countywide procurement & contracting assessment

A

October 14, 2016

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kpmg.com

Countywide

Procurement &

Contracting Assessment

Findings and

Recommendations Final Report

Co

nsid

ered: 10/18/2016

Table of Contents 1. Executive Summary .................................................................................................................... 4

2. Background & Objectives ............................................................................................................ 9

Background ................................................................................................................................. 9 Objectives ................................................................................................................................. 10

3. Methodolodgy and Approach .................................................................................................... 12

KPMG Methodology .................................................................................................................. 12 Approach ................................................................................................................................... 13 Deliverables ............................................................................................................................... 14

4. Mobilization ............................................................................................................................... 16

Kick-off Meeting ........................................................................................................................ 16 Project Management Plan ......................................................................................................... 16 Document List ........................................................................................................................... 16 Interview List............................................................................................................................. 16

5. Assessment .............................................................................................................................. 17

Stakeholder Interviews and Observations ................................................................................ 17 Documentation Review Findings .............................................................................................. 24 Spend Analytics Findings .......................................................................................................... 25

6. Analysis ..................................................................................................................................... 27

Summary of Key Gaps .............................................................................................................. 27 Focus Areas Deep Dive Review................................................................................................ 34 Future State Target Operating Model Alternatives ................................................................... 37

7. Recommendations .................................................................................................................... 46

Management of Different Contract Types ................................................................................ 46 Procurement Vision and Design Principles ............................................................................... 46 Interim versus Future State TOMs ........................................................................................... 47 Future State Recommendation ................................................................................................. 53 Future State Process Delivery ................................................................................................... 58 Countywide Procurement and Contracting FTE Summary ....................................................... 62

Future State Performance Metrics............................................................................................ 65 8. Planning ..................................................................................................................................... 68

County’s Procurement Transformation Journey ....................................................................... 68 Implementation Roadmap ......................................................................................................... 69 Recommendations Summary .................................................................................................... 71

Appendices ........................................................................................................................................ 83

Appendix A – Document Review List ....................................................................................... 84 Appendix B – Interviewee List .................................................................................................. 87 Appendix C – Role Assessments .............................................................................................. 90 Appendix D – Future Job Descriptions ..................................................................................... 92 Appendix E – Description of Spend Categories ........................................................................ 97 Appendix F – Glossary ............................................................................................................. 101

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1. Executive Summary The mission of the County of Santa Clara, California is to plan for the needs of a dynamic community, provide quality services, and promote a healthy, safe and prosperous community for its nearly 2,000,000 residents. As the steward of tax payer dollars, and due to several self-acknowledged concerns, the County recognizes its responsibility to review, revise, and transform the manner in which it procures and contracts goods and services with over 2,000 contracts valued at more than $2.3 billion dollars1,.

The County’s current system is a hybrid model. While the Procurement Department operates a centralized purchasing function for a majority of goods and related services, disparate processes and policies have eroded cross-departmental collaboration on purchasing for these items. Whether due to urgency or unfamiliarity with applicable policies, departments also buy goods through purchase orders, direct pay codes, and purchase card (P-card) transactions independent of Centralized Procurement. Meanwhile departments contract for services through Board-approved contracts and Delegations of Authority (DoA) that lack significant participation from the Procurement Department. Over time these discordant practices have become routine and diminished the managed spend across the County. As a result, the County has unrealized cost savings through shared purchases, duplicative contracting efforts, and limited transparency and oversight of contract management. Many of these concerns have been addressed incrementally through past audits and recommendations, but mounting data shows the current hybrid procurement model is sub-optimal to meet the County’s needs. In May 2016, the County engaged management consultancy KPMG LLP to complete a review of the County’s procurement and contracting strategy, processes, controls, organization, people, and performance management, provide improvement recommendations in all areas, and develop a detailed implementation plan for the improvements.

Based on County’s request, KPMG deployed its proven procurement assessment methodology that covered five assessment dimensions: vision and strategy, organization and skill, policy and governance, process and controls, and performance management. Accordingly KPMG developed a 5-phase approach that encompassed mobilization, assessment, analysis, recommendation and planning to carry out the 15-week project.

During the initial assessment and analysis phases, KPMG conducted 76 stakeholder interviews, reviewed 48 countywide Procurement and Contracting documents, identified public sector specific and cross industry leading practices, and introduced 4 Procurement Target Operating Models (TOMs) that

1 Estimated spend on contract provided by the County Procurement Department.

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are prevalent in the marketplace: Decentralized2, Collaborative3, Center-Led4 and Centralized5. The assessment and analysis phases yielded the following key findings:

1 The Countywide procurement and contracting vision and strategy is unclear and is not aligned with the Countywide development strategy;

2 The communication of procurement and contracting information throughout the County is absent of a single ‘voice’, and there is disparate levels of procurement engagement in centralized and decentralized procurement;

3 There is confusion around the current hybrid procurement model with a lack of clear delineation of responsibility between the centralized procurement and the decentralized functions;

4 A majority of goods and related services are centrally sourced, while professional services are managed in a decentralized manner, leading to limited review of aggregated book of business;

5 Staff conducting procurement activities in decentralized procurement are generally not dedicated to procurement activities, and are limited in expertise; job descriptions are not tailored for procurement positions;

6 High level policy is defined in the Board Policy Manual but detailed and standardized procurement policies and procedures are limited;

7 Lack of an integrated end-to-end procurement and contracting process with unclear roles and responsibilities between procurement and other supporting functions;

8 Timely provision of accurate procurement spend data and other procurement analytical intelligence is limited by manual processes and disjointed financial and procurement systems, and

9 There is no standardized or formal supplier management and associated performance management program in place.

Based on the findings from the assessment and analysis phases, KPMG worked closely with the County’s executive leadership team to establish a future state center-led procurement Target Operating Model (TOM). In the future state, agencies/departments will continue to maintain accountability, skills, and resources for selected goods and services sourcing, contracting, and supplier management. Sourcing Managers and Contract Specialists from all agencies/departments will dotted line report to the County’s Chief Procurement Officer (CPO), Countywide Services Category Lead, or Countywide Goods Category Lead. The Countywide Procurement will continue to expand its scope of services and category sourcing responsibilities for the County by taking on additional spend categories. Furthermore, Procurement will:

1 Expand the CBO/Supplier Diversity team to include a countywide supplier relationship management program including supplier risk management. Procurement will add Full Time Employees (FTEs) to provide supplier management guidance to all agencies/departments;

2 Decentralized: the procurement of goods and services are managed by an individual agent or department and there is limited procurement coordination across the County. 3 Collaborative: the procurement of selected goods and services is coordinated by an agency or department for the entire County. 4 Center-led: the procurement of goods and services is centrally managed by select agencies or departments with Procurement providing leading practices and oversight. 5 Centralized: goods and services procurement is centrally managed by Procurement across the County.

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2 Have select Sourcing Managers take on long-term category planning and management responsibility, in addition to category strategic sourcing;

3 Expand its scope of procurement technology services to include a data analytics function by providing procurement intelligence data to support performance management and management decisions;

4 Own and enhance the Procurement Center of Excellence (CoE), which includes leading practice processes and toolkits, to support the various procurement activities of agencies/departments, deliver additional category knowledge, and supply market intelligence, and

5 Continue to take on center-led or centralized responsibility for selected spend categories.

The future state TOM also defined detailed roles and responsibilities for OCCM, Procurement Steering Committee (PSC) and provided detailed job description recommendations for all key procurement positions.

In addition to the recommended design of countywide future state procurement TOM, KPMG also proposed to the County a total of 18 recommendations ranging from vision and strategy to process and performance management. Understanding the existing maturity of the County’s procurement function, KPMG advised a phased approach to support the implementation. Accordingly, all these recommendations were prioritized to create a three to five years multi-wave procurement transformation roadmap aiming to elevate the countywide procurement function to a strategic advisor role to the County. The 18 recommendations were listed below and categorized in each of the 3 waves based on the recommended implementation start date.

WAVE 1

1 Develop the Procurement Vision and Mission with Supporting Guiding Principles: A strong procurement vision and mission ensures alignment with the County’s overall objectives and values, drives strategy for Procurement, and provides purpose to and solicits commitment from procurement staff;

2 Establish a Procurement Steering Committee (PSC) and Governance Framework: A Procurement Steering Committee (PSC) will serve as the central function of an established governance structure to coordinate key policy changes and decisions, secure buy-in and formalize an issue resolution and escalation process;

3 Conduct a Skills Assessment and Recommend a Targeted Training Curriculum: The County should assess the skillset of current procurement staff to establish a baseline of procurement related skills and competencies which will be used to deliver targeted training to its professionals;

4 Analyze the Countywide Spend Taxonomy6 and Identify Improvement Opportunities: This recommended initiative will help the County leverage spend data for the purpose of gaining visibility into total spend and savings opportunities, performance improvement, and contract compliance. It will also be used to further build out the category management and strategic sourcing initiatives;

6 A spend taxonomy is used to classify an organization’s expenditures, providing visibility of how and where a company is spending money.

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5 Initiate a Countywide Change Management and Communication Program: A Countywide change management and communication program is needed to address the significant challenge presented by undertaking a large-scale transformation;

6 Create a Center-led Target Operating Model (TOM): Transitioning to a center-led procurement organization will help Countywide procurement better deploy sourcing and contracting resources to support Countywide purchasing and generate incremental savings by better spend leverage;

7 Establish the Process and Supporting RACI Matrix7: The RACI matrix will serve as a reference document to indicate who will be responsible, accountable, consulted, and informed along the various steps of an end-to-end procurement and contracting process;

8 Develop a Talent Management Framework and Deliver Training: This recommended initiative will help attract, develop, assess, deploy and retain the people needed to achieve the strategic objectives of the future state Target Operation Models (TOMs) and meet the future business needs of the County;

9 Develop and Communicate Countywide Procurement Policies and Procedures: The County will need to develop a Countywide consistent and detailed policies and procedures to support the future state TOM implementation;

10 Appoint a Dedicated Policy and Procedures Unit: This designated unit will design, develop and implement policies and procedures that are consistent across all the agencies and departments. The dedicated staff will also be able to update the policies and procedures at regular intervals;

11 Execute a Multi-Wave Strategic Sourcing Program: Based on the previously developed spend taxonomy and the associated spend analytics findings, the County will develop a multi-year sourcing program to execute the identified sourcing opportunities. The achieved savings will be utilized to self-fund the Countywide procurement transformation program;

12 Streamline Procure to Pay (P2P) Process, and Expand the Use of Ariba and Other Procurement Related Technologies: In order to fully utilize the capabilities of the Ariba platform, the County should focus on improving its existing P2P process, expand the usage of the tool and incorporate additional modules and features. The County may consider exploring or possibly adding other relevant procurement technologies such as a spend analytics dashboard to support the business needs;

WAVE 2

13 Adjust the Procurement Staffing Level: As the Countywide procurement begins to migrate from current state to future state, the County should perform regular assessment to adjust its procurement staffing level in order to make sure that it is in alignment with the future state Target Operating Model (TOM);

14 Implement a Policy Audit Program: The review of the procurement compliance will enable the County to monitor the consistency of the process and improve the policies and procedures based on the audit findings;

7 The RACI Matrix is a tool used for identifying roles and responsibilities. RACI represents Responsible, Accountable, Consulted and Informed.

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15 Re-evaluate Spend Authorization (SA) and Delegation of Authority (DoA): This recommended initiative is an integral part of the implementation of a clear and effective procurement and contracting policy;

16 Develop and Implement the Procurement Performance Management Approach & Metrics: This recommended initiative will help the County measure, track and monitor performance and take adequate steps to address performance issues and drive efficiency across the organization, and

WAVE 3

17 Implement a Leading Practice Category Management Methodology and Approach: By implementing this initiative, the County can obtain strategic benefits including developing a long-term category source plan and employing strategic cost management tactics such as demand management, and

18 Implement a Robust Supplier Relationship Management (SRM) Program: .A well-structured supplier diversity framework will allow a more ‘inclusive’ approach for engaging diverse suppliers and Community-based Organizations (CBOs). The next phase of this program will involve creating a formal Supplier Relationship Management (SRM) Program which will outline how to maximize value from existing supplier relationships across strategic and tactical suppliers.

Based on the developed implementation roadmap, KPMG worked with the County leadership to select the following 4 initiatives from the roadmap to be implemented immediately:

1. Procurement Steering Committee Establishment: the focus will be on establishing the recommended Procurement Steering Committee (PSC), developing the PSC charter, identifying and mobilizing members, and setting up recurring Committee meetings, and

2. Professional Skills Development: the focus will be on reviewing the County’s current procurement skills profile and recommending a target training curriculum to improve the competency of the procurement professionals based on the skills assessment results;

3. Spend Taxonomy, Spend Analytics and Improvement Opportunity Assessment: the focus will be on developing a countywide spend taxonomy, conducting a detailed spend analysis to improve the countywide spend transparency. The spend analysis output will help estimate the total savings, develop a phased sourcing wave plan and business case to fund the entire countywide procurement and contracting transformation program. County’s central procurement will take the lead to implement this initiative;

4. IT Sourcing Support Planning: the focus will be on evaluating the status of 6 high-priority IT projects and developing milestone-based project plans and associated fixed fee budget to support the successful execution of these projects.

The recommended immediate next steps target to help the County invest in procurement capabilities development, set the foundation to drive out costs, stabilize and enhance procurement value, and ensure the overall sustainability of the countywide procurement transformation program. The success of the transformation program will become the manifesto of the County’s commitment to establishing open and competitive solicitation and contracting processes, ensuring fairness and equal access to business opportunity, increasing social and environmental awareness, and promoting the most cost-effective use of taxpayer dollars.

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2. Background & Objectives

Background Over many years, County leadership, including the County Executive, has maintained a consistent focus on improving the Procurement and Contracting function. Since 1995, the Office of the County Executive has frequently adjusted the authority of purchasing agents, and as early as the late 1990’s it initiated several reviews of the County’s overall procurement performance.

With over 2,000 contracts valued at more than $2.3 billion dollars, Santa Clara County represents one of the largest counties in the State of California in terms of spend. The County has a diverse book of business, with a range of different contract types that include revenue agreements, intergovernmental agreements, and supplier contracts. In addition, many contracts vary by way of length, value, and complexity – ranging from goods procurement of a few hundred dollars, to sole sourced short-term supplier contracts, to multi-million dollar countywide service contracts solicited through a complex Request for Proposal (RFP) process.

The County’s current system is a hybrid model. While the Procurement Department operates a centralized purchasing function for a majority of goods and related services, disparate processes and policies have eroded cross-departmental collaboration on purchasing for these items. Whether due to urgency or unfamiliarity with applicable policies, departments also buy goods through purchase orders, direct pay codes, and purchase card (P-card) transactions independent of Centralized Procurement. Meanwhile departments contract for services through Board-approved contracts and Delegations of Authority (DoA) that lack significant participation from the Procurement Department. Over time these discordant practices have become routine and diminished the managed spend across the County. As a result, the County has unrealized cost savings through shared purchases, duplicative contracting efforts, and limited transparency and oversight of contract management. Many of these concerns have been addressed incrementally through past audits and recommendations, but mounting data shows the current hybrid procurement model is sub-optimal to meet the County’s needs. Although the County has made significant progress in transforming its procurement and contracting function, it had several notable concerns.

• Ambiguity in Procurement and Contracting roles and responsibilities due to the existing hybrid procurement model is leading to inefficiencies and lack of accountability.

• To date, the County doesn’t have a standardized and consistent Procurement and Contracting process. The current state exhibits inconsistencies in the execution of Procurement and Contracting functions between County agencies/departments.

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• Issues with the current procurement and contracting job classifications, or some instances the lack thereof, are contributing to staff performing Procurement and Contracting activities via mismatched job descriptions, roles, and responsibilities.

• Existence of retroactive agreements exposed the loophole in the current procurement and contracting process, leading to potential contracting risks and procurement non-compliance.

Objectives In May 2016, the County engaged KPMG LLP through a competitive bid process to support the review of the County’s Procurement and Contracting. The County requested KPMG to support in providing the following services:

• Evaluate the current Procurement and Contracting operating model; assessment areas to include vision and strategy, organization and skills, policy and governance, process and controls and performance management;

• Identify key gaps versus leading practices and areas to improve policy compliance, process efficiency and organization effectiveness;

• Leverage leading practice Procurement Target Operating Model (TOM) alternatives and design a future state Procurement TOM that optimizes the procurement organization structure, adjusts its staffing level, and clearly defines the roles and responsibility, and

• Recommend improvement initiatives and the supporting implementation roadmap for the countywide procurement to transition to the future state.

Background discussions held with Deputy County Executive Officer James Williams and Director of Procurement Jenti Vandertuig provided the initial context and scope of the review, which included a review of the countywide procurement functions of both centralized procurement (the Procurement Department) and decentralized procurement (select Agencies/Departments Procurement and Contracting). At a high level, the objectives for the completion of this review include:

• Knowledge of procurement and contracting leading practices relative to the County in terms of size and budget;

• Understanding of alternative procurement operating models as compared to the County’s current model, including implementation considerations, benefits, and risks of each model;

• Exposure of the County’s gaps across several key dimensions of Procurement and Contracting;

• Recommendations for changing the County’s current operating model in pursuit of a clearly articulated procurement vision; and

• Creation of an implementation roadmap that outlines the initiatives to be completed over the interim and future states, including interdependencies to achieve sustained changes in relation to the Procurement and Contracting function.

The County is in an advantageous position in terms of readiness for substantial change to its procurement and contracting function. There is appetite amongst County Executives and staff to pursue improvements as part of a broader transformation. The County has progressed to its current state through incremental change and, as such, has naturally progressed toward the ability to implement larger-scale change. The County’s current economic climate is relatively stable, with an

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increase in expenditure from FY2016 to FY2017 of 8.1%, highlighting positive projections.8 KPMG’s past experience indicates that organizations can typically realize 8% to 14% savings on their total addressable spend through a well-planned and implemented procurement transformation program. As such, the savings could self-fund the entire transformation program, resulting in a neutral budget impact. Recommendation #4 in Wave 1 aims at estimating the benefits opportunity available to the County. As per the advice provided to KPMG, all initiatives have been recommended with consideration given to flexibility, achievability, and overall value-add to the County. Initiatives can either be pursued individually or as part of a larger transformation agenda and program.

8 Santa Clara County Recommended Budget 2016-2017 https://www.sccgov.org/sites/scc/gov/Documents/fy16-17-recommended-budget.pdf

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3. Methodolodgy and Approach

To help the County attain the defined project goals, KPMG utilized our established procurement assessment methodology and proven project approach to support the delivery of this project. In addition, the KPMG project team was comprised of selected personnel from KPMG’s procurement and operations practice and professionals from KPMG’s state and local practice. The combined procurement subject matter expertise and the knowledge of other state and local clients provided the necessary background to meet the project needs.

KPMG Methodology Our procurement and contracting methodology consists of six dimensions: Vision & Strategy, Organization & Skills, Policy & Governance, Process & Controls, Performance Management, and Technology & Tools, with definitions included in TABLE 1 - DESCRIPTION OF METHODOLOGY DIMENSIONS, below. Throughout this project, KPMG used the same methodology to drive the initial assessment, analyze the leading practices, and recommend future areas of improvement. Please note that the scope of work for this project did not include performance of an in-depth assessment of the Technology & Tools dimension, primarily due to the County’s active and on-going eProcurement system implementation.

