Strategic Sourcing: Selected Agencies Should Develop Performance Measures on Inclusion of Small Businesses and OMB Should Improve Monitoring
Highlights
What GAO Found
The Office of Management and Budget (OMB), the General Services Administration (GSA), and selected agencies have taken steps to consider small businesses, including small disadvantaged businesses, in their strategic sourcing efforts. (Small disadvantaged businesses are those unconditionally owned and controlled by socially and economically disadvantaged individuals.) OMB and GSA have developed guidance on strategic sourcing that stresses the importance of including small businesses. GAO's review of documentation for three ongoing government-wide strategic sourcing initiatives showed that GSA considered the inclusion of small businesses in the strategic sourcing process. For example, when developing strategic sourcing initiatives for office supplies and print management, GSA identified the current market share of small businesses with these products and also set aside specific contracts for various categories of small businesses, such as service-disabled veteran-owned small businesses. In addition, GAO's review of agency-wide strategic sourcing initiatives at each of five agencies--Departments of Defense (DOD), specifically Army and the Defense Logistics Agency; Homeland Security (DHS); Housing and Urban Development (HUD); and the Interior and the National Aeronautics and Space Administration (NASA)--showed that the agencies generally considered the inclusion of small businesses.
Data and performance measures that would provide a more precise understanding of the inclusion of small and disadvantaged businesses in strategic sourcing initiatives are limited. Although GSA has collected baseline data on proposed government-wide initiatives, it has not developed a performance measure to determine changes in small business participation going forward. Further, DHS has collected some data on contracts awarded to small businesses under strategic sourcing initiatives, but it and the other agencies in GAO's review generally did not have baseline data and performance measures to determine how small businesses were affected by strategic sourcing. OMB guidance requires agencies to establish baselines for small business participation prior to implementing strategic sourcing and set goals for small business participation. In addition, federal internal control standards state that information is needed to determine whether the agency is achieving its compliance requirements under various laws and regulations. Without baseline data and performance measures, the effect of strategic sourcing initiatives on small businesses will be difficult to determine. Moreover, OMB has not monitored agencies' compliance in reporting baseline data and performance measures on the inclusion of small businesses in government-wide and agency-wide strategic sourcing initiatives. OMB required agencies to submit annual reports on the implementation of strategic sourcing from fiscal years 2005 through 2007 and prepare information for acquisition status sessions from fiscal years 2010 through 2012. (No reporting was in place for fiscal years 2008 or 2009.) However, virtually none of this information included baseline data or measures of the effect of strategic sourcing on small businesses. Federal internal control standards state that effective monitoring should assess the quality of performance over time. Without effective monitoring, it will be difficult for OMB to help ensure that agencies are tracking the impact of strategic sourcing on small businesses.
Why GAO Did This Study
Since 2005, OMB has emphasized using strategic sourcing to improve efficiency in federal procurement. Strategic sourcing is a process that moves an organization away from numerous individual procurements toward a broader aggregate approach. GAO was asked to review how strategic sourcing affects small businesses, including small disadvantaged businesses. This report discusses (1) how OMB, GSA, and selected agencies have considered small businesses in their strategic sourcing efforts and (2) the extent to which data and performance measures are available on the inclusion of small businesses in strategic sourcing initiatives. GAO reviewed guidance and documentation from OMB, GSA, and five other agencies selected based on factors such as dollars awarded to small businesses. GAO also reviewed GSA data as of 2013, DHS data from fiscal year 2005 through the first quarter of fiscal year 2013, and agency reports from fiscal years 2005 to 2012.
Recommendations
GAO makes recommendations to GSA, selected agencies, and OMB to improve data collection and performance measures related to the inclusion of small businesses in strategic sourcing. DOD, DHS, GSA, HUD, and OMB agreed with GAO’s recommendation. Interior partially agreed, suggesting that a more effective approach would be to work with OMB and other agencies to develop common approaches. NASA disagreed, stating it already tracks related spending for the agency. GAO believes its recommendations remain valid as discussed in the report.
