If you ask any procurement professional whether they’ve had to deal with off-contract purchases, the unanimous answer would probably be, “yes”.

There’s no doubt that maverick spend is looming large across companies in all different industries.

And, if left unaddressed, it can be harmful in so many ways.

But to be able to truly keep it in check, it is necessary to first understand what it is and why it happens.

That’s exactly why we’re here.

In this article, we’ll tell you everything you need to know about maverick spend, explain why it’s important to get it under control, and share some valuable tips in the process.

If this sounds like exactly what you need, read on.

What is Maverick Spend? 

Maverick spend, also known as rogue or off-contract spend, entails all purchases made outside of the agreed-upon procurement policies.

Simply put, whenever employees buy goods or services through channels and from suppliers that have not been authorized, this is considered maverick spend.

But not all maverick spend is the same.

It can be divided into 3 distinct types, depending on the level of control and visibility that the organization has over it.

Source: Veridion

First, there’s unknown and uncontrolled maverick spending.

It refers to the kind of purchase that probably comes to mind when someone mentions maverick spend: when you receive an invoice from an unknown vendor, asking for payment for something you weren’t even aware of.

In this scenario, neither the expense nor the supplier is recognized within the established procurement process.

Then, there’s partly known and partly controlled maverick spend.

In this case, the purchase was made with a vendor you know and have worked with before. 

However, you don’t know what was purchased, indicating that the agreed-upon procurement process wasn’t fully followed.

Lastly, we have known and partly controlled maverick spend.

This is where the key pieces of information—the vendor and the nature of the purchase—are known, but some details of the purchase, like the pricing or quantities, aren’t.

Even though the buyer made a purchase from a vendor your company has a contract with, the fact that there’s still some ambiguity about the purchase means that they didn’t fully comply with the established procurement policies.

So, what conclusion can we draw from all this?

The existence of multiple levels of maverick spend tells us that the entire issue is more nuanced than it may seem at first glance.

It’s not as black and white as following the procurement rules versus not following them.

In fact, quite the opposite: it involves varying degrees of compliance and visibility, and can occur due to different factors.

Let’s explore those next. 

Why Does Maverick Spend Keep Happening in Your Company? 

The truth about maverick spend is that it’s a very pressing issue for companies of all sizes, and hardly anyone is immune to it.

But why is this the case?

As it turns out, systemically not following the purchasing rules and protocols usually hints at a bigger issue—or issues—within an organization.

More precisely, there are two overarching factors that push buyers to make off-contract purchases: the complexity of purchasing processes and poor communication regarding procurement policies.

Inefficient Purchasing Processes 

As a procurement professional, you may have developed a purchasing process you’re proud of.

One that is thorough, streamlined, and ensures cost savings because it supports building strategic relationships with the approved suppliers.

However, the issue of maverick spend occurs when buyers within your organization don’t feel the same.

Very often, they choose to bypass the rules and policies because they find the entire process too complex.

Don’t believe us?

Take a look at the findings of The Hackett Group’s Maverick Spend Report. 

Illustration: Veridion / Data: The Hackett Group

This number goes to show just how important it is to make purchasing from preferred suppliers as easy and as straightforward as possible.

Making an effort to simplify the purchasing process can be transformational for an organization, and this was certainly the case for Lancaster University.

They used to struggle with employees making purchases without regard for the established procurement processes.

However, this changed once they introduced a marketplace, courtesy of Proactis, that allowed them to connect to the websites and catalogs of approved suppliers more easily.

Streamlining the process in this manner allowed this university to significantly reduce off-contract purchases.

The question is, how can you do the same?

Well, it all starts with finding reliable suppliers.

If you decide to do this manually, prepare to invest a lot of time and effort into scouring the Internet for suppliers that meet your criteria.

You may be thinking, “I don’t mind putting in as much work as necessary to find the right suppliers!”

But what if you didn’t have to?

What if you could simply enter exactly what you’re looking for, step away from the computer, and come back to a comprehensive list of suppliers that are the perfect match?

This becomes a reality when you use Veridion’s supplier discovery service. 

Source: Veridion

Veridion is here to automate supplier search and discovery, leaving you with more time and resources to build a preferred supplier list (PSL) that your company will use to make approved purchases. 

Source: Bill

As it turns out, doing something as simple as sharing a PSL with buyers can make a huge difference in preventing maverick spending and improving the overall performance of the company.

According to the report we mentioned earlier, 56% of the top performers who participated in the study provide a list of pre-approved suppliers for all goods and services.

Only 26% of their peers do the same.

The takeaway is clear: not having to jump through hoops to get to the important information—such as who the approved suppliers are—means it’s easier for people to follow procurement rules and policies. 

So, take a good look at your current purchasing processes and look for opportunities to make them more streamlined and efficient.

Once you do, the results will speak for themselves.

Poor Internal Communication 

Sometimes, the complexity of the procurement process isn’t the main culprit for maverick spend.

Sometimes, it’s the fact that buyers aren’t even aware of the existence of preferred suppliers, or even procurement policies.

In such cases, they go off-contract unintentionally.

But regardless of whether it’s intentional or not, the bottom line is that maverick spend spells trouble for your organization.

