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Presidential Strategic Sourcing Initiative:What Does it Mean to Business?: 

Presidential Strategic Sourcing Initiative: What Does it Mean to Business? The Department of Veteran Affairs National Acquisition & Logistics Center Industry Conference October 10, 2007 Chicago, IL

Federal Strategic Sourcing Initiative(FSSI): 

Federal Strategic Sourcing Initiative (FSSI)

OMB Strategic Sourcing Goals: 

OMB Strategic Sourcing Goals Overarching goal is to institutionalize the strategic sourcing process and secure top management commitment Results OMB wants: Reduction in prices Reduction in administrative costs Improved performance Increased small business participation Improved business intelligence

FSSI Chartering Authority: 

FSSI Chartering Authority The Federal Strategic Sourcing Initiative (FSSI) is chartered under the purview of the Chief Acquisition Officer’s Council and the Strategic Sourcing Working Group monitored by OMB’s Office of Federal Procurement Policy (OFPP).

FSSI Overarching Goals: 

FSSI Overarching Goals Test ability to strategically source across federal agencies Establish mechanisms to increase savings, value, and socio-economic participation Share good practices and build the strategic sourcing community of practice Learn lessons applicable to future strategic sourcing efforts at federal or agency levels Avoid unnecessary duplication of effort in pursuing OMB Strategic Sourcing Initiative

OFPP Definition of Strategic Sourcing: 

OFPP Definition of Strategic Sourcing Strategic sourcing is the collaborative and structured process of critically analyzing an organization’s spending and making business decisions about how to acquire commodities and services more effectively and efficiently. The spending analysis drives decisions about how to optimize performance, minimize price, increase small business participation, evaluate total life cycle management costs, improve vendor access to business opportunities, and otherwise increase the value of taxpayer dollars.

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Let's break it down... Strategic Sourcing is a structured process. It is a systematic approach to sourcing goods and services with clearly defined steps. It is a repeatable process that can be applied over time to any commodity (service or product).   Strategic Sourcing is an analytical process. It is data-driven and relies on facts, not hunches, for sourcing decisions.   Strategic Sourcing is a collaborative process. It is cross-functional and engages stakeholders from multiple perspectives and disciplines.   Strategic Sourcing helps organizations optimize their supply base. It helps organizations identify the optimal number and types of suppliers to satisfy sourcing needs (including small business). It seeks to structure the supplier-buyer relationship for mutually beneficial results.   Strategic Sourcing helps organizations reduce total cost of ownership.  More than just unit price reductions, TCO savings can be achieved through reduced volume and consumption (demand management), improved process efficiencies, and better supplier management    Strategic Sourcing helps organizations improve mission delivery. It improves the quality and value of acquired goods and services that directly or indirectly support mission-focused programs and activities. It contributes to a more efficient use of purchasing dollars.

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OFPP’s Strategic Sourcing Value Proposition KEEP IT Implement and Manage Performance Manage Compliance with Sourcing Strategies GET IT Develop a Commodity Strategy Develop a Business Case Develop an Acquisition Strategy FIND IT Conduct Spend Analysis Profile Commodity Conduct Market Analysis

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The Strategic Sourcing Process (Common steps)  1. Conduct Spend Analysis   Get visibility of spend (detailed view of what is being purchased, by who, when, from what sources, at what prices) Foundation for creating deep commodity level understanding (discover opportunities)   2. Assess Customer Requirements   Establish Commodity Councils (cross functional teams)   3. Analyze Commodity/Industry   Analyze trends   4. Strategy Development   Unique for each commodity   5. Select Suppliers & Negotiate Agreements   Issue RFP, Analyze proposals and Negotiate terms and conditions   6. Implement/Monitor Agreements Across Enterprise   Communication Plans Reports and Compliance   7. Manage Supplier Performance   Develop incentives, scorecards, etc…

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OFPP Potential price savings estimates

Cost Savings Example: 

Cost Savings Example

OMB and Strategic Sourcing: 

OMB and Strategic Sourcing OMB Memorandum issued May 20, 2005 Required CAOs to lead collaborative effort with CIOs, CFOs, small business reps, others Required CAOs to identify three commodities that could be strategically sourced by October 1, 2005 VA Response - pharmaceuticals - interment flags - headstones

FSSI Current Focus: 

FSSI Current Focus Starting with 5 commodities Office Supplies Domestic Delivery Service (Express/Grounds) Wireless Service (Cell Phones/Blackberries) Copiers IT (Printers) VA is actively participating in these efforts.

