OMB’s Zients hints at making strategic sourcing mandatory

The President's Management Advisory Board wants agencies to focus on reducing improper payments and making strategic sourcing mandatory.

The Office of Management and Budget’s acting director is signaling an expansion and the mandatory use of the Obama administration’s strategic sourcing initiative.

Jeff Zients said Friday at the quarterly President’s Management Advisory Board meeting that mandating strategic sourcing initiatives can drive performance.

“Given that we’ve got some areas that are just so obvious we should be doing this together, and we have a history of not doing it that way, I think the risk-reward is very much tilted in the direction of [mandates instead of voluntary initiatives],” he said. “I think without it, we’re just going to be chasing this opportunity rather than getting ahead of it or catching up to it.”

Jeff Zients, acting director, Office of Management and Budget
The strategic sourcing initiative is part of the administration’s plans to use the power of the government’s size to buy everything from print management to mobile devices and services to IT hardware.

“The less you can make optional, the stronger the results,” said board member Gail McGovern, president and CEO of the Red Cross.

Board members also recommended measures to enhance data collection and utilization in the decision making process. That should include making requests for information on cost data prerequisites to solicitations, members wrote in the slides prepared for the meeting.

But the very concept of strategic sourcing has its skeptics, some of whom believe the program could put a squeeze on vendors and the economy.

“The fact of the matter is that there are about 15,000 to 20,000 federal contractors out there, and if they source each schedule down to even 40 contractors, you’re talking about limiting that original pool of 17,000 contractors, the gross majority of which are small businesses and socio-economic disadvantaged businesses,” said Rick Vogel, a federal government sales manager for Coast to Coast Computer Products, in an interview earlier this year. “They will be closing their doors and laying people off in significant fashion. Our concern is not just the detrimental effect on small businesses, but it’s the effect of that loss of the jobs on the U.S. economy as it is.”

Reducing improper payments

Along with the expansion of strategic sourcing, the board adopted recommendations to improve how the government reduces improper payments.

The PMAB said the government should create a team of internal and external specialists who can help prevent and detect fraud.

“Use of third party experts in areas such as forensic auditing, data base/analytic research and error/fraud audits can be very valuable,” the slides said.

The board also recommended the government deploy pilot projects to address the root causes of improper payments.

In 2011, improper payments totaled $115 billion, according to The administration has directed agencies to reduce payment errors by $50 billion before 2013.

Other recommendations from the advisory board include:

  • Establish meaningful incentives and deterrents at the organizational and individual level, which could include contingency-based incentives for third- parties, incentives for whistleblower hotlines and recognition of internal control best practices;
  • Develop a communications plan to ensure all stakeholders understand their responsibilities and consequences for improper payment error and fraud;
  • Analyze relative risk among different types of programs and payment activities, and tailor actions based on the highest value opportunities.

The board’s recommendations aim to improve accountability among agencies and anyone administering federal funds, said board member Greg Brown, president and CEO of Motorola Solutions.

“Leading ultimately, hopefully, towards some centralized verification, centralized database, centralized capacity, so that the deployment of a portal and data analytics … over a few years can unite all agencies,” Brown said.

Board members also said the government should focus on reducing payment errors in the Labor Department’s unemployment insurance program.

The PMAB has scheduled its next meeting for Oct. 12.


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