BOSTON BUSINESS JOURNAL: This ‘tail spend’ startup saves the MBTA $100K per month

By Kevin Frechette
Jul. 11, 2018, 2:16 PM

Each year, the MBTA makes about 15,000 purchases of orders worth less than $50,000 each. Policy rules dictate that for many of those purchases — for things like spray paint, steering shafts and cylinder breaks — the organization must collect at least two competing bids from vendors before finalizing an order.

A year ago, soliciting those bids required someone in the MBTA procurement division to pull out an old phone book or search Google for relevant vendors, send emails or call the companies, and file away the resulting bids in a cabinet where they were unlikely to be looked at again. Now, thanks to a local software startup called FairMarkIT, the entire bidding process is done automatically and publicly, with each bid stored for future reference.

The system has saved the MBTA an average of 30 percent on its purchases by allowing it to collect more bids and have better access to pricing data, according to the agency’s chief transformation officer, Nick Easley. That translates to more than $100,000 in monthly savings, according to a case study FairMarkIT published about its work with the MBTA.

“At the end of the day what it does is increase our ability to get quotes more efficiently,” Easley said. “That gives us more time to focus on the stuff we should have been focusing on all along.”

The change was made possible by the MBTA’s use of FairMarkIT’s software, which helps organizations reduce their procurement “tail spend” — a term for all the money that companies spend on relatively inexpensive purchases, such as staplers and IT software.

FairMarkIT was founded in February 2017 by a pair of former sales directors at Boston-based enterprise software firm Turbonomic Inc. The MBTA was the startup’s first customer, though it now has six customers, including Yeti Coolers and vision care health insurance company VSP Global.

In May, the startup raised its first round of funding from semi-public venture capital firm MassVentures, as well as NewFund Capital, NewStack Ventures, VT Technology Ventures, and several angel investors. The company declined to say how much money it raised, but a document filed with the U.S. Securities and Exchange Commission indicated FairMarkIT raised just under $900,000.

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