VA Strategic Sourcing Focus: 

VA Strategic Sourcing Focus Established a VA Strategic Sourcing Counsel that includes senior management representation from all VA Administrations (VHA, NCA, VBA) as well as Information Technology and the Office of Small & Disadvantaged Business Utilization Conducted extensive benchmarking and market research with other governmental and private sector companies to gather lessons learned.

Support of VA Mission: 

Support of VA Mission Deliver world-class service to veterans and their families by applying sound business principles that result in effective management of people, communications, technology and governance. Stewardship and oversight of VA business activities ensuring their consistency with national policy, law, and regulation.

Awaken the Giant: 

Awaken the Giant George Ruiz, MD Special Assistant to the Secretary

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M P Dist NAC VACO VISN VISN

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One VA

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Purchasing Power Local VA Purchase Cards

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ne VA negotiate VA A P U R C H A E $ S

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ne VA Guided Procurement Environment

Awaken the GiantFindings: 

Awaken the Giant Findings Need shift from transactional to strategic Deliver the volume, improve the value Negotiate centrally, purchase locally Visibility and accountability are essential Micro purchases require a guided procurement environment Compliance, compliance, compliance

VA’s Strategic Sourcing Focus : 

VA’s Strategic Sourcing Focus Phase I Actively Participate in all five (5) FSSI commodity teams Conduct in-depth Spend Analysis on approximately $12 billion in VA yearly expenditures.

VA’s Strategic Sourcing Focus : 

VA’s Strategic Sourcing Focus Phase II Apply lessons learned from FSSI commodity Teams together with the new business intelligence gained from the Spend Analysis, to expand the VA’s Strategic Sourcing efforts to all targetable commodities, including: Medical/surgical products/services Information Technology (computers, printers, etc..) Utilities (electricity, natural gas, etc..) Facility and maintenance (janitorial supplies, MRO, etc…)

Domestic Delivery Service : 

Domestic Delivery Service Over $100 Million Annual VA Spend Express Delivery and Grounds Shipment - should include Pharmaceutical CMOPS to maximize VA’s buying power Can compete Federal Government’s large business among several national companies: - FedEx - UPS - DHL

Federal Express FSSI Tiered Discount Structure: 

Federal Express FSSI Tiered Discount Structure Notes: MAS = Multiple Award Schedule Discounts shown EXCLUDE the waiver of fuel surcharges and are thus understated.

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Notes: MAS = Multiple Award Schedule Discounts shown EXCLUDE the waiver of fuel surcharges and are thus understated. Ground Discounts represent an average and vary by zone.

Priority Overnight Service Tier 3 Savings : 

Priority Overnight Service Tier 3 Savings

FSSI Wireless Devices: 

FSSI Wireless Devices Greater than $11 Million Annual Spend - 10,000 cell phones with Sprint/Nextel - 4,200 cell phones with Cingular/AT&T - 3,500 cell phones with Verizon VA has multiple contracts in place with a huge variety of plans and prices

VA Calling Plans: 

VA Calling Plans Over 100 Calling Plans at Nextel alone Goal is have two or three

Types of VA phones: 

Types of VA phones

Develop a VA Wireless Commodity Strategy: 

Develop a VA Wireless Commodity Strategy Results: Save a significant amount of $$ Eliminating overage charges Pooling minutes Competition among suppliers Procure wireless products and services cheaper, faster and better

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FSSI Copier Overview The FSSI Copier Commodity Team consists of 14 federal agencies. Participating government agencies purchase an estimated $349 million in Copier products/services annually. Copiers are defined as multifunctional devices that provide copies (color or black and white), printing, faxing and scanning capabilities. This commodity also includes maintenance agreements and consumable operating supplies

VA Copiers: 

VA Copiers Over $20 Million in Annual Spend VA Utilizes multiple vendors, including: - Xerox: 3,600 copiers - Cannon: 1,500 copiers - FedSource (Treasury): 950 copiers

