In a four-paragraph letter "to our valued suppliers," Department of Administrative Services Director Matt Damschroeder said the unusual request stems from the state's need to reduce spending due to the coronavirus pandemic.
"The requested reduction would cover all supplies and services procured through DAS contracts as well as any supplies and services awarded by an individual agency," Damschroder wrote.
William Teets, the agency's director of communications, said the request went to about 1,400 vendors with contracts for information technology, general goods and services, and printing and print-related services. The state also is also reaching out to about 180 companies from which the state leases space.
The department has no estimate on potential cost-savings of the move.
"I can say that this is just one solution we felt we could explore to help the state's efforts," Teets said. "As many state contracts are already awarded to the 'lowest cost or best value' offer, we don't intend for this effort to result in large-scale savings, rather provide an opportunity for smaller savings that can have a positive impact with individual state agencies."
There is a bit of a veiled hammer in Damschroder's letter: The vendors' response "will be taken into consideration as we make decisions whether to renew or rebid contracts approaching their end date. If you are in current negotiations regarding a contract or an extension, please keep this request in mind, as well."
Roger Geiger, executive director of the National Federation of Independent Businesses for Ohio, said he expects most small businesses that contract with the state will agree to the voluntary cut.
"If any small businesses want to preserve their status as a state contracted vendor they will likely have to take this very seriously," Geiger said.
He said state contracts represent a big revenue stream for small businesses and they may feel pressured to act in good faith so that the state continues to renew their contracts going forward.
Geiger said many that take the reduction will have to make cuts to their own expenditures to make up for the 15% loss. This could mean layoffs and other budget constraints on small businesses.
Because much of Ohio shut down during the pandemic, state tax revenue dropped off a cliff this spring. Gov. Mike DeWine announced in early May cuts totaling $775 million for the current state fiscal year, when ends June 30.
Several groups have called on the state to use its rainy day fund. That account currently has $2.7 billion, compared to the projected budget shortfall of $2.4 billion for the upcoming fiscal year.
But the DeWine administration doesn't want to draw down that fund too fast.
"The pandemic is expected to continue to impact the global, national, and Ohio economies well into the next biennium, so it is critically important to not expend our entire budget stabilization fund all in the current biennium," said Pete LuPida, communications director for the Ohio Office of Budget and Management.
LuPida said it is important the state addresses revenue shortfalls carefully to ensure future stability.
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