost-cutting practices like having milk delivered every other day, instead of daily, and having schools cleaned at night rather than during the day.”

What stands out to us from reading this statement is when the new CPO started — in March. Taking us from March through early July is roughly 3-4 months (if you count an initial few weeks to ramp up and conduct a quick-hit incomplete spend analysis). In other word, the new CPO and his team are:

1. At the very early stage of an initial phase roll-out of a sourcing that will continue to deliver additional savings in this phase and future sourcing efforts;
2. Unearthing some horrendously dirty laundry from the past purchasing groups based on the speed with which savings was identified;
3. Receptive to the overtures of suppliers who proactively agreed to reducing costs based on an initial discussion or two before any formal sourcing process; or…
4. Good. Just very good.

I suspect it’s likely a combination of these factors. Most important, and we write this as Chicago citizens, we should be thankful to this new team and leadership, as unearthing roughly $50 million in savings in a matter of months in a state/city public sector environment is almost unheard of (especially where the process to run sourcing events can take forever based on stakeholder and supplier pushback and circumvention).

Our own Windy City has a bit of an odd approach to contracting and supplier selection (at least historically) that might receive some disapproval from most in the private sector. Knowing the local Alderman (city councilman), parading your employees around City Hall and associated public sector offices in t-shirts that highlight minority certifications to would-be customers, contributing to the campaign of a state representative or former governor — all of these have historically factored into how suppliers sell and influence public sector workers to make vendor selections. Nope. We’re not kidding. This is Chicago, after all.

But the CPO for the public school system (CPS), Sebastien de Longeaux, who joined in March 2012, is out to change things, as we began to highlight in the start of this post. In a recent Chicago Tribune article, he states, “What we’re doing is really challenging any price the vendor is telling us.” Bringing in a former private sector procurement leader such as de Longeaux is something that is surprising in a public sector environment where the status quo has long been merely tolerated. Yet it looks like having its back up against the budget wall forced CPS to make a bold move. And thank goodness it has.

As the Tribune notes, the city targeted procurement over other budget areas by challenging “vendors’ costs by doing research on market prices and renegotiating where they saw a gap between that and what was being paid … Altogether, $11.5 million was saved in working out better deals with vendors. Another $20 million is expected as new contracts are being negotiated for construction projects, transportation, utilities, food and education supplies. The district has also cut costs by $11 million in its information technology department, including by migrating to a single email system with Google Apps.”

The tactics CPS is deploying could come from any private sector handbook. We’ll share them in the next post in this series.

Written by Jason Busch on SpendMatters.com