Applying Strategic Sourcing in Government Acquisition

The problems with the federal procurement process are well documented in the literature.  Bloggers have also suggested that new approaches be adopted by federal acquisition contract officers to apply the practice of “strategic sourcing”, that implies  that the collective buying power of the federal agencies can be leveraged to squeeze better prices from suppliers on common commercial products.    Another idea is that before the contract (or task order) goes out for bid, that  the government tweak the requirements to save significant money for little or no performance decrement — and then to reward any bidders whose ideas are adopted in the final RFP with some number of evaluation points for each idea accepted. Steven Kelman, Former head of the Office of Federal Procurement Policy, and now a professor at the Kennedy School at Harvard University, has written extensively about these problems in his blog.

Kelman points out that the application of private sector sourcing practices to federal acquisition is not a new idea. Even today, the General Services Administration offers strategic sourcing contracts for printing services and for domestic delivery services, with several IT products covered by blanket purchase agreements.  To date, however, the results have been less than exceptional.  Experts increasingly fear that officials are developing a “lowest cost technically acceptable” attitude for their procurements, through the use of reverse auction tools such as FedBid.

One of the misunderstandings that appears to exist is the fact  that strategic sourcing involves more than simply leveraging supply volume to get a lower price.  Strategic sourcing in fact involves the application of a set of sourcing tools to drive the best value to stakeholders across a specific category.  These tools are applied through a cross-enterprise category team, that develops deep expertise in a focal category of products or service, but whose skills include both technical understanding and supply chain management training.  Several sourcing tools are applied in strategic sourcing:  a) Total Cost of Ownership are applied to understand the life cycle costs of a product or service, b) Supplier Scorecards to apply a weighted performance assessment of multiple performance dimensions to supplier RFP’s, and c) Supplier Relationship Management tools to develop improved communication and transparency on contracts to drive cost savings are all commonplace in the application of strategic sourcing in the private sector.  These skills should ideally be part of a contract officer’s capabilities, but indications are they are lacking today.