Recommendations for Executive Action
| Agency Affected Sort descending | Recommendation | Status |
|---|---|---|
| Department of Defense | Consistent with OMB guidance and to track the effect of strategic sourcing on small businesses, the Secretaries of DOD, DHS, HUD, and the Interior, and the Administrator of NASA should collect baseline data and establish performance measures on the inclusion of small businesses in strategic sourcing initiatives. |
Closed – Implemented
Since we made this recommendation, strategic sourcing has become part of a larger effort, category management. In December 2014, the Office of Management and Budget (OMB) issued a memorandum that directed agencies to take specific actions to implement category management to further streamline and manage entire categories of spending across government more like a single enterprise. Similar to the guidance for strategic sourcing, category management guidance that OMB issued in May 2015 required that agencies baseline small business use under current strategies and set goals to meet or exceed that baseline under the new contract vehicles. In July 2017, OMB published government-wide category management key performance indicators, which included monthly reporting of small business utilization using a federal database sponsored by the General Services Administration (GSA). In March 2019, OMB published additional guidance that required agencies to undertake specific management actions related to category management and also take into account the role of small businesses. Moreover, OMB published strategic plans for 10 categories that outline small business goals for the 10 categories. In response to our recommendation, DOD stated that it uses the GSA-sponsored category management dashboard to track small business utilization in category management. To support this, the agency directed us to the detailed data available at the agency level on the Small Business Dashboard, including baseline data from 2016 and data for subsequent fiscal years. Through the dashboard, DOD has the capability to access information on small business utilization by category, such as baseline data, the number of small business actions, small business percentage, and small business unique vendor count. By taking these steps to review baseline data and performance measures on the inclusion of small businesses in category management initiatives, DOD can determine the impact of category management on small businesses.
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| Department of Homeland Security | Consistent with OMB guidance and to track the effect of strategic sourcing on small businesses, the Secretaries of DOD, DHS, HUD, and the Interior, and the Administrator of NASA should collect baseline data and establish performance measures on the inclusion of small businesses in strategic sourcing initiatives. |
Closed – Implemented
In response to this recommendation, DHS updated its Department-wide contract business case template to require baseline data for specific strategic sourcing initiatives prior to the approval of the strategic sourcing initiative. Moreover, DHS created a performance measure and template to track the change in small business spending for each individual strategic sourcing initiative, as required by OMB. By taking these steps to collect data and create a performance measure on the inclusion of small businesses in strategic sourcing initiatives, DHS has helped ensure that OMB reporting requirements are met and that it can track the impact of its strategic sourcing efforts on small businesses.
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| Department of Housing and Urban Development | Consistent with OMB guidance and to track the effect of strategic sourcing on small businesses, the Secretaries of DOD, DHS, HUD, and the Interior, and the Administrator of NASA should collect baseline data and establish performance measures on the inclusion of small businesses in strategic sourcing initiatives. |
Closed – Implemented
In response to this recommendation, HUD created and disseminated guidance on small business participation in strategic sourcing initiatives. Specifically, the guidance requires the agency to establish and document the baseline for small business participation in strategic sourcing initiatives in order to monitor small business participation going forward through performance metrics. HUD created a business case template that requires baseline data for specific strategic sourcing initiatives prior to the approval of the strategic sourcing initiative. Moreover, in November 2016, HUD created a performance measure and template to track the change in small business spending for each individual strategic sourcing initiative, as required by OMB. By taking these steps to collect data and create a performance measure on the inclusion of small businesses in strategic sourcing initiatives, HUD has helped ensure that OMB reporting requirements are met and that it can track the impact of its strategic sourcing efforts on small businesses.
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| Department of the Interior | Consistent with OMB guidance and to track the effect of strategic sourcing on small businesses, the Secretaries of DOD, DHS, HUD, and the Interior, and the Administrator of NASA should collect baseline data and establish performance measures on the inclusion of small businesses in strategic sourcing initiatives. |
Closed – Implemented
In response to this recommendation, Interior developed a policy memo in August 2017 that established an agency group to make strategic decisions regarding category management and review enterprise procurement initiatives, such as strategic sourcing. This policy requires the Office of Small and Disadvantaged Business Utilization (OSDBU) to prepare a small business impact assessment for each proposed initiative, which at a minimum analyzes the small business performance for the initiative for the preceding three fiscal years and the potential impact. It also requires that once the initiative is formally adopted by Interior, the agency group set targets for small business performance for three fiscal years or the length of the contract, whichever is longer. Moreover, the policy states that the OSDBU director must maintain a dashboard of baseline performance goals and update them annually against the targets. Finally, it notes that if any initiative is found to negatively impact small business performance, the agency group may convene to reconsider the strategy. Additionally, Interior created and provided to us a list of its current strategic sourcing initiatives that were active as of July 2017 and determined the small business baseline metric and FY 2017 performance target, as required by OMB. By taking these steps to collect data and create a performance measure on the inclusion of small businesses in strategic sourcing initiatives, Interior has helped ensure that OMB reporting requirements are met and that it can track the impact of its strategic sourcing efforts on small businesses.
