FED
SPEND
RISK
Why does risk management matter?
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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
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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
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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.
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?