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FrankJon

Has strategic sourcing gone too far?

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Has anybody else noticed the proliferation of agency-level strategic sourcing initiatives that seem to be of dubious value? Examples include vehicles that overlap significantly or completely with existing vehicles; vehicles under which the first order will use up the vast majority of the ceiling or estimated value; and vehicles championed primarily by the contracting community, that receive relatively little input from the requirements community.

My cynical side believes that some COs do this to put feathers in their caps and zeroes on their resumes, but I'm interested in hearing others' experiences and views.

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I saw this years ago -

1 hour ago, FrankJon said:

vehicles that overlap significantly or completely with existing vehicles

For a reason similar to this -

1 hour ago, FrankJon said:

some COs do this to put feathers in their caps

Except it was so a Senior Executive could put a feather in his hat.

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Now OMB and GSA are shoving the vehicles they believe are best down our throats.  They declare  a vehicle or set of vehicles as "best in class" and mandate their use through making us justify why we are not using them.  GSA OASIS for professional services, the new DoD Transcom contract for small package delivery, FSSI for office supplies, etc.   

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Bob,

The best in class list is located here:  https://hallways.cap.gsa.gov/app/#/gateway/best-class-bic/6243/best-in-class-bic-consolidated-list .  GSAs definition of "Best in Class" is here:  https://www.gsa.gov/acquisition/category-management/bestinclass .  It is on the public access to the Gateway so no password is needed. 

Some of these are almost mandatory such as FSSI or the Small Package Delivery.  While others are just highly encouraged with lots of justification such as buying desktops and monitors. 

 

 

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I'm looking at AutoChoice.  I'm assuming--since I haven't looked at the solicitation--that GSA issued an IDIQ for autos in its SINs.  In this case, Fiat, Ford, and Chevy were awarded contracts for that class of vehicles.  The buyer clicks the needs as options and makes its preliminary selection.  If it were me, I'd pick the Chevy Sonic with the 138 HP engine because I once owned a Cruze with that engine.  It's $1,000 more so I must justify it.

I faced a similar decision last year.  My SIN (and believe me we are talking sin) had 3 choices:  Cadillac ATS-V, Alfa-Romeo Giulia Quadrifoglio, and the Corvette Stingray with the Z51 handling package.  The Alfa Romeo Quadrifoglio (I can't change my ancestry) wasn't available, the Cadillac dealer didn't have the ATS-V to drive, the Chevy dealer had the exact Corvette in the showroom and it looked like an angel sitting at the curb waiting for me to test drive it.  The Alfa had 505 HP, the ATS had 464 HP, but the Corvette had only 460 HP.  All were 0-60 mph in under 4 seconds so they could kill me equally.  The Alfa and ATS had 4 seats but the Corvette had only 2 seats.  I went with the low price vehicle--and I'm still alive.

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12 hours ago, Boof said:

Now OMB and GSA are shoving the vehicles they believe are best down our throats.

Boof - I'm really talking about agency-level BPAs and IDIQs here, not governmentwide BIC vehicles. Actually, I think BIC, particularly for commercial items, makes a lot of sense on some level. We are one Government, after all, and acting as such would clearly be the more efficient option than what we do now. With respect, I also get a little tired of listening to COs who jealously guard their discretion like it's a sacred right. By and large, I'm much more likely to trust a vehicle premised on a governmentwide spend analysis than I am on a CO's intuition that she knows what's best based on comparatively limited market research.

Now, what I'm getting at my agency is COs who insist on layering multiple-award BPAs over those BIC solutions. And we're talking COTS here - items that can be purchased rather efficiently using LPTA. Because these BPAs are worth hundreds of millions of dollars, and because the CO insists that trade-offs will be used to establish the BPA pool, we are spending potentially thousands of man hours putting these in place. 

It's like agencies and COs can't leave well enough alone. They insist on having control over something that they can call their own because their thing will somehow be "better." Maybe it's human nature. I can't help but thinking we're just guinea pigs on a wheel - we pat ourselves on the back at the end of a long year, feeling like we accomplished something, when really it was wasted effort for the purpose of justifying our existence. (And the guinea pigs are in better shape than us at the end of the year, to boot.)

2 hours ago, bob7947 said:

I went with the low price vehicle--and I'm still alive.

Bob - I'm glad to hear that you came to your senses, went to the Honda dealership, and purchased the 2018 Fit. I love mine, too!

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Oh, since I'm on my proverbial soapbox, here's the other thing I get at my agency : A CO creating enterprise-wide solutions who refuses to allow BPA orders to extend beyond the life of the BPA.  All that time and effort.... :wacko:

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Hmmm, reminds me of the time that our field office needed a 90 HP outboard motor and, based upon mandatory use of GSA contract and lowest price, The contracting office had to accept a Chrysler outboard.  It ran approximately two weeks before the lower end failed. We sent it to a shop under warranty. Weeks later, it came back and lasted one more week.