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VA Copier Pilot HQ Building with 139 total copiers - ten different manufacturers/brands - over 100 different makes/models Canon - 57 units (41%) Xerox – 20 units (14%) Panasonic – 13 units (9%) Sharp - 12 units (9%) Ricoh – 11 units (8%) Savin – 10 units (7%) Toshiba – 8 units (6%) OCE – 5 units (4%) Konica Minolta – 2 units (1%) Gestetner - 1 unit (1%)

FSSI Office Supplies : 

FSSI Office Supplies $300 Million Annual FSSI Spend $65 Million Annual VA Spend - utilize over 1,900 suppliers Great Opportunity to aggregate volume and leverage VA’s buying power with small number of preferred suppliers

FSSI Office Supply Procurement: 

FSSI Office Supply Procurement GSA issued an RFP to 300 FSS Office Supply Schedule holders. GSA awarded 13 BPAs in August 2007. Procurement currently on hold, pending resolution of a GA protest.

IT Products : 

IT Products VA spend over $337 Million in FY 2005: Desktops Portables Printers Servers VA utilized mandatory PCHS-2 Contract (Procurement of Computer Hardware and Software) VA now utilizes Service Disabled Veteran Owned Firms on NASA’s SEWP IV contract.

VA’s Strategic Sourcing Focus  Summary: 

VA’s Strategic Sourcing Focus Summary Phase I Actively Participate in all five (5) FSSI commodity teams Conduct in-depth Spend Analysis on approximately $12 billion in VA yearly expenditures. Phase II Apply lessons learned from FSSI commodity teams together with the new business intelligence gained from the Spend Analysis, to expand the VA’s Strategic Sourcing efforts to all targetable commodities.

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Future Impact of Strategic Sourcing Pursue additional opportunities amongst the approximately $12 billion in non-pharmaceutical VA yearly expenditures. Market research suggests that the VA can expect to successfully target at least 40% of overall expenditures under future strategic sourcing efforts. 40% of $12 billion is $4.8 billion in targetable VA expenditures. The private sector realizes an average of 10% cost avoidance on strategic sourcing efforts. 10% of $4.8 billion equates to $480 million in potential VA cost avoidance each year.

Objectives for VA’s Spend Analysis: 

Objectives for VA’s Spend Analysis Gain critical insights into the procurement history and spend patterns for goods and services purchased across different key dimensions (commodities, customers, suppliers, etc.). Develop an organization-wide view of spend that is comprehensive, detailed, and accurate. Identify opportunities to improve purchasing efficiency and optimize spend by reducing total costs by coordinating purchasing across the organization. Prioritize strategic sourcing initiatives for further analysis and implementation. Establish a spend baseline against which to measure and compare future spend activity, including internal compliance with approved sourcing strategies.

VA Spend Analysis RFP: 

VA Spend Analysis RFP RFP issued in June 2007 Proposals received August 2007 Anticipate award October 2007 Scope of Work – VA will provide approximately $12 billion in FY 2006 purchasing data to the selected contract awardee to be analyzed RFP includes options to analyze FY 2007 and FY 2008 data

“Drill Anywhere”: 

“Drill Anywhere”

Key Elements to Strategic Sourcing Summary: 

Key Elements to Strategic Sourcing Summary Strategic Sourcing is a methodical, comprehensive process, which includes: Understanding every element of spend Evaluating current sourcing relationships Assessing value of each supplier Formulating a strategy to source each commodity and/or Service

Strategic SourcingKey Success Factors: 

Strategic Sourcing Key Success Factors Strong governance structure Senior-level management commitment Cross-organizational collaboration Reasonable spend analysis approach Comprehensive communication plan Strategic sourcing skills and process training

Small Business Issues: 

Small Business Issues Understand the perceived conflict with contract bundling prohibitions. Require that the small business issue is a top consideration in the acquisition strategy. Ensure your agency’s small business offices are involved in the management of the process – buy-in is key.

Questions?: 

Questions? Jeff Ryan Procurement Analyst Department of Veterans Affairs Office of Acquisition & Logistics (412) 365-5462