Slide1: Defense-Wide Strategic Sourcing (DWSS) Linda W. Neilson Linda.neilson@osd.mil Defense Procurement and Acquisition Policy Office of the Secretary of Defense (OSD) October 25, 2005


Outline: Outline General Overview Vision and Objectives Policy and Guidance Benefits Governance Communities of Interest Process Current Activities


General Overview. . . A Definition: The leveraging of an organization’s buying power to obtain goods and services at better terms and conditions over the life cycle of those goods and services. General Overview. . . A Definition


General Overview. . .Central Role: One lead for DoD Coordinates and provides insight into DoD-wide and Component activities Establishes common processes/policies Performs market and spend analysis to target opportunities Establishes benchmarks Monitors performance Provides cross-functional SMEs Sets enterprise capabilities/standards Sponsors DoD-wide workforce development/ transformation One lead for Federal Focus Supports OMB & OFPP direction Prepares annual OMB reports Supports Federal activities led by OFPP/OMB CoP, CAO Council, and ACE Responds to SBA, GAO & Congressional inquiries & follow-up actions One lead for Federal Focus One voice to industry & small businesses on strategic sourcing matters General Overview. . .Central Role


General Overview. . .Process: General Overview. . .Process Opportunity Assessment A systematic process that incorporates Enterprise Spend Analysis, Supplier Relations Development, Demand Management, and Stakeholder Requirements into the sourcing process


General Overview. . .Stakeholders and Relationships: General Overview. . . Stakeholders and Relationships DoD Stakeholders DPAP OSD(C) L&MR Defense Acquisition University Federal Stakeholders OMB/OFPP Community of Practice (CoP) General Accountability Office Congress Chief Acquisition Officers (CAO) Council Acquisition Committee for eGov (ACE) Federal Acquisition Institute Small Business Administration Common Supplier Engagement DBSE E-Strats (DOD EMALL, Pilots) ASAS / ARM Industry Strategic Sourcing


Vision and Program Objectives: Vision and Program Objectives Reduction in Total Cost of Ownership Department-wide cross-functional acquisition strategies Improvements in meeting socio-economic goals Standardization of acquisition business process Improved skills of DoD acquisition community “To provide customers throughout the Department [of Defense] with services acquired in the most efficient and advantageous manner.” Memorandum from Paul Wolfowitz, Deputy Secretary of Defense, “Acquisition of Services Review” 2/6/2003


Policy and Guidance: Policy and Guidance DoD Concept of Operations January 2004 DoD-wide guidance Directors Board to oversee: DoD-wide Commodity Strategies Development DoD-wide Capabilities/Technologies Reporting to GAO and OFPP/OMB DAU/FAI Resources Changes to core curriculum and new courses are in development Skills development expected in all applicable career fields Knowledge Sharing Workspace Available at: http://acc.dau.mil/strategicsourcing OFPP/OMB 20 May 2005 Memorandum – Requires each Federal Agency/Department to: Encourage and implement Strategic Sourcing Identify at least three commodities for strategic sourcing Report annually to OFPP/OMB on progress GAO GAO-04-870 recognizes Spend Analysis as Industry/Government Best Practice GAO-05-179 recognizes Strategic Sourcing benefits within DHS


Primary Benefits: Primary Benefits Pricing Improvements Lower unit price Volume rebates Payment term discounts Supply Chain Savings Cost of capital Warehousing costs Shipping costs Reduced Lifecycle Costs Maintenance costs Operating costs Disposition costs Reduced Procurement-Related Operating Expense PO Processing Accounts Payable Receipt/Warehousing Standardized procurement process Reduced Non-Procurement Related Operating Expense Other operating efficiencies Performance Monitoring Structured metrics and periodic review of contractor performance Demand Management Eliminate demand Reduce consumption Encourage substitution Change product mix Specification Review Eliminate “gold-plating” Simplify specifications Alternative products Socio-economic Goals Structured analysis of small/disadvantaged business opportunities Source: Censeo Consulting Group: Copyright Censeo Consulting Group, Inc. - All rights reserved, 2005 – Reference must be provided for usage of this material.


Governance – Executive Agent Model: Governance – Executive Agent Model Strategic Sourcing Directors Board consists of SSCG Leadership SSCG = Strategic Sourcing Coordination Group DWSS PSO provides coordination and support to SSDB


Communities of Interest. . .Stakeholders and Relationships: Communities of Interest. . . Stakeholders and Relationships External to DoD OMB/OFPP Community of Practice Senior Federal Agency/Department SS Leadership General Accountability Office Audits and Reports on Spend Analysis, Commodity Management, and Strategic Sourcing Chief Acquisition Officers (CAO) Council Federal Agency/Department CAOs Acquisition Committee for eGov (ACE) Federal Agency/Department eGov Initiatives & Capabilities Federal Acquisition Institute Federal Acquisition Workforce Development and Knowledge Sharing Small Business Administration Industry Internal DoD DWSS Governance Model Governance Board (SGB), Strategic Sourcing Directors Board, and Component Strategic Sourcing Coordination Groups DPAP-Policy Office Development and Coordination of DoD- wide policies, guidance, and instructions DoD-wide and Component Level Commodity Teams / Commodity Management Councils DoD-wide Commodity Strategy Mgmt Ex. Admin/Clerical Support, Bearings Component Level Oversight/Insight Defense Acquisition University DoD Acquisition Workforce Development and Knowledge Sharing


