Strategic Sourcing is the collaborative and structured process of critically analyzing an organization's spending and using this information to make business decisions about acquiring commodities and services more effectively and efficiently. It helps agencies to:

• Optimize performance
• Minimize price
• Increase achievement of socio-economic acquisition goals
• Evaluate total life cycle management costs
• Improve vendor access to business opportunities
• Increase the value of each dollar spent

Strategic Sourcing is intended to: 

• Allow government to develop deep insight into markets and life cycle cost drivers
• Capture and consistently develops best practice federal requirements
• Implement best practices around demand management
• Strategically manage inclusion of targeted socio-economic firms
• Carefully manage commodity contract portfolios to consistently deliver and improve upon negotiated best values throughout the contract administration phase.

Strategic sourcing is NOT:

• Bundling
• Competitive Sourcing
• Consolidated buying only
• Price over value

The federal government spends approximately $300 billion annually on goods and services to support agency missions. It is estimated that agencies spend in excess of $43 billion on cell phones, copiers, office supplies, express delivery services and IT hardware. According to the Office of Management and Budget (OMB), "Strategic sourcing has more potential for taxpayer savings than any other initiative."

The benefits of Strategic Sourcing go beyond price savings to reduction in total cost of ownership:

• Reduction in Cost Per Unit
  • Pricing improvements
  • Supply chain savings
  • Reduced lifecycle costs
• Change in Consumption Volume
  • Demand management
  • Specification review
• Improved Operating Efficiency
  • Reduced Procurement and Non-Procurement Related Operating Expenses
  • Performance Monitoring
• Improved Supply Chain Management
  • Socioeconomic goals (structured analysis of small/disadvantaged business opportunities)
  • Optimized supplier relationships

There are dollar savings and process improvements to be derived from Strategic Sourcing. Federal government, industry suppliers and ultimately the US taxpayers benefit when government can better articulate its requirements and provide committed purchase volumes, and in return, industry suppliers can provide better pricing and solutions.

Through closer supplier relationships, process efficiencies result. E-enabled relationships and increased visibility into purchasing can result in standardization, decreased costs and time, and improved quality.

In May of 2005, OMB, Office of Federal Procurement Policy (OFPP) released a memorandum to all Federal Chief Acquisition, Information, and Financial Officers announcing the establishment of a Strategic Sourcing Initiative. The memo required all agencies identify no fewer than three commodities "that could be purchased more effectively and efficiently through the application of strategic sourcing ..." by October 1, 2005; develop strategic sourcing plans, goals and objectives, and performance measures; develop a governance structure; and develop communications and training strategies.

GSA, in partnership with Treasury, launched FSSI on November 16, 2005. FSSI is co-chaired by the U.S. Department of the Treasury and GSA, and counts more than 23 federal agencies, both military and civilian, as active participants. Current FSSI commodity teams include Express and Ground Domestic Delivery Services (exGDDS), Wireless Telecommunications Expense Management (TEM) Services, Information Technology (Printers and Copiers) and Office Supplies.

The primary goals of FSSI are to strategically source across federal agencies, establish mechanisms to increase total cost savings, value, and socioeconomic participation; collaborate with industry to develop optimal solutions; share best practices; and create a strategic sourcing community of practice.

Mary Davie, GSA and Tom Sharpe, Treasury, are the FSSI co-chairs. The GSA team leads are:

Office Supplies

• Jeffrey Lau, jeffrey.lau@gsa.gov, (212) 264-2459

FSSI Wireless Telecommunications Expense Management (TEM) Services

• Mike Loria, michael.loria@gsa.gov, (504) 589-4348

Express and Ground Domestic Delivery Services

• Blaine Jacobs, blaine.jacobs@gsa.gov, (703) 605-2892

• Creation of a knowledge sharing portal at Defense Acquisition University
• Senior Procurement Executive (SPE) community building -- monthly conference calls to share information across agencies and manage the knowledge portal.
• Share strategic sourcing teams -- identify overlaps in agency sourcing efforts; agree to collaborate on strategic sourcing to gain the greatest leverage and efficiency; GSA, Treasury and OFPP to build model; GSA selected to lead current FSSI commodity teams.

The FSSI commodity teams (led by GSA acquisition and contracting professionals) are following the OMB-supported commodity strategic sourcing process:

• Conduct Opportunity Assessment/Select Commodity
• Profile Commodity
• Conduct Supply Market Analysis
• Develop Commodity Sourcing Strategy
• Develop and Implement Acquisition Strategy
• Manage Sourcing Performance

There is a well known tradeoff among quality, schedule, and price, and it is the job of government acquisition professionals to maximize the government’s value considering these and other factors. A reduced price does not necessarily result in reduced quality. Vendors routinely provide discounts without sacrificing quality or affecting schedule.