However, if the reason you’re experiencing it is a lack of proper internal communication about how purchases should be handled, we’ve got some good news: there is a solution.

And it is actually pretty straightforward.

Your organization as a whole needs to invest more effort into two things:

1. making sure that the buyers are regularly informed about and trained on how to follow procurement policies, and 
2. communicating the importance of following said policies.

Jon Webster, Associate Consultant at the global business consultancy Festive Road, agrees. 

Illustration: Veridion / Quote: Business Travel Executive

So, whenever there is a change in your procurement policies, make sure that everyone responsible for making any kind of purchase knows about it.

Are you no longer working with a certain supplier? 

Or are you perhaps implementing a whole new approval workflow?

Great! Now share that information with the buyers, and don’t forget to explain the reason behind the new policy.

Why?

Because when people don’t understand the rationale behind a rule, they may feel more inclined to simply disregard it.

Frank Vorrath, VP of Supply Chain Services at Danfoss Climate Solutions, highlights the importance of openly communicating the why of it all. 

Illustration: Veridion / Quote: CPO Strategy

Open communication can do a lot for the prevention of maverick spend, that much is clear.

So make an effort to keep every relevant stakeholder in the loop when it comes to procurement policies and any changes related to them. 

It will save them a lot of guesswork, and your company a lot of money.

Why Is It Important to Control Maverick Spend? 

While breaking the rules of procurement every now and again might not seem like a big deal, the consequences of turning maverick spend into a habit can be detrimental to your organization.

From the fact that you’re missing out on savings and the risk of strained relationships with approved vendors, to loss of control over the budget and potentially facing compliance issues, maverick spend spells trouble.

And research backs that up. 

Illustration: Veridion / Data: Basware

As you can see, those occasional off-contract purchases that “are not that big of a deal” can quickly accumulate and cause a domino effect that impacts your organization as a whole.

This makes controlling maverick spend that much more important—even when the intention behind it is good.

That’s because it supports the financial health of your organization and prevents a variety of risks that come with purchasing from unapproved vendors.

Oftentimes, buyers make maverick purchases because they believe that they’ve found a deal better than the one that the company already has with a contracted supplier.

So, they’ll make the purchase, disregarding the total cost that comes with it.

Simon Geale, Executive VP of Procurement at supply chain consultancy Proxima, explains the thought process.  

Illustration: Veridion / Quote: Workday

As a result, instead of saving the company money, they end up spending even more.

But the consequences of maverick spend extend well beyond just financial losses.

The desire to save the company some money can often end in purchases that expose the company to low-quality, counterfeit parts and products.

Here’s what Helen Alder, Head of Knowledge and Learning Development at CIPS, says in that regard:

“With maverick spend there’s a strong chance that buying parts from a non-approved supplier will cost more, possibly take longer to source, and the quality of parts may not be good enough. It’s not unknown for people to simply search the internet and buy parts that turn out to be counterfeit or that don’t meet required quality levels.”

And while inadvertently buying counterfeit pens for the office because the price seemed too good to pass up won’t necessarily cause anyone harm, there are other purchases that certainly can.

Illustration: Veridion / Quote: RS & CIPS

It all boils down to the fact that the suppliers your company works with have been chosen for a reason.

Sure, they might be more pricey than the cheapest option on the market. 

But they’ve also been vetted and can vouch for the quality of the products they offer.

So take the time to communicate this across the organization, monitor how money is being spent, and take the steps necessary to keep unauthorized spending in check.

How to Turn Maverick Spend Into an Advantage?

If there’s one thing you’ve taken away from this article so far, it’s probably that maverick spend is bad news.

And it is—for the most part.

Although it is a huge challenge that carries a variety of negative consequences, it doesn’t always have to be purely negative.

Yes, employees often believe they’ve found better deals when making off-contract purchases, but these choices end up leading to poorer outcomes.

But not always.

Sometimes, maverick spending does result in them finding a more convenient or cost-effective alternative.

Let’s say that your company has been sourcing office supplies from the same supplier for years.

However, during spend analysis, you find out that one of the buyers at a different office has been sourcing these goods from an unapproved supplier.

Upon asking them why they went off-contract, they inform you that they used a supplier discovery platform instead of just Googling alternative providers of office supplies and landing on the cheapest one. 

Source: Veridion

And, as it turns out, they’ve struck gold: the platform provided them with detailed supplier profiles and enabled them to identify a better, more cost-effective alternative.

While they didn’t follow the prescribed procurement policies, they uncovered an opportunity that is going to benefit the company in the long term.

So, the next time you encounter maverick spend, make sure to investigate why it occurred. 

Who knows—it might turn out to be just what your company needs!

Conclusion 

Yes, maverick spend can and does happen to pretty much every organization.

However, this doesn’t mean that you should sit back and just let it keep happening.

What separates the most successful organizations from the rest is how they choose to address maverick spend.

So, take matters into your own hands: keep a watchful eye on the way money is spent, detect instances of unapproved spend, and react to them in a timely manner.

But even more importantly, make sure that your purchasing processes are transparent, efficient, and easy to adhere to—this can truly nip the issue in the bud.