|
Getting what you paid for
On the cover of this issue is Air Transat, a company that takes immense pride in its purchasing department. The Montreal-based airline found significant savings through a recent strategic sourcing program, which includes rewards and penalties for suppliers.
Intentionally or not, Air Transat has joined the growing ranks of believers in a powerful strategy called performance-based acquisition. It isn’t new by any means, having been around since the 1990s. But it got a real boost a few years ago when the U.S. General Services Administration directed government agencies to use it on at least 40 per cent of their service contracts (worth more than $25,000) by 2005. So the push is on.
Canada is excited about it too. A couple of years ago, Public Works and Government Services Canada (PWGSC) announced it would try to enhance contract support services for the Department of National Defence. The contracts deal with the CF-18 Hornet and CC-130 Hercules and aircraft systems. The plan was to issue one long-term, performance-based contract with cost-reduction incentives for each system. The number of contracts issued for these systems was expected to dive from 500 per year to nine or 10 contracts over a 10-year period. The efficiency and savings could be tremendous. And that’s just one department.
The idea behind performance-based sourcing, according to the experts, is measuring the supplier on its quality, price, timely delivery and effectiveness. It sounds straightforward, but putting it into practice in larger organizations is a challenge.
Consider this. Procurement within the federal government is worth $13 billion—fully one-third of the discretionary budget, according to the task force led by Walt Lastewka, a federal MP, who set out to review the government’s purchasing practices in 2003.
Despite the gargantuan chunk of the budget occupied by procurement, the feds don’t have a central database of suppliers, indicating performance. According to Lastewka’s report, issued late last year, they can’t even tell if a particular supplier was legally barred from doing business with the government. The US, on the other hand, has a central list of firms it will no longer do business with. It’s supplier evaluation at its most basic level.
Companies further down the road of performance-based sourcing are asking suppliers to present creative solutions to problems. The supplier is monitored throughout the project, and guided to improve where necessary. The provider gains valuable insight, and purchasers ensure they get what they paid for. Sounds like a worthy endeavor.
Lisa Wichmann
Editor
Salary Survey
By now, some of you have received a 2005 Salary Survey questionnaire in the mail. Please take a few moments to fill it out and get it back to us in the postage-paid envelope. Your input will help us track salaries and other career advancements in your field. Thank you for your help!
Gearing up for PMAC
PMAC’s 80th annual conference is quickly approaching (June 1-3). See you in Winnipeg for what promises to be an exciting and informative event!
|