Strategic Sourcing ranges from the obvious volume discounts, to reengineering processes and relationships to identify and eliminate false tradeoffs. Many suppliers routinely provide better value at lower costs year after year, by:

• Applying innovation
• Working with buyers to support demand management
• Eliminating non-value added “requirements”
• Identifying ways to otherwise reduce the costs of doing business

The government will focus on price improvements, but not at the expense of:

• Quality
• Supporting socio-economic goals
• Reducing total cost of ownership
• Maintaining or improving value to the end users
• Improving our detailed visibility into how much we spend on goods and services

Specific changes to government requirements will be identified commodity by commodity as we better define our shared requirements. The vendor community can assist us in providing data on our usage of goods and services, to help supplement our information systems and gain deeper insights and continuously improve our spending.

GSA's historic role is leveraging the government's market power and streamlining the buying process on behalf of the taxpayers. The Schedules program itself, is one potential platform for Strategic Sourcing. As a potential platform, the Schedules carry a number of advantages:

• Key terms and conditions are already there, and others (such as data reporting requirements to help with spend management) can easily be added in Blanket Purchase Agreements or task orders.
• Easy ability to harness the power of continual competition to ensure that performance remains high, throughout the life of the Strategic Sourcing solution.
• Ability to move seamlessly from solution to solution is an added benefit that can help agencies maximize cost or technical advantages of the products or services that are strategically sourced.

The Schedules program needs to continue to play its traditional role. Strategic Sourcing will apply to several specific commodity or service groupings. We envision that much, but not all, of the Government's requirements can be accomplished through these Strategic Sourcing vehicles.

For comparative purposes, GSA has established over 18,000 Schedule contracts crossing 43 separate multiple awards schedules. The Schedules contracts themselves leverage the Government's market power and command good pricing, while sharply reducing the administrative burden associated with government procurement.

No, Strategic Sourcing does not automatically lead to single vendor solutions. It will be up to each team to weigh the benefits and risks of an acquisition strategy, given that agencies may be challenged to balance competing interests. Multiple awards are likely in many cases, for example to preserve competition within the period of performance or to improve socio-economic firms participation. Some vendor rationalization is likely, especially with respect to multiple contracts with a single vendor.

Each team will decide how best to partner with industry in achieving their overall Strategic Sourcing goals. Again, as the Schedules program is a potential platform, in many cases new contracts may not even be required.

Small business participation is critical in the success of Strategic Sourcing efforts. An explicit goal of the FSSI program is to maintain and/or enhance socio-economic goals. Partnering with industry during key stages will enable us to meet or exceed our mutual goals.

The FSSI teams have baselined current spending in each area, including an understanding of how much is being spent with small business today.

The teams have been chartered to develop sourcing strategies that expand the business done with targeted groups against that baseline, quantify the expected changes and compare this with actual results as required by OMB guidance on Strategic Sourcing.

Each participating agency will continue to be responsible for achieving its socio-economic goals and will need to evaluate the impact of FSSI sourcing recommendations.

Flexible contract vehicles, harnessing the power of continual competition, providing substantial data enabling spend analysis, and driving down prices while delivering world class service.

The Strategic Sourcing teams will consider options for appropriate contract vehicles, including Blanket Purchase Agreements off existing GSA Schedules, introduction of new GSA Schedules, Multiple Agency Contracts, Government Wide Agency Contracts, and if necessary, new contract vehicles.

Yes, the Defense Acquisition University (DAU) offers continuous-learning modules/ courses related to Strategic Sourcing, including a Strategic Sourcing Overview (CLC 110) and Spend Analysis Strategies, CLC 108. You can view and register for these courses at https://learn.dau.mil/html/clc/Clc.jsp.

OMB and the federal government community will help shape the next set of commodities or services for Strategic Sourcing. Some areas of common interest within the government for future strategic sourcing efforts have been suggested, for instance, office furniture and medical supplies.

Who will manage future commodities is still a question. While GSA is leading and/or managing the first five FSSI commodities, we fully expect that other agencies will step up and express interest in managing future commodities based on their specific areas of expertise.

To discuss participation on one of our FSSI teams or to get more information on FSSI, please contact Kristina Nelson, Kristina.nelson@gsa.gov, or call (703) 605-5556.