Overview: Solving the Maverick Spend Mystery
How do I identify it and why is it happening?
Spending that involves products and services bought off-contract is referred to as “maverick” or “rogue” spend.
Because maverick spending occurs outside of the preferred procurement process, it’s invisible. Your goal is to
find it and quantify it so that steps can be taken to bring it under control and convert it to savings. The most
common reasons for maverick spending are:
(1) urgency: end users don’t think they can get what they need, when they need it, unless they go around the
purchasing system, or (2) ignorance: the end user is unaware that there is a preferred supplier or a preferred
way to buy what they need, or (3) other: the spender willfully ignores policies and procedures for any number of
Off-Contract Equals Lost Savings
Maverick spenders probably don’t realize that every dollar spent off-contract represents a loss for the
company -- even if they believe the items were purchased at a lower unit price. Generally, vendors offer
discounts, rebates, and other favorable terms to achieve preferred status. Buying from non-preferred vendors
forfeits budgeted savings and impacts procurement’s performance. Identifying the source of maverick spending
can have a wide range of benefits, including--
increasing the amount of spend under contract
improving contract compliance
analyzing supplier performance
identifying weaknesses in the procurement process
Solving the Mystery
Why does it happen?
Users may have special requirements that are perfectly legitimate but cannot be accommodated by the
procurement process. Often these weaknesses are easily fixed once they have been identified. Once the “why” is
understood, steps can be taken to remove obstacles that encourage system bypass and enhance system processes to
make it easier to handle exceptions.
Gather detailed data from as many sources as possible including:
1. Accounts Payable System
for Vendor, G/L, cost center, PO number, line item description, invoice
ID, date paid, date received, payment type, line item description
2. Purchase Order
for Vendor ID, Vendor name, A/P account number, PO number, price x quantity (line
item total), line item description amount due, status
for Vendor ID, Vendor name, MCC (merchant category code), line item description
4. Vendor Invoices
for Invoice ID, transaction date, status, customer name, customer ID, shipping
method, currency ID, date of delivery, total amount
for Purchaser ID, price x quantity (line item total), requisition total
for date range, vendor name, commodity, contract ID
Where are the savings
Maverick spending can occur anywhere, but there are certain categories that are more prone than others. You may
want to start with those categories first. Then have a look at how much in each category is spending with
A simplified example:
Sort G/L accounts top-down by spend.
||repairs and maintenance
Travel looks high. Check for off-contract spending.
Display Vendors, top-down by spend, filtering by "GL=travel" and "preferred vendor=No"
British Air spend is highest. Let's find out who's flying them.
Create a crosstab of vendor by cost center, filtering further by British Air:
Create a more detailed crosstab to get an idea of spend over time (filtered similarly):
As of February, the CEO's office has been spending large amounts with a non-preferred airline. Turns out this is because the company is opening offices
in parts of the world that aren't served by a preferred airline. Negotiating a contract now with an airline
that does service these areas could result in substantial savings.