Category Management: a New Model for U.S. Federal Contracting
GSA Schedule | 3 Min Read
For the better part of a decade, the General Services Administration (GSA) has been working hard to answer one key question:
“How can we improve how the federal government buys goods and services?” The answer: “Become more strategic!” [Click to Tweet]
The current acquisition environment is fraught with redundant acquisition programs and duplicative efforts for commonly purchased goods and services. When you consider that there are more than 500 different departments, and agencies are collectively spending half a trillion annually on their requirements, it becomes clear that such redundancies can lead to wasteful spending of taxpayer dollars.
Implementing the Solution
Recognizing the need for a more unified approach to procurement, the Office of Federal Procurement Policy (OFPP) launched the Federal Strategic Sourcing Initiative (FSSI) in 2005. The initiative established a partnership between the Department of Treasury and GSA to help provide a more systematic and collaborative approach to making strategic sourcing decisions across the federal government.
The purpose of this initiative was to maximize the value of taxpayer dollars. It led to the establishment of the Strategic Sourcing Leadership Council (since renamed the Category Management Leadership Council), tasked with helping to optimize performance, minimize price, and increase the value of each dollar spent. As a result of the effort, nine FSSI contracts have been issued and generated more than $400 million in savings.
Has the FSSI Made a Difference?
While certainly a step in the right direction, the FSSI effort has not had a holistic impact on the current procurement system. The current system is one marked by rampant contract duplication that continues to drive up costs, slow procurement, and limit innovation. It is not uncommon to find federal agencies awarding contracts for similar products and services (sometimes from the same vendors) at varying pricing levels and terms & conditions.
For example, it is not unusual to see price differences of as much as 300% for the same exact item purchased by two different agencies. Moreover the current system imposes requirements on contractors that are unique to government, increasing the cost of doing business in the federal marketplace. This is compounded by the calls from federal customers and contractors for GSA to become more customer service-oriented.
The Next Step
Enter – Category Management. In order to answer the call for a smarter, more efficient approach that represents a true paradigm shift in how government acquisition is conducted, OFPP launched Category Management government-wide in January 2015.
Led by administrator Anne Rung, the top federal procurement official tasked with ensuring that the federal government is making smart financial decisions, Category Management is an approach for buying goods and services where the federal government acts as a single enterprise. Common practice in the commercial world, Category Management takes common areas of spending, divides those into categories, and treats each category like a business. Each business is led by a category manager.
This new federal government purchasing model would fundamentally redefine agency purchasing behavior by unifying each source. Instead of managing individual purchases across thousands of procurement units, the model moves to oversee spending based on categories. By working in concert, agencies will be better able to leverage their buying power, share information, reduce duplication, foster greater discipline and organization, and drive innovation for the government as a whole.
OFPP has three goals:
1) Increase savings
2) Reduce the number of new contracts
3) Increase the amount of spend that falls under the Category Management initiative
It has also developed a “Spend Under Management Tiered Maturity Model” for evaluating its progress on managing spend under the new cross agency initiative. OFPP and GSA plan to save $2.3 billion by December 2016 and a total of $10 billion by the end of 2019 utilizing the new Category Management acquisition model. Additionally, they plan to increase spending under Category Management for goods and services by 40% by the end of 2016 and 80% by the end of 2019. From a contract duplication standpoint, both agencies also have goals of reducing the number of IT hardware contracts by 20% and 10% each for software and telecommunications. Time will tell if they are able to meet these aggressive goals.
Category Management Resources
In order to support and deliver best practices gained from the initiative, GSA has established the Acquisition Gateway as a starting point for procurement officials. The website helps them share information with one another, gather data on contracting options within a category, understand previous completed purchases and gain overall market intelligence. The goal is to allow agencies to compare products and services side by side using valuable information, such as which contracting vehicle has the most options and which ones charge fees for transactions. By better understanding the landscape, the acquisition gateway will optimize decision making by supporting buyers in making informed, data driven choices and aid the overall acquisition community in reducing the extreme price variability exhibited by the current purchasing environment.
To learn more about the Category Management operating model and how performance will be managed, you may review the Government-Wide Category Management Guidance Document or contact the Winvale team to see how this initiative will impact your business.
About Kevin Lancaster
Kevin Lancaster leads Winvale’s corporate growth strategies in both the commercial and government markets. He develops and drives solutions to meet Winvale’s business goals while enabling an operating model to help staff identify and respond to emerging trends that affect both Winvale and the clients it serves. He is integrally involved in all aspects of managing the firm’s operations and workforce, leading efforts to improve productivity, profitability, and customer satisfaction.