Interview with SCC County Exec Smith Regarding KPMG Contract Subdued But Interesting

In a subdued (perhaps uneasy) but seemingly earnest manner Santa Clara County Executive Jeffrey Smith joined me on the PI Window On The World show yesterday to discuss concerns surrounding the recent extension of a KPMG contract to shore up the County’s procurement practice. (Click Image Below To Listen To Interview.)

This is definitely an interview that requires patience to draw out the key points Smith was trying to make.

For example, when asked about the savings that taxpayers would realize with the strategy to centralize procurement in the County – Smith referred to it has a transition from a collective to a conglomerate function – he initially deferred. However, with further prompting the County Executive indicated that the initiative had delivered “over $100 million in savings so far.” When asked if these savings were realized through the KPMG engagement, Smith said that the $100 million was based on County efforts going back to 2009 – 2010, before the current KPMG contract.

So what is the anticipated savings resulting from the $3.2 million KPMG contract, and what does it entail?

Smith estimates that the County should realize savings of around $200 million.

He then went on to explain that the initial KPMG contract for $1.3 million in 2016 was to provide an assessment of where the County is presently at regarding its move towards a centralized model. Based on this assessment, the untendered extension of the 2016 engagement to the tune of $2 million has two objectives;

1. create the structure to implement a centrally-led process including the hiring of a CPO and,
2. because their employees are “sort of overloaded at the moment,” assist the county with a couple of large IT procurements.

Does KPMG have the in-house expertise to provide this level of support for the additional investment of $2 million? As referenced in my March 14th, 2017 post, KPMG is actively looking for someone to fulfill such a role so the answer may be no – at least not at the present time.

What I found interesting was Smith’s statement that the position KPMG is currently looking to fill to support the County’s contract is a short-term engagement.  In other words, whoever KPMG does hire should be aware that there is a clearly defined knowledge transfer strategy so that Santa Clara can become self-sufficient.

In the end, Smith believes that the project to date has been successful but stressed that his job is to keep his eye on the bottom line. So if KPMG fails to deliver, they will, according to the County Executive, be gone. In fact, and these are the actual words he used, the County can “get rid of” KPMG at any time if the returns are not there.

To what returns was he referring? Was it the $200 million in anticipated savings?

Smith, who had just stated that his job is to keep his eye on the bottom line indicated that the returns to which he was referring involved operational improvement as opposed to an ROI based on . . . The Bottom Line.

So here is the question; will operational improvement lead to a $200 million savings, and if it doesn’t, will the KPMG engagement still be considered a success? Or to put it another way, can you measure operational improvement independent of ROI bottom line savings so that you can justify the $3.2 million price tag?

Time will tell.

So what is your take on Santa Clara County’s KPMG engagement? Share your thoughts in the comment section below.

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