December 28, 2012
An aggressive procurement strategy that began earlier this year has yielded $23 million in savings in vendor contracts for goods and services, funding Chicago Public Schools (CPS) is now able to invest directly towards student learning. Active review of all CPS contracts and engagement with vendors has allowed the District to identify the savings. Over $15 million of these funds will have a direct impact on Fiscal Year 2013, bringing the District halfway to its FY 13 procurement savings goal of $31 million.
“The immense fiscal challenges we face require us to look at every new and existing contract and to work with our vendors to determine where we can find savings,” said CPS Chief Executive Officer Barbara Byrd-Bennett. “This allows us to direct every available dollar to classrooms and to provide our students with the quality education they need to succeed.”
The $23 million comprises the total procurement savings identified since the new strategy was implemented in April 2012, some of which will be applied in subsequent fiscal years. CPS has identified savings in pricing for new contracts, reduced or eliminated increases sought by vendors, and has also found savings within existing contracts such as those now being finalized for healthcare and office supplies that will yield $5 million in savings:
- CPS will save $3.8 million in each of the two years of its contract with Caremark for the purchase of prescription drugs for employees and their dependents who are enrolled in the CPS health plan.
- CPS will save an estimated $1.35 million in its contract with Office Depot over the remaining 12 months of the contract. Office Depot is the District’s strategic vendor for school and office supplies.
The District's procurement strategy is ongoing, and CPS officials continue to identify additional savings as they prepare to bring contracts, both large and small, to the Chicago Board of Education for consideration. For example, earlier this month the Board approved contracts for:
- Servicing the District’s student records system, IMPACT, which represents an estimated cost savings over two years of up to $1.2 million as a result of reducing the vendors’ hourly rates following an RFP process.
- Bundling purchases of school and gym uniforms under a strategic vendor with potential savings of up to $36,000 over two years compared to the prior contract. Since schools can purchase uniforms on their own up to a certain amount, exact savings will depend on how many schools purchase through the contract.
- Reducing fees for hearing officers for an estimated savings of $29,000 per year over the next two and a half years.
In November, CPS announced it will save approximately a half-million dollars in its waste hauling contract renewal for calendar year 2013. Earlier this year, the procurement strategy achieved savings in categories such as:
- Electricity – CPS renegotiated its electricity contract, which was set at a fixed rate two years ago when the market was much higher. By taking advantage of today’s lower market price, savings are $2.7 million (based on last year’s volume) for FY 13 and $4.4 million in total through the end of the contract in January 2014.
- Information Technology Hardware – CPS will generate an estimated $3 million in savings in its IT hardware purchases in FY 13 by bundling IT volume with that of the City of Chicago and Cook County.
- Milk Purchase and Delivery – CPS is saving $1 million after renegotiating a one-cent per carton price drop in its milk contract.
The CPS Office of Procurement’s rigorous approach of scouring new and existing contracts for best pricing mirrors practices employed by private sector purchasing departments. “Through renegotiation, leveraging competition and building strong and transparent relationships with our vendors, we will get the best value for our dollar, an absolute necessity in this financial climate, and preserve scarce resources for the benefit of students,” Byrd-Bennett said.
Chicago Public Schools serves 403,000 students in 681 schools. It is the nation’s third-largest school district.