Final Thoughts: Maverick Spend Redux

Bringing rogue spenders back from the underground

Maverick, rogue, off-contract spending — call it what you will, but despite all the attention that uncontrolled spending has received in recent years, and all the software, consulting and process re-engineering thrown at the problem, employees are still going outside negotiated contracts to buy everything from paperclips to professional services or travel. In fact, data from CAPS, the Center for Strategic Supply Research, shows that the portion of spend controlled by supply management for various spend categories ranges from under 60 percent for professional services, to about 40 percent for facilities and travel, to under 15 percent for real estate.

Corey Billington, the former vice president of supply chain services at technology company HP, believes he knows at least part of the reason why maverick spending has been such a tough nut to crack. "Every organization of any size has protected categories," he explains, "where procurement is really not welcome, and the reason that these categories are protected is that the process owner is concerned about preserving some strategic intent that he or she feels is not adequately represented in the procurement process." In other words, the process owner fears that procurement will not respect some tacit aspect of the relationship with a given supplier, some intangible strategic value that the supplier brings to the table that justifies paying a higher unit price. As a result, the process owner either fights tooth and nail to keep that segment of spend out of procurement's hands, or simply ignores procurement policies and continues to do business with that supplier.

To counter these fears and more effectively reign in maverick spending, Billington says that procurement departments must learn to work more collaboratively with their internal customers — the end users and the category owners (where they exist) — to better understand the drivers behind the decision to go with one supplier or another. In addition, he suggests that procurement could benefit from learning how to build certain "tolerances" into purchasing policies that would allow end users, for example, to use non-preferred suppliers, or to use a supplier that is not offering the lowest price, when justified by the circumstances. By institutionalizing this sort of arrangement, procurement can bring this spend back under its purview and, in the long run, begin to explore ways to decrease the cost of this category.

These days, in addition to his position as consulting associate professor at Stanford University's Engineering School, Billington wears the hat of vice president for supply chain and procurement strategy at Rearden Commerce, a solution provider offering an enterprise platform for the procurement of employee business services. He says that he was drawn to the company in part because Rearden's solution promises the type of micro-control over purchasing (with the ability to set policies at the individual employee level with relative ease) that Billington believes could let procurement executives finally saddle maverick spend. "You get rogue spending," he says, "because people know how to work around the system to get their job done despite constraints, and because the processes that are in place don't necessarily support their mission. But if you can put in place processes that don't force people to go outside the system, and put in place the right infrastructure from a technology standpoint, you can keep those people from going 'underground.'"