FIGURE 1 – KPMG’S PROCUREMENT AND CONTRACTING ASSESSMENT METHODOLOGY

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TABLE 1 - DESCRIPTION OF METHODOLOGY DIMENSIONS

Methodology Dimension Description

Vision & Strategy This dimension included procurement strategic vision and mission development, as well as the overarching countywide procurement and contracting strategy.

Organization & Skills This included Procurement Organization Model, Staffing Plan, and Competency Framework that are designed to support the current & future procurement needs of the County.

Policy & Governance This dimension included leading Procurement Governance Structure and Polices designed to help increase accountability and reinforce policy compliance pertaining to countywide Procurement and Contracting practice.

Process & Controls This area included consistent and standard Procurement and Contracting Processes with embedded Financial and Operational Controls to increase process agility and efficiencies.

Performance Management This included Metrics and Targets to manage the performance of both Procurement and Suppliers, in an effort to drive continuous improvement.

Technology & Tools This dimension includes Tools and Applications that are used to enable the Sourcing and Procurement Processes, Policy Compliance, Internal Controls, and Report generation. This area was not in the scope of this project, as outlined in the Statement of Work (SOW).

Approach The entire project kicked-off on May 23, 2016 and was completed on Sept 3, 2016. During the 15 week delivery period, KPMG organized the approach into five phases based on the defined methodology outlined above. To help review the interim work product and align expectation with the County’s leadership team, KPMG also set up a weekly project status meeting with Jeff Smith, Chief Executive Officer (CEO), and Miguel Marquez, Chief Operating Officer (COO) of the County.

The five-phase project approach consisted of the following phases, as illustrated in FIGURE 2 - APPROACH OVERVIEW, below.

• The Mobilization phase consisted of the planning activities required to successfully launch the project, the development of the initial assessment interviewee list, and the documentation request list.

• The Assessment phase consisted of the development of the baseline “as-is” state of the procurement function. During this phase, the KPMG team interviewed over 70 County personnel at various levels of the organization, along with community-based organizations (CBO) leaders, small business, and diversity business representatives. In addition, KPMG also performed a detailed review of the procurement documentation obtained to date.

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• During the Analysis phase, KPMG analyzed the baseline data gathered during the Assessment phase, identified leading practices associated with each of the five (5) methodology dimensions, and completed a gap assessment. In addition, at the County’s request, KPMG presented and discussed four (4) leading procurement Target Operating Model (TOM) options as possible alternative models for the County’s procurement and contracting future state design consideration.

• In the Recommendation phase of the project, KPMG developed 18 improvement recommendations based on the previously mentioned gap assessment, designed to assist the County in transitioning to its desired future state. Furthermore, KPMG also created the interim and future state procurement TOMs based on the feedback from the County’s executive leadership.

• During the Planning phase of the project, KPMG collaborated with the County to create an implementation roadmap inclusive of all 18 aforementioned recommendations. Each recommendation was outlined with clearly defined implementation objectives, tasks, benefits, timelines, and dependencies.

FIGURE 2 - APPROACH OVERVIEW

Deliverables Throughout the 15-week project, KPMG reviewed and delivered a list of project deliverables, as prescribed in the original SOW. TABLE 2 – DELIVERABLES, below provides a list and brief description of the deliverables that were produced during this project.

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TABLE 2 - DELIVERABLES

Deliverable Name Description Submittal Timeline

Leading Practices Perspectives

This deliverable identified leading practices associated with each of the five (5) assessment areas included in the KPMG methodology. These leading practices were later utilized to conduct the subsequent gap assessment. Also included was a summary of preliminary interview findings based on the interviews completed as of this submittal date.

June 24, 2016

Target Operating Model (TOM) Alternatives

This deliverable introduced four (4) prevalent procurement Target Operating Models (TOMs), with their associated pros and cons. It also contained the initial design blueprint of an interim and future state countywide procurement TOM, with the intent of soliciting feedback from the County’s leadership team

July 1, 2016

Gap Analysis and Recommendations

This deliverable presented a synopsis of key notes and findings from the 73 completed stakeholder interviews. Also included was a summary of the gap assessment findings relating to each of the five (5) assessment areas of the KPMG methodology.

July 15, 2016

Target Operating Model

This deliverable provided a recommended Procurement interim state and future state TOM that covered the following design elements: • Vision, mission, and design principles • Organization structure • Roles and responsibilities division • Job description of individual roles in the

procurement organization • Staffing model • End-to-end sourcing, contracting, and

procurement process steps and supporting Responsibility, Accountability, Contributor, and Informed (RACI) matrix

In addition, KPMG also proposed a preliminary list of improvement recommendations with this deliverable.

July 29, 2016

Implementation Roadmap

This deliverable illustrated the countywide procurement transformation journey with a supporting transformation roadmap encompassing 3- 5 years and inclusive of the 18 final recommendations. The deliverable also included the detailed description of each recommendation by outlining its objectives, tasks, benefits, timeline, and dependencies.

August 12, 2016

Final Report The Final Report summarizes all key findings from the previous five (5) deliverables and was presented to the County’s Board of Supervisors for review and sign-off.

October 18, 2016

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4. Mobilization The first phase in the project approach was Mobilization. The objective of this phase was to plan for project needs by working closely with project stakeholders and sponsors. The intent was to kick-off the project with the County’s project stakeholder, sponsors, County staff, and KPMG’s project team with the objective of establishing lines of communication and developing a common understanding of the project’s purpose, objectives, and scope. As part of this phase, KPMG’s project team, in partnership with the County’s project team, developed several key documents to assist with the “as-is” assessment. The documents include the following:

• A project plan for the purposes of outlining milestones, resources, and responsibilities;

• A document request list, representative of those documents the KPMG team required for review – refer to Appendix A; and

• A list of stakeholders recommended for participation in project interviews – refer to Appendix B.

Kick-off Meeting To establish a strong working relationship, the joint project teams (KPMG and the County) held an initial kick-off meeting on May 23, 2016. The meeting included introductions of the members of each of the respective teams, including their roles and responsibilities, as they related to the project.

The teams worked collaboratively to establish project operating principles, project cadence, clearly articulated project governance requirements (E.g., status updates), and meeting frequency. The kick-off meeting was followed by a countywide announcement from the Office of the County Executive to inform all stakeholders of the official commencement of the project.

Project Management Plan During this phase, the project teams worked collaboratively to develop and refine a detailed project management plan. The plan defined project activities and milestones at a high level, providing guidance and an indicative timeline to both teams throughout the project.

Document List In the Mobilization phase, the KPMG project team also compiled a list of relevant documents for the County to provide for review. The document list was validated by the County, with requests tracked and assigned to key County personnel. All requested documentation was provided to the project team to the extent that the information was available to the County staff.

Interview List The KPMG project team and the County’s executive leadership team worked in partnership to develop a list of relevant interviewees for the project. The interviewees represented an appropriate sample of key stakeholders and representatives from a number of stakeholder groups, including the County’s executives, the Procurement Department, County Agencies/Departments, key support and County functions (e.g., County Counsel), and community-based/not-for-profit organizations. After the list was finalized, the KPMG project team then worked closely with the County to schedule all interviews.

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5. Assessment Following the initial kick-off and project announcement, KPMG started with the Assessment phase to develop an ‘as-is’ baseline of the County’s procurement function. The intent was to understand the County’s current procurement and contracting state, which was then used to make comparisons against leading practices to identify gaps and define areas of improvement. Stakeholder interviews and documentation reviews were the primary methods used to obtain qualitative and quantitative data in this phase. In addition, KPMG also performed a high-level spend analysis of the County’s expenditure to complete the assessment.

Stakeholder Interviews and Observations

Stakeholder Interviews The project team utilized stakeholder interviews as a primary method of gathering key information about the County’s procurement and contracting function. The project team conducted interviews with 76 stakeholders from 5 June, 2016 to 14 July, 2016. Please refer to Appendix B – Interviewee List for a complete list of stakeholders interviewed.

The list of stakeholders was considered a reflective sample of the broader countywide Procurement and Contracting staff population, which can be easily sorted into four broad groups, as shown below in FIGURE 3 – STAKEHOLDER GROUPS. The concept of interviewing stakeholders from the four groups ensured a balanced ‘360-degree’ feedback approach with attention devoted to no single stakeholder group more than another. This not only ensured all stakeholders were sufficiently represented and heard, but also enabled the project team to aggregate findings at the group level and maintain individual anonymity.

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The four stakeholder groups were defined as follows:

Executives includes County executives and heads of County Agencies/Departments

Procurement and Contracting includes directors and staff in both the centralized Procurement Department and decentralized Agencies/Departments

Business includes representatives from County Agencies and Departments who are customers of the procurement function, as well as staff from other procurement and contracting supporting functions such as the County Counsel

Suppliers includes the stakeholders external to the County, such as representatives from community-based and not-for-profit organizations

Key Observations Key observations, themes, and quotes were captured throughout the project, through the execution of stakeholder interviews, documentation review, and informal conversations with County staff. Quotes were captured in the form of minutes from each interview and then validated with the stakeholders, if requested. During interviews, the focus was on documenting not only the essence of what was said, but also the intent with which the message was conveyed. Quotes and verbiage were then aggregated at a high level to reflect the key themes from each stakeholder group. Key observations were also made by the project team, all of which are summarized below.

The assessment and analysis phases yielded the following key findings:

1 The Countywide procurement and contracting vision and strategy is unclear and is not aligned with the Countywide development strategy;

2 The communication of procurement and contracting information throughout the County is absent of a single ‘voice’, and there is disparate levels of procurement engagement in centralized and decentralized procurement;

3 There is confusion around the current hybrid procurement model with a lack of clear delineation of responsibility between the centralized procurement and the decentralized functions;

4 A majority of goods are centrally sourced, while professional services are managed in a decentralized manner, leading to limited review of aggregated book of business;

5 Staff conducting procurement activities in decentralized procurement are generally not dedicated to procurement activities, and are limited in expertise; job descriptions are not tailored for procurement positions;

6 High level policy is defined in the Board Policy Manual but detailed and standardized procurement policies and procedures are limited;

FIGURE 3 - STAKEHOLDER GROUPS

Voice of Executives

Voice of Procurement & Contracting

Voice of Business

Voice of Suppliers

Holistic View of

Source to Contract

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7 Lack of an integrated end-to-end procurement and contracting process with unclear roles and responsibilities between procurement and other supporting functions;

8 Timely provision of accurate procurement spend data and other procurement analytical intelligence is limited by manual processes and disjointed financial and procurement systems, and

9 There is no standardized or formal supplier management and associated performance management program in place.

Voice of the Executives The Voice of the Executives provided a summary of key observations, themes, and quotes sourced from interviews, conversations, and meetings with County executives and heads of County Agencies/Departments.

The following quotes related to the County’s procurement and contracting function, operating model, processes, policy, and organization were captured from the Voice of the Executives group.

Quotes – Voice of the Executives • “The current hybrid model does not work for me. We

are still trying to find the happy medium between centralized and decentralized that works for everyone.”

• “There needs to be a system where there’s not a single point of failure and one that features multiple nodes of expertise.”

• “The contracting process should be efficient – people who touch contracts must add value, not add bureaucracy to the process.”

• “We need an organization to provide policy and strategic purchasing direction to the County.”

• “Procurement needs to strike a balance between driving policy compliance and providing timely customer service.”

Key Themes – Voice of the Executives • A procurement vision and mission statement has not

been developed by the County, and subsequently, not clearly articulated.

• The existing hybrid operating model is not working and there is consistent confusion around how the model works in practice.

• There is a shortage of procurement and contracting talent, with related positions often outdated and/or misclassified, and no formal training and knowledge program in existence, which would assist in the effort to up-skill current staff.

• Besides the Santa Clara County Board Policy Manual Chapter 5.0 on Soliciting and Contracting, and some supporting guidelines, any existing procurement and contracting policy, procedures, and process documentation is limited in its completeness and availability.

Voice of Executives

Voice of Procurement &

Contracting

Voice of Business

Voice of Suppliers

Countywide Procurement

& Contracting

“The current hybrid model does not work for me. We are still trying to find the happy medium between

centralized and decentralized that works for everyone.”

There is also limited clear guidance on the need for the Procurement Department’s involvement in a

various County contracts.

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• The County’s current Procurement governance structure restricts the Executive’s ability to monitor compliance with Procurement Policies and effectively communicate across the County.

• The end-to-end procurement and contracting process is unclear with blurred delineation of roles and responsibilities throughout the different steps of the process.

• There is also limited clear guidance on the need for the Procurement Department’s involvement in a various County contracts.

• Supplier performance management is often non-existent across the County. When it does exist, it is deployed inconsistently and relatively ineffective in holistically managing and measuring supplier performance.

• The provision of countywide spend data and other procurement intelligence information is neither timely, nor complete.

Voice of Procurement and Contracting The Voice of Procurement and Contracting provides a summary of key observations, themes and quotes sourced from interviews, conversations and meetings with staff in the Procurement Department’s centralized and decentralized teams.

The following quotes are from the Voice of Procurement and Contracting group about the County’s Procurement and Contracting function, operating model, process, policy and organization.

Key Quotes – Voice of Procurement and Contracting • “There is little understanding of the industry and

commodity purchases – people are buying blindly.”

• “Staff in decentralized agencies lean on Procurement Department staff for technical support to contract, but we (the Procurement Department) are understaffed.”

• “We need to develop a sustainable procurement structure and staffing plan to fit the future state vision of countywide procurement and contracting.”

• “There is a countywide shortage of staff with procurement skills and expertise.”

• “Procurement and contracting staff in agencies don’t believe in the procurement and contracting process, they are concerned with business as usual and just want to get their work done.”

• “A centralized procurement model won’t work for the County, and we also need to address the people issue.”

• “The introduction of the OCCM has made things more complicated. It’s a good idea in theory, but not properly staffed or run.”

• “We need to determine what the approximate staffing levels should be. Some people are responsible for 50 contracts and others have 200.”

Voice of Executives


Contracting

Voice of Business

Voice of Suppliers


& Contracting

“There is a countywide shortage of staff with procurement skills and

expertise.”

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• “Although well intended, Procurement Department staff are inefficient and the value adding aspect is lost in the process.”

• “Although there are efforts made to manage supplier performance, the process lacks standards, data systems, and methodologies.”

Key Themes – Voice of Procurement and Contracting • The Procurement Department is not considered a

critical business advisor, and their value add to the County departments Procurement and Contracting staff limited to goods purchases with no impact on professional services purchases.

• The current Procurement Department organization is highly reliant on a limited group of knowledgeable staff, which is not scalable nor sustainable.

• Procurement Department staff lack business-specific knowledge and capability to properly support the specific needs of their customers – Procurement and Contracting staff in departments and agencies.

• There is a lack of capability and understanding of process in the departments and agencies procurement and contracting teams.

• There is a prominent ‘people issue’ in the Procurement Department that impedes further collaboration between Procurement Department staff, and procurement and contracting staff in departments and agencies.

• The delineation of roles and responsibilities between the OCCM and the Procurement Department are unclear, there is unclear ownership of procurement policy development in particular, and the existence of silos amongst departments and agencies restricts the sharing of best practices and category sourcing knowledge.

• There are examples of both intentional and unintentional non-compliance with policy, stemming from a lack of accountability in departments and a lack of oversight from Procurement Department staff.

• There is a lack of policy and procedures available on the execution of different purchase types, and no clear definition of a standard end-to-end procurement and contracting process.

• Current procurement system and process training is lacking a standardized approach, frequency and curriculum.

• Current contract reporting capabilities are inadequate with few procurement and contracting staff in the Procurement Department and in other departments, establishing basic supplier performance management metrics leading to an unstandardized and inconsistent performance management approach across the County.

There are examples of both intentional and unintentional non-compliance with policy, stemming

from a lack of accountability in departments and a lack of oversight from Procurement Department staff.

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Voice of Business Voice of Business provides a summary of key observations, themes, and quotes sourced from interviews, conversations, and meetings with staff considered customers of the Procurement Department’s decentralized team and staff supporting the countywide procurement and contracting process.

Key Quotes – Voice of Business • “I would love to have an up-to-date countywide

Procurement Policy and Procedure that I can direct my team to.”

• “I cannot see how Procurement can add value to intergovernmental agreements and revenue contracts. These contracts should be managed by the agencies.”

• “The procurement process is not always a clear process. Timelines and expectations are not clearly articulated, making it challenging to plan.”

• “I have limited understanding of the OCCM and how it works with the Procurement Department.” • “There is a lack of support materials to assist staff

through the contracting process and many are completely unaware of the Procurement web presence.”

Key Themes – Voice of Business • Any existing countywide Procurement vision and strategy is largely unknown to the business.

• The majority of County departments and agencies are in favor of increased Procurement autonomy through expanding their DoA and are not in favor of a centralized procurement model as it is associated with slow progress, and command, and control.

• There is a lack of standardized procurement and contracting documentation available to offer policy, procedures, and process guidance to the business.

• Current purchasing approval workflows limits the spend approval authority to a few select personnel, creating a bottleneck and prolonging contract cycle times.

• Procurement and contracting staff in agencies and departments have limited visibility of and receive little communication on the progress of their specific projects once they are transferred to the Procurement Department.

• There is limited countywide supplier relationship management guidance and a lack of standardized metrics to measure supplier performance offered to procurement and contracting staff.

Voice of Executives


Contracting

Voice of Business

Voice of Suppliers


& Contracting

“I would love to have an up-to-date countywide Procurement Policy and

Procedure that I can direct my team to.”

“The procurement process is not always a clear process. Timelines and

expectations are not clearly articulated, making it challenging to plan.”

Any existing countywide Procurement vision and strategy is largely unknown

to the business.

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Voice of Suppliers Voice of Suppliers provides a summary of key observations, themes and quotes sourced from interviews, conversations and meetings with stakeholders external to the County such as representatives from community-based and not-for-profit organizations.

Key Quotes – Voice of Suppliers • “There is limited and non-standardized

performance management of contractors.”

• “There needs to be a third party (independent) auditing division to ensure County agencies are compliant with policy.”

• “The County needs to standardize the procurement and contracting solicitation process.”

• “There used to be a quarterly meeting for all suppliers, but the County hasn’t done that in a long time.”

• “Bid timelines change regularly and there is a lack of communication of the change to suppliers.”

Key Themes – Voice of Suppliers • Any existing countywide procurement vision and

strategy is unclear to Suppliers.

• Procurement and contracting staff in agencies and departments are regarded as lacking the necessary skill sets and understanding of pertinent policy.

• There is no clear policy and procedure guidance on including supplier diversity criterion in the solicitation process.

• The existing procurement and contracting process is perceived as lacking fairness and precluding small suppliers from bidding.

• There is a lack of third party audit and oversight of the procurement and contracting process to ensure compliance with the relevant policies and processes.

• The BidSync system does not provide clear visibility to potential suppliers of all current nor future procurement opportunities.

• Contract monitoring and supplier performance management is implemented by a limited number of County departments and agencies.

Voice of Executives


Contracting

Voice of Business

Voice of Suppliers


& Contracting

“There is limited and non-standardized performance management of

contractors.”

Procurement and contracting staff in agencies and departments are regarded as lacking the necessary skill sets and

understanding of pertinent policy.

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Documentation Review Findings To better understand the County’s current state including the history of change related to procurement and contracting, the KPMG reviewed a myriad of documentation provided by the County. Documentation review was a necessary component of the Assessment phase as it provided the context and background in which countywide procurement and contracting has been operating. It also allowed KPMG to leverage the learning from past studies and assessments, and to avoid starting with a lack of grounded insights and information.

