Use of national online marketplace tool FedBid reduced costs by up to 53%. DPS saved nearly $104,000 on a single classroom handbook purchase
Detroit Public Schools in June became the first U.S. school district to use a national online marketplace tool for public sector commodity buys and has since generated over $800,000 in savings during the mission-critical back-to-school period during which essential supplies are procured and delivered to 100 schools in time for the first day of teaching and learning.
DPS saved nearly $104,000 on a single classroom handbook buy, $15,000 on school supplies and $14,000 on pipefitting accessories. The district reduced costs by up to 53% on a number of academic and operational purchases while increasing overall competition as well as utilization of small, disadvantaged and minority businesses.
The savings were recorded after new DPS Chief Procurement and Logistics Officer Dr. Tracy Joshua implemented DPS’ first strategic sourcing program. The FY2013 adopted Detroit Public Schools budget calls for $5 million to be shaved from the cost of procuring goods and services, and Joshua expects the use of FedBid will result in $3 million of that savings goal this year.
Overall, savings were obtained in purchases ranging from school furniture to A/V equipment, from books, dictionaries and clothing to enrollment marketing materials, and training aids.
Under the FedBid system, each “buy” stays open in the marketplace for approximately three days, during which the company’s support service team offers customer support while sourcing and building competition from a pool of qualified suppliers.
In one case study, due to FedBid’s “reverse auction model,” the buyer’s suggested source needed to re-bid to stay competitive, which led to 28% further savings from the original pre-FedBid quote the supplier provided for school supplies. According to Southeastern Louisiana University Professor of Management David Wyld, in a reverse auction, a single buyer makes potential suppliers aware of their intent to buy a specified good or service, and during the course of the actual reverse auction event, the suppliers bid against one another to secure the buyer’s business, driving the price to be paid for the item downward.
DPS’ Joshua states that the new system enables Detroit Public Schools to include additional quality suppliers in its supply base that can deliver overall value including best service and price.
“This is an absolute must for Detroit Public Schools,” Joshua commented. “It is our responsibility to provide excellence in education for all the children that we serve, which means we must be good financial stewards. FedBid gives us a tool to very effectively drive competition like never before.”
The FedBid tool requires no investment by DPS. Instead, it provides tremendous benefits for the suppliers who participate by expanding their business reach. Detroit Public Schools is leading the way with innovative business processes and DPS will be used as a model for other school districts as well as other public and private sector organizations.