KIPP Houston Takes Procurement Paperless
By Brad Welter and Jon Schwartz
KIPP Houston has made great strides installing new systems and processes to keep up with their growth, but one area where the organization was still feeling the pain of a manual approach was procurement — which KIPP Houston defines as everything from selecting goods and services, negotiating prices, establishing compliant contracts, submitting purchase orders for approval, and ultimately making payment.
Over the last 18 months, KIPP Houston has made a push to transition from a manual, paper-based procurement process to a digital “procure-to-pay” solution.
I recently sat down for a Q&A with Brad Welter, Director of Capital Planning and Contract Management, to learn more about his work leading this initiative.
Note: This interview has been edited and condensed for length and clarity.
Jon: Can you say more about the term “procure to pay”, which may be a new one for many of our readers?
Brad: The term “procure to pay” refers to a comprehensive system that captures the terms and details of awarded contracts, especially those that are negotiated on behalf of the entire organization, such that school and central office teams can then purchase the negotiated items or services and easily pay for those goods. These systems can capture a variety of contracts, like purchasing cooperatives in which KIPP Houston may participate.
Jon: Can you describe what your overarching system requirements were for this project?
Brad: Beyond the technical challenges we were hoping to solve, we needed a “procure to pay” system that was going to be simple for our end users, save time, and scale with us as we grow.
On the technical side, we were aiming for a solution that would help us in the following four areas: procurement, accounts payable, compliance, and systems integration. To provide more detail, here’s some more specific language pulled directly from our system evaluation and selection criteria.
Jon: Ok, so can you briefly paint a picture of how a KIPP Houston purchaser will experience your new “procure-to-pay” solution? And how a purchase order works its way through the new system?
Brad: At KIPP Houston, we feel that purchasing decisions are best made by those closest to the work. This translates to a largely decentralized process with our school level ops teams and central office departmental teams initiating most of the purchasing in our region. Within the new system, our users are able to create a purchase requisition, document 3 bids (if the purchase requires), and submit the requisition for approval. This should take no longer than 5 minutes for typical ‘on contract’ purchases.
The automated approval process then sends the requisition through various checks and balances depending on the dollar amount of the requisition, funding source, and commodities / services being requested. Additionally, the vendor will be verified as still being active in our system, the selected account codes will be verified, and the funds remaining in the budget will be checked. Once fully vetted and approved, the requisition will be accepted, the purchase order issued, and funds encumbered. Payment is then released once the invoice is received and matched to the packing slip and the purchase order.
Jon: Can you share a bit more about the pain points that prompted you to take on procurement in such a serious way?
Brad: The core problem with our old way of doing business was not that procurement was decentralized, but that it was disconnected and done in silos, which exposed us to audit risk. For instance, we centrally negotiated office supply contracts. However, these contracts weren’t readily available and transparent to people who did the purchasing. In addition, the terms and conditions of these weren’t known or understood by the folks paying the bills on the back-end. This led to a lot of “off-contract” purchasing.
Also, our existing manual, paper-based system was time-consuming and confusing for end users. And the process of getting a purchase order, issuing it to the supplier, and then receiving goods and making payments required many steps that weren’t always obvious.
Despite our size, we weren’t taking advantages of economies of scale and, in some cases, we were frustrating our school and central office teams.
Jon: What vendor did you end up selecting? And why did they stand out?
Brad: The good news is that our procurement problems at KIPP Houston are not unique, so there were plenty of vendors to choose from. We ended up going with a system called Jaggaer, but we also seriously considered a system called Coupa which works with a number of charter networks. Two other firms, Zycus and SAP Ariba, were also in the running. In the end, there were two things that really stood out to us about Jaggaer. First, they don’t outsource their implementation to a third party. While we are aware that it’s quite common to split out system sales from the systems implementation, we have had bad experiences with this approach in the past. Second, unlike their competitors, Jaggaer’s pricing structure is not tied to seat licenses that, in a dispersed system with as many purchasers as ours, would have made it cost-prohibitive to implement.
Jon: When it came to what systems to consider, who did you turn to for advice?
Brad: We talked with KIPP New Jersey, KIPP DC and KIPP New Orleans as they have all gone down the path of exploring “procure-to-pay” solutions. We also spoke to a few traditional districts here in Texas and a handful of local universities. Our conversation with KIPP NJ was particularly useful. They pushed us hard to think about not only the capabilities of the various systems but also how the systems would integrate with Intacct, our existing GL accounting system.
