Software helps Minnesota spend wisely

Minnesota's procurement officials say new software is helping them better understand what products and services state agencies are buying.

Although it's still in the early phase of implementation, the software will provide greater insight and visibility into statewide spending practices, said Kent Allin, the state's chief procurement officer. For example, it recently provided detailed information about how employees use purchase cards.

"We didn't have this detail of who's spending what, where, and that's millions of dollars" of purchases, said Allin, director of the state's Materials Management Division, which is responsible for state purchasing and contracting activities.

Officials said the software, TrueSource's Spend Intelligence Solution, could yield a 2 percent to 10 percent savings on high-volume purchases. The state spends more than $1 billion on commodities from 25,000 vendors.

Minnesota implemented its current accounting and procurement system in 1995, and the state hasn't had enough money to revamp or install a new system, Allin said.

Under a gubernatorial initiative called Drive to Excellence, which started this spring, procurement is one of eight opportunities for the state to save money if it can become more efficient and improve service.

State officials sought a solution that could analyze spending. They awarded a five-year, $835,000 contract to TrueSource, based in Libertyville, Ill., for its intelligent spending software.

"The reason that we believe we can save a lot of money there is, historically, Minnesota agencies had the freedom to purchase whatever they defined as meeting their needs and wants," Allin said. "Although we have statewide contracts for goods and services, they are multiple-award contracts, and agencies can choose from an array of vendors."

Rodney True, president and chief executive officer of TrueSource, said the company's software enables organizations to collect data from the entire organization and across disparate systems. It reclassifies, cleanses and consolidates the collected data into groups relative to what an organization wants to understand, True said.

"You can't manage what you don't know," he said.

With more information, an organization can implement more effective contracts enterprisewide. But equally important, he said, continually repeating this automated process provides more insight, tracking and measurement on statewide spending.

"If you think more intelligence for your business is a value, then this is an intelligence on steroids for [spending] and suppliers," True said.

He added that he doesn't know of any other state that has adopted an automated application for managing spending, although the company is in discussions with a half-dozen other states and is also eyeing the federal market.

Minnesota's new approach will enable state officials to develop standards for agencies that previously had the freedom to buy what they wanted, Allin said. Standardization can help the state bundle purchases and negotiate better prices with vendors, he added.

The strategy could reduce the number of vendors that are willing to bid on contracts -- meaning fewer choices -- but the state could almost promise vendors they'll be getting the full volume of state business, he said. That's because the automated software will be able to track an agency's "maverick or renegade spending outside the state contract," he said.

Allin said the strongest resistance is coming from vendors that fear losing state business. But he said agencies are realizing the advantages of the state's new approach.

Officials are also planning to use the TrueSource software to analyze spending in the Minnesota Multi-State Contracting Alliance for Pharmacy (MMCAP), a cooperative of 42 participating states and the city of Chicago that purchases $1 billion in pharmaceutical products for public-sector use.

Rose Svitak, a project manager at the Materials Management Division, said the software will enable the division, which manages MMCAP, to analyze the purchasing history and details of those 43 entities. It will be able to run side-by-side comparisons of name-brand and generic pharmaceuticals and provide comparisons of therapeutic alternatives that could result in savings and improved service, she said.

The software will also enable officials to aggregate spending on products developed by manufacturers that are part of a larger parent company, Svitak said.

She added that they are extracting data from disparate systems. MMCAP participants will meet in January, when the first analysis of the data will be presented.

Allin said saving money on pharmaceuticals will enable agencies to invest in other projects.

Officials at Minnesota's Materials Management Division use TrueSource's Spend Intelligence Solution to gather information from multiple databases so they can analyze state agencies' spending on commodities.

They also rely on the software to analyze the state's cooperative purchasing on behalf of the Minnesota Multi-State Contracting Alliance for Pharmacy, a consortium of 42 states and the city of Chicago that buys pharmaceutical products for government health care facilities.

TrueSource spent nine years developing the software, which has three components:

• TrueData aggregates structured and unstructured data from all systems and standardizes it into one format. The information is grouped and categorized according to standard classification systems.
• TrueAnalysis provides detailed analysis of data, including what was purchased, from whom it was purchased and how much was spent.
• TrueManage allows users to store procurement information -- such as electronic contracts, policies, procedures and templates -- at a shared, centralized site. A customizable Web-based interface can link data on spending to contracts and suppliers, among other activities.

The system costs from $500,000 to $1 million depending on the organization's size, said Rodney True, president and chief executive officer of TrueSource.

-- Dibya Sarkar