Federal Acquisition Service U.S. General Services Administration May 6, 2010 Acquisition Reform...

Federal Acquisition Service

U.S. General Services Administration

May 6, 2010

Acquisition Reform Using Strategic Sourcing as a Tool

Agenda

Introduction to Acquisition Reform

Strategic Sourcing Overview

Case Studies: Strategic Sourcing Driving Acquisition Reform

Spending on Federal contracts has more than doubled since 2002

CONTRACT SPENDING AND ACQUISITION WORKFORCEFY2002 - 2008

SOURCE: Office of Management & Budget

PRESIDENTIAL CHALLENGE

Reforming the government’s $500B+ annual contract spend is a key priority of President Obama’s administration

• Save $40 billion annually by FY2011• Terminate unnecessary contracts• Strengthen acquisition management• End the overreliance on contractors• Reduce the use of high-risk contracts

across government

“The Federal Government has an overriding obligation to American taxpayers. It should perform its functions efficiently and effectively while ensuring that its actions result in the best value for the taxpayers.”

President Barack ObamaMarch 4, 2009

Many agencies already have implemented reforms, resulting in increased efficiencies and real savings for the American taxpayer

SOURCE: Office of Management & Budget

Agenda




Strategic Sourcing is an identified and proven way to drive acquisition reform

Opportunity Analysis

Conduct Market

Analysis

Develop Commodity

Strategy

Select Sources of

Supply

Implement & Manage

Performance

2 3 4 5

ProfileCommodit

y

1

Profile Commodity

Strategic Sourcing is an analytical process for optimizing the government’s supply base while reducing Total Cost of Ownership and improving mission delivery

Develop More Strategic AcquisitionsStrengthen Acquisition Practices

… which can implemented through the use of Strategic Sourcing

OMB Director Peter Orszag identified ways for agencies to drive savings…

PRIMARY BENEFITS OF STRATEGIC SOURCINGPRIMARY BENEFITS OF STRATEGIC SOURCING

Reduction in Cost Per Unit

Reduction in Cost Per Unit

Improved Operating Efficiency

Improved Operating Efficiency

Improved Supply Management

Improved Supply Management

Pricing Improvements• Lower unit price• Volume rebates• Payment term discounts

Supply Chain Savings• Cost of capital• Warehousing costs• Shipping costs

Reduced Lifecycle Costs• Maintenance costs• Operating costs• Disposition costs

• PO Processing• Accounts Payable• Receipt/Warehousing• Standardized procurement

process

• Other operating efficiencies

Reduced Procurement-Related Operating Expense

Reduced Non-Procurement Related Operating Expense

Change in Consumption/

Volume

Change in Consumption/

Volume

Demand Management• Eliminate demand• Reduce consumption• Encourage substitution• Change product mix

Specification Review• Eliminate “gold-plating”• Simplify specifications• Alternative products

Socio-economic Goals • Structured analysis of

small/disadvantaged business opportunities

Optimized Supplier Relationships• Improved joint

understanding of needs and capabilities

• Increased efficiencies across the entire supply chain

8

The benefits of Strategic Sourcing go far beyond leveraging the government’s spend to negotiate lower prices

• Structured metrics and periodic review of contractor performance

Performance Monitoring

Strategic Sourcing promotes an effective acquisition system that meets government needs and ensures the prudent use of taxpayer dollars

DRIVES EFFICIENT GOVERNMENT OPERATIONS

IMPROVES VENDOR

PERFORMANCE

• Increases clarity of requirements• Optimizes supplier relationships• Improves competition & contract structures• Holds vendors accountable for meeting performance goals

• Provides visibility into spending habits• Lowers Total Cost of Ownership through data analysis • Creates commodity expertise• Enables better and more informed decisions by employees• Minimizes complexity for end-users

SUPPORTS ADMINISTRATION

GOALS

• Helps agencies achieve the President’s savings target of $40B

• Enables right sizing of the acquisition workforce by minimizing redundant contracts & activities

• Uses Federal acquisitions to drive sustainable and socio-economic goals

• Increases transparency & accountability

The Federal Strategic Sourcing Initiative (FSSI) is a cross-agency program created to drive use of Strategic Sourcing throughout the government

10

Develop commodity expertise and use best practices to generate governmentwide requirements and drive business process improvements

