A hidebound central purchasing department could have stuck to its one-contract-serves-all guns and let low price be king. Certainly, no governor or legislator could take issue with such a policy.
That wasn't, however, the tack taken by New York State's purchasing department and Paula Moskowitz, its director. Moskowitz had her staff at the state's Office of General Services set up a series of contracts with the big retailers, which then provided delivery within 24 hours to agencies throughout the state--at competitive prices.
The accommodation is easy to explain, Moskowitz says: "The customer rules." By customers, Moskowitz, who has been director of the procurement services group within the general services office since 1988, means the myriad people who buy supplies for the agencies that operate parks, prisons, hospitals, universities and other facilities all over the state--from highly urban centers to the most remote rural pockets.
Embracing market forces and constant change--the logical extensions of letting the customer rule--is not always the hallmark of purchasing departments and purchasing officials. But as the customer-service idea rages through private-sector management ranks and turns up in business-oriented government circles, the notion is beginning to make headway in purchasing departments. And New York's purchasing office, with Moskowitz at the helm, has been a leader in quietly and steadily bringing the dynamics of change and a customer-oriented urgency to a tradition-bound process.
EASING THE CUSTOMER'S LOAD
Moskowitz's forte has been to concentrate on tactical opportunities to serve the disparate parts of New York State government. These include a move toward making purchasing decisions based on overall value rather than just lowest price, creation of "mini-bid contracts" and leadership in aggregating demand for goods among state agencies and across state lines.Reflecting the nationwide train of thought, New York's legislature gave agency purchasers significant latitude in 1995 to buy based on best overall value, including such criteria as delivery schedule, total product life-cycle cost, maintenance and vendor experience. It is an approach Moskowitz has encouraged her buyers to use when it is appropriate--even though it is not without risk. With best value, rather than lowest price, as the criteria for awarding a contract, unhappy losing bidders can find many more reasons to lodge a protest. And developing the criteria for a best-value bid can be difficult, as well as time-consuming.
That said, best value is an important step forward for procurement agencies. Taxpayers stand to benefit greatly since best-value buying shifts the burden of creatively solving problems from purchasing agents to vendors. "The state almost would have to do the proj-ect to be able to write the low-price bid correctly," says James Costa, head of IBM Corp.'s public-sector sales in the Northeast. "That seems like a waste of state money."
Mini-bid contracting separates procurement efforts for many services- -training, consulting, programming, systems integration--into two steps. The central procurement office handles the first, identifying prospective vendors for particular activities, checking out their background and writing a contract specifying a maximum hourly rate. The second step, performed by the end-user agency, then consists only of describing a specific project and evaluating how vendors would handle the job. Agencies save time and money by going directly to the list of approved vendors compiled by the purchasing department. They don't have to advertise for contractors; they can skip repetitive background investigation: The state's already taken care of it.
It's a service that Judith K. Miller, assistant vice president for procurement at the University of New York at Buffalo, says saved her several months of work when she was buying a $1 million mainframe equipment upgrade. Rather than having to write its own solicitation for a loan, advertise the solicitation in a state compendium of contracting opportunities and evaluate the qualifications of bidders-- a process that might have taken three months--the university simply requested bids from three companies on a list of lenders that were pre-qualified by the Office of General Services. Thanks to the OGS service, the university had the financing it needed in place in about three weeks.
Few other states have a similar system, Moskowitz says, because it depends on legal authority for best-value buying and a formal role for the central procurement office in services, which many such offices do not have.
TRADING ON SIZE
Moskowitz has also been successful at using New York's size to maximum advantage. For example, although New York, in aggregate, is one of IBM's top 100 customers, it hadn't been viewed that way. "One of the things Paula has been very good at is getting IBM and other large corporations to look at the state as a whole, instead of as a bunch of tiny, little accounts," Costa says. By estimating how much the state will purchase from IBM annually in the course of negotiating multiple- award contracts, Moskowitz has been able to leverage the state's buying power and obtain better pricing from IBM, Costa says.Moskowitz has even used New York's buying power for the benefit of other state governments. About five years ago, she persuaded IBM to allow 12 other states to buy off its contracts with New York. That was a tough call for the computer giant, Costa says. It forced the company to weigh the higher prices it typically charges states with less buying volume than New York against the possibility of more-uniform contract terms that would cut administrative costs. "When a larger state, knowing that it has a better discount structure, takes it upon itself to include smaller states in the same environment for no benefit of its own," the IBM salesman says, "that's industry-leading thinking."
