What will make category management trickle down?

If a category management memo falls in the forest and no one is there to hear it, does anyone care that it fell?

Michael Fischetti
Michael Fischetti

Wrong analogy? Well you get it because that’s the sentiment many are asking as the Obama administration continues its full-court press with changing how agencies buy products and services. Despite multiple memos, including the latest on July 1 around data breach services, and now a proposed rule to all but mandate the use of strategic sourcing contracts, there is a growing question of how does the Office of Federal Procurement Policy ensure the requirements trickle down far enough?

“I think the incentives or punishments around category management are unclear. What will OFPP do about it if agencies don’t follow the memos?” said Michael Fischetti, the executive director of the National Contract Management Association (NCMA). “With the decentralized nature of government acquisition and management, especially at the lower level tier organizations, there are many that may not get the memo or choose just not to respond to it. Chief acquisition officers and senior procurement executives don’t really have a lot of authority.”

Fischetti and other experts don’t disagree with OFPP’s approach to improving how agencies buy and what prices they get. But category management is very much a build it and hope they will come approach.

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Take the July 1 memo to agencies around buying identity monitoring data breach response and protection services. Anne Rung, who by the way seems to have inherited a new title, U.S. Chief Acquisition Officer, in her last two memos, instructed agencies to use the blanket purchase agreement created by the General Services Administration after the massive data breach suffered by the Office of Personnel Management in 2015. It’s interesting the administration decided to use the new title on the last two memos, on par with the U.S. Chief Information Officer. Previously, Rung used the OFPP Administrator title, and as one industry expert pointed out, Rung doesn’t buy anything so she is not an “acquisition officer” in the classic definition. But that’s a discussion for another time.

“When the BPAs were launched, OMB instructed agencies to review the pricing and terms and conditions of the BPAs in addition to any other credit monitoring services they may be considering in their market research and notify OMB prior to making an award outside of the BPAs,” Rung wrote. “[T]he IPS BPAs shall be treated as a preferred source for federal agencies when agencies have a need for credit monitoring, breach response, and identity protection services. Consistent with category management principles, GSA, as the contract manager, will work with an interagency team to periodically review and refresh, as appropriate, the contract terms and requirements to ensure the BPAs continue to reflect the best identity protection practices and agencies’ needs.”

Fischetti said to compel agencies to use the IPS BPAs or any other preferred source contract, such as the GSA Schedule 70, NASA SEWP and the National Institutes of Health CIO-SP3 contracts for laptops and desktops, there has to be a combination of memos with reporting requirements, culture change and training.

“This is the right step, but how does OFPP develop that sense of community? There almost needs to be ground swell of collaboration around the category,” he said. “OFPP needs to make it easy and not a special case or extra work for contracting professionals.”

Paul Donato, a principal at Ernst & Young and co-author of Implementing Category Management in the Federal Government a category management case study, said part of the goal of category management is to reduce the amount of “maverick spend” that happens across government.

“Maverick spend usually happens when the main channel is not meeting the user’s requirements or is not easy to use,” Donato said. “You have to try to make sure you understand, to the greatest extent possible, the requirements of the user as well as all the potential variables that are important as you develop and implement solutions.”

Donato said Ernst & Young’s experience in working with public and private sector clients highlights the increased understanding of buying more efficiently. He said it’s a matter of the agencies looking at acquisition more holistically.

“When we work with our clients, we find that spend analysis is a key piece. Where do you spend your money? Who are you spending it with? And what’s driving those answers or spend behaviors?” he said. “GSA and OFPP are looking at these common categories and what they are doing is smart. They realize with something like identity management services, everyone is impacted by this so they’ve gone out and looked at the requirements and put something in place that can be leveraged by all agencies.”

The idea of putting together contracts that every agency can use for common products or services has been the driving factor behind strategic sourcing. It also led lawmakers to add a provision to the Federal IT Acquisition Reform Act (FITARA) to require contracts under the Federal Strategic Sourcing Initiative (FSSI) to be “preferred sources.”

The Federal Acquisition Regulatory Council issued a proposed rule June 20 implementing the provision.

The proposed rule would require “contracting officers when purchasing supplies or services that are offered under the FSSI, but the FSSI is not used, to document the contract file to include a brief analysis of the comparative value, including price and non-price factors, between the supplies and services offered under the FSSI and those offered under the source(s) to be used for the purchase.”

Comments are due Aug. 19.

But the FSSI concept has struggled, especially around office supplies, in terms of its impact on small businesses.

There are growing concerns that the focus on category management also could limit which companies have access to the federal market and limit competition for agencies.

Lloyd Chapman, president of the American Small Business League, said the proposed rule, and category management more generally, are too exclusive.

He said the council “should focus their efforts to develop policies that are more inclusive and make it easier to start a new small business and win government contracts.”

Fischetti said the proposed rule, in many ways, is asking agencies to do something they should already be doing.

“All of these are requirements in the FAR anyways. But what happens in practice is either agencies get lazy or make some decision that says they want their own vehicle because the perception of having another agency do contracting for you means you lose power,” he said. “There is nothing in the memo that isn’t already required other than the new reporting part.”

And that brings us full circle back to how Rung as OFPP administrator, err U.S. Chief Acquisition Officer, can get agencies to follow the spirit and intent of category management.

Donato said with the continued tightening of agency budgets, he sees acquisition professionals understanding the benefits of managing their spending, increasing the efficiency of how they buy and ultimately moving those resources toward mission or more complex acquisitions.

“People are beyond the view that this is just another mandate and are looking for the benefits of category management,” he said. “A year from now, I believe agencies will be more focused on looking at total cost of ownership and how to manage at the category level. My belief is you will see people taking a hard look at acquisition and how to embed category management principles in their day-to-day acquisition efforts. Eventually category management will become the norm in how agencies operate.”

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