The Obama administration’s category management initiative seems to be slipping under the radar. And there is no time to lose, because the comment period ends after Nov. 7. This program will hurt many industry providers, especially small businesses. Yet many people have not yet heard about it.
The Office of Federal Procurement Policy (OFPP) is now at the “draft” stage and plans to roll out the category management paradigm over the next three-to-four years starting right away. There are plenty of good reasons as to why you need to complain about this program to OFPP, your trade groups and congressmen and senators.
If your company is among the 95 percent, this article is written for you. If you are a government administrator wanting to be served by healthy contractor firms, then this also includes you.
A General Services Administration leader got the idea of applying category management to federal procurement, and Anne Rung, the former administrator of OFPP, took responsibility for implementing the program in 2014.
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She claimed that the program soon started saving money for the government. In 2016, the OFPP formed a council to govern the category management program composed of representatives from the largest agencies/services.
On Sept. 30, Rung left the government, but as a parting “gift,” she left a circular proposing to make category management permanent and widely implemented.
Category management applies to more than half of what the federal government buys.
How much and to what extent the concerns of the suppliers identified here are true will not be known until OFPP, etc., step back and conduct a serious study of the type a Big Four accountant firm is qualified to perform. As you can imagine, the changes envisioned by category management would be especially hard on small businesses.The potential for disruption of relationships between small businesses and their customers is huge.
OFPP has plans to keep the same percentages of business earmarked for small businesses. However, if the vehicles left in place are in a different state and are run by people they don’t know, how long will it take small businesses to adapt to the changes? How many small businesses will be badly hurt, and how many will be forced to go out of business? How many large businesses will be disrupted? We expect that the industrial disruptions caused by category management as presently envisioned will affect both large and small business. However, the outcomes will likely be worse for small business since they typically have fewer cash reserves and less capability to handle market stress. We will not know what the net effect of this radical program would be until the authorities at OFPP, GAO, and GSA undertake a serious study of likely outcomes.
Here are some ideas about what you can do to help save us from category management:
Comments could center on:
APMP recommends with respect to lack of industry education: OFPP should spend a minimum of six months promoting, informing and educating industry, especially contractors, on the definition of category management, why it is being implemented, and any research data that shows why it was adopted and how it will help both the contracting community and the U.S. government.
APMP recommendation with respect to impact to small business: Prior to implementation, hire a polling firm and/or a group of consulting economists to offer guidance about how implementing such a large initiative will impact small business, based on research data.
APMP recommendation: If there are impact studies or other research that demonstrate the net effect of category management on small business, the OFPP should release those studies. If there are not, we urge such a study that focuses on the impact of this decision, and if it should be implemented.
Note: The draft circular can be seen here.
The deadline for comments is Nov. 7.
Russell Smith is the president of Organizational Communications Inc., a full-service proposal consulting firm in business for 32 years.