Item No. 6a_supp 
Meeting Date:  April 26, 2016 
Procurement Excellence 

Nora Huey 
Director, CPO

Why Procurement Excellence? 
Small Business      Jobs      Environment 


Partner      Speed      Skills       Cost 

Effort is about more than just being a financial steward 
1

Why now? 
Procurement supports: 
Small, women and minority-owned businesses 
Environmentally-friendly purchasing practices 
Financial stewardship 
Current situation: 
Procurement is in many cases a challenging process 
$280M spend (2015)  $490M (2016 budget) 
Moving into phase of increased capital spend 
Now is the time to take action 
Effort will support the Port and region during rapid growth phase 
2

Significant Stakeholder Input 
50+ Port of Seattle employees interviewed 
Across all divisions and corporate functions 
65+
attendees at project kick-off meetings 
40 
responses to Procurement Excellence survey 
7
conversations with Port of Seattle service providers 
Consultant community (American Council of Engineering
Companies), Small Business 
Many recommendations emerged from these conversations 
3

Strong Employee Support 
This is a great opportunity to develop a
strategy and use Procurement Excellence
as a launching board to execute 
-Central Procurement Office 

These are exactly the right opportunities
for us to be focused on  especially with
the growth plans on the horizon 
-Capital Development Division 

Clear appetite to "change the way we work" 
4

Strong Employee Support 
We need to take more of a TCO (Total
Cost of Ownership) mindset. My team
has recommendations on where it should
be applied next 
-Aviation Maintenance 

I am certain that this process will result in
significant recommendations and improvements 
-Information & Communication Technology 

Clear appetite to "change the way we work" 
5

Transition to Implementation 
Phase 1                 Phase 2 
Diagnostic: 4 weeks        Implementation: 30 weeks 
Focused on:              Focused on: 
Fact base                 Program management 
Process, capability, tool       Support for priority
diagnostic                initiatives 
Opportunity identification,    Opportunity realization 
sizing                    Sustaining the change 

Diagnostic complete  now at transition point 
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Opportunity Categories & Impacts 
Century Agenda 
Small 
Jobs 
Business 
High Performance Org 
Environment    Partner 
Capital expenses 
Speed       Skills 
Operating expenses 
Cost 
Phase 2 will address each of these categories 
7

Century Agenda 
Small Business Enterprises (SBE) 
Great progress so far...       ...But could be doing more 
33% of spend in 2015       Supplier management 
Up from 30% in 2013      Pre-bid meetings w/ Primes 
Port Gen program 
Data & tools 
Larger set-asides 
Supplier database 
2 recent outreach
meetings             Bid process 
Set-asides, incentives, scoring
40% target by 2020        in consulting and purchasing 
Capabilities 
SBE liaisons in business units 
Procurement processes can support small business 
8

Century Agenda 
Women and Minority-Owned Business
Enterprises (WMBE) 
Port is not doing as well as we could 
Not meeting 4% target 
Some progress 
Race and gender specific goals on federally funded contracts 
More that we need to do through procurement 
Supplier development and management 
Increased outreach 
WMBE liaisons in business units 

Procurement processes can support women and minority businesses 
9

Century Agenda 
Environmental Purchasing 
Quick wins to explore 
Utilities: Replace carbon sources with renewable 
Fleet: Accelerate green vehicle purchasing, renewable
natural gas 
Goods: Work with vendors on green supplies, delivery 
Design: Apply environmental lens to design process 
Strategic actions 
Apply total cost of ownership 
Energy lifecycle cost analysis 
Adjust RFP scoring for environmental considerations 
Procurement can drive environmentally-friendly purchasing 
10

High Performance Org 
Process Improvements 
Time lost today due to re-work 
Scope of Work/Technical specs lack needed detail 
Leads to multiple edit & review cycles 
Impacts all procurement categories 
Opportunity: Streamline with planning, training 
Central Procurement office reviews earlier in the process 
Scope of Work preparers better educated on needs 
Potential 3-5 days faster execution 

One of many process opportunities identified to save time 
11

Capital Expenses 
Opportunity to Enhance Capital Process 
Opportunities     Potential Phase 2 Activities 
Strategic Capital   Formalized, early engagement 
Planning      Incorporate lessons learned 
Dedicated project teams 
Lean Design 
Formalized expert input at correct times 
Model development and application 
Total Cost of
Bundling across projects 
Ownership (TCO) 
Strategic vendor management 
Risk sharing 
Change Order
Change order approval and negotiating        feedback mechanism 
Management 
process 
Capex opportunities critical to support growth for Port and region 
12

Capital Expenses 
Total Cost of Ownership 
Total cost of ownership = a new way of
evaluating project alternatives taking full
lifecycle into account when purchasing 

Passenger Loading Bridges (PLBs)         Actions 
~30% first cost                     Coordinate across projects 
20+ purchases planned in next 5 years      Negotiate rates based on
Last 10 years: All purchased from one       committed volume 
supplier (no discounts)                Competitive bid with selection
based on Total Cost of
Ownership analysis 
Approach is applicable across broad spend base 
13

Operating Expenses 
How we Identified Opportunities 
Procurement levers...       ...Applied to relevant spend 
Supplier management 
Bundling                   $126M of
Demand management        operating and
recurring capital
Process optimization 
spend 
Standardization 
Make or buy 
Phase 2 objective: Train Port staff to apply these levers 
14

Operating Expenses 
Credit Card Fees 
Network provider    Fee to Port    Potential Opportunity 
2.76%         2.2 - 2.4% 
Processed by     Target lower rate 
Wells Fargo       Save $200-300k 
$1.4M in '15 
2.15%          None 
Utilizing state      Best in class rate 
contract 
$0.4M in '15 
Opex opportunities likeliest to be realized in the near-term 
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Results 
Reinforce Century Agenda goals 
Increase Small, Women- and Minority-Owned Business performance 
Improve environmentally-friendly purchasing 
Support and create jobs 
Increase speed to delivery 
Target 15%+ average reduction in cycle time 
Improve stakeholder management 
Internal and external 
Enhance capabilities in-house 
Build skills of our staff and become more high performing organization 
Save money to re-invest in areas that create jobs 
Target $4M savings within 12 months; $20M+ steady state impact 

Significant value in this effort 
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Expected Cost Impact 
Opex     Capex     Total 
# of initiatives     10          18          28 
2016 Budget   $144M     $348M     $492M 
2017 impact   $3-5M      $2-5M     $5-10M 
Steady state impact   $5-7M     $15-28M    $20-35M 

Any savings can be re-invested in other Port activities 
17

How we will Measure Results 
KPI                     Source 
Small, Women and Minority-    Small, Women & Minority
Owned Business            Business scorecard 
Environmental purchasing      Environmental scorecard 
Customer service            Customer surveys 
Cost impact                Finance validation 

Additional metrics may be added as needed 
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End goal: Performance-driven
procurement 
Performance-driven org 
Data-driven 
Problem-solver 
Growth              Viewed as resource 
phase                  Nimble and flexible 
Maximize value while
reinforcing goals 
Compliance-        Standard work processes 
driven org 

2008 Audit

Phase 2 
Request Commission approval 
Establish "Procurement Council" to
guide effort 
Assign Port staff to each priority
initiative 
Begin implementation of priority
initiatives 
Periodically report back 
Request approval to proceed to Phase 2 
20

Thank you! 
Questions? 
21