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ABSTRACT.
"Spend analysis" is a tool that provides knowledge about who are the buyers, who are the suppliers, how much is being spent for what goods and services, and where are the opportunities to leverage buying power. Private sector companies are using spend analysis as a foundation for employing a strategic approach to procurement. Recognizing the potential in government purchasing, GAO examined if the departments of Agriculture, Health and Human Services (HHS), Justice, Transportation, and Veterans Affairs are using spend analysis to take a strategic approach to acquisition. GAO assessed (1) if agencies use spend analysis to obtain knowledge to improve procurement of goods and services and to reduce procurement costs, (2) how agencies' practices compare to leading companies' best practices.
INTRODUCTION
Taking a strategic approach to procurement involves a range of activities-from using "spend analysis" to develop a better picture of what an agency is spending on goods and services, to taking an enterprisewide approach for procuring goods and services, to developing new ways of doing business. Our prior work has shown that such an approach could help agencies leverage their buying power, reduce costs, and better manage suppliers of goods and services, as leading private sector companies have discovered on adopting these activities. One survey of 147 companies in 22 industries indicated that such an approach produced savings of more than $13 billion in 2000.1
Spend analysis is a tool that provides companies knowledge about how much is being spent for what goods and services, who are the buyers, and who are the suppliers, thereby identifying opportunities to leverage buying, save money, and improve performance. To obtain these answers, companies use a number of practices involving automating, extracting, supplementing, organizing, and analyzing procurement data. Companies establish automated systems to extract and compile internal financial data covering everything they buy; supplement that data with information from external sources; organize this data into complete and consistent categories of products, services, and suppliers; and have the data continually analyzed. Companies then leverage this data to institute a series of structural, process, and role changes aimed at moving away from a fragmented procurement process to a more efficient and effective corporate process in which managers make decisions on a companywide basis.
We have already issued several...