Through the process of conducting the assessment, KPMG performed a thorough review of all documents received, some of which proved more useful compared to others and, as a result, received further attention. A summary of some documents used for reference throughout the project is provided below:

• Santa Clara County Board Policy Manual 5.0 Policies on Soliciting and Contracting (Adopted 2-28-12; Amended 11-26-13; Amended 11-17-15) hereafter referred to as Board Policy Chapter 5 – The BoS Policies relating to the County’s solicitation and contracting processes are well documented in this chapter and it provides sufficient high-level guidance. This document was consistently used to revise project outputs and as a reference document to determine appropriate process. However, the policy provides high level guidance only. A clear gap and need exists to compose a countywide procurement and contracting procedure document that focuses on tactical execution of various procurement activities that is consistent with the intent of the policy.

• Office of the County Executive Memoranda to Department Heads – These memoranda provide context and document decision making history which the project team leveraged to understand the County’s current state. The memoranda are clear and concise, with messages easy to comprehend.

• County of Santa Clara Board of Supervisors Legislative Files – Legislative files provide a formal mechanism to update the Board and document the procurement and contract related history in terms of decisions, and issue escalation and resolution. Through reviewing legislative files, the project team was able to construct a timeline to understand the changes to the County’s procurement and contract function in sequence. They also provided context and reasons behind significant changes, which subsequently, informed the development of recommendations for the County.

• Procurement Training Materials – Materials used by the centralized Procurement Department to provide procurement and contracting training for teaching new staff, or retrain existing staff. The training materials provided to the project team by the County were developed and distributed to County department staff in 2014. It was observed that some staff are still using these materials for guidance, without consideration of recent changes, such as the implementation of Wage Theft Policy and County Nutrition Standards. This observation highlights the need for updated training materials and curriculum.

• Countywide Social Policies – The County has recently embarked upon a social program to increase social and environmental awareness including updating Board Policy Chapter 5 and County contract standard terms and conditions. These policy changes have an impact on suppliers, and are proving time consuming. This observation highlights the need for easy to understand procurement process guidance to account for all social policy changes.

In addition to reviewing the documents listed in the above summary, the project team also reviewed previous management consulting reports, internal audit reports, organizational charts, existing job descriptions and current contract lifecycle process flows. For a full list of documentation provided by the County and reviewed by the project team, refer to Appendix A – Document Review List.

https://www.sccgov.org/sites/bos/Legislation/BOS-Policy-Manual/Documents/BOSPolicyCHAP5.pdf

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Spend Analytics Findings As part of our baseline “as-is” study, KPMG conducted a high-level spend analysis to better understand procurement oversight of the countywide expenditures. As part of this analysis, KPMG worked with the Centralized Procurement Department to extract Purchase Order (PO) and non-PO-based spend from SAP9 as well as PMM10, a separate ERP11 system tool used by the County’s hospital system, for calendar year 2015. A total of $3.7 Billion dollars’ worth of spend was extracted accounting for all countywide spend. KPMG also referenced County Ordinance No. NS-300.859, which defines the various Direct Pay codes, and considered the Direct Pay code associated with payments out of scope for our analysis. As a result the following Direct Pay Codes and related spend were removed:

• H12: Reissue state dated warrant/check • H13: Mandatory Payments to Other Government Agencies • H15: Non-mandatory payments to Other Government Agencies • H18: Payroll Related Payments • H19: Property Tax and Assessments Apportionments • H21: Vending machine revenue distribution • H22: Revenue Refunds • H46: Payment of bank charges or fees incurred for banking or financial services The removal of these Direct Pay codes ead to an estimate of the CY2015 countywide third-party supplier spend of about $1,234 Million. During the data extraction and validation process, KPMG noticed that the County had no countywide spend visibility of its third-party supplier spend. There is no one integrated system to extract spend data timely, no single source of truth to provide needed assurance to the overall spend data quality and integrity and no existing process to do so. As this is a foundational capability, the County is in urgent need of establishing a spend transparency program to support better procurement analysis and reporting, improve procurement and contracting compliance, and minimize potential procurement fraud risks. The ongoing implementation of Ariba system will provide the technical capabilities to address this issue in the next 12 – 18 months by consolidating all Countywide spend in one single system and providing standard and ad-hoc reporting on countywide spend, contacts and suppliers. In addition, the County’s procurement department recently launched its spend visibility project as part of its set of Ariba technology initiatives. The spend visibility project is designed to cover both goods and services spend and will provide such structured spend dashboard to the County staff and the management team.

9 SAP is a company that develops software predominantly. One of the County’s finance systems is a SAP-based system. 10 PMM refers to Project Materials Management. Another one of the County’s finance systems is a PMM system. 11 ERP refers to Enterprise Resource Planning. ERP systems are used by organizations to manage and automate business functions.

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In order to separate PO spend and non-PO spend, KPMG used invoice coding provided by Centralized Procurement.

• PO vs. Non-PO Spend Analysis

According to our analysis, as illustrated in FIGURE 4 – PO VS. NON-PO SPEND

ANALYSIS, the County spent a total of $3.7B in calendar year 2015. Of the $3.7B total spend, $2.4B was attributable to the removed Direct Pay codes highlighted above, $499M was spend that had a PO, and $734M was spend without POs, which is approximately 60% of the total County supplier spend. The County’s non-PO spend is significantly higher than leading practice organizations, which usually allows only 20 – 30% of the total spend as non-PO spend.

FIGURE 4 – PO VS. NON-PO SPEND ANALYSIS

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6. Analysis After the completion of the Assessment phase, where an ‘As Is’ baseline was established, the focus of the review transitioned to the Analysis phase, which was the third phase in the overall project. The objective of this phase was to analyze the County’s Procurement ‘as-is’ baseline captured in the Assessment Phase to identify any gaps in the County’s existing procurement operating model against leading practices, and develop Procurement target operating model alternatives.

Summary of Key Gaps The Leading Practices and Gap Assessment section findings were summarized by each of the five (5) assessment dimensions as outlined in each respective section below.

Vision & Strategy TABLE 3 - VISION & STRATEGY GAP ASSESSMENT, below, provides a summary of procurement Vision & Strategy leading practices, gap assessment findings, and recommended actions to address the gaps.

Key Findings:

• The countywide Procurement and Contracting vision & strategy are unclear and not aligned with the County’s strategy; the communication of Procurement and Contracting information throughout the County is absent of a single ‘voice’;

• There are disparate levels of procurement engagement among centralized and decentralized Procurement.

TABLE 3 - VISION & STRATEGY GAP ASSESSMENT

Key Gaps Leading Practices Actions

• The countywide Procurement and Contracting vision & strategy are unclear and not aligned with the countywide development strategy. H

• Procurement strategy is fully aligned and integrated with the overall County strategy and is a key dimension of the County’s overall set of goals.

• Develop a countywide procurement vision & strategy with supporting guiding principles.

• There is no procurement strategy governing the third party spend of the County. H

• Procurement strategy covers all sourcing groups across all spend areas.

• Develop a countywide Procurement Steering Committee (PSC) to integrate Centralized Procurement and decentralized Agencies/Departments.

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• Communication of Procurement and Contracting information throughout the County is absent of a single ‘voice’. H

• Board of Supervisors and County Executives are aligned with Procurement’s vision statement and speak with "one voice" to employees.

• Initiate a countywide change management and communications program to: − Increase the awareness

of the new countywide procurement vision;

− Engage key stakeholders, business, suppliers, centralized and decentralized Procurement to prepare for the upcoming changes; and

− Secure buy-in and support for other countywide procurement initiatives.

• There are disparate levels of procurement engagement among centralized and decentralized Procurement. H

• Engaging procurement is mandated above certain spend thresholds across the organization.

High = H Medium = M Low = L

Organization & Skills TABLE 4 - ORGANIZATION & SKILLS GAP ASSESSMENT, below, provides a summary of Organization & Skill leading practices, gap assessment findings, and recommended actions to address the gaps.

Key Findings:

• There is confusion around the current hybrid procurement model with a lack of clear delineation of responsibility between the Procurement and decentralized functions;

• There is a countywide shortage of staff with procurement skills and expertise.

TABLE 4 - ORGANIZATION & SKILLS GAP ASSESSMENT


• There is confusion around the current hybrid procurement model with a lack of clear delineation of responsibility between the Procurement Department and decentralized functions. H

• Procurement organization design is center-led, category-focused and process-driven.

• Establish a center-led procurement TOM across the end to end Procurement and Contracting process and across all countywide spend.

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• A majority of goods are centrally sourced, while professional services are managed in a decentralized manner, leading to limited review of aggregated books of business. H

• Well-defined interfaces are in place for key Procurement and Contracting users and key stakeholders across all County levels.

• Develop a countywide PSC to integrate centralized procurement and decentralized Agencies/Departments.

• There is limited cross functional collaboration between agencies and departments. M

• Third party/supplier spend is aggregated, leveraged, and coordinated across Agencies/Departments.

• Define a supporting RACI matrix to clearly delineate roles and responsibilities among the key stakeholders.

• Centralized Procurement is not known for its specific sourcing subject matter expertise business know-how, while decentralized Agencies/Departments have limited access to market intelligence. M

• Organization has sourcing experts specializing in specific sourcing areas with access to market intelligence and using a standard integrated process

• Develop and implement a comprehensive communication plan to secure buy-in from participating Agencies/Departments.

• CBO contracts are currently managed by individual Agencies/Departments with limited procurement oversight. M

• A Community Based Organization (CBO) contracting organization is maintained to address the County’s specific needs.

• Establish a CBO management function in the future Procurement TOM.

• Staff conducting procurement activities in decentralized Agencies/Departments are generally not dedicated to procurement activities, and are limited in expertise. M

• Jobs/roles have consistent titles and definitions with defined job competencies for Procurement activities.

• Adjust the existing procurement staffing level to align with the future state TOM.

• Current Procurement resource levels are not monitored an aggregate level. M

• Resource levels are deployed and monitored across different categories and re-assessed periodically based on the overall demand.

• Re-evaluate and revise the Procurement job classifications, descriptions, and required skillsets to support the future state TOM.

• Job descriptions are not tailored for procurement positions. M

• Detailed skills matrices are linked to performance assessments.

• Conduct skills assessment and develop targeted procurement training curriculum.

• Countywide hiring processes and job descriptions make it difficult to hire and maintain a talent management strategy. L

• Talent management strategy and long-term succession planning are implemented and maintained.

• Develop a talent management framework to proactively manage procurement career

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• Limited succession planning has led to skills deficiencies and increased loss of vital knowledge and experience. L

development path and external recruiting

• There are no procurement related courses offered on the County’s existing Learning Management System (LMS). L

• Formal learning programs are designed based on the individual development needs.

• Develop procurement related courses for the County’s LMS.

• There is an absence of both learning and knowledge management programs. L

• Implement a countywide knowledge management system.


Policy & Governance TABLE 5 - POLICY & GOVERNANCE GAP ASSESSMENT, below, provides a summary of Policy & Governance leading practices, gap assessment findings, and recommended actions to address the gaps.

Key Findings:

• High-level policy is defined in the Board Policy Manual but detailed and standardized Procurement Policies and Procedures are limited;

• Lack of a Countywide Procurement Steering Committee (PSC) to closely monitor and address procurement compliance issues.

TABLE 5 - POLICY & GOVERNANCE GAP ASSESSMENT


• High-level policy is defined in the Board Policy Manual but detailed and standardized Procurement Policies and Procedures are limited. H

• Procurement policies are centrally managed.

• Develop a countywide Procurement Policy and Procedures document and utilize the communications program to distribute to the County and relevant suppliers.

• Lack of a Countywide Procurement Steering Committee (PSC) and the role of OCCM in the area of policy development and compliance monitoring is not well defined. H

• Adherence to Procurement policies is closely monitored by Procurement Steering Committee (PSC) and is supported by regular audits

• Procurement policies and associated procedures are updated on an ongoing basis

• Establish a Procurement Steering Committee (PSC) and appoint a dedicated countywide Procurement Policy Unit responsible for the drafting, maintenance, and communication of the countywide Procurement

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• There is an absence of a defined policy review and updating process. L

and are revised according to changing business needs and market conditions.

Policy and Procedures based on the PSC discussions.

• There is no countywide formal audit program for procurement activities. L

• There is an existence of a countywide governance body that owns policies and monitors compliance.

• Implement a formal countywide Procurement and Contracting policy audit program.


Process & Controls TABLE 6 - PROCESS & CONTROLS GAP ASSESSMENT, below, provides a summary of procurement Process & Controls leading practices, gap assessment findings, and recommended actions to address the gaps.

Key Findings:

• Lack of an integrated end-to-end process encompassing Category Management, Strategic Sourcing, Supplier Relationship and Risk Management with unclear roles and responsibilities;

• Timely provision of procurement spend data and other procurement analytical intelligence is limited by manual processes and disjointed financial systems.

TABLE 6 - PROCESS & CONTROLS GAP ASSESSMENT


• Process Overall − Lack of integrated end-to-

end process encompassing Category Management, Strategic Sourcing, Supplier Relationship and Risk Management. H

− Unclear roles and responsibilities related to the end-to-end Procurement process. H

• Process Overall − Consistent and standard

processes are established as well as used and reviewed regularly.

− The process is supported by a well-structured RACI matrix that clearly defines the roles and responsibilities across multiple parties involved in the process.

− Procurement owns the end-to-end sourcing and contract management activities.

• Process Overall − Design, pilot, and

implement an integrated end-to-end Procurement and Contracting process.

− Clearly define the supporting RACI matrix.

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• Strategic Sourcing and Contract Management

− Lack of alignment on spend areas that are required to follow ‘Strategic Sourcing’ methodology. M

− Lack of automated Meta--data tagging from Contracts into a centralized contract repository. Limited search functionality available on existing contracts. L

− Lack of integrated ‘Value Management Framework” (Including cost savings, cost avoidance, and value beyond cost). L


− Strategic sourcing is a collaborative process that involves business and procurement across the entire process to plan and execute sourcing events.

− Strategic sourcing approach is used across projects when anticipated total contract value is higher than a pre-determined financial threshold.

− End-users are empowered with a P-Card program to purchase low value items, and the majority of low-value procurement items are competitively sourced in advance of commitment, invoice, and payment.


− Design and deploy standard ‘Strategic Sourcing’ methodology and identify the categories or spend buckets for implementation.

• Category Management and Planning

− Lack of alignment between Business Goals and Procurement organization due to limited early. M

− Lack of clear delineation between Category Strategy and Sourcing Strategy. L


− Multi-year category management goals and plans are established and aligned across the organization.

− Demand management process is in place where future demand is profiled and tested with stakeholders across all categories.


− Create a countywide spend taxonomy as per United Nations Standard Products and Services Code© (UNSPSC) standard.

− Institutionalize a leading practice category management methodology and approach.

− Ensure sufficient Category expertise through the use of in-house or third party Market Intelligence providers.

− Create multi-year Category Strategies taking into consideration long-term business goals.

− Establish process for ‘Demand Forecasting’ based on historical spend volumes.

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• Procurement Analytics − Timely provision of

procurement spend data and other procurement analytical intelligence is limited by manual processes and disjointed financial systems. H

− Lack of clear understanding of spend that constitutes ‘Spend under Management. M

• Procurement Analytics − Existing procurement

analytics capabilities are in place to get quick visibility and transparency into spend information.

− Spend information is classified across Categories aligned with the UNSPSC classification structure.

• Procurement Analytics − Develop a Procurement

management reporting dashboard.

− Implement a spend analytics tool by capturing data across both SAP and PMM (Healthcare) systems.

• Operational Procurement − Missing common

commodity codes for purchase of goods across the County. L

• Operational Procurement − Procure to Pay (P2P)

processes are enabled through an eProcurement tool to streamline and automate the process.

− All external expenditure is within the scope or influence of Procurement and is actively managed to minimize spend outside process and policy.

• Operational Procurement − Develop a Procurement

management reporting dashboard.

− Expand the usage of Ariba and other Procurement technologies to: o Enable automated Meta-

data tagging from contracts;

o Include service procurement in future Ariba platform to reinforce procurement compliance;

o Define threshold and implement self-serve solution for low dollar value purchases; and

o Provide spend data to support better procurement intelligence reporting.

• Process Controls − Long lead times in

authorization process due to approval thresholds. M

− Lack of active monitoring and compliance for existing and new contract terms. L

− Lack of process adherence and enforcement to limit workarounds. L

• Process Controls − Formal Procurement-led

approval process is in place for contract implementation, transition, and termination. Controls are embedded using a procurement technology tool.

− Exceptions are documented, tracked, and approved by appropriate parties.

• Process Controls − Re-evaluate countywide

Spend Authorization and Delegation of Authority to increase efficiency.


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Performance Management TABLE 7 - PERFORMANCE MANAGEMENT GAP ASSESSMENT, below, provides a summary of procurement Performance Management leading practices, gap assessment findings, and recommended actions to address the gaps.

Key Findings:

• No formal internal procurement performance management program currently in place; • No standardized or formal supplier performance management program in place.

. TABLE 7 - PERFORMANCE MANAGEMENT GAP ASSESSMENT


• No formal internal procurement performance management program currently in place. M

• Procurement performance is managed based on clearly defined financial and non-financial measurements

• Develop and implement Procurement Performance Management approach and supporting metrics based on clearly defined financial and non-financial measurements.

• No standardized or formal supplier performance management program in place. M

• Measurements are clearly defined for different organizational levels and are linked to individual performance

• Implement a robust supplier relationship management program to manage supplier performance.

• Performance of the fully integrated supplier relationship management program is managed through the use of dashboards to enhance supplier performance using a wide range of key performance indicators


Focus Areas Deep Dive Review In addition to the broad Gap Assessment covering the 5 assessment dimensions, KPMG also opted to conduct several deep dive reviews, focusing on specific functional areas, and taking the necessary time to gather a detailed understanding of the subject matter. The focus areas chosen for deep dive reviews on the Organization & Skills dimension focused on the competency gap assessments for select Procurement and Contracting positions throughout the County. The areas chosen for deep dive reviews on the Process & Controls dimension include process gap assessments of the category management and strategic sourcing, and supplier relationship management.

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Organization – Job Descriptions and Competencies Assessment The deep dive review in the organization dimension was focused on role and competencies gap assessments for select Procurement and Contracting positions in the County. The intent of the role and competencies gap assessment was to analyze current job descriptions and compare them against the role and responsibilities of relative positions in leading practice organizations. For example, the County’s Director of Procurement position was compared to the position of Chief Procurement Officer in leading practice organizations.

The three positions selected for role and competency gap assessments were considered critical to the County’s Procurement and Contracting function; Director of Procurement, Deputy Director of Procurement, and Procurement Contracts Specialist. The selected positions were considered a representative sample of the County’s specific procurement and contracting positions.

FIGURE 5 - CHIEF PROCUREMENT OFFICER GAP ASSESSMENT, below, is an example of the role and competency assessment completed for the Director of Procurement or Chief Procurement Officer position. For detailed gap assessment on two other positions, refer to Appendix C.

FIGURE 5 - CHIEF PROCUREMENT OFFICER GAP ASSESSMENT

Additional findings from the role and competencies gap assessments include:

• A lack of diversity in Procurement and Contracting specific job descriptions, which limits the potential roles and responsibilities that the future state procurement function may fulfill such as roles with talent management, Center of Excellence (CoE) establishment, or supplier performance management responsibilities.

• Inconsistency between job descriptions and actual tasks performed by staff in those positions which leads to inconsistent performance, the completion of tasks outside the areas of responsibility, and the recruitment of under-skilled staff. E.g., the job description of a Management Analyst is absent of any reference to Procurement and Contracting duties, yet this position frequently performs contracting duties in decentralized Agencies/Departments.

