Power to the Purchasers

It is pretty clear these days that major change is not going to be coming out of Washington, D.C. anytime soon. At least maybe/maybe not until after November 2010. So for those of us who would still like to see some things done and real solutions brought to bear, what are our alternatives?

One thing we can do is to identify previously unrecognized pockets where real “power to impact” exists. Places where the opportunity for collective action can multiply outcomes beyond our usual sense of “what can one person do?”

One of America’s greatest characteristics, both past and present, is innovation. It is the ability to see a need and bring a solution to it. Quickly. The insight to look at something old and see a new use, a new opportunity no one else has seen before. The imagination to envision that which has been heretofore unimaginable.

But innovation needs to be nourished and supported. Support includes startup funding, time to put an organization in place, and a market willing to pay for “Version 1.” Especially when version 1, hot off the assembly line, is typically not cost-economical until either version 2 (or even version 3) shows up, or enough sales can drop the unit cost. Fear of risk, fear of failure, an unwillingness to fund a new market, stymies innovation.

We have seen this with many recent attempts at innovation. Alternative fuels and energy. Alternatives to gasoline-powered automobiles, or over-sized cars, or to cars themselves. Alternative manufacturing techniques. These, and other innovation attempts, all wander in search of the money to reach their new marketplace. So who is the potential white knight hiding in the shadows, waiting to be called upon to bring our innovation potential to fulfillment?

Meet America’s purchasing agents. These are the typically nameless, faceless people who guide and oversee the buying of goods and services for corporate and government institutions. They usually are not the final deciders of what will be bought, but they minimally have the power of influence and enforcement. And if so delegated, they can actually define the standards for acceptable goods and services.

Why is this important? Because these people collectively manage the decision process for trillions of dollars of purchases every year. At their worse, they are exemplified by the horror stories of the Pentagon’s $400 toilet seats, and the wasted money that literally goes down the graft commode. Or they themselves are the object of bribes or payoffs. But at their best, they help negotiate the price savings that make institutions operate cost-effectively and accomplish their missions. Properly armed and directed, especially when acting in a group, they have the potential to be a prime enabler in accomplishing economic and social transformation.

The U.S. General Services Administration (GSA) is the prime centralized procurer for all federal agencies. They buy all the “stuff” that other federal agencies need, and then bill them back for the cost of the purchase. In their 2008 budget request, they stated that this stuff amounted to $56B in sales volume for their client agencies. That’s a lot of stuff, and a lot of decision-making for “this item instead of that.” More specifically, the GSA stated that in FY 2006 it had bought 60,000 vehicles during that one year.

We’ve wasted 30 years of phony energy policy planning trying to squeeze miniscule gas mileage increases out of recalcitrant auto and gasoline industries. Yet in our profit-driven world, if the GSA came out and said, “next year, we will buy 30,000 new cars that will give us 5 more mpg,” don’t you kind of bet that some innovative automaker – looking at that guaranteed sales number – would be right there on the GSA’s doorstep, ready to serve? Or similarly for a new electric car? Or for any number of other desirable economic and/or social objectives?

Thank about it. What would happen if just the five most populous states (California, Texas [well, probably wishful thinking], New York, Florida and Illinois, representing 36% of the population – or even the 10 most populous states, who have 53% of the entire US population) banded together with their collective buying power and made a similar offer or demand? With a guaranteed market, a new product, support structure, and distribution center network could be put together in record time.

Instead of trying endlessly to pass congressional laws regulating the auto industry (or any other industry), or throwing research and development money at industry and university researchers, why not just offer the capitalist prize that entrepreneurs want at the end of the race – sales? Entrepreneurs, meet purchasing agents. Mr. President and governors, meet your change engines. It is in the buying, not the legislating. Instead of continuing to buy what we say we do not want, start buying what we say we do want.

It is time to quit just talking about it and making excuses. Stop rewarding those who cannot do, and reward through the marketplace those who will do. It is investment by simply redirecting the spending that you are already doing for things we already need and have to buy anyway. And it provides billions of available dollars. It really is just that simple.