We couldnt figure out how our Operations Division could buy Evinrudes and Johnsons and we got stuck with a Chrysler.   Ops explained some special requirements language that allowed them to avoid Chrysler. An employee brought his own boat and motor to work while we waited  for a reprocurement action.

Before joining the Civil Service, I lived in Hartford, Wisconsin, two blocks from the Chrysler Outboard factory.  My neighbor was a carburetion engineer there.  He got fed up with the poor quality of their products (their “engineering design”  was largely based upon buying other brands, stripping them down and copying or adapting the designs). He told me to NEVER buy a Chrysler outboard - that their lower ends were notoriously prone to failure.

So much for my first taste of mandatory Federal agency sourcing and buying on the basis of lowest price.  Then there was the GSA automobile fleet of the late 70’s early 80’s...ARRGH!  Lowest priced technically (un)acceptable clunkers. 

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On 3/6/2018 at 12:44 PM, FrankJon said:

Examples include vehicles that overlap significantly or completely with existing vehicles; vehicles under which the first order will use up the vast majority of the ceiling or estimated value; and vehicles championed primarily by the contracting community, that receive relatively little input from the requirements community.

I emphasized the piece of FrankJon's description above that caught my eye.

I thought strategic sourcing requires you to solicit an actual order, not just establish some ordering vehicle.  This entails whipping disparate requiring activities into consolidating and standardizing their requirements, or so I thought. So my follow up question is: Is this stuff even strategic sourcing?

I'm not a supply chain person, so this is a plea to those who are to educate me.

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apsofacto - 

1 hour ago, apsofacto said:

I thought strategic sourcing requires you to solicit an actual order, not just establish some ordering vehicle.

DPAP defines strategic sourcing as follows: 

Quote

Strategic Sourcing is a key practice within the Category Management framework. It is 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 (e.g., price benchmarks), and capabilities (e.g., IT integration) in contract terms and conditions.

In this regard, what I am seeing is strategic sourcing because the vehicles are premised upon department-wide spend analyses. Does that answer your question?

My concern that you highlighted above refers to the manner that the vehicles are established. The acquisition office takes the lead, performs the spend analysis, and queries the requirements community in piecemeal fashion. It then puts together a patchwork of ideas (usually based on incomplete data) that it believes are technically sound and best fulfill existing needs. The requirements community then gets a final review before the solicitation goes out, but at that point, things are mostly baked into place. It would take chutzpah and clout to stop and uproot everything at that point.

A more sound approach would be for the requirements community to drive the requirement through a POC that works in tandem with the acquisition office. In this way, the experts would be the ones to gather the relevant information, project their needs, and craft the requirement, resulting in a stronger, better planned, more efficient vehicle. 

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Strategic UNsourcing: 

http://www.nextgov.com/it-modernization/2018/03/company-calls-out-old-guard-after-pentagon-cuts-its-nearly-1-billion-cloud-contract/146529/

 

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Strategic Sourcing is not a vehicle.   It is a behavior.  It is what you do and how you do it...not the vehicle in and of itself.  

From the private sector point of view, strategic sourcing is an activity geared towards driving down costs (not prices per say.....but costs) to maintain a competitive advantage in the marketplace (Lacity, M. C., & Willcocks, L. P. (1998). Strategic sourcing of information systems: perspectives and practices. John Wiley & Sons, Inc..).

The best definition I can find identifies strategic sourcing as initiatives that include: Supply Based Rationalization (which means reducing the total number of suppliers to which a firm does business); Commodity Management (which matches corporate needs of parts and materials with the changing capabilities of the supply base); Spend Consolidation (which involves an increased dollar spent on purchases from an individual supplier); Global Sourcing (which involves exploiting global markets for improved capabilities, such as low-cost labor for the manufacturing of labor-intensive parts); Establishing Sole-Source Agreements (the act of purchasing a product or family of products from one supplier); Long-Term Agreements (establishing a relationship with a supplier where there is an understanding that buyer-supplier relationship will extend over several years or indefinitely); and Just In Time (JIT) Purchasing (which is aimed at minimization of supply lead time). (Rossetti, C., & Choi, T. Y. (2005). On the dark side of strategic sourcing: experiences from the aerospace industry. The Academy of Management Executive, 19(1), 46-60.)

All of these activities working in concert, achieve the results by which companies are able to reduce costs, reduce the amount of in-house labor needed to conduct business, and thereby increase profits of the firm.  This is the private sector model....in the public sector rather than increasing profits it is meant to creating efficiencies of budget and execution.

That being said, in government we have bastardized the term a bit.  Today strategic sourcing is defined by the government as “a fact-based analytical process used to reduce direct spend and Total Cost of Ownership (TCO), while improving mission delivery” and was established to “improve the federal government acquisition value chain, increase socio-economic participation and ultimately lower total cost of operations and/or ownership for strategic sourcing vehicles.”   (reference for this definition is no longer available, but it was retrieved from https://strategicsourcing.gov/ on 3/08/15).  

