Amidst a New Budget Shortfall, Chicago's Procurement Blundering is Costing the City $500MM or More in Annual Savings Potential

Cost reduction opportunity knocks, but instead Chicago Mayor Brandon Johnson fired a competent Chief Procurement Officer (CPO) and replaced her with a supplier diversity rubber stamper

By now, you’ve probably read the news that Chicago is in a new fiscal mess. It’s a situation that makes former Mayor Richard M. Daley’s selling of the parking meters and Skyway seem like finding loose change between the couch cushions.

With less than four months to go in 2024, Chicago now faces a last-minute (right?) $223 million shortfall in this year’s budget, with an even bigger new $1 billion abyss looming in 2025.

So what are we doing about it? 

Cue the predictable reactive measures: Hiring freezes (including police and fire), travel restrictions, and our personal favorite, plugging holes with bureaucracy's version of duct tape — more red tape that is increasing, not decreasing, mandated spending with preferred unions such as the CTU.

Nevertheless, instead of harping on the usual suspects — such as the now nearly $30K per student spent in Chicago Public Schools or the infinite open bar tab for sanctuary city policies — a new perspective should be added. One that could save the city hundreds of millions annually: Better procurement.

Yes, procurement. It's been said before on these virtual pages. 

Procurement is “akin to the circulatory system in a human body: Unseen, often under appreciated, yet increasingly vital to keep the patient not just living but thriving.” The patient here is Chicago, with a historic spending habit that makes a Kardarisian shopping spree look like fiscal prudence. 

The city’s $18 billion budget is on the line, with an estimated $5.4 billion of that going to external suppliers and contractors.

Now, here’s where it gets fun: a 10 percent savings in procurement — standard fare for any private sector organization worth its salt which is in cost reduction mode — could net Chicago a cool $540 million. That’s $540 million in savings just waiting to be picked off like low-hanging fruit. But instead of focusing on common-sense tactics like renegotiating contracts, eliminating extraneous requirements, managing demand, auditing contracts, tracking supplier performance (including SLA violations), and managing vendors more efficiently, we’ve opted for political theater.

Take, for example, the firing of Chief Procurement Officer Aileen Velazquez. Her unforgivable sin? Not stamping "approved" fast enough on contracts from Mayor Brandon Johnson's preferred vendors. After all, competition and market due diligence have no place in a city that sees procurement as nothing more than a tool for patronage. 

This isn’t strategic procurement; it’s procurement roulette, and the taxpayers are holding the Colt .357 Magnum. As this author wrote in an earlier piece: “Procurement isn’t just about getting the best price, but also about securing the best terms, relationships, and risk mitigation in contracts.”

Funny how that part is being left out.

Velazquez’s replacement? Sharla Roberts, who, according to her LinkedIn bio, seems more experienced in the art of checking off supplier diversity boxes than managing multi-billion-dollar procurement operations. 

Don’t get me wrong. Supplier diversity demographic procurement gerrymandering is part of government contracting by law, even if you disagree with it (in contrast to the private sector, where it is often illegal, though common).

Continue reading the full article over at the Chicago Contrarian.