Jon: Any advice on the Request for Proposal (RFP) process?
Brad: KIPP Houston has a lot of experience running RFP processes. However, the specifics of running a ‘procure-to-pay’ RFP process were new to us. To help us get started, we asked the vendors we were considering and folks like KIPP NJ to send us sample RFPs.
We picked the aspects of the RFPs that we liked and got rid of the parts that did not fit. In addition, for the vendors that we knew wanted to bid, we made sure the RFP made sense to them so that the content didn’t accidentally dissuade them from bidding.
The other big thing we learned was the importance of naming the exact capabilities we needed and our unique systems integration needs.
One thing I think we also did well was not rush the process. We spent a good year talking with suppliers, users, and schools about their systems and integrations prior to ever publishing an RFP. All those conversations added subtle details that ultimately allowed us to have a strong RFP.
Jon: Any advice on how to best get stakeholder feedback and input before selecting a system?
Brad: Yes! Do not “go it alone” on the decision-making front. We had all the companies we were seriously considering do demos for our campus-based operations folks. We also had school ops folks sit in on the follow-up clarification meetings we had with the vendors. Given their critical importance on the back-end of the system, our accounts payable and finance teams also provided guidance throughout the selection process. And while our IT team is primarily focused on school-facing software, we did make sure to consult with them to ensure the systems we were considering were compatible with our overall IT systems infrastructure.
Jon: Sounds like there are lots of wins for KIPP Houston by switching to a “procure-to-pay” system. But, on the loss side, what happens to any existing vendors that schools were loyal to, or smaller community-based companies that want to compete for KIPP Houston’s business?
Brad: That was definitely a concern. The good news is that the system we selected allows for that. All of our existing vendors were pre-populated into the new system. And the system also allows purchasers to request new suppliers that my team can then review and approve. So, for example, if there’s a parent at one of our schools who provides janitorial services, and the school wants them to bid for our business, the new system can accommodate that.
Jon: How do you see this system reducing cost and headcount across KIPP Houston and/or increasing efficiency?
Brad: Accounts payable is the biggest winner of the bunch. Because they are no longer asked to manually ensure that all purchasing is being done in a compliant manner. They can focus on their core payables work which allows us to keep headcount down even as we continue to scale. As for the 1.5 FTE on my contract and capital management team, it’s possible that we may need to add 1–2 FTE over time as we’re now required to do product management, training, and customer support for the new system in ways that we previously didn’t have to. However, these additional FTE costs as well as the cost of the system itself will be more than offset by the product cost savings we’ll see by pushing more spend through the contracts in the system.
Jon: Can you help me understand the timeline from start to finish for a project of this size and scope?
Brad: Foolishly, I initially estimated that this would be a 6-month process! But when all was said and done, this was a 2-year process for KIPP Houston. We really took our time learning the marketplace and the RFP process, but that could likely be cut in half for another CMO that wanted to piggyback on the research that we did. Regardless, integration and configuration was a 6-month process after the system was selected. We also allocated an additional 3–6 months for all the training, change management, and support required for a 1700+ employee organization.
Jon: Any final words of wisdom?
Brad: Sure. Implementing a system like this required a level of standardization that was new and initially uncomfortable for us. In the old way of doing things, school and department users had a good deal of autonomy because we had never really taken the time to define, let alone enforce, that there was one “right” process for purchasing at KIPP Houston. But, while “procure to pay” systems do allow for some variability based on the size of a purchase or the role of the purchaser (e.g., Directors of Operations and Principals can be assigned different access rights ), having an automated system by its very nature requires you to organizationally coalesce around a unified “right way” of managing your organizational spend. So, we had to have a ton of conversations — particularly with our school users — both to help them see the value of increased standardization and to define in conversation with them what the “right” way was. And then we had to document all of those decisions, so we could communicate that to Jaggaer and memorialize those decisions into revised policies and procedures.
KIPP Houston Procure to Pay Internal Kick-Off Presentation
KIPP Houston Procure to Pay Request for Proposal
KIPP Houston Procure to Pay Solution Scope Worksheet
KIPP Houston Procure to Pay Follow-Up Questions for Vendors