Image source: http://costreduction.cc/images/s1.gif
Expense reduction in government agencies often take the form of yearly or quarterly budget cuts. But expense reduction should not be based on making cuts. Instead, it should be focused on continuously managing costs so that they are contained, so the agency can get the most value possible out of those dollars spent.
One way government agencies can focus on reducing their expenses is through vendor negotiations. Most businesses or organizations, no matter the industry, pay other businesses to provide services for them -- waste management, IT services, outside advertising, etc.
Expense reduction can happen here during the contract negotiation stage. Rather than just automatically paying the vendor's "rack rate," agencies should contact the vendor's sales manager or even the CFO or owner, and ask about reduced rates they can provide for long-term contract holders -- two years as opposed to one year. Many vendors will respond positively to bringing in long term business. Just leave room in the contract for adjustments made as a result of market rates, so the long-term contract does not cost more in the long run.
Another expense reduction tactic a government agency can use is to hire an outside cost containment firm. This may be a challenge due to the vendor vetting process with a government agency, but it is often more affordable to work with a cost containment firm than people realize.
Expense reduction specialists are typically paid based on performance. If they cannot find ways for the agency to reduce expenses, there is no cost to the client. If the expense reduction firm does find ways to improve the agency's financial performance and reduce their budgets through cost reduction, the specialist is paid a percentage of the money saved, and the agency can still save tens of thousands of dollars as a result.
Expense reduction for government agencies should also occur through the standardization of business practices. People work in different ways, and departments may prefer one type of office supply or piece of equipment to another, but paying full price for these items often add up. Expenses like this are small so they are often made without needing clearance from department heads. Standardization of equipment and supplies helps ensure public dollars are not wasted. In standardizing the agency's equipment and supplies, inventory tracking becomes simpler and agencies can receive bulk buying discounts.
By making a few of these adjustments, government agencies can save a substantial amount of money on their budgets without making drastic cuts to service, and the agency can operate more efficiently in both the short and long term.
