Analysis: Why Would Chicago’s Mayor Fire Top Procurement Executive and Bring in Someone with Fraction of Experience?

May 28, 2024

Brandon Johnson and his allies seek total control over billion-dollar purchasing budget

Last week, Crain’s Chicago Business published an article stating that Mayor Brandon Johnson’s administration wanted to fire Chicago’s Chief Procurement Officer (CPO) Aileen Velazquez and replace her with his handpicked successor. While the average person would glance at this headline with the interest of a TikTok addict watching a 30-second ad for oat milk, I immediately stopped my urgent work of mixing the perfect Memorial Day weekend G&T — Monkey 47 and Indian River Mediterranean tonic, thank you for asking — and knew I had to dive into the story at hand (for reasons we’ll get to in a minute).

According to Crain's, “The mayor’s office and Aileen Velazquez have been trying to negotiate a settlement in recent weeks that would see her provided financial compensation to forgo the remainder of her term — members of the City Council have pushed for her ouster ... complaining about the length of time it takes to issue requests for proposals, award new contracts and certify applicants as part of the city's minority- and women-owned businesses initiative.”

While I don’t read Crain’s much anymore as I’m more concerned with shareholder equity vs. that equity which the allies at our city business rag obsess over, and most importantly, I’m no longer a FIB (although I still turn my head when someone yells it in my direction on I-94 North of Kenosha while flipping me the bird), I know a thing or two about procurement. It’s where I’ve spent over 25 years of my career, first as a management consultant and later as a technology researcher, analyst, entrepreneur, investor, and M&A advisor (in both the private and public sectors).

I also have some knowledge of procurement and Chicago. Back during the Rahm years, I got to know one of the city's ranking procurement officials. (As an aside, he was overqualified for the role — even the role of CPO of the city — and was doing it as a public service, having served as a Director of Procurement and Supply Chain for a Fortune 500 company with previous stints at Accenture and McKinsey).

Flash forward 10 years and a 50-point IQ decline of the person sitting on Chicago’s Iron Throne (now draped in CTU, Democratic Socialists of America, and Palestinian flags), one of those looking to drive Velazquez out (in addition to Chicago’s mayor) is Alderman Jason Ervin (28th), who leads the Budget Committee. Ervin told Crain’s his concern over the current CPO is that: “People are concerned about the lack of participation of African American contractors (and) the slow pace of contracts being let, and that’s having an impact on the work that the city is able to do.”

I’ll deconstruct Alderman Ervin’s argument later in this analysis but hold the thought for a minute because in 2018, according to Ballotpedia and Block Club Chicago, Ervin came under scrutiny for potential conflicts of interest related to his wife, Melissa Conyears-Ervin, who was serving as a state representative and later became the Chicago City Treasurer. Specifically: “Concerns were raised about potential overlapping interests and the influence of their political connections​.”

It sounds like a true Chicago story. But at this point, explaining procurement and why it matters to a place like Chicago may be a good idea.

What the heck is procurement? 

By now, you’re probably asking what procurement is, and why it matters. In a city like Chicago, with a roughly $18 billion annual budget, there’s usually a roughly “70/30” rule. Under this model, you can spitball that in most cases, 70 percent of the budget goes to headcount/employees, pensions, school costs, etc., while the remaining 30 percent is “external” — which falls under procurement. External spending includes IT hardware, software, vehicles, MRO (maintenance, repair, and operations), construction, office supplies, contractors, consultants, etc. From a quick look at 2022 and 2023 budget documents, it seems Chicago roughly follows the 70/30 rule.

In cities like Chicago, procurement — back when it was called “buying” or “purchasing” — was a rubber-stamping function. But today, the role of procurement in government matters more than ever, especially as municipalities become more comfortable with buying “outcomes” from third parties instead of managing them in-house (such as leasing technology infrastructure from AWS vs. running their data centers with full-time IT resources and old hardware).

Given this, we can say that city procurement is now akin to the circulatory system in a human body: Unseen, often underappreciated, yet increasingly vital to keep the patient not just living but thriving. Without the careful and strategic acquisition of goods and services (not to mention project-based spending on construction and other initiatives), no public sector body can hope to function efficiently and responsibly.