BROADENING HORIZONS
Particularly important to Moskowitz has been an ongoing campaign for the notion that good ideas--practices worth emulating and projects worth joining--are found beyond New York. "It's much more normal now for the staff to say, `Let's ask Massachusetts,'" says Moskowitz. "Or, `Let's ask Texas.'"As an early example, Moskowitz cited participation in a Minnesota-led multi-state pharmaceutical purchasing program. After managing as many as 100 drug contracts for State University of New York hospitals, prison infirmaries and other state-owned facilities, in the early 1990s New York joined a group consisting of about 15 states, mostly in the West, to buy from a single multi-vendor contract through one distributor. As a large state already getting sizable price concessions, New York did not gain a great deal in commodity pricing, Moskowitz says. The drug contract did, however, provide a cut in the cost of distribution. And more important, she says, participation in the program has freed up staff to work on other projects and given staff members a chance to meet and learn from their peers in other states.
More recently, New York's procurement office looked beyond the state border when, in 1998, it joined a pilot electronic mall proj-ect led by Massachusetts and including five other states. The idea was to create a vehicle for commodity vendors to post electronic catalogs reflecting contracts they have with any of the participating states and to allow states to buy from one another's contracts. The pilot helped identify a host of operational issues for central procurement offices and line agencies--without every state needing to reinvent the wheel. "If a few jurisdictions can get together and agree on a platform, that would be significant progress over each state saying, `I'm special. You've got to do it my way,'" Moskowitz says. "If states are going to do business electronically, the supplier community can't afford to learn 50 ways of doing business with the states."
As the e-mall moves from pilot to established program, it will go forward initially with only two partners: Massachusetts and New York.
THE CHANGE AGENT
The role Moskowitz has chosen to play--infusing procurement with business-like ideas and bringing a well-defined customer-orientation to the purchasing process--is not necessarily something you would expect from a government officer who has toiled for the same agency for 29 years through five gubernatorial administrations. "It's common to see people in a bureaucratic organization for a long time be resistant to change," says David R. Eichenthal, chief of staff for New York City Public Advocate Mark Green and a member of the New York State Procurement Council, which develops policy guidelines for state purchasers. But Moskowitz, he says, appears to always be on the lookout for the best practices in public purchasing.For Moskowitz, it's the obvious lesson of a family business in Endicott, New York, an industrial city near the New York-Pennsylvania line. Moskowitz's father operated a butcher shop and grocery store that was nearly overrun when supermarket chains began building much bigger stores in the 1980s. With its business dwindling, the company, now owned by two of Moskowitz's brothers, reinvented itself as a producer of marinated cubes of meat, the key ingredient in spiedies, a New York Southern Tier delicacy. The company, Lupo's, sells both meat and its marinade through local supermarkets and directly on its Web site. In addition, the spiedies are sold at two fast-food restaurants it opened. "My father had to adapt because the customers changed their desires," says Moskowitz.
With the childhood memory of packing eggs at the store still in her head, Moskowitz headed for Albany and took on the challenge of New York State procurement and more. She's also gotten involved in many of the big, national procurement issues.
One of these was her enterprise, a few years ago, in wrestling with the United States Trade Representative over language in the last major world trade agreement, the Uruguay Round of the General Agreement on Tariffs and Trade. Draft language that was intended to allow foreign businesses to sell to sub-federal governments in the United States called for what her peers in state procurement regarded as an unreasonably long period--40 days--between when bidding opportunities would be announced and when bids would be opened. Such a long turnaround on routine purchases would force state operations to grind to a halt, state representatives said.
The issue was important, recalls Margaret E. McConnell, who was Arizona's purchasing director, because many European countries were unlikely to support the pact unless they believed that most states would abide by the procurement code. "The U.S. Trade Representative was just ignoring the states' purchasing officials," she says, until Moskowitz pressed the case on behalf of the National Association of State Procurement Officials.
Although the 40-day standard was retained, at the same time, with Moskowitz's assistance, the states were given a way around it. Public- sector bidding turnaround of just 10 days is allowed under the trade agreement, so long as states describe, on an annual basis, what types of goods they are likely to buy and say where prospective bidders can look for current contract opportunities.
Not said in so many words but appreciated by Moskowitz's NASPO colleagues was the New York official's willingness to immerse herself in the minutia of distinctly unsexy issues that ultimately determine whether parks departments get the lawn mowers they need when they need them and hospitals are kept stocked in medical supplies.
