One area of federal government acquisition that has always fascinated me is the concept of “strategic sourcing.”  The Office of Secretary of Defense (OSD) website defines strategic sourcing as the collaborative and structured process of critically analyzing an organization’s spending and using this information to make business decisions. Strategic Sourcing involves the establishment or modification of acquisition vehicles to better address Federal Government procurement needs and/or more effectively leverage spend, market position, market knowledge… and capabilities… in contract terms and conditions. This process helps agencies optimize performance, minimize price, increase achievement of socio-economic acquisition goals, evaluate total life cycle management costs, improve vendor access to business opportunities, and otherwise increase the value of each dollar spent. (www.acq.osd.mil/dpap/ss/index.html)

One aspect of this idea the deliberate effort to achieve the best possible price and other considerations, based on quantity discounts.  Truly, it staggers the imagination to conceive of the vast number of items purchased across the federal government.  When aggregated, the US government is likely the largest single customer for any given commodity on the planet.  (NOTE – this is merely my supposition, I do not have data to support this claim, but it is useful to illustrate the scale of purchasing that I am referring to.)  Regardless, the idea that the government can combine quantities to make larger batch purchases appears to be a win-win for both the buyer and the seller.

So, why is it only recently, say the last 10 years, that the US Government has chosen to pursue strategic sourcing?  As with most questions regarding the federal behemoth, the answers are many, varied and not so simple.  For instance, the government is huge, and to achieve efficiency at the lower levels, procurement authority is decentralized as low as possible.  When the buying authority is decentralized, it is then somewhat challenging to consolidate purchases.  Also, while the sellers appreciate the volume, if they can sell the same item to 10 different buyers in lower quantities, the per unit price would tend to remain higher.  Combining those purchases into a single buy, or even multiple orders combined into a single lower price point, reduces the overall profit margin of the producer.  Naturally, they would prefer the multiple sales at a higher price point.  So there has been some resistance amongst industry, which translates into lobbying Congress and the back and forth of federal procurement policy.  All in all, it has taken years to get to the point where the federal government actively seeks volume discounts due to strategic sourcing.

With the US Government finally pushing for strategic sourcing, what outcomes have manifested from this?  First, the various agencies are encouraged to pursue common items and reduce specialization.  This is observed most prominently in the Department of Defense, as the various services are being directed to maximize commonality of systems, parts and spares.  There is increased frequency of “joint” programs for major weapon systems, which supports the strategic sourcing concept through quantity discounts for items, components and spare parts.  Additionally, the FAR contains language and guidance about Government-wide Acquisition Contracts (GWACs) and multi-agency contracts, which serve to support the centralization of purchasing via large contract vehicles that are accessible by multiple buying offices.  Another initiative is found in the General Services Administration (GSA), which has rolled out the Federal Strategic Sourcing Initiative (FSSI).  The FSSI currently operates in five areas: (1) Building Maintenance and Operations, (2) Janitorial and Sanitation Supplies, (3) Maintenance, Repair, and Operations (MRO), (4) Wireless FSSI, and (5) Office Supplies.  These offer a variety of contract vehicles and options, including Blanket Purchase Agreements (BPAs) and Federal Supply Schedules (FSS).

So, while it has taken awhile, the US Government has finally gotten earnest about promoting strategic sourcing, across the federal enterprise and down within the various agencies.  Combined with other acquisition reform initiatives like streamlining and commercialization, these efforts appear to be making massive impacts in the arena of federal contracting.