Markets Opinion

School Improvement RFP of the Week (2): The State of School District Procurement

June 24, 2008 3 min read

From Monday’s issue of K-12Leads and Youth Service Markets Report
Announcement: Procurement Operational Review & Analysis Due July 15 (Jun 16) Los Angeles Unified School District, California

Their Description:

The Procurement Services Group (PSG) is made up of three primary functions; Purchasing, Contracts and Materiel Management. A fourth unit Policies, Procedures and Compliance, was recently added but is not as yet fully staffed. Annual expenditures for goods and services District wide with the exception of the building program are approximately $750 million. A total of 27,000 transactions are submitted centrally and are processed by a staff of approximately 80. Historically, the purchasing operation has... not (taken) advantage of the District buying power.... Contract reform was initiated in 2003 with an approved budget to fund 8 positions. This unit has focused on increasing competition through the use of... Request for Proposal....

A significant number of requests submitted by schools and offices are considered low dollar value. With the introduction of the p-card, several transactions were eliminated but left a sizable number of requisitions still handled centrally 90% of which are below $25,000.

Purchasing staff experience... is on average 2-3 years primarily due to District philosophy of promoting from within. Due to high turnover, the experience level has remained constant for at least the last 5 years. Few employees have industry certifications and limited training has been provided by internal management staff and if provided focused on “doing the work the District way and not best practices”. Union agreements allow for bumping to occur in shared classifications with other District divisions making it difficult to stabilize the workforce.....

The state has established the competitive bid threshold for goods and general services at $72,400 for 2008. This amount gets adjusted annually. There is no state requirement for professional service but Board of Education policy has aligned competitive professional services with the bid threshold....

The Los Angeles Unified School District seeks proposals from qualified firms for assistance in the implementation of streamlining and reorganization of the Procurement Services Group (PSG).... The recommendations shall cover... 1) organization, 2) operations, 3) key performance measures (based on industry standards / benchmarks), 4) customer services, 5) competition, 6) internal controls, and 7) training....

Task 5 - Competition

• Review the current aggregation of non-stock items into strategically sourced events or economies of scale stocked items. Develop recommendations on how the District can optimize items through aggregation and strategic sourcing.

• Review the District’s current outline for achieving discount pricing on the largest vendors used through the District’s PCard program. Develop recommendations on how to achieve the largest discount opportunities....

• Review the current policies, processes, and outcome measures for competing
Professional Service contracts....

My Thoughts: The location is not Podunk, but our second largest school district. Three quarters of a billion dollars in annual procurement is managed by a small undertrained staff of short-timers. The clear implication of this RFP is that too much is being paid for products and services. It’s not too much to infer that many of the products and services that are purchased are not the right ones. These are also the conditions that encourage outright abuse and fraud.

A ten percent savings in LAUSD purchasing from improved practices would yield roughly $100 per student. How much would you bet that every other American school district’s purchasing function is materially superior? If the LA savings could be scaled nationally, we are talking $5.5 billion, a long way towards the shortfall on Title I funding claimed by Democrats under NCLB.

Today, the nation is focused on the conservation of hydrocarbons to ameliorate the energy crisis. We might consider improving the efficiency of k-12’s basic support functions like purchasing before throwing more money at that problem.

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