As you can see from the definitions, there is a significant different between private sector strategic sourcing, and public sector strategic sourcing.  One is specific while the other is intent-laden.  For example, when assessing total cost of ownership agencies need to look into operational costs, which include their internal transaction costs (how much does it cost us to buy) and administrative costs (how much does it cost us to manage).   We don't do this.  Further, strategic sourcing hinges on the ability to consolidate spend, which is a function of a consolidated budget.  Few budgets are consolidated, in large federates agencies like DHS, DOD, or any other multi-bureau cabinet level agency, therefore strategically sourcing your assets will not take place.  BPAs are not strategic sourcing vehicles, especially if they are multi-award BPAs.  They are promissory notes that prices will not rise, but there is no economies of scale when doing 100 buys of 100 rather than 1 buy of 10000. 

Budgets aside, each group suffers from "special snowflake syndrome".  Even internal within a large federated agency CO's and Program personnel will do what they can to maintain their "purview" of their units buying and behavior, which means any difference with a requirement will negate an agency's ability to strategic source their goods.  You cannot strategically source without standardizing what is bought.  

The government has taken a vehicular approach to strategic sourcing rather than a structural/behavior based approach, and vehicles don't in-and-of themselves change behavior.

2 cents.

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jonmjohnson - Thank you for your thoughts on the topic.

On 3/9/2018 at 10:59 AM, jonmjohnson said:

For example, when assessing total cost of ownership agencies need to look into operational costs, which include their internal transaction costs (how much does it cost us to buy) and administrative costs (how much does it cost us to manage).   We don't do this. 

Actually, we do at least attempt to do this in the cases I've seen. And this is almost guaranteed to occur when consolidation is involved. Granted, the estimates are often crude and agenda-laden.

On 3/9/2018 at 10:59 AM, jonmjohnson said:

Further, strategic sourcing hinges on the ability to consolidate spend, which is a function of a consolidated budget.  Few budgets are consolidated, in large federates agencies like DHS, DOD, or any other multi-bureau cabinet level agency, therefore strategically sourcing your assets will not take place.

Would a vehicle that encourages bureaus to coalesce through tiered, quantity-based unit price ceilings obviate this concern from your perspective?

On 3/9/2018 at 10:59 AM, jonmjohnson said:

BPAs are not strategic sourcing vehicles, especially if they are multi-award BPAs.  They are promissory notes that prices will not rise, but there is no economies of scale when doing 100 buys of 100 rather than 1 buy of 10000. 

I don't agree with this conclusion. I agree that BPAs don't necessarily achieve the purpose of public sector strategic sourcing, but I think they can. Take a single-award BPA with price ceilings. The BPA awardee is confident that it will have all or most of any agency's business in a certain sector over a certain period of time, and might therefore be incentivized to offer lower prices to guarantee that business. How is this concept different from any other public sector strategic sourcing initiative, such as GWACs and the MAS Program?

On 3/9/2018 at 10:59 AM, jonmjohnson said:

Budgets aside, each group suffers from "special snowflake syndrome".  Even internal within a large federated agency CO's and Program personnel will do what they can to maintain their "purview" of their units buying and behavior, which means any difference with a requirement will negate an agency's ability to strategic source their goods.  You cannot strategically source without standardizing what is bought. 

Yes. Thank you.

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Quote

DOD was subject to this market volatility because it does not have a strategic purchasing program for titanium. We calculate, for example, that DOD could save from $100 million to $300 million annually if DOD purchased half of its annual titanium requirement (10 million to 15 million pounds) on a long-term contract priced at about $10 per pound, instead of at market prices ranging between $20 to $30 per pound.

(See DoD OIG Report No. D-2010-004, October 29, 2009)

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To me, its a shortcut that is of dubious value. 

First, it relieves the CS/KO from anything close to market research.  If market research is actually completed that finds a better way, better price, faster delivery, well, too bad.  The agency's "strategic sourcing" contract vehicle trumps all of those.

Second, it creates another barrier for small businesses.  I have seen so many "strategic sourcing" contract vehicles that had one or no small businesses, and those vehicles have a life that may be exceed 5 years.  A small business wants to fulfill your requirement?  Too bad, you have to wait for another 4-7 years until the next solicitation is release and HOPE that the CS/KO does their market research and finds that small business and its cohort.  Otherwise its another "no small businesses found that can meet this requirement" market research document once again.  Remember, the CS/KO for that program may not have done any market research since that last re-compete, so those skills might just be a bit rusty.

Strategic sourcing is an insult to the buying ability of the Government.  It says the whole procurement team cannot find the best pricing in the market, is not consistent in sourcing those products and services, and they take too long.  Whether or not those accusations are true is up for debate, but the system itself is not without blame; its hard to be fast and efficient when the procurement system has so many anchors attached to it.

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