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FED

SPEND

RISK

Anchor 1

Why does risk management matter?

 

  • Risk management is an essential part of procurement. Typically, best-in-class procurement organizations take a
    balanced approach to risk management by creating win-win relationships with suppliers.

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  • According to a recent Volcker Alliance study, an unbalanced or unsophisticated approach to risk management
    "can exacerbate underperformance, increase costs, discourage innovation, and threaten time lines and
    continuity of supply.    ​"

Background


Although contract pricing type gives us limited information about risk, it nevertheless can be useful in identifying potential issues to explore.


Questions to Consider

 

  • What is the predominant type of contract pricing in a specific spend category?

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  • How do contract types compare across departments for the same category?

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  • Is there a wide disparity in the contract types used for the same good or service across departments? If so, why?

CONTRACt PRICING TYPE, SPEND %

DISTRIBUTION

BY FISCAL QUARTER

Background

 

  • Typically, to avoid money being sent back to the Treasury, a "mad rush" to spend remaining funds occurs in the fourth quarter of each federal fiscal year.

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  • This rush, sometimes a result of poor planning on the part of programs, can result in less than optimal spending decisions.

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Questions to Consider

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  • Does spending by quarter differ significantly by department?

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  • How does the timing of expenditures differ by category?

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  • What can be done to improve and smooth out the spending?

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  • How does the rush to execute so many contracts impact
    efficiency, competition, and small business participation?

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