• Existing procurement job descriptions at the management level consist of an excess of tactical duties and lack ‘strategic’ functions that a mature procurement organization would ordinarily

https://www.sccgov.org/sites/esa/classification_and_compensation/job_specifications/Pages/js.aspx




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assume, such as procurement strategy development, category planning, and procurement goal setting.

Process Gap Assessment The third deep dive assessment was an in-depth look at two key Procurement and Contracting processes; Category Management & Strategic Sourcing and Supplier Relationship Management. Based on interviews, these were two areas where stakeholders felt that there were significant gaps and a general lack of understanding. KPMG utilized leading practices to map out a standard Category Management & Strategic Sourcing process and identified key gaps along the end-to-end process that currently exist within the County. Some of the gaps that currently exist are as follows:

• A lack of an overall strategic category management concept in the existing strategic sourcing process.

• A lack of the vital early procurement involvement through the process step identification of sourcing needs. This step allows procurement to impact purchasing activities through various sourcing levers, either through competitive bidding or demand management.

• Additional gaps are identified in the process map in FIGURE 6 – CATEGORY MANAGEMENT PROCESS MAP, below.

In terms of the Supplier Relationship Management process within the County, one of the most significant takeaways from the interview process was that there is little-to-no formal process in place to manage suppliers across the County. As mentioned previously, there are “pockets of excellence” in various Agencies/Departments. However, there is no formal, consistent, and documented process for Supplier Relationship Management.

FIGURE 6 – CATEGORY MANAGEMENT PROCESS MAP

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Similar to how KPMG approached the Category Management & Strategic Sourcing process assessment, a leading practice process map was used to identify current gaps within Supplier Relationship Management processes inside the County, as shown in FIGURE 7 - SUPPLIER RELATIONSHIP MANAGEMENT PROCESS MAP, below.

Future State Target Operating Model Alternatives After the County’s current operating model was researched and analyzed, the next step was to assist the County in developing an optimal future state Procurement TOM. To facilitate the future state design discussion, KPMG presented four (4) of most prevalent procurement TOM alternatives in the marketplace, along with the advantages, disadvantages, benefits, and risks of implementing each TOM alternative.

Target Operating Model Alternative 1 – Decentralized Procurement A decentralized operating model provides complete autonomy to all Agencies/Departments across the County to complete Procurement and Contracting activities.

The Decentralized Target Operating Model is depicted in FIGURE 8 - DECENTRALIZED TARGET OPERATING MODEL, below.

FIGURE 7 - SUPPLIER RELATIONSHIP MANAGEMENT PROCESS MAP

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FIGURE 8 - DECENTRALIZED TARGET OPERATING MODEL

Key Characteristics of Decentralized Model Key characteristics of the decentralized operating model include:

• A small central group responsible for developing basic procurement policy and procedures to support any centralized procurement activities;

• Individual Agency/Department procurement resources do not report to the central procurement group;

• Accountability, skills, and resources are based within individual Agencies/Departments for sourcing activities, contract management, and supplier management; and

• Options exist to centralize a small number of ‘common commodities’ within the central procurement group.

Benefits and Risks of Decentralized Model There are several benefits and risks to the County associated with implementing the decentralized operating model as outlined below.

TABLE 8 – DECENTRALIZED MODEL BENEFITS AND RISKS

Benefits Risks

• Retention of Agency/Department procurement involvement/capability for all categories

• Established alignment between dispersed decentralized procurement within each Agency/Department

• Focus on Agency/Department requirements and achievement of Agency/Department aims and objectives

• Minimal central procurement involvement and intervention

• Various procurement teams executing a number of different approaches and sharing success, experience, and

• Reduced countywide spend leverage and associated savings or added value

• Data quality may be low across all Agencies/Departments with limited standardization of management information and reporting

• Opportunity for shared initiatives is restricted by the lack of mandate and centrally controlled procurement resources to deliver

• Repetition of sourcing activity across Agencies/Departments

• No standard or common procurement methodologies and tools

• Limited opportunity for central procurement to develop deeper category expertise

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leading practices through Procurement Forums

• The profile of procurement is limited by the recognition and mandate achieved by individual Agencies/Departments

• Reduced career and skills development opportunities across the procurement organization/function

Target Operating Model Alternative 2 – Collaborative Procurement A collaborative operating model is designed to have one Agency/Department responsible for sourcing a commodity on behalf of the other agencies and departments which limits duplication of work and leverages some of the County’s buying power potential.

The Collaborative Target Operating Model is depicted in FIGURE 9 - COLLABORATIVE TARGET OPERATING MODEL, below.

FIGURE 9 - COLLABORATIVE TARGET OPERATING MODEL

Key Characteristics of Collaborative Model Key characteristics of the collaborative operating model include:

• Central procurement sets overall policy and guidelines, organization interpretation and implementation, procurement methodology, systems, procurement training and knowledge management, and reviewing of management information (E.g., all spend from across the Agencies/Departments to identify and prioritize opportunities);

• Central procurement facilitates training and shared knowledge and provides guidance on category and strategic sourcing planning with selected category spend owners;

• Accountability, skills, and resources retained by Agencies/Departments for sourcing and contract/supplier management;

• Deeper category knowledge is held by identified individuals within specific Agencies/Departments across the county who share expertise on request or lead initiatives when agreed with Procurement Forum and Agencies/Departments; and

• Option to centralize a small number of common commodities within or alongside the central procurement together with line reporting.

Benefits and Risks of Collaborative Model There are several benefits and risks to the County associated with implementing the collaborative operating model as outlined below.

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TABLE 9 - COLLABORATIVE MODEL BENEFITS AND RISKS

Benefits Risks

• Retention of Agency/Department procurement involvement/capability for all categories;

• Close alignment between decentralized procurement and Agencies/Departments;

• Opportunity to develop deeper supply market knowledge and enhance the credibility of procurement with customers through planning, collaboration, and knowledge sharing;

• Reduced duplication of sourcing activity with sourcing coordinated from the center; and

• Limited central procurement intervention and involvement.

• Difficulty in prioritizing and coordinating resources across shared initiatives;

• Agency/Department resources diverted from ‘high value’ departmental group initiatives due to focusing on individual Agency/Department requests;

• Leverage may be limited to certain categories and not delivered on the full scale of the available savings;

• Limited commonality of procurement methodology, tools, and/or approach;

• Extended time to fully realize Agency/Department initiatives due to lack of countywide communication and a group ‘buy-in’ process;

• Reduced Agency /Department buy-in to supplier contracts due to limited engagement in the sourcing process; and

• Limited procurement mandate and career development opportunities across teams.

Target Operating Model Alternative 3 – Center-led Procurement A center-led operating model is designed to have centralized Category Managers that coordinate purchasing, provide advice to countywide requisitioners, and source common items. Procurement and Contracting staff in other County Agencies/Departments retain ownership of their organization’s specific categories and maintain line reporting with central procurement.

The center-led operating model is depicted in FIGURE 10 - CENTER-LED TARGET OPERATING MODEL, below:

FIGURE 50 - CENTER-LED TARGET OPERATING MODEL

Key Characteristics of Center-led Model Key characteristics of the center-led operating model include:

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• Central management of sourcing and contract management of common expenditure categories with line reporting into central procurement leader;

• Central group sets overall policy and guidelines for central process, organization interpretation and implementation, procurement methodology, systems, procurement training and knowledge management, and reviewing of management information. (E.g., all spend from across the Agencies/Departments to identify and prioritize opportunities);

• Strong central procurement leadership and governance, leading practice guidelines, skills, and systems development;

• Agency/Department procurement teams retain ownership of their unique or specific requirements with Agency/Department organization line reporting, with all other procurement managed by the central group;

• Central staff engage directly with key stakeholders in Agencies/Departments, promoting compliance to supplier contracts; and

• Agency/Department procurement staff act as agents of change and support the implementation and management of supplier contracts.

Benefits and Risks of Center-led Model There are several benefits and risks to the County associated with implementing the center-led operating model as outlined in TABLE 10 - CENTER-LED MODEL BENEFITS AND RISKS, below.

TABLE 10 - CENTER-LED MODEL BENEFITS AND RISKS

Benefits Risks

• Development of category specific supply market knowledge;

• Strong procurement leverage in all centrally managed spend areas;

• Reinforces mandate for procurement and recognition of benefits;

• ‘Critical mass’ at the center encourages development of core skills, leading practices, and a consistent process across both the central and Agency /Department teams;

• Model offers greater flexibility in terms of what spend and workload can be managed and flexed between the central group and Agencies/Departments; and

• Greater potential for support and migration to wider shared services organization.

• Increased cost of central procurement team;

• Agency/Department relationships may not be strong enough to ensure engagement and compliance with corporate contracts;

• Some loss of standard category management methodology for “specialty” categories still to be managed in Agencies/Departments;

• Agency/Department procurement may not fully support or comply with central procurement due to agency and department internal reporting lines and allegiances; and

• Complex to manage and communicate direct and indirect mix to stakeholders.

Target Operating Model Alternative 4 – Centralized Procurement A centralized operating model is designed to have Responsibility for most County procurement reside in a single centralized procurement group to maintain high control and visibility of all Procurement and Contracting activities.

The centralized operating model is depicted below in FIGURE 11 - CENTRALIZED TARGET OPERATING MODEL:

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FIGURE 61 - CENTRALIZED TARGET OPERATING MODEL

Key Characteristics of Centralized Model Key characteristics of the centralized operating model include:

• Strong central leadership and mandate for procurement; • Central ownership of all procurement program, and skills and resources necessary to deliver the

program, along with central line reporting for all procurement staff; • Services provided through Service Level Agreements (SLAs) with Agencies/Departments; • Category management, sourcing, and supplier management are undertaken centrally; • Customer Relationship Manager (CRM) will work closely with key stakeholders and customers

within Agencies/Departments to co-ordinate staff engagement and compliance to central policies and processes; and

• CRM roles are performed by senior managers with specialist category skills and knowledge, and sufficient experience to communicate with Agency/Department executives.

Benefits and Risks of Centralized Model There are several benefits and risks to the County associated with implementing the centralized operating model as outlined below.

TABLE 11 - CENTRALIZED MODEL BENEFITS AND RISKS

Benefits Risks

• Maximize development of supply market knowledge and leverage with consolidated supplier base;

• Standard approach to category management and procurement methodology and tools;

• Reinforce strong mandate for procurement and recognition of benefits delivered;

• Consistent process and development of core skills and leading practices;

• Enhanced ability to offer skills and career development; and

• Greater potential for migration to wider shared services organization.

• Significant central overhead will need to be reallocated across Agencies/Departments and controlled via robust Service Level Agreement (SLA) management;

• If required service levels and organization focus and alignment are not achieved, Agencies/Departments may re-establish internal teams to the detriment of the central procurement’s influence and value;

• CRM role could be perceived as a ‘blocker’ between the customer and the actual procurement contact;

• Possible misalignment between aims and objectives of the central procurement, and Agencies/Departments; and

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• Agency/Department executives may perceive this model as ‘losing’ some of their core competencies and skills.

Alternative Target Operating Model Considerations The selection of a future procurement operating model from the four options presented above is dependent on the County’s future needs, leadership expectations, and the current environment in which the County exists. Each operating model presented has advantages and disadvantages as outlined in TABLE 12 - COMPARISON OF ADVANTAGES AND DISADVANTAGES - ALL MODELS, below.

TABLE 82 - COMPARISON OF ADVANTAGES AND DISADVANTAGES - ALL MODELS

Decentralized Collaborative Center-led Centralized

Ad

van

tag

es

• Authority with Agencies/Departments

• No collaboration with procurement

• Maximum support for Agency/Department demands

• Agency/Department organizational structures are easily connected

• Authority with Agencies/Departments

• Collaboration with and support from procurement

• Clear responsibility for analyses and synergy identification

• Focus on high volume commodities and actions

• Lead with procurement

• Sign-off by agencies or PSC

• Strong collaboration

• Focus and resource allocation in line with strategic requirements

• Strong purchasing power and portfolio effects

• Full authority with procurement

• Collaboration only voluntarily and if initiated by procurement

• Maximum purchasing and bundling power

• Fully standardized processes

Dis

adva

nta

ges

• No possibility and enforcement of global initiatives and/or policies

• Minimum use of full purchasing power

• No mandate to enforce initiatives and policies

• Conflict of interests and strong focus on agency and department needs

• Dual reporting lines with potential conflicts

• Complex and requires strong management attention and commitment

• Possibly bureaucratic and administrative, neglecting Agency/Department needs

• Limited sense of responsibility towards demand owners

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Decentralized Collaborative Center-led Centralized G

ove

rnm

ent

Exa

mp

les

• State of Indiana12 • City of Tulsa

• State University of New York13

• Ohio University14

• Commonwealth of Pennsylvania15

• NY MTA (non-core categories)16

• San Diego County17

• San Bernardino County18

Trend toward center-led operating model In designing the optimal future state procurement TOM, it is essential to consider current industry trends in procurement TOM evolution. In a recent global survey19 of nearly 600 companies, several key themes emerged when selecting a future TOM. In particular, the survey indicated a growing trend towards centralization with 50 per cent of organizations surveyed, adopting a centralized (or center-led) operating model with a stronger focus on aligning with the business to operate as a true strategic partner.

The survey collected procurement specific benchmark data and gathered insights on four dimensions, value and performance, strategy and business planning, operational excellence, operating model. On average, center-led and centralized operating models deliver significantly more value than decentralized operating models, resulting in:

• Higher spend under management; • Lower cycle-times; and • Increased cost savings.

12 Decentralized model trending toward collaborative; http://www.in.gov/idoa/2354.htm. 13 State University of New York (SUNY) Purchasing Guidelines and Procedures 14 Ohio University Procurement Services and Business Policy & Procedures. 15 Discussion with the former Commonwealth Director of Procurement. 16 KPMG experience. 17 http://www.ocgrandjury.org/pdfs/2015_2016_GJreport/2016-06-30_Website_(Procurement).pdf 18 http://www.ocgrandjury.org/pdfs/2015_2016_GJreport/2016-06-30_Website_(Procurement).pdf 19 The Power of Procurement – A global survey of procurement functions, KPMG 2012

http://www.in.gov/idoa/2354.htm

http://system.suny.edu/purchasing/

http://www.ocgrandjury.org/pdfs/2015_2016_GJreport/2016-06-30_Website_(Procurement).pdf

http://www.ocgrandjury.org/pdfs/2015_2016_GJreport/2016-06-30_Website_(Procurement).pdf

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FIGURE 12 - TREND TOWARDS CENTER-LED AND CENTRALIZED TOM, below, displays the shift from a decentralized operating model to a centralized operating model, one which is strongly favored by organizations in recent years.

FIGURE 12 - TREND TOWARDS CENTER-LED AND CENTRALIZED TOM

Decentralized Collaborative Center-led Centralized

Completely decentralized

with activity across agencies and departments

One agency or department is

responsible for sourcing a commodity on behalf of the other agencies and

departments

Centralized category managers coordinate

purchasing, advise countywide

requisitioners, and source common items

Responsibility for most procurement resides in a

single centralized procurement group

FIGURE 13 – PERCENTAGE OF COST SAVINGS BY OPERATING MODEL and FIGURE 14 – PERCENTAGE OF SPEND UNDER MANAGEMENT BY OPERATING MODEL, below, show the increase in percentage of cost savings and percentage of spend under management for indirect goods and services, for a range of corporate and public sector organizations that have evolved from decentralized procurement to a center-led or centralized procurement.

FIGURE 73 – PERCENTAGE OF COST SAVINGS BY OPERATING MODEL

FIGURE 14 – PERCENTAGE OF SPEND UNDER MANAGEMENT BY OPERATING MODEL

xTrend towards center-led and centralizedx

3.7%

5.9%6.3%

9.5%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Decentralized Collaborative Center Led Centralized

% c

ost

sav

ing

50%52%

71%69%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Decentralized Collaborative Center Led Centralized

% s

pen

d u

nd

er m

anag

emen

t

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7. Recommendations Following the completion of the Analysis phase, the Recommendations phase concentrated on developing the countywide future state procurement TOM, and recommending areas of improvement.

Management of Different Contract Types Of over 2,000 contracts that the County processes and manages annually, there are typical 5 different contract types exist:

• Intergovernmental contract: an agreement between the County and another government entity in which each entity outlines its role and function under the agreement;

• Revenue contract: an agreement between the County and another entity to provide revenue in exchange for providing a good and/or service;

• Community-based Organization (CBO) contract: an agreement with a CBO to fulfill a role and/or function for the County;

• Third Party contract: an agreement between the County and an entity to acquire certain types of goods and services, and

• Board contract: an agreement that requires the signing authority of the County’s board of supervisors

In terms of County’s procurement involvement in the procurement and contracting process of these contract types, KPMG’s leading practices recommended that Intergovernmental and Revenue contracts continue to be managed by the agencies or departments where the contracting oversight is provided by the County Counsel. If the scope of the Board and CBO contracts involves procuring services or goods from a third party provider, these contracts should be considered as third party contracts with procurement staff assigned as either the primary responsible party to manage the procurement and contracting process or assist the designated agency or department in a supporting and consulted capacity. Third Party contracts should always involve procurement in its procurement and contracting process

Procurement Vision and Design Principles The first step in designing the future state procurement TOM was creating a countywide procurement vision and mission statement with supporting guiding principles (see Figure 15 for details.)

• The procurement vision and mission statement usually outlines what Procurement function signifies in an organization. The statement is often designed to concentrate on future growth, provides a source of inspiration, and guides procurement decision-making and behaviors.

• The procurement guiding principles provide parameters for decisions on scope of services and prioritization. It creates direction for specific procurement services, defines the behaviors to promote, and establishes a baseline from which investments can be made.

Both the vision and mission statement and the guiding principles served as the foundation on which the future countywide procurement function would be built.

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FIGURE 15 - PROCUREMENT VISION & GUIDING PRINCIPLES

Procurement Vision Guiding Principles

• Be a key contributor to County’s business strategy, competitive differentiation, and financial performance;

• Ensure execution of a proactive, disciplined, and systematic strategic sourcing, contracting, and supplier management approach across all countywide spend;

• Integrate Procurement and Contracting with other countywide supporting functions with clear interfaces and responsibility delineation;

• Deploy an optimum number of professionals with leading sourcing competencies and agency/department domain knowledge to focus on high value activities; and

• Apply technology enablers across County to strengthen core Procurement and Contracting processes, reduce transaction costs, improve decision making capabilities, and accelerate benefits realization.

• Proactively ensure that the procurement function adds value to the business through cost leadership, innovation excellence, and market differentiation;

• Exploit County’s full buying power through optimal aggregation, coordination, and specifications rationalization;

• Focus on procurement as a cross-functional process, rather than a function, and develop a center-led structure with strong cross functional involvement in key processes;

• Make procurement a talent draw and talent exporter – a function that shapes people’s careers; and

• Measure organization with specific, actionable performance metrics, and utilize the technology to automate the performance reporting.

Interim versus Future State TOMs Taking into account the existing maturity of the countywide Procurement and Contracting practice and the change management challenges to be encountered during implementation, KPMG recommended a practical interim state TOM that would allow the County to: arrive at an interim point in its growth trajectory; reflect on lessons learned; celebrate early wins; and further mobilize the entire County leadership and staff to eventually reach its future state TOM.

