Total acquisition cost: The missing tool from the procurement reform toolbox

This column was originally published on Roger Waldron’s blog at The Coalition for Government Procurement and was republished here with permission from the author.

In 2013, the FAR & Beyond blog discussed the importance of measuring/assessing TAC, noting that “commercial best practices inform us that the key metric in measuring and delivering best value in procurement/logistics operations is total ownership cost. In government terms, let’s use the term total acquisition cost (TAC).”  In 2017, TAC remains the missing link in measuring, assessing, and, ultimately, reforming the procurement system to deliver best value mission support for customer agencies and the American people.

Acquisition approaches and decisions must be data-driven and must include the TAC, which should be comprised of all direct and indirect costs of acquisition.  In addition, because delay impacts cost, a mandatory element of the TAC is the monetized cost of time.  TAC also includes consideration of costs associated with government-unique requirements that are inconsistent commercial practice.  So too, it includes administrative costs, like the cost of data reporting, management, and oversight functions, including audits.

Recent procurement initiatives have not addressed TAC.  Instead, based on publicly available information, the Federal Strategic Souring Initiative and category management have focused on price-based measures to assess savings.  With regard to category management, the proposed circular from the end of last year also included a series of process-related measures that appear to have little or no relationship to determining TAC, to measuring value, and/or to assessing customer agency satisfaction.  For more on FSSI’s and category management’s “savings” performance measures, I commend to you Sean Nulty’s Federal Market Matters article in today’s Friday Flash.

In the case of Transactional Data Reporting, based on GSA’s Sept. 19, 2016 answers the Coalition’s 65 TDR questions, the four TDR performance measures appear to be: (1) competitive pricing; (2) increased sales volume; (3) small business participation; and (4) macro use of transactional data by category managers and teams to create smart buying strategies. The is no mention of TAC.  Aside from ignoring a key factor in the cost to the government and the quality of deliverables, it raises the significant questions regarding the transparency and soundness of the future TDR results.

As the new administration examines opportunities to reform the procurement process, it can and should include TAC in the procurement toolbox.  TAC will support examination of costs and benefits of government unique requirements, including reporting requirements.  It will support streamlining acquisition processes, increasing competition, and breaking down barriers to entry in the Federal market.  In short, TAC is vital to assessing and establishing clear, measurable operational goals that result in best value outcomes to meet mission requirements on behalf of the American people.

Roger Waldron is the president of the Coalition for Government Procurement, and host of Off the Shelf on Federal News Radio.

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