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Cost-optimization strategies for government IT purchasing

How Contract Vehicles and License Bundles Help Government Agencies Optimize IT Costs

State and local government entities in the U.S. spend more than $100 billion annually on information technology, placing them among the nation’s leading consumers of IT solutions and services. However, the near-constant budget pressures these agencies face are likely to be exacerbated by the COVID-19 pandemic.

Declining tax revenues and accelerating unemployment brought on by the pandemic will undoubtedly cause public sector organizations to consider spending cuts. On the bright side, however, state and local governments can stretch their IT purchasing power through a variety of contract and licensing strategies that streamline the purchasing process, reduce duplication of services and create better pricing through economies of scale.

 

Contract Vehicles

Contract vehicles are powerful tools government agencies can use to save time and money during the procurement of IT solutions and services. Contract vehicles such as the GSA Schedule streamline the purchasing process by giving agencies a defined list of approved vendors, products, services and prices from which to choose. Contract vehicles are centrally managed by a federal agency, which reduces acquisition administrative costs and creates time and resource efficiencies.

These are the three most common types of government contract vehicles:

  • IDIQ Contract (Indefinite Delivery, Indefinite Quantity). This is a type of contract that provides for an indefinite quantity of supplies or services during a fixed period of time. IDIQ contracts are typically used when the government cannot predetermine the precise quantitates of supplies or services that it will require. For example, on-call tech support services are commonly purchased under an IDIQ contract.
  • GWAC Contract (Government-Wide Acquisition Contract). These contracts consolidate procurement of IT solutions or services across multiple government agencies. GWACs enable economies of scale that reduce per-unit costs by eliminating the need for individual agencies to enter into separate contracts for common solutions or services.
  • BPA Contract (Blanket Purchase Agreement). BPAs simplify the process of filling recurring orders for goods and services. They essentially create a charge account with an approved vendor for supplies and services that are regularly needed. Once the initial contract is set up, repeat purchases are easy to complete.

 

License Bundles

While saving money on an initial purchase is always a good thing, many agencies find that product licensing fees are ultimately more expensive. Licenses set limits on the use, distribution and modification of software, and this frequently causes problems for state and local governments. Under provisioning or overprovisioning licenses can lead to cost overruns.

Many vendors now offer license bundles that make it much easier to stay on top of licensing requirements. Bundling is a popular sales model that combines products and services into one attractively priced package. All components of the bundle are activated with the same license code. This eliminates the need to purchase and manage multiple individual product licenses that are applied on a per-application or per-tool basis.

Bundling sometimes saves money initially by reducing the total number of licenses that must be acquired. However, it can produce much greater savings over the product lifecycle through improved license management. By dramatically reducing the total number of licenses an agency must track and provision, bundling reduces the risk potentially devastating fines, fees and costs.

How Cerium Can Help

As an approved government procurement source with nearly two decades of experience working with state and local agencies in the Northwest, Cerium is well-versed in contract vehicles, licensing bundles and other cost-saving procurement mechanisms. Let us show you how we can help your agency acquire essential technologies without busting your budget.

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