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24,684 page views
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Primary Functional Area : Contracting
OMB’s Definition: A collaborative and structured process of analyzing an organization’s spend and using the information to make business decisions about acquiring commodities and services more efficiently and effectively.
As a tenet of Supply Chain Management, Strategic Sourcing represents a shift from buying tactically, on an as-needed basis, to buying collaboratively, with well-planned service acquisitions that consider spending trends and future requirements of the entire enterprise. Strategic Sourcing is applying the best approach to spending money. It is aligning source selection processes and other approaches to sourcing goods and services. It is meaningful and effective competition to get the best deal for the taxpayer.
Strategic Sourcing benefits include:
- Increased collaboration and communication
- Enhanced supplier relationships and market expertise
- Improved holistic views of Defense-wide requirements
- Increased workforce skills, efficiency, and effectiveness
- Increased understanding of small business spend and markets
- Standardized business processes
- Maintained workforce balance
- Reduced number of duplicative business arrangements
- Reduced duplication of effort
BENEFITS FROM STRATEGIC SOURCING (STAKEHOLDER/STRATEGIC SOURCING BENEFIT)
DOD LEADERSHIP
- Enterprise-wide view of goods and services spend
- Enhanced acquisition forecasting capabilities
- Demonstrated stewardship of defense funding
- Demonstrated commitment to small and disadvantaged business utilization
- More efficient use of acquisition personnel
DOD CUSTOMERS (I.E., REQUESTING OFFICES)
- Greater input on goods and services requirements
- Demonstrated program budget savings resulting from Strategic Sourcing
- Access to more diverse pool of goods and services providers
- Standard, shared process for requisitioning goods and services
- Reduced procurement cycle times
- More value-added services from procurement community
DOD CONTRACTING COMMUNITY (I.E., BUYERS – CONTRACTING OFFICES)
- More proactive collaboration with end-users on requirements
- More collaboration between commodity experts
- Increased availability and reliability of spend data
- More rigorous market analyses
- Better understanding of supply/demand drivers
- Greater leverage in deal making
- Improved planning for meeting socio-economic acquisition goals
- Standard, shared process for coordinating and executing purchases
- Improved analytical capabilities
- Improved channels for sharing expertise, lessons learned and best practices
- Enhanced professional fulfillment
DOD SUPPLIERS (I.E., SELLERS – PRIME CONTRACTORS)
- More efficient coordination for single vendors with multiple DoD contracts
- Opportunities to grow business across DoD through more efficient, coordinated contracting
- Opportunities to compete on multiple levels – not just contract price
- Increased contracting opportunities for small disadvantaged businesses
- Standard, clearly understood process for doing business with DoD
- Opportunities for more in-depth, multi-level contract negotiations with DoD purchasing personnel (Source: Adapted from Defense-Wide Strategic Sourcing Program, Concept of Operations, approved January 2005, pp. 15-16)
Spend Analysis is the foundation for identifying Strategic Sourcing focus areas. A spend analysis assesses the breakdown of spend in terms of:
- Who did the buying? (Contracting Agency)
- Who did the spending? (Requesting Agency)
- How much was spent?
- What type of contract award was used? (BPA, PO, Delivery Order, Definitive Contract)
- What was purchased? (Portfolio Groups/FSC/PSC)
- What was the size of the purchase? (>$1M, <$1M, Micro Purchase threshold, etc)
- What acquisition method was used? (Assisted vs. Direct)
- What type of contract was used? (Cost, FFP, T&M, etc)
- Who received the work? (Top 1%, Top 10, Top 100)
In the Department of Defense the foundation for Strategic Sourcing is spend data and portfolio analysis and management. The spend analyses play a critical role in DoD acquisitions as it provides transparent, powerful information that Military Departments and Other Defense Agencies can use to assist in making Strategic Sourcing decisions. Both commercial organizations and the federal government rely on spend analyses to evaluate spend patterns in order to identify what the organization is buying, how they are buying, and from what suppliers. This knowledge and understanding can identify the right and wrong results from strategic decision-making and enables organizations to improve on their approaches to sourcing goods and services. Portfolio management provides a management structure for procurement spend and drives insight and collaboration, thereby increasing data transparency and reducing duplicate business arrangements. It also helps acquisition personnel build deeper functional skills by allowing them to specialize in grouped like-services/commodities.
Strategic Sourcing must be performed continuously to understand the constant changes in organizational spend – both past and future. It not only addresses actions leading to contract award, but actions and spend taking place after contract award. Most importantly, Strategic Sourcing activities are accomplished early so as to shape and influence the development and approval of the individual contract acquisition strategy – especially as it relates to the sourcing decision.
Strategic Sourcing solutions can range from implementing supplier partnerships, to establishing centers of excellence (based on region or core competencies), to leveraging strategic business arrangements that garner results for the enterprise. By creating an environment of data transparency and instilling a culture of strategic decision-making and collaboration, the Department can provide strategically sourced goods and services that maximize procurement dollars, resources, and warfighter support. Strategic Sourcing is not simply about reducing the number of DoD contracts or reallocating spend; it is about working collectively and operating as a single, unified acquisition workforce. It seeks to maximize enterprise-level benefits by achieving for the warfighter the right balance in terms of product/service quality and innovation, delivery time, prices, competition, contract administration costs and workload, and socio-economic goals. Therefore, it is DoD’s vision to: Institutionalize Strategic Sourcing across the DoD Supply Chain to Better Meet Warfighter Needs and Maximize Taxpayer Value.
Defense Acquisition Guidebook, Policies, Directives, Regulations,
Laws
[Suggest Change]
Office of Federal Procurement Policy Memos:
Best Practices, Lessons Learned, Stories, Guides,
Handbooks, Templates, Examples, Tools
[Suggest Change]
Best Practices (identified by the Services Acquisition Reform Act (SARA), Section 1423 Acquisition Advisory Panel in 2007):
- Invest time and resources necessary to understand and define requirements
- Use multi-functional cadre to plan procurements, conduct competitions and monitor contract performance throughout the term of the contract
- Rely on well-defined requirements and competitive awards to reduce prices and to obtain innovative and high quality goods and services
- Establish objective measures of performance and continuously monitor contract performance
- Rely on carefully crafted standardized terms and conditions, developed with vendor input, to manage risk and ensure quality performance
- Use fixed-price contacts when feasible
- Use relatively short-term contracts (3-5 yrs) with right to re-compete before contract has run full term
- Achieve time to award in 6-12 months
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Page Information
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Page Views
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24,684
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Created on
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4/27/2009
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Modified on
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6/9/2016
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Last Reviewed
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6/9/2016
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