But procurement is not merely about buying things; it's about ensuring that the right resources are obtained at the right price, quality, and time. This demands a balance of strategy and negotiation acumen (or the ability to leverage this knowledge, increasingly, in applied technology), change management, market insight, and ethical consideration. In this regard, procurement professionals must be as meticulous as scientists (let’s hope not the kind sworn to DEI litmus test statements at the University of Illinois), as shrewd as diplomats (well, maybe not those from the Biden administration working on Iran), and as vigilant as auditors (insert your own Arthur Andersen joke here). 

Jesting aside, I might go so far as to add that procurement, ideally, should serve as a municipal moral compass. It’s where decisions must balance singular price consideration alongside other elements (such as sustainability, fair labor practices, and transparent, competitive processes that solicit and enable all qualified suppliers to participate). But like many essential functions in government, especially at the local level, procurement is susceptible to being undermined by nepotism, kickbacks, and a lack of oversight, with municipal supplier diversity programs being an all too frequent source of fraud through illegal pass-through schemes (in which a minority contractor is a vendor in name only), bribes and more. Thus, civic procurement leaders must constantly manage and audit the entire procurement process, from “source to pay,” as we say in the private sector, to maintain its integrity and effectiveness. 

Not that it always works this way. Chicago, for one, has a rich history of procurement fraud. And, likely, only a tiny percentage of the actual schemes have ever been caught. Yet the city’s public history of procurement fraud is as entertaining as it is tragic. Who can forget the Barbara Byrd-Bennett scandal from 2015, when Mrs. Byrd-Bennett was involved in one particular kick-back scheme in which she directed $23 million in “no-bid” contracts, which were awarded to her chosen suppliers without competition, and these vendors, in turn, helped fund her lavish lifestyle, including first-class vacation tickets and meals at Chicago’s Michelin star establishments. The former head of CPS pleaded guilty to fraud charges and received a four and a half-year prison sentence (serving only three years behind bars for “good behavior,” even though it was later found that she also steered another $6 million contract to close friends). 

If we conjure up the Chicago “way back procurement fraud machine” to previous schemes from the Richard Daley years, two scandals took the cake: The hired truck program (in which various employees, including Alderman Arenda Troutman, were indicted and convicted for taking bribes in exchange for directing contract awards to unqualified or completely fake trucking companies) and the Waste Management bribery scandal, in which various executives of the firm were charged and convicted of bribery in the form of campaign contributions and direct kick-backs to city employees and politicians. 

So, to sum things up, procurement is the backbone of any government organization’s operational success, a guardian of ethical practice, and a potential pitfall of bureaucratic excess. Handled well, it ensures a city’s prosperity and reputation; handled poorly, it can lead to, well, the Chicago we’ve come to know. But can it get worse from here? Absolutely. If Johnson and his alder-cronies get their way, we’re about to witness the fall of Rome all over again, but this time with fewer togas, more paperwork, and a phalanx of Marcus Licinius Crassuses vying to see who can steal the most from its citizens as the city burns. 

Incidentally, Crassus was metaphorically 100 percent the Chicago politician of the Roman Empire: He ran the fire brigade and was known for making lowball offers to buy buildings in Rome that were literally on fire. If the owner refused his offer, he let their property burn to the ground, but if they agreed, he put the fire out, rebuilt them, and leased them back to the original owner for a massive profit!

Sound familiar, Chicago?  

Who's running the show today?

The Chief Procurement Officer (CPO) for the City of Chicago is Aileen Velazquez. I don’t know how Chicago’s current CPO is performing these days, but previously, she worked for someone I consider an incredibly respected CPO, Craig Meadors, who I knew well. She worked for him for 15+ years at CNA Insurance, running sourcing and contracts (arguably the most strategic aspect of the procurement function at a place like CNA). Given the tight ship Craig ran, there's no way she would have been there for more than a minute if she were not qualified (and she rose to a director role overall, which is senior in the private sector).