While designing the interim and future state TOMs, KPMG focused on four key design elements:

• Roles and Responsibilities Division: defines the new roles and responsibilities to be assumed by the Procurement function, OCCM, the newly created Procurement Steering Committee (PSC), the Shared Services Center (SSC), and the Procurement and Contracting team within Agencies/Departments. The defined Roles and Responsibilities Division usually impacts the design of the interim and future state organization structure, the staffing model, and individual resource capabilities.

• Spend Category Ownership: defines the ownership of each individual spend category, i.e., who should be responsible for procuring and contracting a specific spend category, e.g., IT? The spend category ownership model usually works in tandem with the Roles and Responsibilities Division, and impacts the interim and future state organization structure, and the staffing model.

• Organization Structure: the overall structure of the interim and future procurement organization, with positions defined to support various procurement functions. It must be aligned with the interim and future state staffing model.

• Resource Capabilities and Staffing Model: defines the skills and competencies required to fulfill the various procurement positions included in the Organization Structure, and the staffing needs to support the creation of the interim and future state procurement organization.

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Interim State Recommendation

As previously mentioned, the interim state model was developed as an interim point in the County’s overall transformation journey. KPMG expects the County to reach its interim state in one to three years.

Roles and Responsibilities Division In the interim state, as illustrated in Figure 16 below, OCCM will be primarily responsible for procurement strategy, planning, policy and governance development, and performance management. The Procurement and Contracting responsibilities will continue to be divided by central procurement and decentralized procurement in Agencies/Departments.

FIGURE 16 - INTERIM STATE ROLES AND RESPONSIBILITIES MATRIX

Spend Category Ownership Prior to redefining the interim state spend category ownership, KPMG leveraged a leading practice public sector spend taxonomy example to create an illustrative countywide spend category structure. By doing so, KPMG identified 9 key level 1 spend categories and 51 level 2 sub categories to form the overall structure. For a list of the category definitions, please refer to Appendix E.

KPMG’s approach to redefine the spend ownership model started with the 9 level 1 categories. While some of the level 1 categories have one single spend ownership model defined, IT & Telecom has a combination of center-led and collaborative models at its subcategories level. In this cases, we defined the spend ownership model for each of the underlying level 2 subcategories.

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FIGURE 18 - INTERIM STATE SPEND CATEGORY MAPPING

FIGURE 17 - ILLUSTRATIVE COUNTYWIDE SPEND TAXONOMY

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Centralized Procurement is currently organized by broad categories that include Facilities/Institutional, Medical, IT/OT/Telecom, Complex IT Projects, and Operations/Property Disposal. The interviews with the Agencies revealed that there are issues with the current structure stemming from existing staffing level and understanding of the business needs. As a result, we have suggested shifting the category ownership of some spend categories to a collaborative model in the Interim State. This shift would help facilitate effective spend category ownership as well as enable knowledge transfer from Agency/Departments to centralized procurement staff for the more complex categories in order to allow additional categories to be centralized in the future state. This assumption will need to be validated by the Agencies and Centralized Procurement through discussion within the Procurement Steering Committee.

In the interim state, KPMG proposed a “hybrid” spend ownership model with a mix of collaborative, center-led, and centralized spend ownership models. Following is a summary of KPMG’s recommended interim state spend model.

1) Professional Services- With the various types of Professional Services needed across the County and vast supplier base, the category is best suited for a Center-Led model where Agencies / Departments can benefit from best practices.

2) Real Estate & Facilities- Since there is currently a centralized team focused on facilities, in an effort to fully-centralize the category, Procurement will assume full responsibility for the category in a centralized model.

3) Social Services- Due to the unique requirements and subject matter knowledge required for Social Services, this category in the interim will transition to Collaborative under proper guidance from Procurement but will be moving towards a center-led model once knowledge transfer is complete.

4) Medical Services- Much like Social Services, the unique requirements and subject matter knowledge required for Medical Services purchases means the category in the interim will transition to Collaborative under proper guidance from Procurement.

5) HR & Staffing Services- Due to the unique requirements and subject matter knowledge required by HR & Staffing Services, this category in the interim will transition to Collaborative under proper guidance from Procurement.

6a) Network / Telecom Equipment & Services- Procurement will begin building structure around a center-led team while leaning on IT to transition knowledge in the interim.

6b) IT Hardware- Centralized Procurement is currently staffed with a Procurement Manager and Contract Specialists to handle the IT Hardware category, so we will utilize the existing organization structure to fully centralize this category in the interim state.

6c) IT Software- Due to the complex nature of IT Software and lack of subject matter expertise, Procurement work collaboratively with ISD to identify items to be centrally managed in addition to enterprise-wide license purchases.

6d) IT Services- Similar to Network / Telecom Equipment & Services, Procurement will begin building structure around a center-led team while leaning on IT to transition knowledge in the interim.

6e) Multi-functional Devices (MFD) - As with IT Hardware, Centralized Procurement is currently staffed with a Procurement Manager and Contract Specialists to handle the IT Hardware category, so we will utilize the existing organization structure to fully centralize this category in the interim state.

7) Construction & Public Works- Due to the technical nature of the purchases, the required level of expertise, and the consolidated spend, RAD will be responsible for sourcing these services across the County.

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8) Fleet- Due to the unique requirements associated with vehicles & fleet, it makes sense for a team of subject matter experts within the Agencies / Departments to handle the purchase for the County.

9) Travel & P-Card- It is leading practice to centralize the procurement of Travel to leverage spend Countywide and execute demand management and the proper governance and controls.

Organization Structure As illustrated in Table 13 below, the interim state procurement organization structure has the following attributes:

• Procurement Steering Committee (PSC) - The County will establish a Procurement Steering Committee (PSC) consisting of the Chief Procurement Officer, select county Agency/Department Executives, key procurement Agency/Department leaders, and the OCCM.

− Reports directly to the County Executive Officer, and is responsible for coordinating various procurement planning activities and developing common practices (e.g., process and measurement) between Procurement and Agency/Department Leads

− Chaired by the County Executive Officer, with OCCM providing required administrative support

• OCCM – OCCM will assume the critical roles of formalizing procurement strategy, facilitating annual procurement planning, developing and maintaining procurement policy and governance structure, developing performance management practice and metrics (based on the output of the PSC discussions), and working with Procurement to design, develop, maintain, and implement Procurement-related training.

• Sourcing Manager/Contract Specialist/Buyer - The strategic sourcing and tactical procurement roles will be divided between Procurement and Agencies/Departments.

− Based on the interim category ownership model mapping output, select goods and services purchases will continue to be managed centrally through Procurement, while others will be managed in a collaborative or hybrid manner by Agencies/Departments.

− Tactical procurement roles (e.g., buyers) will continue to be managed by various Agencies/Departments aligned with the goods and services categories within each Agency/Department.

• Community Based Organization (CBO) /Diversified Supplier Management – The County will establish a CBO/Supplier Diversity program within Procurement. With a primary objective of managing the supplier base including CBOs and other diversified supplier groups, the CBO/Supplier Diversity team will focus on supplier engagement, policy development, and performance management with a direct reporting line to the Chief Procurement Officer (CPO).

• Center of Excellence (CoE) – The County will focus on elevating the Procurement function to provide a countywide Procurement Center of Excellence (CoE), wherein Procurement sets the standard for leading practices, countywide category knowledge, market intelligence, talent management, training, and knowledge management.

• Procurement has an expanded scope of services and responsibilities for the County, including:

− Provide leading practices, category knowledge, and market intelligence to support various sourcing and contracting needs from Agencies/Departments

− Establish standard processes and methodologies, promote system utilization, and gather spend intelligence to support management decisions

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− Develop and implement a Procurement talent management strategy and training program

− Proactively manage the CBOs and other diversified supplier groups

FIGURE 19 - INTERIM STATE ORGANIZATION STRUCTURE

Resource Capabilities Within the interim state procurement structure, KPMG defined a new set of procurement roles, responsibilities, and capabilities to guide the interim state staffing needs.

TABLE 813 - INTERIM STATE RESOURCE CAPABILITIES AND STAFFING NEEDS TABLE

Role Role Description Responsibilities and Capabilities

Contract Specialist

Administer negotiated contracts

• Assist Sourcing Manager with various sourcing needs • Administer (with County Counsel) standard templates

for all components of arrangements (e.g., T&Cs, NDAs, MSAs, & SOWs)

• Maintain executed contracts in a single repository • Monitor contract compliance and expiration dates • Key conduit for information to Accounts Payable

Category Lead/ Sourcing Manager

Develop and own key category expertise and strategy sourcing activities

• Focus on long-term category expertise and development

• Conduct supply market and internal demands • Resident expert in sourcing policy, procedures, and

processes • Lead sourcing negotiations • Resident expert in contract negotiation and contract

development • Uncover sourcing opportunities in the market through

research/analysis • Coordinate supplier management with Agencies/Depts.

Operational Procurement Lead

Oversee the entire operational procurement practice

• Provide process support to assure efficient and responsive purchasing

• Enforce procurement policies, including preferred supplier usage and approvals

• Assure contract pricing compliance • Manage execution and monitor open POs

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Role Role Description Responsibilities and Capabilities

• Work with AP to resolve any exceptions from the existing P2P process

CoE & Talent Management Lead

Develop and own the Procurement CoE and the talent management program

• Establish a CoE knowledge portal to house all CoE content

• Actively engage Procurement, Agencies/Departments to leverage leading practices

• Serve as the point of contact for Sourcing Managers needing subject matter knowledge

• Create and administer a Procurement talent management strategy

• Develop and own the Procurement training program CBO/Supplier Diversity Lead

Manage performance of CBOs and diversified supplier groups

• Serve as the point of contact to engage and manage CBOs and diversified supplier groups

• Develop supplier diversity policies and guidance • Engage with sourcing teams to ensure supplier

diversity throughout the sourcing process • Provide supplier performance management guidance

and scorecard templates Technology Lead

Provide procurement technology and technical support

• Lead implementation of Ariba rollout • Address end-user rollout issues, and monitor the tool

usage • Provide preliminary spend analytics to support

management decisions • Provide application and infrastructure support to the

County Strategy, Policy, & Performance Mgmt.

Create and maintain Procurement strategy, policy, and performance management

• Facilitate PSC meetings by coordinating meeting agenda and participants

• Set Procurement performance goals and KPIs, and report Procurement performance

• Analyze and interpret regulation and guidance contained in the SCC Code of Ordinances, and develop PSC Committee decisions

Future State Recommendation The future state TOM is designed to help the County achieve its desired future state with a matured organization structure, optimally managed spend categories, and fully adjusted staffing model.

Roles and Responsibilities Division In the future state, performance management responsibility will be transferred from OCCM to Procurement, and the newly-established Procurement SSC will manage the P2P process.

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FIGURE 20 - FUTURE STATE ROLES AND RESPONSIBILITIES MATRIX

Spend Category Ownership For the future state, KPMG proposed more spend categories be migrated to either a centralized or center-led model.

FIGURE 21 – FUTURE STATE SPEND CATEGORY MAPPING

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** includes all underlying subcategories.

Following is a summary of KPMG’s proposed changes from interim to future state:

1) Professional Services- There is no change from Interim state category approach.

2) Real Estate & Facilities- A fully-centralized Facilities procurement team along will leverage spend and the supplier base across the County.

3) Social Services- While continuing to gain subject matter knowledge and foster a collaborative relationship with various Agencies / Departments, Procurement will eventually manage this category in a Center-led manner to further consolidate all Social Services spend in order to negotiate better savings and manage the supplier base holistically.

4) Medical Services- There is no change from Interim state category approach.

5a) Benefits- There is no change from Interim state category approach.

5b) Contingent Labor – this category will be center-led by Procurement with key stakeholder input solicited from HR and other business units who has needs to utilize contingent labor.

5c) Training Services – this category will be center-led and coordinated by Procurement with input from HR.

5d) Recruiting Services – this category will be center-led and coordinated by Procurement with input from HR.

6a) Network / Telecom Equipment & Services- As there are different needs in regards to Network / Telecom equipment & services across various Agencies / Departments and evolving technical needs associated with this category, a Center-led model is best suited to manage this category to facilitate cross functional decisions.

6b) IT Hardware- It is leading practice to centralize the procurement of IT Hardware to leverage spend Countywide and rationalize hardware purchase specifications.

6c) IT Software- Much like IT Hardware, it is leading practice to implement Countywide MSAs with major suppliers in order to ensure that there are consistent applications or systems implemented Countywide.

6d) IT Services- Similar to Network / Telecom Equipment & Services, as there are different needs in regards IT Services across various Agencies / Departments and evolving technical needs associated with this category, a Center-led model is best suited to manage this category to facilitate cross functional decisions.

6e) Multi-functional Devices (MFD) - Much like IT Hardware and Software, it is leading practice to implement Countywide MSAs with major suppliers in order to ensure that organizations are able to rationalize MFD purchase specifications.

7) Construction & Public Works- There is no change from Interim state category approach.

8) Fleet- There is no change from Interim state category approach.

9) Travel & P-Card- There is no change from Interim state category approach.

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Organization Structure In the future state Procurement organization structure, Agencies/Departments will continue to maintain accountability, skills, and resources for limited goods and services sourcing, contracting, and supplier management. Sourcing Managers and Contract Specialists from all Agencies/Departments will dotted line report to the CPO, Procurement Services Category Lead, or Goods Category Lead. Procurement will continue to expand its scope of services and category sourcing responsibilities for the County by taking on additional spend categories. Furthermore, Procurement will:

6 Expand the CBO/Supplier Diversity team to include a countywide supplier relationship management program including supplier risk management. Procurement will add additional FTEs to provide supplier management guidance to all agencies/departments.

7 Select Sourcing Managers will take on long-term category planning and management responsibility, in addition to category strategic sourcing.

8 The Technology Team will expand its scope of services to include a data analytics function by providing procurement intelligence data to support performance management and management decisions.

9 Own and enhance the Procurement CoE, which includes leading practice processes and toolkits, to support the various procurement activities of Agencies/Departments, deliver additional category knowledge, and supply market intelligence.

10 Continue to take on center-led or centralized responsibility for selected spend categories.

• OCCM – OCCM will continue to work with the PSC and Procurement to formalize the procurement strategy, facilitate procurement planning, and develop and maintain procurement policy and governance. Overall performance management responsibility will be transferred to Procurement.

• Sourcing Management - The strategic sourcing and contract administration roles will continue to be divided between Procurement and Agencies/Departments, with notable reduction of categories to be managed by Agencies/Departments in a collaborative manner. The strategic category management concept will be deployed in selected spend categories by elevating Procurement’s role in the early stage category planning process.

• Shared Services Center – An SSC will be created to centrally manage the countywide P2P process, and consolidate all tactical procurement resources and activities.

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FIGURE 22 - FUTURE STATE ORGANIZATION STRUCTURE

Resource Capabilities Within the future state Procurement function, responsibilities will continue to be split between centralized Procurement FTEs and Procurement FTEs within Agencies/Departments. However, numerous roles will be expanded with additional responsibilities, and the role of Procurement Analytics Lead will be added. The Operational Procurement role will also be shifted from Procurement to the newly formed SSC. Additional expanded responsibilities and changes from the interim state are underlined and marked with an asterisk (*) in Table 14.

TABLE 14 - FUTURE STATE RESOURCE CAPABILITIES AND STAFFING NEEDS TABLE

Role Role Description Responsibilities

Contract Specialist

Administer negotiated contracts

Assist Sourcing Manager with various sourcing needs Administer (with County Counsel) standard templates for

all components of arrangements (e.g., T&Cs, NDAs, MSAs, & SOWs)

Maintenance of executed contracts in a single repository Monitor contract compliance & expiration dates

Key conduit for information to Accounts Payable

Category Lead/ Sourcing Manager

Develop and own key category expertise and strategy sourcing activities

Develop category strategic plan by early involvement in the Agencies’/Departments’ planning process∗ Focus on long-term category expertise and development

Conduct supply market and internal demands Resident expert in sourcing policy, procedures, and

processes Lead sourcing negotiations

Serve as resident expert in contract negotiations and contract development

Uncover sourcing opportunities in the market through research/analysis

Coordinate supplier management with Agencies/Depts.

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Role Role Description Responsibilities

Operational Procurement*

Oversee the entire operational procurement practice *

Provide process support to assure efficient and responsive purchasing* Enforce procurement policies including preferred supplier

usage and approvals* Assure contract pricing compliance*

Manage execution and monitor open POs* Work with AP to resolve any exceptions from the existing

P2P process*

CoE & Talent Management Lead

Develop and own the Procurement CoE and talent management program

Establish a CoE knowledge portal to house all CoE content

Actively engage Procurement, Agencies/Departments to leverage leading practices

Serve as the point of contact for Sourcing Managers needing subject matter knowledge

Create and administer a Procurement talent management strategy

Develop and own the Procurement training program

Supplier & Diversity Lead

Create a countywide Supplier Relationship Management Program∗, and manage supplier performance of CBOs and diversified supplier groups

Create a center-led countywide supplier relationship program including processes, tools, and templates∗ Serve as the point of contact to engage and manage

CBOs and diversified supplier groups Develop supplier diversity policy and guidance

Engage with sourcing teams to ensure supplier diversity throughout the sourcing process

Provide supplier performance management guidance and scorecard templates

Analytics &* Technology Lead

Responsible for procurement analytics∗ and Ariba and other technical support

Provide a comprehensive procurement analytics capability to support performance management and management decisions∗ Provide Ariba and other application and infrastructure

support to Procurement

Strategy, Policy, & Performance Mgmt.

Create and maintain Procurement strategy, policy, and performance management

Facilitate PSC meetings by coordinating meeting agenda and participants

Set Procurement performance goals and KPIs, and report Procurement performance

Analyze and interpret regulation and guidance contained in the SCC Code of Ordinances, and develop PSC Committee decisions

Future State Process Delivery KPMG has developed RACI matrices for the center-lead and centralized models, based on the KPMG Procurement Process Delivery Model Framework (see Figure 23.) The RACI matrices should be utilized to define the roles and responsibilities delineation between Procurement and other supporting functions involved in the countywide procurement and contracting process. The RACI matrices will also be applied by the category spend ownership model. The framework below breaks down the

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procurement process into eight key process steps, with supporting sub-processes. The RACI delineation is defined at the sub-processes level.

FIGURE 23 - KPMG PROCUREMENT PROCESS DELIVERY MODEL FRAMEWORK

Procurement Delivery Collaborative Model FIGURE 24 - PROCUREMENT SPEND OWNERSHIP MODEL - COLLABORATIVE

Process Sub-Process

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Category Management

Category Strategy & Planning C C R,A I I I Supply Assessment I C R,A I I I Demand Planning I C R,A I I I Category Risk Management I C R,A I I I Category Performance Management I C R,A I I I

Strategic Sourcing

Spend and Trend Analysis I C R,A I I I Requirements & Specifications Definition I C R,A I I I Supply Market Analysis & Planning I C R,A I I I Sourcing Strategy I C R,A I I I Sourcing Execution I R, A C I I I Sourcing Negotiation I R, A C I I I

Contract Lifecycle Management

Contract Negotiation & Drafting* I R,A C R,A I I Contract Execution* I R,A C R,A I I Contract Storage & Retrieval* I R,A C R,A I I Contract Maintenance* I R,A C R,A I I Contract Renewals & Termination* I R,A C R,A I I

Supplier Lifecycle Management

SRM Strategy C R,A C I I I Supplier Qualification I R,A C I I I Supplier Risk Management I R,A C C I I Supplier Performance Management I C R,A I I I Supplier Development I C R,A I I I Supplier Transitioning I C R,A I I I

Operational Processes

Buying Channel Definition I R,A C I I I Requisition & Fiscal/Technical Approval I I R,A C I I PO Execution I C C I I R,A Receipt Management I C R,A I I I Invoice Processing & Payment I C C I I R,A

Master Data & BI/PI

BI/PI Strategy & Implementation C R,A C I I I Master Data Management I R,A C I I I

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Spend Taxonomy Maintenance I R,A C I I I Process Tool Support I R,A I I I I

Governance & Control

Approval Authority C C C C R,A I Policies C C C C R,A I SOP Maintenance C C C C R,A I Monitoring & Compliance C C C C R,A I

People Skill Training & Development I R,A C I I I Knowledge Management I R,A C I I I

*The detailed roles and responsibilities delineation, i.e. RACI matrix20, between Procurement and County Counsel associated with contract lifecycle management will be further defined in the implementation phase.