Aggregate requirements, streamline processes and coordinate purchases

Increase total cost savings, value, socio-economic participation, and sustainability

Create commodity teams and share knowledge with all government purchasers

Collaborate with industry to develop optimal solutions

Focuses on most promising government-wide opportunities to strategically source commonly purchased goods and services

Develops solutions through collaborative cross-agency “Commodity Teams”

Works under the purview of the Chief Acquisition Officer’s Council (CAOC) Strategic Sourcing Working Group (SSWG), and is monitored by the Office of Federal Procurement Policy (OFPP) within OMB

Leads the Strategic Sourcing Community of Practice with representatives from 18 federal agencies

FSSI OPERATING APPROACH

FSSI VISION & GOALS

Agenda




OVERVIEWOVERVIEW

INNOVATIONSINNOVATIONS

Second Generation Domestic Delivery Services Program

Est. Annual Total Government Spend $373M

Solution Implementation Timing

• 1st Generation: FY07 • 2nd Generation: FY10

One year (plus 4 option years) award to UPS based on efforts of a 15 agency Strategic Sourcing team focused on:

• Ensuring high quality service • Maintaining DDS1 savings• Lowering surcharge costs• Improving reporting & analysis capabilities

SOLUTION BENEFITSSOLUTION BENEFITS

• Collection & analysis of business intelligence data “evened the playing field” and eliminated incumbent advantage, resulting in highly competitive bidding

• Agencies have increased visibility into total cost of ownership for shipments, resulting in improved employee decisions

• Savings over 16% compared to Multiple Award Schedule rates and 7% below DDS1

• Elimination of fuel surcharges

• Streamlined acquisition processes and minimized redundant contracts across government

• Robust savings and usage reports

• Mode optimization and more efficient operations

Second Generation Office Supplies Program

OVERVIEWOVERVIEW

INNOVATIONSINNOVATIONSPROJECTED SOLUTION BENEFITSPROJECTED SOLUTION BENEFITS

• Over $40 savings over lifetime of solution

• Easy access to qualified and competitive small and disadvantaged businesses

• Minimized redundant contracting and program management activities

• Understanding government spending behaviors leading to further acquisition and usage improvements

Second generation acquisition is in process, with the goals of:

• Improving agency ability to procure competitively priced products while meeting socio-economic goals

• Lowering delivery and other “hidden” costs

• Focus on driving competitive pricing for those core items which government users purchase most

• Incorporation of point-of-sale terms to reduce price variability, increase ease-of-use, and improve compliance with mandates

• Collection & analysis of business intelligence data will allow agencies to better manage spend



• 1st Generation: FY07 • 2nd Generation: FY10

Wireless Programs

Page 14

OVERVIEWOVERVIEW

PROJECTED SOLUTION BENEFITS PROJECTED SOLUTION BENEFITS

A team is in the process of implementing a solution which will:

• Improve demand management• Leverage government volume to develop

governmentwide contracts• Enable agencies to optimize selection &

utilization of plans

INNOVATIONSINNOVATIONS

• Collaboration between IT and Acquisition communities

• Development of a full service suite of solutions to address agency wireless lifecycle needs

• Deeply discounted rates• Standardized services and plan types • Reduced inventory costs and billing errors• Minimized redundant contracting activities• Spend data to drive improved decision making

and lead to improved efficiencies and acquisition practices



• TEMS: FY08• Rate Plans &

Devices: Est. FY10

Printers, Copiers, Multi-Function Devices Program

OVERVIEWOVERVIEW

PROJECTED SOLUTION BENEFITSPROJECTED SOLUTION BENEFITS INNOVATIONSINNOVATIONS

• Enables agencies to lower costs and increase environmental performance by:

• Utilizing the most efficient equipment

• Making “green” print options the default

• Optimizes equipment deployment and usage through sophisticated Managed Print Services

• Multiple buy and lease options to meet specific agency requirements

• Designed to minimize agency spend on paper and toner

• Robust usage reports which will identify opportunities for additional savings

A team is in the process of implementing a solution which will:• Lower both equipment and consumable

costs• Provide new services on the Multiple

Award Schedule 36

Est. Annual Total Government Spend

$1B+ (includes consumables)

Solution Implementation Timing Est. FY11

Federal Acquisition Service U.S. General Services Administration May 6, 2010 Acquisition Reform...

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