Strategic Sourcing:
Improved and Expanded Use Could Save Billions in Annual Procurement Costs
GAO-12-919, Sep 20, 2012
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What GAO Found
Selected agencies leveraged only a fraction of their buying power through strategic sourcing and achieved limited savings. In fiscal year 2011, the Departments of Defense (DOD), Homeland Security (DHS), Energy, and Veterans Affairs (VA) accounted for 80 percent of the $537 billion in federal procurement spending, but reported managing about 5 percent or $25.8 billion through strategic sourcing efforts. These agencies reported savings of $1.8 billion—less than one-half of one percent of procurement spending. While strategic sourcing may not be suitable for all procurement spending, leading companies strategically manage about 90 percent of their procurements and report annual savings of 10 percent or more. Further, most agencies’ efforts do not address their highest spending areas such as services, which may provide opportunities for additional savings.
Most selected agencies and the Federal Strategic Sourcing Initiative (FSSI) program have not fully adopted a strategic sourcing approach. In prior work, GAO found that sustained leadership and effective metrics are important factors to implementing strategic sourcing. However, leaders at DOD have dedicated limited resources to strategic sourcing, and leaders at VA and Energy are just beginning to align resources for agencywide strategic sourcing efforts. A lack of clear guidance on metrics for measuring success has also impacted the management of ongoing FSSI efforts as well as most selected agencies’ efforts. In contrast, DHS leaders stood up a centralized office and hold senior managers accountable to meet goals. DHS sets targets for use of strategic sourcing contracts, and reported that nearly 20 percent of its fiscal year 2011 procurement spending was directed through strategically sourced contracts.
The FSSI program managed little spending through strategic sourcing initiatives, but reported considerable savings. In fiscal year 2011, the program managed $339 million through several governmentwide initiatives and reported $60 million in savings. However, total spending through the program remains low, in part, because the FSSI contracts have low rates of use and the program has not yet targeted the products and services on which the government spends the most.
Why GAO Did This Study
GAO has reported that the government is not fully leveraging its aggregate buying power, and that strategic sourcing, a process that moves a company away from numerous individual procurements to a broader aggregate approach, allowed companies to achieve savings of 10 to 20 percent. A similar savings rate applied to the federal procurement budget would equal more than $50 billion dollars. In 2005, the Office of Management and Budget directed agencies to use strategic sourcing and established the FSSI program to manage governmentwide efforts. GAO was asked to assess (1) the extent to which selected agencies managed spending and achieved savings through strategic sourcing, (2) key challenges selected agency and FSSI officials face in strategically sourcing products and services, and (3) the extent to which the FSSI program managed spending and achieved savings through strategic sourcing. To do this, GAO selected four agencies that were among the highest in fiscal year 2011 procurement obligations—DOD, DHS, VA, and Energy—and reviewed governmentwide FSSI efforts. For each, GAO analyzed strategic sourcing data and policies, and interviewed responsible officials.
What GAO Recommends
GAO recommends a number of actions OMB, DOD, and VA can take to achieve more savings, such as applying strategic sourcing practices to their highest spending procurement categories, and setting targets for use of strategic sourcing contracts. All three agencies concurred with our recommendations.
For more information, contact Cristina Chaplain at (202) 512-4841 or chaplainc@gao.gov.
Status Legend:
- Review Pending
- Open
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: To improve departmentwide strategic sourcing efforts at DOD, the Secretary of Defense should direct the Office of Acquisition, Technology, and Logistics to issue direction that (1) sets goals for spending managed through strategic sourcing vehicles, (2) establishes procedures for the identification and tracking of departmentwide and component strategic sourcing efforts through the PASS office, (3) implements the PASS office strategic sourcing guidance, (4) links strategic sourcing to its Better Buying Power memorandum, and (5) establishes metrics, such as utilization rates, to track progress toward these goals.
Agency Affected: Department of Defense
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve departmentwide strategic sourcing efforts at DOD, the Secretary of Defense should direct the Office of Acquisition, Technology, and Logistics to evaluate whether the current resources of OSD's PASS office are sufficient to enable the office to fulfill its strategic sourcing mission.
Agency Affected: Department of Defense
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve departmentwide strategic sourcing efforts at DOD, the Secretary of Defense should direct the Office of Acquisition, Technology, and Logistics to evaluate existing acquisition strategies for DOD's current departmentwide acquisitions, and where these represent a strategic sourcing approach, ensure that data on these programs are submitted to the Program Acquisition and Strategic Sourcing (PASS) office.
Agency Affected: Department of Defense
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve departmentwide strategic sourcing efforts at DOD, the Secretary of Defense should direct the Office of Acquisition, Technology, and Logistics to identify and evaluate the best way to strategically source DOD's highest spending categories of products and services (e.g., governmentwide vehicles, interagency collaboration, departmentwide vehicles).
Agency Affected: Department of Defense
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve departmentwide strategic sourcing efforts at DOD, the Secretary of Defense should direct the Office of Acquisition, Technology, and Logistics to identify and submit to the FSSI program a list of products and services that, if developed as FSSIs, present the best opportunities for future DOD participation.
Agency Affected: Department of Defense
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To improve strategic sourcing efforts at the Army, and in light of significant potential savings and performance improvements, the Secretary of Defense should evaluate whether the resources that the Army's Policy and Oversight Directorate has allocated to strategic sourcing are sufficient to enable the Directorate to fulfill its strategic sourcing mission.
Agency Affected: Department of Defense
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To help ensure that VA's strategic sourcing efforts further reflect leading practices, and in light of significant potential savings and performance improvements, the Secretary of Veterans Affairs should direct strategic sourcing staff to, based on analysis of agencywide spending, evaluate the best way to strategically source VA's highest spending categories of products and services (e.g., governmentwide vehicles, interagency collaboration, agencywide vehicles).
Agency Affected: Department of Veterans Affairs
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To help ensure that VA's strategic sourcing efforts further reflect leading practices, and in light of significant potential savings and performance improvements, the Secretary of Veterans Affairs should direct strategic sourcing staff to set goals for spending managed through strategic sourcing, and establish metrics, such as utilization rates, to monitor progress toward these goals.
Agency Affected: Department of Veterans Affairs
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To help ensure that government strategic sourcing efforts further reflect leading practices, and in light of significant potential savings and performance improvements, the Director of Office of Management and Budget (OMB) should direct the Administrator of Office of Federal Procurement Policy (OFPP) to issue an updated memorandum or other direction to federal agencies that includes guidance on calculating savings (including administrative cost savings) and establishes additional metrics to measure progress toward goals.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To help ensure that government strategic sourcing efforts further reflect leading practices, and in light of significant potential savings and performance improvements, the Director of OMB should direct the Administrator of OFPP to direct the FSSI Program to report on the program's assessment of whether each top spend product and service governmentwide is suitable for an FSSI, with a plan to address those products or services that are suitable for strategic sourcing.
Agency Affected: Executive Office of the President: Office of Management and Budget
Status: Review Pending
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.