Procurement Delivery Center-led Model FIGURE 25 - PROCUREMENT DELIVERY RACI - CENTER-LED

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Category Management

Category Strategy & Planning C R,A C I I I Supply Assessment I R,A C I I I Demand Planning I C R,A I I I Category Risk Management I R,A C I I I Category Performance Management I R,A C I I I

Strategic Sourcing

Spend and Trend Analysis I R,A C I I I Requirements & Specifications Definition I C R,A I I I Supply Market Analysis & Planning I R,A C I I I Sourcing Strategy I R,A C I I I Sourcing Execution I R,A C I I I Sourcing Negotiation I R,A C I I I


Contract Negotiation & Drafting* I R,A* C R,A I I Contract Execution* I R,A C R,A I I Contract Storage & Retrieval* I R,A C R,A I I Contract Maintenance* I R,A C R,A I I Contract Renewals & Termination* I R,A C R,A I I





Master Data & BI/PI

BI/PI Strategy & Implementation C R,A C I I I Master Data Management I R,A C I I I Spend Taxonomy Maintenance I R,A C I I I Process Tool Support I R,A I I I I




20 The RACI Matrix is a tool used for identifying roles and responsibilities. RACI represents Responsible, Accountable, Consulted and Informed.

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*The detailed roles and responsibilities delineation between Procurement and County Counsel associated with contract lifecycle management will be further defined in the implementation phase.

Procurement Delivery Centralized Model FIGURE 26 - PROCUREMENT DELIVERY RACI - CENTRALIZED

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Category Strategy & Planning C R,A I I I I Supply Assessment I R,A I I I I Demand Planning I R,A I I I I Category Risk Management I R,A I I I I Category Performance Management I R,A I I I I

Strategic Sourcing

Spend and Trend Analysis I R,A I I I I Requirements & Specifications Definition I R,A I I I I Supply Market Analysis & Planning I R,A I I I I Sourcing Strategy I R,A I I I I Sourcing Execution I R,A I I I I Sourcing Negotiation I R,A I I I I


Contract Negotiation & Drafting* I R,A* C R,A I I Contract Execution* I R,A C R,A I I Contract Storage & Retrieval* I R,A C R,A I I Contract Maintenance* I R,A C R,A I I Contract Renewals & Termination* I R,A C R,A I I





Master Data & BI/PI

BI/PI Strategy & Implementation C R,A C I I I Master Data Management I R,A C I I I Spend Taxonomy Maintenance I R,A C I I I Process Tool Support I R,A I I I I




*The detailed roles and responsibilities delineation between Procurement and County Counsel associated with contract lifecycle management will be further defined in the implementation phase.

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Countywide Procurement and Contracting FTE Workload Summary While the County continues to examine its procurement and contracting FTE allocation across the procurement department and its agencies, it is important to understand that the FTE estimates summarized below are for directional purposes only.

Due to the lack of accurate County’s categorized spend data, historical benefits/performance measures and procurement headcount and activities across the Agencies, our FTE estimates were developed based on a limited set of information collected from key agencies and departments and used to extrapolate across the County. We have outlined our FTE estimate assumptions in the section below.

As the County launches its transformative procurement program, these FTE estimates will be substantively updated using foundational information such as the actual headcount information gathered over the course of the project, more accurate spend and categorization information provided by the County’s Ariba spend visibility initiative and the consensus on its priorities and roles that will be driven by the newly established Procurement Steering Committee.

While key data is unavailable, we felt it worthwhile to lay out a methodology to measure the County’s progress toward its Future State and identifying the set of required facts and the capabilities to be enhanced while driving toward improved transparency and accountability.

Please refer to Table 15 for a summary of the evolution of countywide Procurement and Contracting FTE workload estimates from the current state to the future state.

In the current state, there are an estimated 266 Procurement and Contracting FTEs across the County, with about 188 in the individual Agencies/Departments, 74 in Centralized Procurement and 4 in OCCM21. This equates to approximately $4.6 million in spend per Procurement and Contracting FTE based on a baseline spend of $1.234 billion.

In the interim state, as the County shifts towards a more collaborative model, we envision an incremental headcount of five FTEs in Procurement. This increase in FTEs is meant to serve the new positions we have outlined: Supplier Relationship & Risk Management, Contract Management, HR/Talent Management and CBO/Supplier Diversity Management. Absent detailed insights into the staffing for all agencies, we’ve assumed that the agency Procurement and Contracting FTEs remain constant in order to support the collaborative operating model and drive procurement activities within their Agencies. The FTE allocation within each Agency/Department or across Agencies/Department could change to meet its priorities and required workload. During this stage procurement professional skills would be enhanced through training and mentoring. With these estimates, the spend per Procurement and Contracting FTE would increase to $5.3 million.

In the future state, the majority of the countywide spend categories would be managed in a center-led manner. Procurement would see an incremental headcount of four additional FTEs, bringing the total to 83 FTEs, by continuing to expand on the key areas outlined above, re-allocating resources high-value activities and building a new Shared Services Center (SSC) to serve procurement transactional activities for all Agencies. Assuming the County targets to conservatively achieve results within the 50th percentile of KPMG benchmarks of its peers, the spend per Procurement and Contracting FTE would become $9.1 million based on a baseline spend of $1.58 billion.. This objective is for assumption purpose and could be set higher by the Procurement Steering Committee informed by better spend visibility, performance measurement and skilled procurement professionals over the course of its transformative journey.

21 4 out of the 5 OCCM positions are expected to be Procurement and Contracting-related to meet the roles outlined in the Interim and Future States.

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TABLE 15 - FTE RESOURCE AVAILABILITY TABLE

Organization Current State

Interim State

Future State

Countywide Total Spend $1,234M $1,429M $1,576M

Spend per Procurement & Contracting FTE $4.6M $5.3M $9.1M

FTE 266 271 173

FTE Workload Increase/Decrease for Other Activities

- 5▲ 93▼

% of Procurement Department FTE of Total County Procurement & Contracting FTE

28% 29% 48%

Procurement FTE 74 79 83 FTE Workload Increase/Decrease - 5▲ 4▲

Agency FTE 188 188 86 FTE Workload Available for Other Activities - - 102▼

OCCM22 FTE 4 4 4 FTE Workload Increase/Decrease - - -

KPMG Benchmarks –

Spend per FTE

Percentile Cross-Industry1 Peer Group

2 25th $6,454,800 $8,125,900 50th $12,307,700 $9,110,200 70th $20,000,000 $18,790,700

FTE Estimates Key Assumptions:

• Spend Calculation:

1 The current state baseline spend of $1.234M was calculated by removing Direct Pay codes H12, H13, H15, H18, H19, H21, H22, and H46 from the total Countywide spend of $3.7B.

2 Interim and future state spend were projected using a conservative 5% annual increase in spend. For the interim state which will fall in year 3, it is estimated to be about $1.429M. For the future state which will fall in year 5, it is estimated to be about $1.576M

• Procurement FTE estimates:

1. Budgeted FTE FY2017: Both the interim and future state organization structures include unfilled FTE positions budgeted in fiscal year 2016 – 2017.

2. Ariba supplier and catalog implementation FTEs are considered out-of-scope of the FTE estimates. We recommended an in-depth assessment of the future state Ariba headcounts by

22 4 out of the 5 OCCM positions are expected to be Procurement and Contracting-related to meet the roles outlined in the Interim and Future States.

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comparing the staffing needs of the in-flight implementation to the post go-live sustainable phase.

3. Additional FTEs: Additional FTEs were estimated based on the key positions created to move to leading practices. The FTE estimates will require further refinement based on the actual category spend analysis and workload assessment.

4. FTE reallocation: We utilized existing FTEs to fill available open positions; we did not take into consideration individual procurement competency levels and personal willingness to migrate to a different job position and classification.

• Agency FTE estimates:

1. Current state FTEs: The estimates were developed based on the information collected during our interviews with a wide range of Agencies/Departments including Health & Hospital Systems, Facilities and Fleet Department, Parks & Recreation Department, Roads Dept., Social Services Agency, Information Services Department, County Executive's Office, Probation Dept., Controller-Treasurer Dept., Agriculture and Environmental Mgt., Employee Services Agency, Department of Environmental Health, Department of Revenue, Clerk of the Board, Pre-Trial Services Office and Board of Supervisors. Due to the short project timeframe, we used this data set to estimate the countywide FTE based on spend managed. This approach was agreed upon at the onset of the project.

2. Interim state FTEs: Agency FTE estimates are assumed to remain constant during the transition to Interim State. While doing so, the objective would be to transition to a model where procurement professionals are fully dedicated (at least 50% of their time) to procurement activities.

5. Future state FTE Workload Available for Other Activities: This estimate is driven by the County reaching its future state’s objective to be within the 25th percentile in the peer group benchmark. As a result of efficiency gains and the move to a Center-led model, this estimates is the difference between the Future State countywide FTEs and the FTEs for both the Procurement Department and OCCM. These estimates will require further refinement based on the actual category spend analysis, workload assessment and progress made toward the Future State.

• OCCM FTE estimates:

1. The estimates take into account existing and open positions and assumed to remain constant over time.

• Countywide FTE estimates:

1. Current state FTEs: The estimates were developed by adding the procurement and contracting FTE estimates from Procurement Department, Agencies and OCCM.

2. Interim state FTEs: The estimates were developed by adding the procurement and contracting FTE estimates from Procurement Department, Agencies and OCCM.

3. Future state FTEs: Future state spend is forecasted using a five percent annual increase over five years, which is the estimated duration for the County to reach its future state, divided by the 25th percentile in the peer group benchmark. Organizations included in the peer group benchmark are comparable to the County in terms of employee size and revenue/appropriation and represent a mix of private and public sector companies.

4. FTE Workload Increase/Decrease for Other Activities: The estimates are the difference between the current state and interim state or future state.

Role Assessment Summary As part of the future state recommendations, KPMG introduced several new roles to the County Procurement and Contracting function. These new roles, along with adjustments to existing ones, will help the County become better able to implement and manage a mature procurement function.

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Following is a summary of the recommended future roles. Additional details are included in Appendix D.

TABLE 16 - ROLE ASSESSMENT SUMMARY TABLE

Future Role Title Purpose

Chief Procurement Officer (CPO)

The overall management of strategic sourcing, technology, process, and change initiatives related to Procurement and Contracting to drive value and deliver efficiency to the County. Develop and implement system-wide procurement strategy and planning, together with the PSC. Serve as principal advisor to the County Executive Leadership, and provide guidance to Agency/Department heads and contracting staff.

Sourcing Manager/Category Lead

Direct oversight of and accountability for the County’s sourcing strategies, methodologies, and organization management of the sourcing function*. Manage and supervise the sourcing team, lead systematic continuous improvement of the sourcing function, and assure the performance of the supply base.

OCCM Lead

Lead the Office of the countywide Contracting Management (OCCM) to provide strategic oversight, organization governance and planning, and policy development across the County’s Procurement and Contracting function. The purpose of the role is to facilitate PSC meetings, coordinate the development of standardized procurement policies and procedures, provide regular reviews, monitor compliance, and communicate changes.

CoE and Talent Management Lead

Manage and lead the countywide Procurement CoE, provide leading practice knowledge associated with category management, strategic sourcing, contract management, and supplier management, and drive end-to-end P2P process excellence. Create the overall Procurement talent management strategy, and design role- specific training to up-skill the existing Procurement workforce.

CBO/Supplier Diversity Lead

Lead the CBO/Supplier Diversity Team to successfully implement, administer, monitor, and provide capacity-building support for CBOs and diversified supplier groups in alignment with the County’s strategic plan and the Board of Supervisors Policy Manual Chapter 5.

Analytics and Technology Lead

Responsible for the development, implementation, and management of countywide procurement processes to drive efficiencies and cost savings. Responsible for the planning, development, design, deployment, and ongoing management of all common countywide procurement technologies. Evaluate how in-house applications can be leveraged to provide leadership and other Procurement peer groups with timely and accurate procurement analytics to support decisions.

* indicates category lead role and responsibility

.

Future State Performance Metrics In order to measure and track the increased effectiveness of the operations created by the new Procurement TOM, KPMG recommends a formal Performance Measurement Framework.

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FIGURE 27 - KPMG PERFORMANCE MEASUREMENT FRAMEWORK

Included in the Performance Measurement Framework (see Figure 27) is a balanced scorecard that measures a small set of outcome-based metrics that reflect the overall efficiency and effectiveness of countywide procurement performance. The diagnostic measures are designed to identify specific process breakdowns and improvement opportunities.

The framework is broken down into four strategic priorities, as follows, and all are tracked and reported at the executive, managerial, and operational levels.

• Cost Improvement

• Process Efficiency

• Customer Satisfaction

• Continuous Improvement

Following are KPMG’s recommendations of a few sample metrics at each of the three management levels:

Executive Metrics:

FIGURE 28 - EXAMPLE EXECUTIVE PERFORMANCE METRICS

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Managerial Metrics:

Operational Metrics: FIGURE 30 - EXAMPLE OPERATIONAL PERFORMANCE METRICS

FIGURE 29 - EXAMPLE MANAGERIAL PERFORMANCE METRICS

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8. Planning County’s Procurement Transformation Journey Following the completion of the Assessment, Analysis, and Recommendations phases, KPMG outlined an implementation plan for the County to execute the interim and future state TOMs and other procurement improvement recommendations over a five-year period, as depicted in Figure 31 below. FIGURE 31 - OVERALL TRANSFORMATION

Year 1 – Investment in Procurement capabilities The first activities in the transformation journey include steps that lay the foundational investments in the County’s Procurement capabilities, with a focus on processes, tools, and governance. These investments include: • Implementing a new Procurement TOM and the related processes and policies. • Defining and aligning Procurement competencies by leading practice Procurement roles, and

assess the “as-is” skillset to determine existing proficiencies and gaps • Stabilizing and adopting procurement technology • Leveraging spend analytics in an effort to identify new savings and delivery of quick wins across

the Procurement program.

Year 2 – Drive out costs The second phase of the transformation begins in year two with the execution of a multi-wave sourcing program designed to achieve incremental savings. The plan recommends the County:

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• Continue to review and assess resources, rationalizing them through strategic organizational restructuring

• Institute a talent management program designed to recruit, develop, and retain key and critical resources

• Continue to expand Procurement technology functionality and connectivity.

Year 3 – Stabilize and enhance value In the third year of the journey, the plan recommends the County formalize business partnerships through an overarching Supplier Relationship Management, and assess and subsequently realign, as necessary, the Procurement vision, mission, and performance metrics.

Year 5 and Beyond – Program sustainability The final phase is focused on the overall sustainability of the mature Procurement program. In this part of the journey, the County will implement a Procurement CoE to champion leading practices, disseminate standard tools and templates, and re-enforce the governance structure.

Implementation Roadmap The County of Santa Clara’s five-phase improvement journey is intended to be implemented in three waves: • Wave 1 – the first 12 – 18 months from initial launch • Wave 2 – Years 2 and 3 • Wave 3 – Years 3 through 5 Some activities progress across various phases, and some also traverse beyond year 5. Recommended initiatives are planned across various waves, as shown in FIGURE 32 – IMPLEMENTATION ROADMAP and TABLE 17, IMPLEMENTATION INITIATIVES BY WAVE. FIGURE 32 - IMPLEMENTATION ROADMAP

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Initiatives spanning multiple phases, with iterative activities designed to be implemented in multiple steps, are shown in alphabetical order by initiative. For example, Initiative 4 includes four (4) related steps, which are shown as 4a, 4b, 4c, and 4d, as illustrated in Figure 36 above. These steps are also called out in Table 17 below. TABLE 17 - IMPLEMENTATION INITIATIVES BY WAVE

Wave Initiatives

Wave 1 (first 12 – 18 Months)

1. Develop a Countywide procurement vision and mission with supporting guiding principles

2. Establish a Procurement Steering Committee (PSC) and 3. Governance Framework

3. Initiate a Countywide Change Management and Communication Program

4a.Develop a Countywide Collaborative Procurement Target Operating Model (TOM)

5. Establish the Process and Supporting RACI Matrix 7. Conduct a Skills Assessment and Recommend a Targeted

Training Curriculum 8. Develop a Talent Management Framework and Deliver Training 9. Develop and Communicate Countywide Procurement Policies

and Procedures 10. Appoint a Dedicated Policy and Procedures Unit 12. Analyze the Countywide Spend Taxonomy and Identify

Improvement Opportunity 13a Launch a Multi-year Strategic Sourcing Program; Conduct

WAVE 1 Sourcing 15. Streamline P2P Process, and Expand the Use of Ariba and Other Procurement Related Technologies

Wave 2 (years 2 - 3 )

4b. Create Center-led Model; Pilot and WAVE 1 Implementation 4c. WAVE 2 TOM Implementation 6a. Rationalize Procurement Staffing Level 11. Implement a Procurement and Contracting Policy Audit Program 13b.Conduct WAVE 2 Sourcing 16. Re-evaluate Spend Authorization (SA) and Delegation of

Authority (DoA) 17. Develop and Implement the Procurement Performance

Management Approach & Metrics 18a.Implement supplier diversity / CBO program

Wave 3 (years 3 – 5)

4d. WAVE 3 TOM Implementation 6b. Rationalize Procurement Staffing Level 13c.Conduct WAVE 3 Sourcing 14. Implement a Leading Practice Category Management

Methodology and Approach 18b.Implement a Robust Supplier Relationship Management (SRM)

Program

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Recommendations Summary The plan for the County’s transformation journey includes numerous recommended improvement initiatives. This section describes each of these recommendations, along with benefits, timing, and the related inter-dependencies among the different initiatives.

# Initiative

1 Develop the Procurement Vision and Mission with Supporting Guiding Principles

2 Establish a Procurement Steering Committee and Governance Framework

3 Initiate a Countywide Change Management and Communication Program

4 Create a Center-led Target Operating Model (TOM)

5 Establish the Process and Supporting RACI Matrix

6 Adjust the Procurement Staffing Level

7 Conduct a Skills Assessment and Recommend a Targeted Training Curriculum

8 Develop a Talent Management Framework and Deliver Training

9 Develop and Communicate Countywide Procurement Policies and Procedures

10 Appoint a Dedicated Policy and Procedures Unit

11 Implement a Policy Audit Program

12 Analyze the Countywide Spend Taxonomy and Identify Improvement Opportunities

13 Execute a Multi-Wave Strategic Sourcing Program

14 Implement a Leading Practice Category Mgmt. Methodology and Approach

15 Streamline P2P Process, and Expand the Use of Ariba and Other Procurement Related Technologies

16 Re-evaluate Spend Authorization (SA) and Delegation of Authority (DoA)

17 Develop and Implement the Procurement Performance Mgmt. Approach & Metrics

18 Implement a Robust Supplier Relationship Mgmt. (SRM) Program

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#1 – Develop the Procurement Vision and Mission with Supporting Guiding Principles Description

This includes socializing the vision, mission, and guiding principles with the Procurement Steering Committee, and seeking feedback from key stakeholders to ensure buy-in. Once finalized, the vision and mission should be communicated countywide as part of the change management and communications program.

