TVA to save time and money on outsourced services
Mary Clair Austin -- Purchasing, 8/17/2004 2:00:00 AM
The Tennessee Valley Authority is rewriting its purchasing rules to buy and manage such outsourced services as information technology, engineering services, administrative assistance, grounds keeping and facilities maintenance and construction services. The utility's indirect services buyers are using procurement and management software provided by Elance of Sunnyvale, Calif., to coordinate purchases, track delivery and pay providers of these services.
Knoxville, Tenn.-based TVA is the largest U.S. public power provider with $7 billion in annual revenue. The self-financed organization generates electricity from 11 fossil plants, 29 hydroelectric dams, three nuclear plants, and a pumped-storage facility. It also produces green (environmentally clean) power from wind turbines, methane gas and solar-collection panels. Through 17,000 miles of transmission lines, it sends power to large industrial companies and 158 distributors, which in turn serve 8.3 million customers across seven southeastern states.
Issues that prompted TVA to look into e-sourcing were staffing inefficiency and costly manual reporting methods for contractors and seasonal hires, says Paul LaPointe, senior vice president of procurement.
"We are continually looking for more efficient ways to manage our use of contractors and the amount we spend on contracts for about 4,000 union trade workers, such as electricians who are hired to do preventive maintenance work during off-peak periods in the spring and fall," he says. "We also recognized the need to standardize the multiple processes and systems we had in place and identified the need to reduce costly manual reporting methods."
LaPointe says the Elance-designed system will replace a manually intensive process to manage its contingent workforce. Requests to companies that supply TVA with contract workers have been handled through a flurry of phone calls, faxes and e-mails, with a mix of spreadsheets and other systems used to track the headcount and whereabouts of temporary help. LaPointe expects the new management system to pay for itself within a year, by enabling electronic bidding by the 15 to 20 companies that supply IT contractors and other temporary workers. Diane Bunch, the TVA's senior vice president of information services, expects the competitive bidding capabilities made possible by the new system to save her group $200,000 to $300,000 a year in labor costs.
Typical procurement systems are constructed for goods used in manufacturing and often don't take into account the complexities of buying labor and services. That's why paperwork audit checks, approval and review process, matching of skills, bill rates and candidate interview assessment are part of the indirect services procurement package. So, in rolling-out the Elance tool, the TVA purchasing team trained more than 600 employees in the use of the e-sourcing solution.
"We secured executive management sponsorship, established a cross-functional team from all business units, developed standardized processes for contractor workforce management and conducted an assessment of opportunities for cost savings," says LaPointe. "Complete executive support is essential for success because this software is going to change the way the company buys services."
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