What is Maverick Spending?  

Maverick spending (or rouge or dark spending) is the expense resulting from purchases that are breaking the rules established by corporate or governing organization procedures. Maverick spending either intentionally ignores defined procurement processes or simply by purchasing mistakes that aren’t in accordance with previous negotiated purchasing terms. 

Businesses and organizations typically make contracts with suppliers to help build a long-term relationship that’s profitable and favorable to both sides. 

The supplier agrees to keep making supplies to the procuring organization, and the procuring organization agrees to making their orders from the supplier and making payments. The aim of these contracts is to keep acquisition costs low and secure a guaranteed supply of inputs via a relationship with trustworthy vendors. 

Here’s where maverick spending comes in: maverick spend is a procurement or acquisition an organization makes outside those agreed contracts or with no contract at all (orchestrated much like a consumer purchase). Education organizations typically have tight budgets that procurement and finance teams must control to ensure staff members have what they need while not overspending. 

What are Types of Maverick Spend in Education? 

Non-Approved Purchases: 

Technology Purchases: 

Training and Professional Development: 

Subscription Services: 

Why Does Maverick Spending Happen? 

Distributed procurement 

Many organizations opt for a decentralized procurement system to enhance agility. In this model, individual team members and departments are empowered with access to funds through corporate cards, allowing them to independently make purchases. The intention is to streamline the procurement process by eliminating bureaucratic layers, requiring only permission from someone within the procurement team. 

However, this decentralized approach may inadvertently result in instances where individuals or departments make purchases that are redundantly covered by existing contracts. This could occur due to a lack of awareness or information about pre-existing agreements, potentially leading to inefficiencies and missed opportunities for cost optimization.  In education in particular, we see this especially at school / site-based purchases that are not in line with district or department organizational procedures.  

Competitive Maverick Spending 

In certain scenarios, team members are aware of an existing contract that already covers the order they intend to make. However, they opt to procure from a different source, believing it to be a more cost-effective alternative, with the intention of saving money for the company.  For example, a school or department may independently purchase a set of textbooks and educational materials from a specialized publisher or technology provider without considering the bulk purchasing arrangements negotiated by the central procurement office. They believe these materials are more tailored to their teaching methods thus the spend is justified even though it may be within the school’s budget.   

Poor Supplier Documentation / Lack of Knowledge 

The utilization of contracts by employees and team members is contingent on their awareness of the contract's existence. If individuals within an organization are not informed that a specific resource they require is already covered by an established contract, they are likely to explore alternative options, perceiving it as their sole recourse. 

Purchasing Card Spend 

Imagine a school district equipping school administrators with purchasing cards (P-cards) to facilitate smoother procurement processes for site base purchases or a university that provides p-cards to departments for use by professors for smaller purchases. While the goal is to enhance efficiency, there's a potential for maverick spending due to the decentralized use of these cards by administrators. 

Why Should You Care About Maverick Spending? 

Overspending in technology and other purchases within the education industry due to maverick spending poses several critical challenges:  

Uncontrolled Expenditure: Maverick spending, occurring outside the established procurement process, results in uncontrolled expenditures. When staff bypass approval procedures and independently choose suppliers or technology products, the absence of competitive pricing and pre-negotiated contracts often leads to higher costs. Individual purchases typically incur higher rates compared to bulk purchases, putting a strain on budgets and reducing the availability of funds for other essential products or services. 

Waste: Lack of proper oversight in individual technology purchases, for example, may lead to buying more than necessary, resulting in wastage and inefficient budget utilization. This excess expenditure affects the allocation of funds and hampers the school's ability to optimize financial resources effectively. 

Fraudulent Practices: Circumventing established procurement protocols opens the door to unauthorized transactions, kickbacks, or collusion with fraudulent vendors. Such activities can deplete the university, district, school's finances, tarnish its reputation, and potentially lead to legal consequences. Preventing maverick spending is crucial to safeguard the financial integrity of the school and mitigate the risk of fraudulent practices. 

Strained Vendor Relationships: Procurement teams establish partnerships and negotiate contracts with vendors to secure competitive pricing, favorable terms, and reliable service. Maverick spending outside of these agreements undermines these relationships. It can result in decreased vendor cooperation, loss of negotiation leverage, and negatively impact future opportunities. Maintaining adherence to established procurement processes is essential to foster strong and mutually beneficial vendor relationships. 

Inaccurate Budgeting: Maverick spends makes it difficult to know for sure if you have been spending within budget or overspending, making budget planning and saving more difficult.   

What Can You Do to Help Control Maverick Spending? 

Conduct a Spend Analysis: Break down expenditures to understand the extent of spending outside existing contracts. Identify key vendors and stakeholders driving maverick spending. Evaluate both short and long-term costs, comparing actual maverick spending with potential costs within contractual boundaries. This analysis forms the foundation for strategic cost reduction and budget optimization. 

Educate Staff: In education, for effective procurement participation, ensure your employees grasps key points: 

Create a Process for Special Purchase Needs: In the education sector, despite well-structured procurement systems, there may arise instances where a specific need emerges without an existing vendor solution or when urgency exceeds the capabilities of current vendors. To prevent uncontrolled maverick spending in such situations, establish a straightforward escalation process. Clearly outline the steps to follow when required supplies cannot be reasonably met by existing vendors. This ensures a controlled and transparent approach to addressing unique procurement challenges. 

Build Procurement Education into Your HR Practices: Engaging your HR team in procurement training within the university, district, or school is crucial. It instills a deep understanding of the gravity of procurement compliance from the outset, reducing the likelihood of maverick spending. Additionally, HR can play a pivotal role in developing and enforcing penalties for team members consistently spending outside agreed contracts. This proactive involvement strengthens adherence to procurement policies and bolsters financial discipline within the organization. 

Organizations lose on average 10 to 20% of their savings from maverick spend. This impacts budgeting, efficiency, and trust. Contact Edtrax to help understand your spending habits and help improve the allocation of your technology funds.