Benefits

A strong procurement vision and mission ensures alignment with the County’s overall objectives and values. It also helps drive the strategy for the Procurement organization, gives purpose to and solicits commitment from the procurement staff, and underpins the overall transformation initiative.

Timing

Wave 1 (first 12 – 18 months)

Dependencies

None

#2 - Establish a Procurement Steering Committee (PSC) and a Governance Framework Description

The County should establish a Procurement Steering Committee (PSC) to strengthen the governance around how countywide procurement decisions are made, and encourage collaboration between the Procurement, Agencies, Departments and related corporate functions, such as County Counsel and Finance. Steps include creating the PSC Charter, identifying appropriate members, determining roles and responsibilities, and establishing a regular cadence for meetings with related agenda structure.

Benefits

The PSC will serve as the central function of the established governance structure to coordinate key policy changes and decisions, secure buy-in, and formalize an issue resolution and escalation process.

Timing


Dependencies

1. Develop the procurement vision and mission with supporting guiding principles

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#3 - Initiate a Countywide Change Management and Communication Program Description

A countywide change management and communication program is needed to address the significant challenge presented by undertaking a large-scale transformation of the Procurement function. The program will include development of a change management strategy, change management and communication plan, deployment of the plan, scheduled feedback opportunities, progress measures, and reporting.

Benefits

This program will inform County staff of changes to the Procurement function, and provide much needed clarity to County staff around what to buy and how to buy relevant goods and services.

Timing

Progressive – Beginning with Wave 1 (first 12 – 18 months), continuing in Wave 2 (2 – 3 years), and throughout and beyond Wave 3 (3 – 5 years and beyond)

Dependencies

None

#4 - Create a Center-led Target Operating Model (TOM) Description

The County Procurement function currently operates as a hybrid procurement organization, with centralized Procurement procuring the majority of goods, and the respective Departments and Agencies procuring professional services as needed. KPMG’s recommendation for mitigating the issues surrounding the current hybrid operating model is for the County to create a Center-led Target Operating Model (TOM).

Benefits

Transitioning to a Center-led procurement organization will help countywide procurement better deploy sourcing and contracting resources to support countywide purchasing and generate incremental savings via better spend leverage.

Timing

Progressive – Beginning with Wave 1 (first 12 – 18 months), continuing in Wave 2 (2 – 3 years), and throughout Wave 3 (3 – 5 years)

Dependencies

12. Develop a Countywide Spend Taxonomy, Conduct Analysis and Identify Saving Opportunities

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#5 - Establish the Process and Supporting RACI Matrix Description

In order to ensure effectiveness and adherence to policies and procedures, the County will need to develop and implement a standard countywide Procurement process and associated Responsibility, Accountability, Consulted, and Informed (RACI) matrix. Steps to complete this initiative include defining a process blueprint, defining the supporting RACI matrix, and establishing a rollout plan, including pilot implementation and phased rollouts.

Benefits

The RACI matrix will serve as a reference document to indicate participation throughout the various steps of the end-to-end Procurement and Contracting process.

Timing

Progressive – Beginning with Wave 1 (first 12 – 18 months), continuing in Wave 2 (2 – 3 years), and Wave 3 (3 – 5 years)

Dependencies

4. Create a Center-led Target Operating Model (TOM)

12. Develop a Countywide Spend Taxonomy, Conduct Analysis and Identify Saving Opportunities

#6 – Adjust the Procurement Staffing Level Description

As the County Procurement function begins to migrate from current to interim to future state, the County should perform regular assessments to adjust its Procurement staffing levels. Steps include the collection and assessment of current organization staffing models and FTE headcounts, as well as phased adjustment models and rollout strategy.

Benefits

Frequent and regular staffing adjustment will help ensure Procurement and Procurement-related Agency/Departmental staffing align with the goals and objectives of the interim and future state Target Operating Models (TOM).

Timing

Progressive – Beginning with Wave 1 (first 12 – 18 months), continuing in Wave 2 (2 – 3 years), and Wave 3 (3 – 5 years)

Dependencies

4. Create a Center-led Target Operating Model (TOM)

5. Establish the Process and Supporting RACI Matrix

15. Streamline the P2P Process, and Expand the Use of Ariba and Other Procurement Related Technologies

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#7 - Conduct a Skills Assessment & Recommend a Targeted Training Curriculum

Description

The County should assess the skillset of current Procurement staff to establish a baseline of Procurement related skills and competencies in order to deliver targeted training to its professionals. Steps include developing target competencies, performing skills assessments, analyzing and reporting on assessment findings, and creating a recommended training curriculum designed around identified skill gaps.

Benefits

This will serve as a catalyst for immediate improvements to the County’s overall organization and skillset, and help in preparation for implementation of the interim state operating model

Timing


Dependencies

None

#8 - Develop a Talent Management Framework & Deliver Training Description

As the County progresses toward greater maturity, it will be important to develop a talent management framework that includes a set of integrated processes. This includes development and implementation of the framework, and creation and delivery of a customized training curriculum that aligns to the framework’s objectives and the aforementioned skills assessments.

Benefits

The talent management framework and aligned training will enable the County to attract, develop, assess, deploy, and retain the people needed to achieve the strategic objectives of the interim and future state target operating models, and meet the County’s future business needs.

Timing

Progressive – Beginning with Wave 2 (2 – 3 years), and continuing through and beyond Wave 3 (3 – 5 years, and beyond)

Dependencies

7. Conduct a Skills Assessment and Recommend a Training Curriculum

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#9 - Develop and Communicate Countywide Procurement Policies and Procedures Description

As part of the overall journey of improvement, the County should develop detailed countywide policies that are consistent with Board policies and guidelines. This includes the establishment of PSC, development of a communications plan, and implementation.

Benefits

These policies and procedures will assist in establishing the overall sustainability and success of the new Target Operating Model (TOM).

Timing Wave 1 (first 12 – 18 months)

Dependencies 2. Establish a Procurement Steering Committee and a Governance Framework

10. Appoint a Dedicated Policy & Procedures Unit

#10 - Appoint a Dedicated Policy and Procedures Unit Description A dedicated Policy and Procedures Unit will help the County eliminate the issues associated with disparate policies and procedures across the various departments. Steps include selecting members, and assigning specific roles and responsibilities

Benefits With this dedicated Policy and Procedures Unit, the County will be able to design, develop, and implement policies and procedures that are consistent across all departments. The dedicated staff will be able to update the policies and procedures at regular intervals.


Dependencies 2. Establish a Procurement Steering Committee and a Governance Framework

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#11 - Implement a Policy Audit Program Description This initiative focuses on the development of a countywide contracting policy audit program which will review the various Agencies’/Departments’ compliance with the policies and procedures established by the appointed Policy and Procedures Unit. Steps include defining the audit program ownership, scope, guidelines, cadence, and rollout strategy.

Benefits The compliance reviews will enable the County to monitor the consistency of the Procurement and Contracting process, and improve the policies and procedures based on the audit findings.

Timing Progressive –Wave 2 (2 – 3 years), and continuing through and beyond Wave 3 (3 – 5 years, and beyond)

Dependencies 9. Appoint a Dedicated Policy and Procurement Unit

#12 - Analyze the Countywide Spend Taxonomy and Identify Improvement Opportunities

Description

The County should develop a spend taxonomy for all contracting activities in order to identify and classify the services and goods that are purchased under contract. This step includes utilizing leading practices and spend tools in order to properly recognize, organize, and classify spend, and to identify potential savings opportunities through increased transparency into category-based spend in this multi-wave strategic sourcing program.

Benefits This will help leverage spend data to gain visibility into total spend and savings opportunities, performance improvement, and contract compliance, and will be used to further build out the category management and strategic sourcing initiatives.


Dependencies None

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#13 - Execute a Multi-Wave Strategic Sourcing Program Description Based on the previously developed spend taxonomy and the associated findings, the County should develop a multi-wave strategic sourcing program – organized by complexity and potential benefit, and categorized by quick win opportunities, medium-term opportunities, and long-term opportunities – to execute the identified sourcing opportunities.

Benefits Achieve incremental savings to demonstrate early return on investment of the countywide procurement and contracting transformation program.

Timing Progressive – Beginning with Wave 1 (first 12 – 18 months), continuing in Wave 2 (2 – 3 years), and Wave 3 (3 – 5 years)

Dependencies 12. Develop a Countywide Spend Taxonomy and Identify Savings Opportunities

#14 - Implement a Leading Practice Category Management Methodology and Approach Description This initiative focuses on developing and implementing a leading practice Category Management Methodology Framework and Approach strategy, and the eventual refinement and maturity of the Framework.

Benefits By implementing a Category Management Methodology and Approach, the County can develop a long-term category source plan, and employ strategic cost management tactics such as demand management.

Timing Wave 3 (3 – 5 years)

Dependencies 12. Develop a Countywide Spend Taxonomy and Identify Savings Opportunities

13. Execute a Multi-wave Strategic Sourcing Program

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#15 - Streamline P2P Process, and Expand the Use of Ariba and Other Procurement Related Technologies Description The County should expand its usage of the Ariba, including additional modules and features. The County may also want to consider exploring other relevant procurement technologies such as a spend analytics dashboard to support business needs.

Benefits This initiative will help the County fully utilize the capabilities of technology platforms, including Ariba, in order to gain P2P process efficiency, improve contract compliance and improve the intelligence reporting capability.


Dependencies None

#16 - Re-evaluate Spend Authorization (SA) and Delegation of Authority (DoA) Description The County should evaluate the various levels of Spend Authorization (SA) and its Delegation of Authority (DoA) policies. The policies should allow for the necessary governance and oversight, but not cause roadblocks or bottlenecks.

Benefits This will help optimize the Procurement and Contracting process, and assist in the implementation of clear and effective Procurement and Contracting policies.

Timing Progressive – Beginning with Wave 1 (first 12 – 18 months) and continuing in Wave 2 (2 – 3 years)

Dependencies 2. Establish a Countywide Procurement Steering Committee and a Governance Framework

9. Develop and communicate a Countywide Procurement Policy and Procedures

10. Appoint a Dedicated Countywide Procurement Policy and Procedures Unit

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#17 - Develop & Implement Procurement Performance Mgmt. Approach & Metrics

Description The County should consider implementing a procurement performance management approach. This includes defining key performance indicators (KPIs), identifying relevant data sources, displaying actionable information through an integrated dashboard, and actively tracking and measuring performance. Benefit This focus will help drive the best value across countywide internal resources and suppliers, and help the County measure, track, and monitor performance. With effective visibility and monitoring, the County can take adequate steps to address performance issues and drive efficiency across the organization.

Timing Progressive – Beginning with Wave 1 (first 12 – 18 months) and continuing in Wave 2 (2 – 3 years)

Dependencies 1. Develop the Countywide Procurement Vision and Mission with Supporting Guiding Principles

15. Streamline P2P Process, and Expand the use of Ariba and Other Procurement Related Technologies

#18 - Implement a Robust Supplier Relationship Management (SRM) Program Description The County needs to address the immediate challenge associated with lack of a supplier diversity framework. This initiative involves creating a formal Supplier Relationship Management (SRM) Program, which will outline how to maximize value from existing supplier relationships across strategic and tactical suppliers.

Benefits A well-structured supplier diversity framework will enable more inclusive approach to the supplier base, including Community-based Organizations (CBOs).


Dependencies None

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Key Success Factors There are many components that are critical to successfully implementing and sustaining the recommended procurement transformation for the County. The County has already undertaken many of these activities, prior to implementation, such as engaging KPMG to review the existing Procurement and Contracting practice. These activities and their eventual role in the program success are outlined below.

Build a Fact Based Case Creating a fact-based case for change includes looking critically into several components of the existing program. At a minimum, the areas of consideration should include: • Spend • Current Operating Model • Processes

The County has already taken steps to review the current operating model, as evidenced by this report. The next steps in the process are to perform in-depth spend analytics and a deep review of processes. The visibility into these three areas will serve to set a baseline for change, against which improvement metrics can be established and measured throughout the implementation and on-going lifecycle of the program.

Focus on Stakeholders The human component of change is one of the most vital areas to be addressed to ensure the success of the transformation program. It is important to identify early on individuals both inside and outside the organization who have a large stake in the successful outcome. It is also important to conduct frequent reviews of stakeholders throughout the program lifecycle, in order to maintain accurate and appropriate stakeholder relationships. An array of change management communications and stakeholder engagement tactics can be deployed to secure early buy-in and continued stakeholder support. Relationships with stakeholders should consistently focus on four key areas: • Perception –What people believe to be true more often than not overshadows that actual truth.

Therefore, it is of utmost importance to maintain stakeholder communication and relationships so that perceptions and reality are in alignment.

• Expectations –Early engagement with stakeholders, and involving them in the various implementation initiatives, can help promote common goals and keep expectations on an even plane.

• Priorities –Requesting that stakeholders be part of planning and prioritization will help promote a holistic understanding of and agreement on priorities throughout the program, and across all Agencies/Departments.

• Capability and Performance Goals – Lastly, the planning and implementation effort should take into consideration the capabilities of stakeholders, aligning milestones and initiatives to those capabilities, or planning for changes necessary to improve and enhance capabilities, if necessary. Once capabilities are incorporated, performance goals can be determined.

Look to Leading Practice Another key consideration when determining program success is to evaluate the program against leading practices. By understanding the successful practices of like organizations and comparing yours to theirs, insights that will play an important role in improvement and overall maturity can be gained. The County should incorporate views into comparators, gaps, and capability enablers.

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Use Sourcing to Fund the Program One of the largest measurements of success of any program is its financial viability. Through cost savings that occur as the consequence of the migration of operating models, execution of the multi-wave strategic sourcing program, tightened staffing models, and overall cost reductions, the County should start to realize savings that can serve to fund the entire program and demonstrate significant Return of Investment (ROI).

Make the Business Case Making an integrated case for change early on is essential to garnish support from the executive leadership team. From a quantitative perspective, present real data on the bottom-line impacts of the transformation program. Qualitatively, detail the ways in which the program aligns with the County’s strategic priorities.

Plan for Change Lastly, one of the key success measures of any mature program incorporates strategic planning for change. Implementation will impact several user groups, including internal customers, suppliers, and other stakeholders. Planning for, and measuring against relevant change activities throughout the transformation lifecycle, will provide visibility into acceptance of the systematic changes of the program.

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Appendices

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Appendix A – Document Review

List

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Document type Documents

Budget Procurement Department Budget Submittal - FY12; FY15; FY16 and FY17

Procurement Department Budget Transmittal - FY12; FY14; FY15 and FY16

Procurement Department Mid-Year Funding Request Budget Unit 118 - FY16

Procurement Department Recommended Budget Book Budget Unit 118 - FY12; FY13; FY14 and FY15

Procurement Department Succession Plan - 2011

Santa Clara County FY16 Adopted Budget

Santa Clara County FY17 Recommended Budget

Contract Ariba Contract Agreement Beyond 5 Year Term

Organization Chief Procurement Officer Correspondence on Santa Clara County Supply and Product Requisition Process

Procurement Department Meeting Files - July 2012

Procurement Department Organization Charts - FY11; FY13; FY14; FY15 and FY17

Public Health Department Staff Roles and Responsibilities - March 2016

Social Services Agency Contracting team training targets - June 2016

Policy and Guidelines

Facilities and Fleet Department Capital Projects Policy and Procedures Manual Table of Contents

Legislative File on agreement to contract Ariba - June 24, 2014

Legislative File on Ariba contract amendment - March 22, 2016

Legislative File on Countywide Contracting - May 12, 2016

Legislative File on eProcurement implementation progress update - June 10, 2014

Legislative File on Pilot to Deploy Procurement Staff in Agencies - February 9, 2010; June 15, 2010 and February 9, 2011

Legislative File on Proposed Amendments to the Santa Clara County Ordinance Code - April 11, 2013 including Ordinance No. NS-300.859 authorizing direct payment for specified goods and services

Legislative Files on Countywide Contracting - September 13, 2012; September 11, 2014; November 18, 2014; March 12, 2015 and April 14, 2015; September 10, 2015 and May 12, 2016

Legislative Files on Quarterly Reports of Implementation of Countywide Contracting Changes

Office of the County Executive Memo to Department Heads on Increase in Purchasing Agents' Authority - August 30, 1995

Procurement Department Current and Emerging Issues FY15; FY16 and FY17

Public Health Department Contract Monitoring Tool

Public Health Department Contracts Main Page

Public Health Department Critical Care Unit Quick Reference Guide - June 2016

Public Health Department RFC Solicitation - April 2016

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Document type Documents

Santa Clara County Board of Supervisor's Policy Manual Chapter 5

Social Services Agency Contracting Function - June 2016

Presentation Ariba Implementation Project Presentation to Finance and Government Operations Committee - March 5 2014 and April 4, 2014

Report Accounting Systems and Business Process Reengineering Project - Performance Measurement Report 2001

Accounting Systems and Business Process Reengineering Project - To-Be Process Model

Accounting Systems and Business Process Reengineering Project - To-Be Process Model Procurement Policy Change Recommendations 2001

Accounting Systems and Business Process Reengineering Project - To-Be Process Model Recommended Changes and Identified Procurement Issues

Accounting Systems and Business Process Reengineering Project - To-Be Process Model Report - Accounting Section

Accounting Systems and Business Process Reengineering Project - To-Be Process Model Report - Procurement Section

Accounting Systems and Business Process Reengineering Project - Transition and Training Plan 2001

City of Sunnyvale eProcurement Requirements Assessment

City of Sunnyvale Purchasing Functional Requirements Report

Internal Audit Report on Follow up on SCC Personal Property Disposal Process

List of Santa Clara County Management Auditor Reports 1979 to 2016

Office of the County Executive Recommendations to Department Heads on contract related issues - January 11, 2010

Office of the County Executive Report on Countywide contracting changes - March 13, 2014

Procurement Department Direct Pay Revised Draft Report

Santa Clara County Property Disposal Report and Procedures - January 2016

Santa Clara County Structure for Acquisition of Goods and Services - 2016

Survey of Santa Clara County Procurement Staff - November 2010

Training materials Procurement Department Training materials - 2014

Appendix B – Interviewee List

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First name Last name Organization/agency/department

Natalie Allen Social Services Agency

Pomi Amjad Procurement Department – Centralized

Reynaldo Aralar Procurement Department – Centralized

Anthony Arata Roads and Airports Department

Dan Baldree Information Services Department

Nate Bruce Procurement Department – Centralized

Bruce Butler Health and Hospital System – Valley Health Plan

Donald Casillas Health and Hospital System – Behavioral Health Services

Joseph Chou Facilities and Fleet Department

Susan Clements Health and Hospital System – Information Services

Sara Cody Health and Hospital System – Public Health Department

Raul Colunga La Raza Roundtable

John Cookinham Santa Clara Valley Health and Hospital System

Robb Courtney Parks and Recreation Department

Leslie Crowell County Executive’s Office

Jeffery Draper Facilities and Fleet Department

Susan Estes Procurement Department – Centralized

Anu Ethiraj Procurement Department – Centralized

Michael (M.J.) Fogelstrom Office of the County Executive

Hank Ford Employee Services Agency

Sylvia Gallegos Office of the County Executive

May Garcia Procurement Department – Decentralized

Patricia Gardner Silicon Valley Council of Non-Profits

Laura Garnette Probation Department

Michelle Guevara Health and Hospital System – Valley Health Plan

Roger (Lee) Herrmann Information Services Department

Gregory Iturria Office of Budget and Analysis

Renda James Procurement Department – Centralized

Dennis King Hispanic Chamber of Commerce Silicon Valley

Caroline Koh Procurement Department – Centralized

Michael Kornder Office of Budget and Analysis

Cheryl Liu Procurement Department – Centralized

Paul Lorenz Health and Hospital System

Marsh Mendez Health and Hospital System – Facilities

Robert Menicocci Social Services Agency

Alan Minato Finance Agency

Ranjani Mohana Hispanic Chamber of Commerce Silicon Valley

Jorge Montes Social Services Agency - Office of Contracts Management

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First name Last name Organization/agency/department

