A new vision has emerged among top Obama administration officials for how they want federal contracting to look in a few years:
- Key categories of spending — information technology, professional services, construction, etc. — will be aggregated across agencies and managed by dedicated executives who will focus on smoothing out pricing variability, analyzing spending data to optimize procurement strategies, culling duplicative contracts, and negotiating better deals based on overall governmentwide demand.
- New digital tools will help procurement agents navigate the myriad contracts available. Those tools will provide quick access to the range of prices being paid at other agencies for comparable products and services to ensure fair pricing.
- Databases on spending across agencies will inform smarter procurement approaches that leverage government buying power.
Known as Category Management, the approach is used widely in industry and in the United Kingdom, say proponents like Office of Federal Procurement Policy Administrator Anne Rung.
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"We need to propose a new vision for purchasing — one that fundamentally shifts from managing purchases and prices individually across thousands of procurement units to managing entire categories of purchases across government collaboratively and in sync," Rung told an audience of contracting officials in November.
"By bringing common spend under management including collecting prices paid and other key performance information we can ensure, among other things, that agencies get the same competitive price and quality of performance. We can also free up agency acquisition personnel to focus on the really complex agency specific procurements, which I think is key. At the same time we are giving vendors one place to go and one person accountable for shaping the strategic direction of that one common category."
Each procurement category will be led by a senior official who may be from industry or government, but who is an expert in that category.
"So each category manager would really understand the buying trends, what drives cost, new innovations on the horizon and emerging companies. And this type of expertise from a team that understands the market is also how you drive greater innovation," Rung said.
Top-level support
Top officials at the General Services Administration have been making strides toward this vision within the last year. What's new now is that President Obama personally endorsed the effort in a meeting last month, giving it greater momentum.
The effort represents a huge change from the decentralized approach now in place that has led to countless duplicative contracts, uncoordinated spending, and considerable chaos at the ground level where requirements are assembled and task orders awarded.
Since 2014, the administration has moved forward on all fronts, tasking agencies with reorienting their contracting around more efficient categories and away from the thousands of contracts and decentralized task orders awarded every year. While there will be 17 categories total, the administration is focusing first on 10 basic categories, including IT, professional services and construction.
By the end of fiscal 2016, the government will have critical contract data for the $275 billion of spending in the 10 most basic categories, and it will have tens of thousands of acquisition workers able to access that data to make better decisions, Rung said. Agencies will also be getting data on the efficiency and operations of their own purchasing officers, and they will be able to track the number of transactions and their relative prices.
"In short, we'll have institutionalized Category Management in the U.S. federal government, and started generating savings, less contracts and better overall performance," Rung said. "We have less price variability in identified categories. We have strong government-industry communication and collaboration."
The main goal is to reduce duplication of contracts, which can be a drain on agency time and resources, said Tom Sharpe, commissioner of the Federal Acquisition Service at GSA. "It is an endless cycle, limitless new solicitations, and numerous bid and proposal activities," Sharpe said of the way things work today. Agencies should instead focus on core mission activites and use existing contracts, according to GSA.
By instituting Category Management, agencies can cut down the amount of contracting activities by purchasing through pre-vetted contracts under the advice of knowledgeable experts. That will save agencies money they can spend on mission-critical activities, he said.
"You will hear the term 'Spend Under Management,' " Sharpe told an audience last month. "That simply means to me that, for these categories, we increasingly are having our procurement obligations go in a direction that best meets the taxpayers' interests." That translates into fewer contracts, more socioeconomic participation, more sustainability in procurement, a faster process, and a better sense of what constitutes best value, he added.
"The preferred approach would be a contract that could be shared across government. A lesser preferred approach would be a contract that simply supports one bureau," Sharpe said.
Transparency is key
GSA is already reforming its rules to help create price transparency — a linchpin in the Category Management effort — requiring contractors to report prices they offer agencies for products and services. GSA has already saved agencies more than $300 million since 2010 by using enhanced pricing data.
"The current lack of transparency on prices paid by government customers has led to significant price variation, sometimes 300 percent or more, for identical purchases by federal agencies from the same commercial vendor as well as the unnecessary duplication of contract vehicles," GSA wrote in the proposed rule.
The proposed rule would allow agencies to compare prices on products and services and would be implemented in all of GSA's governmentwide contract vehicles, except for its Multiple Award Schedules contract vehicles, where the agency would phase in the new rules.
The practice of Category Management means federal spending will be divided into a number of categories, such as facilities, IT or professional services spending, and agencies with expertise in each will take the lead on providing contracting expertise and knowledge to other agencies.
GSA will be leading the professional services and the office management categories, while the Defense Department will be leading the transportation category. The Office of Personnel Management will lead the human capital category, according to OMB. OMB will be leading the IT category, and it plans to pick somebody to lead that category later this year.
Eventually, the $428 billion of federal spending, 60,000 acquisition professionals and the thousands of yearly contract actions will all be organized around the new categories, according to Sharpe.
Tiffany Hixson, director for GSA's Northwest Arctic Region, said the Federal Acquisition Service is organizing itself around the various spending categories and the contracts that provide those services.
"That is going to be a heavy lift and a lot of work for both industry and for us to better meet our customer's requirements. We are already hearing from customers that the same structure today is not working for them," Hixson said.
Most important of all, GSA is stressing flexibility in its workforce and new tools to help contracting officials make better, smarter decisions, Hixson said.
GSA is working on building a common acquisition platform that will help agencies direct their spending in the new categories, offering best practices and contract terms, as well as price transparency on the services and products offered through the various contracts.
The potential savings by having agencies move to a category management system is enormous if done correctly, according to Michael Fischetti, executive director of the National Contract Management Association.
Category Management also has the potential to encourage wider industry participation in federal government by lowering the investment companies' need to bid on contracts. The private sector would know who to go to for various products and services, and the number of contracts would drop, meaning companies would not have to constantly apply for new contracts, he added.
"The rules of the game would be clear, and the opportunities would be greater for potential contractors," Fischetti said. "It may be one of the most effective things we are able to do."