Common Commodity Selection Criteria: Common Commodity Selection Criteria Low High Low High Mission Criticality Cross-DoD Overlap Coordinated Cross-DoD Sourcing* Cross-DoD Collaboration (Best Practices) Other Sourcing Options Service-Specific Sourcing Example: Administrative Services Example: Professional IT Services Primary Segmentation Criteria Coordinated Sourcing – commodities that may provide the most significant opportunities through DoD-wide sourcing Collaboration – these commodities may provide significant opportunities for sharing knowledge and information across all services Service-Specific – these commodities may be unique to a service and thus sourced by that service Other Options – commodities that are neither mission critical nor have much overlap with other services could be contracted through GSA, for example Other Possible Criteria Spend Volume Requirements Compatibility Commodity Complexity Organizational Sensitivity Sourcing approaches based on spend characteristics Example: Aircraft Maintenance


Commodity Strategic Sourcing Process: Commodity Strategic Sourcing Process Profile Commodity Conduct Supply Market Analysis Develop Commodity Strategy Issue RFx & Negotiate Implement & Manage Performance 1 2 3 4 5 Baseline Analysis Overview of Commodity (definition, usage, stakeholders, mission criticality, etc.) Spend Summary Existing Sourcing Strategy and Initiatives Existing Contracts Analysis Existing Sourcing Strategy & Initiatives Business Process and Policy Total Cost of Ownership Commodity Requirements Customer Needs Analysis/Requirements Socio-Economic Requirements Regulatory and Process Related Requirements Estimated Volume Requirements Market Analysis Findings and Opportunities Market overview (segments, size) Key trends Small Business Capabilities Comparison of market capabilities to requirements Potential Sourcing Levers SUMMARY OF ANALYSES PERFORMED Commodity Goals and Objectives (Includes scope, usage, mission criticality) Business Need/Case for Change A. Requirements B. “As Is” Environment (sourcing strategy, process, technology) C. “To Be” Environment (sourcing strategy, process, technology) D. Benefits Commodity Sourcing Strategy (strategy and tactics) Business Case Acquisition Strategy Implementation Plan COMMODITY STRATEGY


Current DoD Activities: Current DoD Activities Materiel Commodity Management OSD Led Services Commodity Management OSD Led Air Force Purchasing Supply Chain Management (PSCM) Materiel 8 Commodities Managed by AFMC Information Technology Strategic buying of IT equipment Managed by SAF(AQ) Army Purchasing and Supply Management (PSM) Materiel 5 Commodities (planned) Managed by AMC Office Supplies Strategic BPAs posted on DoD EMALL Managed by ACA Navy Program Management Support Services 151 contracts awarded Maximum of $1.3 Billion per year for 5 years Managed by NAVSEA eFSC Facilities Maintenance Electronic Task Ordering via DoD EMALL Managed by NAVFAC DLA Supplier Relationship Management 25+ Strategic Supplier Alliances Fuels Management Consolidated purchase point for DoD fuels Wireless Services EA: Army Administrative Services EA: Navy Medical Services EA: Army Bearings Led by OSD (L&MR SCI) Microelectronics Led by OSD (L&MR SCI)


Current DoD Activities. . .Details: Current DoD Activities. . .Details Administrative-Clerical Support Services Evaluated by a DoD Wide Commodity Council Scope: Philadelphia, Washington DC Metro, Norfolk Regions Initially, 100% Small Business Set-aside Wireless Services Evaluated by a DoD-wide Commodity Council Each Service responsible to determine & pilot most optimal solution Army and Air Force: Working to develop a joint strategy Navy: FISC-San Diego and NMCI alternatives underway DoD-Wide Commodity Council to evaluate Service pilot results Other Commodities Under Consideration Medical Services Bearings Microelectronics


Current DoD Activities. . . DAU: Current DoD Activities. . . DAU Community of Practice in development https://acc.dau.mil/strategicsourcing


Current DoD Activities. . . DAU: Current DoD Activities. . . DAU Continuous Learning Modules in Development Module 1: Strategic Sourcing Overview Chapter 1 – Introduction to Strategic Sourcing Chapter 2 – The Strategic Sourcing Process Chapter 3 – Building a Successful Strategic Sourcing Program Module 2: Spend Analysis Strategies Chapter 1 – Spend Analysis Overview Chapter 2 – Data Collection Chapter 3 – Spend Profiling Open to all: http://clc.dau.mil/


Questions?: Questions?