Velazquez has an annual salary of approximately $191,129 as CPO of Chicago today. This may sound like a lot, but it’s not within the profession and is far less than she would make in the private sector. In Fortune 500 firms, the total compensation for CPOs often exceeds $500,000 per year if you factor in bonuses, restricted stock/options, and other elements. Generally speaking, public sector procurement leaders are way overworked and underpaid (relative to their private sector peers). And the further down you go in the public sector, the more underpaid they are on a comparative benchmark basis. In addition, many state, local, and municipal government procurement teams are significantly under-resourced because of overall budgets, and few want these jobs because they pay so much less than the private sector.

Here’s my read of the situation, knowing Velazquez’s past and the current situation. Simply put, I would not be surprised if she has ruffled feathers in the Johnson administration for refusing to rubber-stamp certain activities. Good contracting does not happen quickly (in most cases), especially when it involves the combination of new vendors (which increases fraud risk), new budget cycles and allocations (ditto), new spending priorities, and antiquated technology systems (Chicago’s procurement department uses a clunky, outdated Oracle solution that was legacy when it came out over a decade ago). This leads me to think that the attempt to put a more junior person in charge, who is rumored to be Sharla Roberts, who has served most recently as the Director of Procurement Diversity at the University of Illinois, Chicago, according to Crain’s, is nothing more than a ruse to replace a qualified professional saying “not so fast Brandon” as she should, with someone who will, at best, be in over their heads based on their lack of broad-based procurement executive leadership experience, or, at worst, complacent, turning an eye away to avoid seeing certain things (of course a third option exists that she’ll be in on the spending siphoning ruse). Certainly, Chicago’s lackluster procurement technology environment won’t be helping the situation (or catching bad actors).

Replacing a seasoned chief procurement officer with a narrow supplier diversity specialist in her place, someone without anything close to the experience (or the seniority), is akin to making the gal who oversees the popcorn stand at a rural movie theater the CEO of AMC, thinking her knowledge of extra butter is transferable to corporate finance, box office sales, content strategy, and business strategy.

As much as I empathize with the fact some people believe it is a noble intention to hire someone with a supplier diversity background for a CPO role, the idea that an individual can emerge from the small, dimly-lit corner of a typical buying organization — where less than five percent (usually much less) of the procurement staff reside in a typical company or public sector body — and effectively oversee procurement for a major city is nothing short of absurd. 

To be genuinely qualified for the task of becoming CPO of Chicago, one would need, at a bare minimum:

  • Extensive category management experience — handling everything from IT hardware and SaaS/software to MRO, construction, and office products. This isn’t the realm of the diversity dilettante; it’s the battleground for seasoned professionals who can work in all areas of procurement with a deep understanding of category strategy, negotiation, contracting, risk management, and supplier development across all suppliers (including very large ones), not just diverse businesses. 
  • Experience managing a diverse team within a procurement organization. This includes contract specialists, buyers, category managers, IT gurus, process owners, risk managers, and fraud specialists — a veritable Noah’s Ark of procurement expertise.
  • A robust understanding of core source-to-pay technology. This encompasses spend analytics, supplier management (onboarding, cyber security, fraud risk, supplier stability, performance management, etc.), sourcing (including RFX/RFI, auctions, optimization, AI-driven sourcing), contract management (authoring, clause libraries, AI-based analytics/discovery, contract monitoring), e-procurement—and let’s not even get started on the nuances of MDF Commerce, Ivalua, Coupa, SAP Ariba, and other public sector stalwarts. And this is Procurement Technology 101, folks – there’s much more to it.
  • Experience in change management, system roll-outs, and stakeholder/demand management. Because herding cats is nothing compared to implementing new procurement systems in a government setting.
  • The fortitude to stand up to municipal procurement's myriad ethical and moral challenges. Government and procurement fraud, including the infamous supplier diversity pass-through entities, are, regrettably, far too common. But dozens of schemes and playbooks exist to defraud cities and municipalities, many relying on deeply hidden collusion between politicians or senior bureaucrats, procurement, and suppliers (which can make fraud very hard to catch, in certain cases) 
  • A deep understanding of public sector-specific issues. Supplier diversity is merely one of many considerations. Others include recruiting and talent challenges, stakeholder management, cross-agency and department spend visibility, budgeting cycles, CAPEX spending, and the intricate web of laws and rules (federal, state, and municipal) governing tendering processes and the inevitable appeals from disgruntled suppliers. The list goes on.