Miguel (Mike) Moreno Health and Hospital System

Michael Murdter Roads and Airports Department

Paul Murphy Board of Supervisors

Robert Nakamae County Counsel

Mary Nguyen Consumer and Environmental Protection Agency

David Noriega Procurement Department – Centralized

Margaret Olaiya Finance Agency

Frances Palacio Office of the County Executive

Michael Pangilinan Procurement Department – Decentralized

Teresa Pascali Procurement Department – Decentralized

Craig Pasqua La Raza Roundtable

Susana Perez-Hernandez Facilities and Fleet Department

Jan Pfiffner Social Services Agency – Senior Nutrition Program

Michael Pfister Procurement Department – Centralized

Paul Phan Office of Budget and Analysis

Steve Preminger Office of the County Executive

Kenneth Rado Facilities and Fleet Department

Kathryn Rolland Health and Hospital System – Public Health Department

Michelle Sandoval Office of the County Executive

Rene Santiago Office of the County Executive

Dania Schaffer Health and Hospital System – Custody Health Services

Michele Seaton Health and Hospital System – Public Health Department

Chanthavy Sivongxay Clerk of the Board

Jeffery Smith Office of the County Executive

Lance Sposito Employee Services Agency

Reginald Swilley Minority Business Consortium

Toni Tullys Health and Hospital System – Behavioral Health Services

Jenti Vandertuig Procurement Department – Centralized & Decentralized

Veronica Soliz Health and Hospital System

Martha Wapenski Office of the County Executive

Katherine Wasserlauf Procurement Department – Centralized

Maurice Webb Hispanic Chamber of Commerce Silicon Valley

James Williams Office of the County Executive

Walter Wilson Minority Business Consortium

Kenneth Wong Facilities and Fleet Department

Matt Woo Information Services Department

Jaslin Yu Procurement Department – Decentralized

Long Zhang Procurement Department – Centralized

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Appendix C – Role Assessments

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Deputy Director of Procurement – Centralized

Leading Practices Key Gaps Current State Role Description

• Performs the full range of managerial duties including planning, assigning and reviewing work; selecting and training staff; approving leave; preparing performance evaluations; and resolving disciplinary matters

• Develops educational and category management tools and provides technical assistance and training to staff

• Formulates and executes procurement strategies

• Develops Total Cost Ownership models to identify significant cost savings opportunities including cost modeling quotation analysis, and the identification of industry and category trends

• Anticipates impending labor disputes, market or industry usage changes, category shortages, price changes and other factors, and develops and implements contingency plans

• Participates in the development of internal and external metrics

Current responsibilities of the Deputy Director of Procurement role include:

• Represents the Department at various external activities, manages effective relationships with existing and potential suppliers, department heads, County staff, and outside organizations

• Works closely with County department representatives in assisting with the development of short-term and long-range strategic procurement plans anticipating/ satisfying department needs, maximizing buying power, and minimizing inefficiencies

• Lead procurement innovation and improvement activities to continuously improve and support a positive quality and improvement culture

• Trains staff and identifies new trends and implements further training for continued development to maintain an up to date operation

1. Lack of full range of managerial duties expected from a team leader

2. Limited focus on developing procurement methodology, approach and tools to train and facilitate the work of the team

3. Limited quantitative cost savings and reduction target that is tied to the team and individual performance goals

4. Inadequate involvement in the overall procurement function goal setting and performance management discussion

1

2

3

4

2

Procurement Contracts Specialist

Leading Practices Key Gaps Current State Role Description

• Drive continuous improvement in all aspects of assigned categories while applying strategic sourcing, supplier relationship management, and other best practices.

• Influence others and affect decisions with expert knowledge of specific categories,.

• Develop annual and long term category plans

• Lead the execution of the strategic sourcing process leveraging leadership, project management, communication, analytical evaluations, and negotiation skills to produce successful outcomes.

• Review and offer guidance to the sourcing team’s bids and proposals. Investigate developments in contract types, pricing and other strategic sourcing trends.

• Manage overall relationship with suppliers, monitor contract compliance, and serve as internal and external liaison for performance and contract related issues.

• Develop and implementation supplier performance scorecards to include operational and strategic metrics

Current responsibilities of the Procurement Contracts Specialist role include:

• Analyzes Statement of Work and project plans; assists in defining products and services specifications and determining contract parameters including cost of contract, creation of performance-based criteria, and solicitation of bids

• Evaluates acquisition and contract requirements and determines appropriate solicitation process such as RFPs and ITB

• Provides training to user departments to facilitate effective use of the County purchasing and contracts programs and policies

• Provides leadership, direction, and assistance to agencies on conducting highly complex contract negotiation with outside suppliers

• Assistance in long-term procurement planning and recommends purchasing and payment policy and procedural changes

• May provide training and lead supervision

1. Existing role lacks of a holistic procurement support definition across all strategic procurement processes such as category management, strategic sourcing and supplier relationship management.

2. Inadequate emphasis on category subject matter knowledge and relevant market intelligence development

3. Responsibility of supplier relationship management and supplier performance management is non-existent

1

2

3

1

2

1

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Appendix D – Future Job

Descriptions

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Sourcing Manager/Category Lead

Purpose Direct oversight of and accountability for the County’s sourcing strategies, methodologies, and organization management of the sourcing function*. Management and supervision of the sourcing team, lead systematic continuous improvement of the sourcing function, and assure the performance of the supply base.

Role • In-depth knowledge of and expertise in the sourcing lifecycle including identifying needs, developing specifications, identifying options, selecting suppliers, establishing contracts, and monitoring performance.

• Develop sources of supply and services, meet with supplier representatives, assist in the development and enhancement of technical specifications, and ensure goods or services delivered meet the contract requirements.

• Oversight of the County’s sourcing team including preparation of all sourcing documentation, performance measurement, analysis, and tracking of target achievements for the team*.

• Establish and maintain effective working relationships with stakeholders, providing a direct liaison and escalation path for suppliers.

• Collaborate with the County Counsel, Office of Budget and Analysis (OBA) and Office of Countywide Contract Management (OCCM), as necessary, throughout the sourcing lifecycle.

• Proactively contribute to sourcing staff recruiting, staff development, and performance appraisals*.

Technical Competency

• Knowledge of principles, practices, concepts, methods, and techniques related to the sourcing function of the County

• Sourcing goal setting and management • Specifications and requirements development expertise • Strong understanding of supplier relationship management and supplier

performance measurement • Sourcing strategy development and implementation • Monitoring compliance with County policy, procedures, and processes

Non-Technical Competency

• Leadership and supervision of subordinates* • Strong relationship development • Strong communication • Negotiation and conflict resolution • Ability to coach and motivate staff* • Customer focused • Results oriented with sound decision making ability

*Category Lead role and competencies

OCCM Lead

Purpose Lead the Office of Countywide Contracting Management (OCCM) to provide strategic oversight, organization governance and planning, and policy development across the County’s procurement and contracting function. The purpose of the role is to facilitate Steering Committee meetings, coordinate the development of standardized procurement policies and procedures, provide regular reviews, monitoring compliance, and communicate changes.

Role • Facilitate Steering Committee meetings by defining meeting agenda and participants, documenting and executing key Steering Committee decisions.

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• Lead the County through procurement policy creation and organization governance across the County.

• Facilitate the development of standardized procurement policies and procedures for the County.

• Maintain oversight of countywide procurement and contracting policy including creation, reviewing, updating, and communicating changes to the Board of Supervisors Policy Chapter 5 and the to-be developed standardized procurement policies and procedures.

• Oversee the development and implementation of regular countywide procurement and contracting policy reviews, supported by regular audits of specific transactions and contracts.

• Lead monitoring activities to ensure compliance and alignment with the County’s procurement policies.

• Communicate changes to procurement and contracting policy across the County.


• Knowledge of and expertise in procurement policy setting, development, and implementation

• Knowledge of public administration, public policy, and local government • Strategic oversight and management of policy creation, compliance, and

standard operating procedures • Strong understanding of organizational and governance practices • Strategy development and implementation • Monitoring compliance with policy • Risk management expertise


• Leadership and people management • Politically savvy • Trusted advisor to the executive • Communicator • Viewed as an authority • Customer centric outlook • Strong relationship development • Results oriented with sound decision making ability

CoE and Talent Management Lead

Purpose • Manage and lead countywide Procurement CoE, provide leading practice knowledge associated with category management, strategic sourcing, contract management, supplier management, and drive end-to-end source-to-procurement process excellence.

• Create overall Procurement talent management strategy and design the role specific Training Program to up-skill existing procurement workforce.

Role • Serve as the countywide CoE lead by delivering leading practices and other procurement centric knowledge related to: − Strategic Sourcing − Contract Management − Category Management − Supplier Risk management − Supplier Relationship Management

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• Fulfill the role of talent development champion for the countywide Procurement by: − Formalizing both short and long-term talent management strategies − Coordinating with HR on refining job classification and development of

external recruiting strategy − Developing role-based procurement competency framework − Designing role-based training curriculum


• Strategy and Planning • Category Management and Strategic Sourcing • Supplier Management • Performance Management • Procurement Skill Assessment and Development • Knowledge about Procurement Career Development • Strategic and Tactical Procurement Processes • Procurement Technology


• Communication • Partnering and collaboration • Knowledge management • Politically savvy • Leadership and people management • Community and customer service focused • Develop self and others • Inspire trust and confidence

CBO/Supplier Diversity Lead

Purpose Lead the Community-Based Organization (CBO)/Supplier Diversity Team to successfully implement, administer, monitor, and provide capacity-building support for CBOs and diversified supplier groups in alignment with the County’s strategic plan and Board of Supervisors Policy Manual Chapter 5.

Role • Assist the Sourcing Manager with the development and management of the CBO/diversified supplier bid solicitation process including solicitation development activities, reviewing proposals, and conducting vendor debriefs.

• Assist the Sourcing Manager with contract negotiation activities with CBOs and diversified supplier groups.

• Provide subject matter knowledge or guidance to Sourcing Manager and Contract Specialist with executing contracts including reviewing, editing, preparing, and revising contract documentation.

• Maintain oversight of contracted CBOs and diversified suppliers’ performance including reviewing performance monitoring plans, ensuring contract compliance and milestones are reached, and investigating complaints.

• Serve as the primary liaison between contracted CBOs/diversified supplier groups and the County.

• Lead coaching and technical assistance activities to support suppliers in the implementation of their capacity-building activities and plans in collaboration with the CBO/Supplier Diversity Team, County staff, and other third parties.


• Knowledge of standard local government, public procurement, and CBO contract administration practices

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• Knowledge of best practices in capacity-building, quality assurance, and performance management

• Non-profit management, public administration and/or social services experience

• Project management skills • Supplier relationship and supplier risk management expertise • Contract management and compliance expertise • Solicitation and proposal development experience


• Culturally sensitive and literate • Politically savvy • Communicator and coach • Negotiator • Leadership and people management • Community and customer service focused • Supplier relationship development

Analytics and Technology Lead

Purpose Responsible for the development, implementation, and management of countywide procurement processes to drive efficiencies and cost savings. Responsible for the planning, development, design, deployment, and ongoing management of all common countywide procurement technologies. Evaluate how in-house applications can be leveraged to provide leadership and other Procurement peer groups with timely and accurate procurement analytics to support decisions.

Role • Effectively develop and implement countywide procurement processes and provide knowledge content to Agencies/Departments and to COEs to ensure successful adoption.

• Successfully implement common procurement technology that is easy to use, accessible, and meets countywide customer needs. Develop, communicate, and implement technology roadmap.

• Provide post go-live support including all Procurement related applications and infrastructure and continue to monitor user adoption and resolve issues.

• Develop procurement analytics capabilities to support the analytical needs from the Procurement peer groups.

• Define performance management metrics to measure performance and develop management dashboard to support leadership decisions.


• Category Management and Strategic Sourcing • Supplier Management • Performance Management • Strategic and Tactical Procurement Processes • Procurement Technology • Procurement Analytics and Reporting


• Culturally sensitive and literate • Politically savvy • Communicator • Trusted advisor to the executive

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Appendix E – Description of

Spend Categories

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Top Level Category Subcategory Examples

1a Professional Services Strategy Services Consultancy, other strategic professional services

1b Professional Services Operations Services Audit, BPO, legal services, translations

1c Professional Services Finance and Risk Management Services

Risk management, financial services, audit

1d Professional Services Audit Services Audit services and consultancy

1e Professional Services Tax Services Tax services and consultancy

1f Professional Services Management Services Management services and consultancy

2a Real Estate & Facilities Buildings & Maintenance

Capital equipment, MRO, mechanical & electrical equipment maintenance, landscaping, cleaning

2b Real Estate & Facilities Security Electronic security systems and maintenance, guards, security consumables

2c Real Estate & Facilities Catering & Vending Hospitality, vending equipment services, vending ingredients/consumables, staff catering

2d Real Estate & Facilities Office Equipment A/V equipment and maintenance and signage

2e Real Estate & Facilities Leases Real estate leases

2f Real Estate & Facilities Janitorial Janitorial services and supplies

2g Real Estate & Facilities Furniture & Fixture Furniture and fixtures

2h Real Estate & Facilities Office Services & Supplies

Office supplies, print

2i Real Estate & Facilities Utilities Electricity, gas, oil, water, utilities consultancy, waste management

3a Social Services Children & Family Services

Child care services, child welfare services, juvenile justice, domestic violence, adult protective services

3b Social Services Community Services Community housing projects, community cleaning and community service programs

3c Social Services Housing & Homeless Services

Emergency housing services, shelter programs, outreach programs, mental health support

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3d Social Services Counselling Services Mental and behavioral health programs, addiction and abuse programs

3e Social Services Elderly & Disabled Services

In-home care/decision making, senior meal services, food assistance

3f Social Services Veterans Services Housebound, aid & attendance services, vocational rehabilitation, educational benefits and resources

4a Medical Services Medical Services General medical services

4b Medical Services Surgeon Services Surgeons and surgical-related professional services

4c Medical Services Medical Supplies & Equipment

Pharmaceuticals, blood products & medical gases, dressings, patient clothing, chemicals & reagents

4d Medical Services Medical Transportation

Ambulance services, other miscellaneous medical transportation services

4e Medical Services Nursing Services Nursing-related professional services, travel nurses

4f Medical Services Pharmacy Services Pharmacy-related professional services and consulting

5a HR & Staffing Services Benefits Benefits & relocation expenses

5b HR & Staffing Services Contingent Labor Contingent labor managed services

5c HR & Staffing Services Training Services Third party training services

5d HR & Staffing Services Recruiting Services Recruiting expenses, external recruiting services

6a IT & Telecom Network / Telecom Equipment & Services

Data, telecom hardware, video conferencing, voice, telecom support, networking support

6b IT & Telecom IT Hardware IT consumables, notebooks/tablets, peripherals, servers

6c IT & Telecom IT Software Licensing, SaaS, software development

6d IT &Telecom IT Services IT consultancy, managed services, IT contractors, helpdesk

6e IT &Telecom Multi-functional Devices (MFD)

Printer/copiers, other office machines which incorporates the functionality of multiple devices in one

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7a Construction & Public Works

Roads & Airports Equipment & Maintenance

Roads maintenance services & equipment, non-vehicle equipment maintenance & repair, and specialty equipment maintenance services

7b Construction & Public Works

Construction Architect/interior design, materials, project management, real estate

7c Construction & Public Works

Engineering Engineering services and consulting

7d Construction & Public Works

Environmental Health and Safety (EHS)

Environment, health, and safety initiatives

8a Fleet Fuel Fleet fuel

8b Fleet Rentals Vehicle rentals

8c Fleet Vehicles & Maintenance

Vehicle purchases, leases, manufacturers, fleet management, vehicle/fleet maintenance and repairs

8d Fleet Parts Vehicle/fleet parts and supplies

9a Travel & P-Card Travel Employee travel expenses

9b Travel & P-Card Travel Agency Travel agency expenses

9c Travel & P-Card Air Employee air expenses

9d Travel & P-Card Hotel Employee hotel expenses

9e Travel & P-Card Car Rental Car rental expenses

9f Travel & P-Card Meetings/Events Venues, registration, events, conferences, trade shows, miscellaneous meeting expenses

9g Travel & P-Card P-Card P-Card management services, P-Card expenses

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Appendix F – Glossary

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Glossary of Acronyms

Acronym Term

BoS Board of Supervisors

BU Business Unit

CBO Community Based Organization

CEO Chief Executive Officer

CPO Chief Procurement Officer

CY Calendar Year

ESA Employee Services Agency

FAF Facilities and Fleet

FY Fiscal Year

HHS Health and Hospital System

ISD Information Services Department

OBA Office of Budget and Analysis

OCCM Office of Countywide Contracting Management

P-Card Purchasing Card

PO Purchase Order

RAD Roads and Airports Department

SCC Santa Clara County

SOW Statement of Work

SSA Social Services Agency

T&C Terms and Conditions

Glossary of Terms

Acronym Term Definition

CBO Community-based Organization

An organization that is representative of a community or a significant segment of a community.

CoE Center of Excellence A team or shared services group that provides leadership, best practices, research, support and/or training for a focus area.

DoA Delegation of Authority A term used to describe a division of authority and decision making powers downwards to the subordinate.

ERP Enterprise Resource Planning

A business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and/or human resources.

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Acronym Term Definition

FTE Full-Time Equivalent A unit that indicates an equivalent unit working full-time e.g., an employee working 40 hours per week is equivalent to 1 FTE.

KPI Key Performance Indicator A measurable value that demonstrates how effectively a company is achieving key business objectives.

LMS Learning Management System

A system application for the administration, documentation, reporting and delivery of electronic training and educational material.

P2P Procure-to-Pay The process of obtaining and managing the raw materials needed for manufacturing a product or providing a service.

PMM Project Materials Management

A system commonly used to create purchase orders for consumable supplies, services, and capital purchases.

PSC Procurement Steering Committee

A committee with authority to define, approve, enforce and help streamline Procurement organization strategic direction and facilitate the relationship between different stakeholders impacted by Procurement.

RACI Responsible, Accountable, Consulted, Informed

A tool that can be used for identifying roles and responsibilities in a matrix.

ROI Return on Investment Typically represented as a percentage to reflect the efficiency or returns of different investments.

SA Spend Authorization A term used to describe a dollar value limit on purchase authority.

SAP Systems, Applications and Products

A company that develops software.

SRM Supplier Relationship Management

The term used to describe strategically planning for and managing all interactions with third party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions.

SVCN Silicon Valley Council of Nonprofits

A nonprofit organization representing the needs and concerns of its member agencies.

TOM Target Operating Model A description of the desired state of the operating model of an organization.

UNSPSC United Nations Standard Products and Services Code

A taxonomy of products and services for use in e-Commerce.

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