Back to basics has been a little mantra of mine recently. I have noticed more and more variations on a theme that really have seemed to complicate what would otherwise be straight-forward business concerns. Over-complicated solutions to Business 101 concepts tends to drive me crazy (but not certifiable). Today, I turn to the government acquisition process.
Clearly, government agencies are under increasing pressure to cut costs (ok, technically they are budget cuts, but let’s not split hairs). Overall government contract spending has been declining “steadily” for the past 3 years and more cuts are coming as the U.S. tightens its belt. So, how is an agency to continue providing a good product and still remain competitive? (Sounds like a discussion you had in Business 101 doesn’t it?)
The U.S. government is the largest purchaser of goods and services in the United States. U.S. “big-box” stores use their power as purchasers of large volumes of products to reduce prices below what would normally be charged by manufacturers and wholesalers. Shouldn’t the government be able to do the same thing?
In mid-2011 the writing was on the wall that strategic sourcing would begin to gain favor as a way to reduce costs. This technique for reducing costs has been around, seemingly, forever and can lead to significant savings. Unfortunately, since 2005 when OMB tried to move this initiative forward, agencies have not been using the technique well. Fortunately, the Obama administration renewed the initiative in a memo released Dec. 5, 2012.
Example of Strategic Sourcing: This year, the DOD has to buy 3000 new laptops across all departments. (Army needs 500, Navy needs 250, Marines needs 300, Air Force needs 400, DCAA needs 1500, and HQ needs 50). Normally, each buying authority would buy the smaller number because “their needs are just a little different.” Under strategic sourcing, all 3000 would be purchased through a single buyer and issued to the subordinate offices. The difference between buying 250 laptops at $800 each or including those in a larger buy at $600 each is significant.