New Spending Caps Lead to Saving$

At the end of last year, as part of our 2008 budget deliberations, I proposed, and the Commission adopted, a new strategy to cut costs: imposing "spending caps" on the everday purchases the County makes. The results are in through August, and so far this strategy has saved us almost $1.5 million.

The background: Every year, the County makes tens of millions of dollars in "purchases" in order to support the functions we perform. From software, to office and janitorial supplies, to uniforms, to cleaning supplies, a County our size consumes all sorts of goods and services to get the job done. While many of these appear small, across the County, these purchases add up.

One of the cleanest and simplest cost reductions governments and businesses can make is to systematically get their arms around these purchases, consolidate them whenever possible to get the best bang for your buck, and be more thoughtful and disciplined about what they're buying, and how they're using/consuming those purchased goods. Simply consuming these goods more efficiently (ie. using every pen or notepad until it runs out, turning off the lights and computers, etc.) can lead to real savings, just as purchasing them cost-effectively can save money on their up-front cost. (Note: we are fortunate to have a strong purchasing department that works hard to get the best "buys").

At the end of 2007, as we were exploring ways to balance our 2008 budget, I asked to see a list of all purchases we made in 2007 and prior years by category. In doing so, I noticed there were huge fluctuations in the amounts of different items being purchased from year to year. This suggested there was need for more discipline in how these decisions were being made, and in how items were being consumed--and therefore a real opportunity to save money. We also noticed that even though we had a handful of preferred vendors for certain categories, departments were buying from all sorts of vendors beyond that list. Clearly, an inefficient way to buy things.

The Solution

For our 2008 budget, we targeted a number of key purchasing categories, and imposed a "spending cap" on the amount of each category that could be spent in 2008. Each cap was a percentage cut from our 2007 purchases in that area. For example, we would spend 10% less in computer software support services, 10% less for office supplies, and 33% less for subscriptions. In all, we identified 20 categories, and imposed spending caps on each that, combined, we thought would save us about $1.2M. (These caps were set Countywide, so they included departments that the County Commissioners do not directly control; but we asked them to participate nevertheless).

The Results

A report looking at our results through August showed that we are on pace to achieve our spending caps in 11 out of the 20 categories. And spending has declined at some level in 15 our of the 20 categories. (Electric costs have been the biggest area of unfortunate increase, which is not suprising due to higher costs overall). In total, though, we have saved $1.4M, so we are exceeding the anticipated savings by several hundred thousand dollars.

Biggest areas of savings include: consulting services (architectural), -77%; consulting services (engineering), -88%; food distribution services, -19.1%; office supplies, miscellaneous, -19.5%; police uniforms, -49%; subscriptions and memberships, -18.4%; training manuals, -96.6%.

Overall, this is clearly a direction that is bearing fruit. These results also beg for follow-up on why, in some areas, we have not met the spending caps. And we must ask what other systemwide changes we can make to ensure that all caps are met. And most importantly, it's an approach we will expand on in the coming budget so we gain far more savings in future years.

Big picture: this type of approach is critical because it allows us to cut spending without impacting services that go directly to citizens. We're able to provide the same services at a lower cost. Thanks to all those who helped take us in this positive new direction.