OFPP kicks the strategic-sourcing door wide open

Administrator Joe Jordan said he views the possibilities as everything from new contracts to take advantage of volume discounts to standardizing terms and condi...

The Strategic Sourcing Leadership Council has delivered a set of proposals for how and where to expand the Federal Strategic Sourcing Initiative.

But not every suggestion sent to the Office of Federal Procurement Policy in March was about a new contract or expanding a current blanket purchase agreement.

Joe Jordan, the administrator of OFPP, said the council wants to move forward with a number of strategic sourcing efforts, including technology hardware and software, laboratory supplies, janitorial and sanitation, mobile and wireless products and services, and others.

“We are now working with them to say, ‘what is the solution?’ It doesn’t mean, in all those categories, there is one governmentwide contract,” Jordan said after a panel discussion on strategic sourcing at an event sponsored by the Coalition for Government Procurement Wednesday. “We are putting all that commodity under management with an executive agent that has a deep content knowledge and all of the large buyers at the table, along with the Small Business Administration, to figure out what the right solution is. In some cases, it will mean reduced contract duplication, better leveraging our spend and driving volume-based discounts. In other cases, it’s more terms and conditions, and taking administrative costs out of the approach.”

Jordan said the opportunities now are clearly defined and it’s a matter of moving forward.

Four contracts in place today

OMB set up the Strategic Sourcing Leadership Council in December as part of its efforts to increase the rate of adoption. The SSLC is made up of the largest agencies by total spending, including the Defense Department, NASA, the Department of Homeland Security and SBA, to improve the management of commodity products and services across the government.

Joe Jordan, administrator, Office of Federal Procurement Policy
The General Services Administration, which runs the FSSI from an operational standpoint, has four contracts in place today — office supplies, domestic delivery, print management and Wireless Telecommunications Expense Management Services (TEMS).

GSA currently is in the process of updating the mobile and wireless services sourcing effort. OMB said in the fiscal 2014 budget request agencies spend about $1.2 billion across 1.5 million wireless accounts, and that number will only increase in the coming years.

Tom Sharpe, the commissioner of GSA’s Federal Acquisition Service, said he is reorganizing FAS around 14 strategic sourcing areas, including working on five categories annually over the next two years.

Jordan said the managing partner for each of these areas will review every aspect of how agencies buy the particular product or service.

He said one area they will spend a lot of time on is trying to standardize, as much as possible, the terms and conditions of the item.

“If we standardize more of the terms and conditions around best practice examples, then we can take the duplication costs out of the system and take the costs driven by those terms and conditions,” he said. “For example, we look at software and one of the things we found is in certain categories agencies are entering into contracts that have true up-licensing provisions so as we add more seats, we pay for more licenses. That makes perfect sense. But no true down provision, so if our needs are reduced and utilize fewer licenses, we pay less. That’s not in there. That would never happen in the private sector. We have to make sure we are standardizing around things like that.”

Addressing small business impacts

Jordan added the goal is to get to the 80-20 rule, where 80 percent of all terms and conditions are the same, and agencies have room to customize and tweak as necessary or required by legislative provisions under the other 20 percent.

“Most of these terms and conditions that can drive savings are commodity category specific,” he said. “It’s on a rolling basis. The SSLC said go forward in a number of areas, so in those areas it’s starting right now in developing the timeline with milestones.”

One criticism of the FSSI effort is the impact it is having on small businesses.

Jordan and others cite the fact that a higher percentage of work is going to the 13 small businesses under the Office Supplies 2 vehicle as proof that strategic sourcing is good for small firms.

But other experts say by limiting competition to just 15 companies under Office Supplies 2, instead of the few hundred under GSA’s Federal Supply Schedule, the government is both hurting the competitive nature of the market and impacting the broader economy.

Jordan said OFPP, GSA and the SSLC realize the potential impact on small firms and they are trying to ensure competition doesn’t get impacted.

Tom Sharpe, commissioner, Federal Acquisition Service, GSA
“How do you create a refresh cycle that is long-enough so that the winners who won because they really stepped up and provided great price and low cost solutions to the government get the benefit of the volume that is the trade-off in the deal,” he said. “But frequent enough that keeping a robust market in that commodity category or making sure small businesses who were unsuccessful offerers in the first iteration are still able to compete, understand where they fell short, and if they are able to improve the quality of the price or what the gap was, then they can compete in the next around. It’s absolutely a key tenet of our thinking as we develop the strategy to roll this out.”

Jordan said OFPP is reviewing other possible options too such as aggregating buying events where vendors can compete for the dollars. He said a good example is the Army’s Computer Hardware, Enterprise Software and Solutions contract (CHESS) program where they are mandated to buy commercial hardware, software and services from the contract.

“In doing that sort of large scale, less periodic buying event so they can get great prices from the vendors, is that replicable to other categories? I believe so. How best to do that?” Jordan said. “It is something we are looking at, as well as other tools, where you can get more vendors on a vehicle in some of the spot market categories, but then run more robust competitions when it’s time to buy. Reverse auctions is a place we are looking quite a bit and those types of commodity spot markets where you may not be able to capture all the value with up front negotiations because the vendor doesn’t know what his cost of goods will be when you are buying them. But if you can do all the terms and conditions standardization, get all the right vendors in a group and then, when appropriate, run a competition that has the characteristics that will drive pricing down and get you what you need. I have a very big tent view of strategic sourcing. It’s not one-size-fits-all in any way.”


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