Auditor: City got a bum deal

‘Strategic savings’ may not have covered cost of consultant’s contract

By Nick Budnick

The Portland Tribune, Jul 3, 2007 (16 Reader comments)

The city of Portland paid a consultant $911,000 to save it money by combining agency purchases, but the city cannot prove the contract even paid for itself, according to a report prepared by the city’s elected financial watchdog, Auditor Gary Blackmer.

The report, scheduled to be released publicly today, takes aim at a popular buzzword in corporate and government circles: “strategic sourcing.” The term refers to the practice of a company or agency using buying clout to drive down the cost of goods and services.

In May 2004, the City Council authorized hiring a consultant, Silver Oak Solutions of Boston, after being told that it could help the city save a “conservative” estimate of $25 million over the next six years.

Shortly thereafter, the projected savings estimate was dropped to $1.7 million a year. However, the city has been unable to document those savings, or even savings that equal the cost of hiring Silver Oak, the report said.

Silver Oak since has been acquired by CGI, a Montreal-based international consulting firm that offers similar services. CGI spokesman Philippe Beauregard declined to respond to the audit’s specific findings, but defended his company’s track record, saying they’ve helped many clients do better purchasing.

“CGI has worked on strategic sourcing projects for more than 100 clients,” Beauregard said. Out of $11 billion in spending overall by those clients, the firm delivered $2 billion in annual savings, or 18 percent, he said.

The auditor’s report, however, cited a variety of difficulties faced in translating Silver Oak’s advice into reality, and also faulted the city Bureau of Purchases for failing to require the consultant to fulfill its contractual responsibilities, such as documenting savings and training staff.

“In some cases, the consultant’s failed efforts left city bureaus without contracts to purchase the goods they need to perform their operations. In other cases, contracts were established that were troublesome for bureaus logistically. Several bureaus resorted to using local purchase orders to buy the goods they needed.

“In addition, many bureau representatives we interviewed told us that the city’s relationship with some vendors has been strained by some of the consultant’s contracting strategies and negotiation tactics.”

1 | 2 Next Page >>

Facebook	Digg	Del.icio.us
Newsvine	Stumbleupon	Reddit