's chief procurement officer is leaving state government, but not before a final push to reach the governor's promised goal of saving $200 million on state purchases of goods and services by the end of the fiscal year on June 30.
Reaching that goal is costing the state more money on outside consultants, including four information technology consultants that the governor's office hired in the previous three months. The state is paying the four consultants — hired from Computer Aid Inc. in Allentown, Pennsylvania — from $104 per hour to $204.73 per hour for their work, for a maximum cost of $520,630 through June 30.
The consultants report to Michael O'Malley, whom Youngkin named chief procurement officer 16 months ago, as part of a push that the governor began in 2022 by hiring Boston Consulting Group to look for ways to save on the goods and services that the state buys through the and the , known as VITA.
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The governor's office said the state paid Boston Consulting just under $7.7 million for a 12-person team that worked from mid-2022 to November, 2023 to save on procurement costs.
Youngkin touted the work of O'Malley, who reports directly to Secretary of Administration Lyn McDermid, in a speech to General Assembly money committees last August.
"Through the good work of our Chief Procurement Officer, we've already initiated actions that will save $20 million annually," he said then. "By Christmas, that number will grow to $100 million and, by end of the fiscal year, we will have implemented actions to save taxpayers $200 million annually."
O'Malley is preparing to leave on June 30, returning to his family in New York and a consulting company he plans to create. It is not clear how close the administration will come to meeting the governor's ultimate target of $200 million in annual savings.
"Governor Youngkin’s goal to reform Virginia’s procurement process and be better stewards of taxpayer dollars is well on its way to achievement with more than $100 million in cost savings," spokesman Christian Martinez said Monday. "As agencies identify alternative and more cost-effective suppliers, negotiate contract terms, and transition to reduced rates, savings will continue to grow over time."
Some members of the General Assembly are skeptical about how much Youngkin's initiative has actually saved in the state's budget. The spending plan remains under negotiation for a special session next week. Lawmakers will revise the spending plan for this fiscal year and adopt a proposed $188 billion budget for the two years that will begin on July 1.
"I would like for them to point out in their budget where these savings are," said Del. Mark Sickles, D-Fairfax, one of the budget negotiators for the House of Delegates.
Savings on hardware, mobile services
Communications Director Rob Damschen said O'Malley's team has "negotiated hardware cost savings" of $21 million over the life of one contract and saved $18 million by enforcing limits on "not to exceed rates" for contingency work. He cited about $40 million in expected savings on competitive bidding for mobile telecommunication services, reduced rates for two consulting firms on three contracts, and recovery of fees on unused software licenses.
The total for those five projects is $78 million, but Damschen said O'Malley's team had renegotiated contracts with more than 20 vendors of state services.
The team's primary focus has been procurement savings in information technology contracts through VITA, created almost 20 years ago under then-Gov. Mark Warner to consolidate IT services for more than 60 state agencies.
But the administration also moved the purchasing division at the Department of General Services to VITA offices, without changing the division's status in the state budget.
"While new procurement methods are devised, agencies are often encouraged to collaborate," Martinez said for the governor's office.
"Collocating DGS and VITA teams has facilitated in the sharing of best practices such as enhancing vendor management, proactively identifying procurement prospects, and bolstering interagency knowledge, thereby strengthening their capabilities within the commonwealth."
General Services dispute
The Department of General Services — covering a vast range of state operations from laboratory analyses to management of state-owned real estate and construction projects — is part of a budget battle between Youngkin and General Assembly Democrats. The Democrats want the agency to be independent instead of controlled by the executive branch because of what they term political interference by the governor's office.
Youngkin vetoed a bill that the assembly approved this year to make the General Services agency an independent arm of state government. Its status remains in limbo in the budget.
The administration's continued push on procurement alarms Sen. Jeremy McPike, D-Prince William. He chairs a Senate Finance subcommittee that has challenged the governor's plan to house state employees in leased space in downtown Richmond after demolishing the Monroe Building, instead of building a new state office building on East Main Street. That issue, too, is part of pending budget negotiations.
"When you have the political arm reaching into procurement, it's never a good thing," said McPike, who is director of general services for the city of Alexandria.
Youngkin initially relied on Boston Consulting Group to achieve savings in state procurement operations. He brought the reform initiative in-house at the beginning of last year and , a role he previously had served for American International Group, or AIG, a global insurance company based in New York City.
O'Malley began his own firm, SourceForce Consulting, in January, according to a post on LinkedIn that subsequently was removed.
Damschen, in the governor's office, said O'Malley plans to return to New York, where his family lives, and start a business, but has not yet done so.
"It's not operational yet," the spokesman said.