So you want the job (and you think you’re qualified?) 

Let’s revisit Alderman Ervin’s argument — yes, the one previously accused of corruption — that the general concern with the current CPO is that “people are concerned about the lack of participation of African American contractors (and) the slow pace of contracts being let.” 

African American contracts? An inquiring mind might wonder if these are contracts in which Alderman Ervin may have a potentially “vested” interest. Friends? Family? Constituents? Campaign contributors? Affiliated persons or entities? Inquiring minds might want to know, especially given the past allegations involving Alderman Ervin. 

And what about the “slow pace” of contracting? Might Alderman Ervin, Mayor Johnson, and others have a personal interest in seeing the “pace” of contracting accelerated at the expense of things like full vendor due diligence, supplier risk searches, confirming diversity credentials (and doing full diligence to ensure these are not illegal pass-through entities), procure-to-pay fraud controls (especially given Chicago’s procurement technology is aging like a bottle of Electric Melon Mad Dog 20/20), and, G-d forbid, an actual proper competitive bidding process that is in the best interest of taxpayers? 

In sum, the notion that someone can waltz into a CPO role for a major city without a senior leadership background in all of the procurement (or at least the highly strategic areas) is not just optimistic, it’s downright delusional, especially in Chicago, given the city’s historical procurement fraud issues and current, half-baked technology systems. Unless, of course, you are an alderman or mayor with a vested interest in seeing proper procurement processes never run in the first place because such formalities may toss a kink into your plans for, shall we say, “diverting” things? 

My old work colleague and business partner, Peter Smith, who served as a senior procurement executive in both the public and private sectors in the UK and authored the book Bad Buying: How Organisations Waste Billions Through Failures, Frauds, and Fck-ups* (Penguin, 2020), notes that in public sector procurement, “there is an openness to fraud and corruption, exacerbated by ‘box ticking’ which disguises weak processes.” One can only wonder at the motions Chicago’s potentially new CPO will go through to provide an appearance of “box ticking” when the entire pencil and sheet of paper are potentially being stolen from taxpayers simultaneously. 

After all, procurement in a place like Chicago is like the flimsy screen door between a horde of ravenous zombies and the last safe house on the block, trying to hold the undead back from devouring all that is good and proper in the world. If you would let me indulge my muse, I do say this is a clever analogy because the entire thing reminds me of the “Night’s Watch” in Game of Thrones. The Night’s Watch is a ragtag group from all elements of society that stands guard at the northern edge of the civilized world. What marches behind its massive, fortified gates is the army of the undead, the “white walkers,” hell-bent on destroying everything living — that is, provided they can breach the fortifications.

I think of Chicago’s current CPO and her team as the Night’s Watch. They’re holding down the fort at the Northern Wall, or so we hope. Procurement is all that stands between civilization and a hoard of contract-hungry zombies looking to gorge themselves on public tax dollars while also eating the rich, the poor, and anyone else who gets in their way. Now, just suppose Mayor Johnson has his way and the “Night’s Watch” falls (which is looking more and more likely by the day). If this happens, it won’t take a procurement wizard or warlock to know it will take more than Dragonglass and Valyrian Steel — or even a fire-breathing dragon itself — to get the city’s purchasing processes back on track, perhaps hundreds of millions of dollars (or more) of bad and/or fraudulent buying decisions later.

But at least if things end up the way they appear to be headed, it will give my old friend Mr. Smith all the source material he needs for a sequel to his earlier work, which I can only imagine he’ll title Really, Really, Really Bad Buying.

J.D. Busch usually writes on more laughing matters at Chicago Contrarian and elsewhere (because he needs a break from his scintillating day job in the procurement technology industry of all things, where throughout his career, he has authored over a thousand whitepapers, analyst briefs, essays and contributed articles).

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