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| General Services Administration | Consistent with OMB guidance and to track the effect of strategic sourcing on small businesses, the Administrator of GSA should establish performance measures on the inclusion of small businesses in strategic sourcing initiatives. |
Closed – Implemented
In response to this recommendation, GSA created and disseminated guidance on small business participation in strategic sourcing initiatives. Specifically, the guidance, published in April 2015, provided information on how to determine baseline data for small business participation in strategic sourcing initiatives and annual requirements for assessing small business performance relative to that baseline. Moreover, the guidance requires a corrective action plan if a strategic sourcing initiative falls below the baseline for two consecutive quarters. GSA also created a strategic sourcing template to track the baseline and monthly small business performance and monitor the change in small business spending for each individual strategic sourcing initiative, as required by OMB. By taking these steps to create a performance measure on the inclusion of small businesses in strategic sourcing initiatives, GSA has helped ensure that OMB reporting requirements are met and that it can track the impact of its strategic sourcing efforts on small businesses.
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| National Aeronautics and Space Administration | Consistent with OMB guidance and to track the effect of strategic sourcing on small businesses, the Secretaries of DOD, DHS, HUD, and the Interior, and the Administrator of NASA should collect baseline data and establish performance measures on the inclusion of small businesses in strategic sourcing initiatives. |
Closed – Implemented
Since we made this recommendation, strategic sourcing has become part of a larger effort, category management. In December 2014, the Office of Management and Budget (OMB) issued a memorandum that directed agencies to take specific actions to implement category management to further streamline and manage entire categories of spending across government more like a single enterprise. Similar to the guidance for strategic sourcing, category management guidance that OMB issued in May 2015 required that agencies baseline small business use under current strategies and set goals to meet or exceed that baseline under the new contract vehicles. In July 2017, the General Services Administration (GSA) published government-wide category management key performance indicators, which included monthly reporting of small business utilization using a federal database sponsored by GSA. In March 2019, OMB published additional guidance that required agencies to undertake specific management actions related to category management and to continue to meet small business goals. In response to our recommendation and this updated guidance, NASA stated in May 2019 that it was using the Small Business Dashboard in GSA's database to capture and report data on NASA's small business utilization relative to category management. To support this, the agency provided screenshots from the Small Business Dashboard showing NASA's entries for fiscal years 2017 and 2018. According to NASA, it used the dashboard to determine its baseline, and moving forward, will annually assess performance against the baseline and current year performance targets. In addition, NASA updated the Strategy Sourcing/Category Management portion of its Office of Procurement Analyst Handbook to require (1) the development of category management plans that are consistent with small business and other statutory socioeconomic responsibilities and (2) annual briefings to Office of Procurement leadership on category management metrics, including assessment of small business utilization against the fiscal year 2017 baseline and current year performance targets. NASA also updated its template for enterprise procurement strategy/strategic sourcing decision packages to include discussion of the strategy's impact on small businesses. By taking these steps to collect data and establish performance measures on the inclusion of small businesses in category management initiatives, NASA has helped ensure that OMB requirements are met and that it can track the impact of category management on small businesses.
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| Office of Federal Procurement Policy | To help ensure that agencies are tracking the effect of strategic sourcing on small businesses, OMB's Administrator for Federal Procurement Policys should monitor agencies' compliance with the requirement to maintain baseline data and performance measures on small business participation in strategic sourcing initiatives. |
Closed – Implemented
In response to our recommendation, in December 2014, OMB's Office of Federal Procurement Policy issued a memorandum that directed agencies to take specific actions to implement category management--an approach based on industry leading practices--to further streamline and manage entire categories of spending across government more like a single enterprise. Category management includes strategic sourcing. Similar to strategic sourcing, category management guidance required that agencies baseline small business use under current strategies and set goals to meet or exceed that baseline under the new contract vehicles. In March 2019, OMB issued a new category management memorandum, which supersedes prior guidance. OMB, with the assistance of the General Services Administration (GSA), has taken steps to implement our recommendation. More specifically, OMB has provided quarterly reports on government-wide small business utilization in category management as part of its updates on Cross Agency Priority goals (priority goals for the federal government). OMB set a goal for spending on common products and services to be allocated to small businesses at 30 percent (the baseline). Further, OMB sets and reviews small business utilization goals for the 10 common categories of spending, such as facilities and construction and professional services. To track the baseline and performance metrics, OMB and GSA developed a publicly-available federal database that provides information on performance levels on small business utilization by agency, spending category, and for the overall government. By taking these steps to monitor the government and agencies' compliance with the inclusion of small businesses in category management, OMB is better positioned to see how category management may impact small business participation in federal contracting.
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