Four factors to developing a centralized procurement model

By - June 15, 2016

Enhancing the strategic role of state procurement through a centralized procurement authority has become a top priority for decentralized states. By operationalizing statewide policies and elevating a procurement officer in the executive branch, states are able to strengthen alignment among three key areas: people, process and technology.

In an effort to achieve this goal, state governments’ are exploring and moving to centralized models in order to create greater cost savings, lower personnel costs, increased agency control, reduced risk of fraud and improved data management. However, these goals are not attainable without the proper structure and authority being delegated.

Below are four critical success factors to develop a strong and efficient centralized procurement model:

  1.  Single Chief Procurement Officer (CPO) – States should elevate a single procurement official with the authority and responsibility to provide leadership and direction for all goods/commodities and professional services procurement functions within the state. With an appointed CPO, the goal is to create an environment that considers procurement as one unified mission, rather than a, “divided house.” Intangible benefits would include increased efficiencies, transparency, accountability as well as maximizing vendor competition.
  2.  Delegation of authority – In cases where agencies employ skilled procurement professionals, the use of delegating authority to empower agencies to make small dollar purchases is widely considered as a best practice. Additionally, the CPO still maintains centralized oversight and authority while allowing agencies with specialized purchasing needs to control all or part of the procurement process.
  3. eProcurement systems –eProcurement systems enhance centralize purchasing, more quickly achieving a reduction in costs and less complexity for vendors through the alignment of processes. Posting solicitation notices in a single location is the first step toward the alignment of processes that almost all states have taken. The Commonwealth of Virginia, has gone one step further with their eProcurement system by automating bidding and ordering processes, integrating financial systems internally, and providing access to approved vendor catalogs. Additionally, the Commonwealth of Virginia was nationally recognized for their innovative tactics, designing two mobile applications that puts state, local and higher education bidding processes directly at the fingertips of users and gives business owners real time access to approve requisitions. In all, eProcurement systems are technology’s contribution to the value of centralization.
  4. Skilled procurement officials – States need highly skilled and qualified procurement professionals involved at each part of the process. In order for delegated authority to be effective in a centralized model, States need to develop, manage and grow talent through professional development training programs and provide them with sufficient resources to be effective. Skilled officials increase public trust, provide thorough knowledge of the market and increase vendor output and performance through skilled contract management.

Leading organizations and State procurement departments are simplifying their procurement process to allow their buyers to have more time to make strategic purchasing decisions. Process efficiencies enable State governments to transition buyers, once responsible for tactical activities (e.g., ‘order materials / services’), to focus more on strategic and value added tasks (e.g., conducting commodity level strategic spend analyses and implementing and managing strategic sourcing programs to reduce costs).

Consolidating common purchases across the State has provided the first great wave of procurement savings for many leading procurement offices. As the procurement landscape continues to evolve, the top priorities States face remain the same: process reform and reengineering, measuring performance, eProcurement solutions and centralization. To learn more about how RSM can assist you with your other business needs, contact RSM’s management consulting professionals at 800.274.3978 or email us

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