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Merging Common Purchases Makes Dollars and Sense

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We often are reminded that the unintended behaviors in the way federal agencies acquire goods and services are counterproductive. To different degrees, buyers, sellers and beneficiaries experience acquisition as risk-averse, slow, rife with duplication, costly, wasteful, rulebound, inefficient, ineffective and frustrating to near exasperation for those who depend on it.

As a result, stakeholders are bound in a continuous effort to reform federal acquisition through changes to rules and laws. But there is a better way. It’s called category management, and it promises to modify constraints and multiply incentives in a system in need of transformation.

Category management is neither regulation nor legislation. Instead, it’s a concept and an operating model widely used by companies around the world to understand and manage their spending and their relationships with vendors. They adopt it to drive more value for less cost. They tap their suppliers for innovations to make existing products and services better and cheaper to produce and to create new ones that dazzle customers old and new. It works in the marketplace.

The White House’s version of the practice is similar, but its means are, of course, somewhat different from industry’s. Anne Rung, administrator of the Office of Federal Procurement Policy, has placed category management squarely in the center of her plan to get the government to make purchases as a single entity.

Rung hopes to encourage this approach in 10 categories of goods and services commonly bought across agencies, in the push to consolidate contracts, whether agency-specific or governmentwide. To further reduce contract proliferation, OFPP wants to develop common standards for common goods, spur the use of data-driven decisions, apply industry expertise and specialization to purchasing and better manage procurement spending.

An  Oct. 16 order, for example, requires civilian agencies to choose from five standard configurations under just three contracts for 80 percent of their laptop and desktop computer purchases. By prohibiting the use of contracts other than NASA’s Solutions for Enterprise-Wide Procurement, the National Institutes of Health’s Chief Information Officer-Commodities and Solutions, and the General Services Administration’s IT Schedule 70, the order borrows a technique from commercial practices.

Meanwhile, the Federal Acquisition Service simultaneously is reorganizing itself around the largest categories of goods and services commonly bought through its multiple award schedules, governmentwide acquisition contracts and other vehicles.

If executed well by all members of the federal acquisition team — including program, financial, legal, technology and oversight — category management may well bring more positive change than the reforms that have preceded it.

It stands to add systemwide incentives by illuminating patterns and opportunities across the $270 billion in annual government spending.

Making spending transparent prompts agency leaders to question it. The result is better management of demand, freeing up more funds and people for mission-critical work.

Further, reducing contract duplication and settling on standard configurations for products and services, where appropriate, simplifies and reduces the cost of selling to government. That attracts new suppliers, increases competition, frees up company investments for more productive uses and boosts the economy. Incentives abound.

Reducing the proliferation of contracts for common goods and services can free procurement professionals from a tsunami of requisitions for commodity items and enable them to focus on buying the complex goods and services unique to their agencies.

Economist Adam Smith first described the advantages of specialization in the pin factory, where dividing up the work increased output per employee, rather than having each worker perform all the tasks involved in making each pin. The same principles apply to the acquisition process.  

On a visceral level, category management also just makes sense. This is what inspires hope that the approach will survive the impending elections.

“Category management is about better supporting the customer to understand their challenges and needs and continuing to deliver on GSA’s mission. We need to stay the course," says Tiffany Hixson, GSA’s professional services category executive. “Governmentwide, I think the category management concept is just good business.”

Good business in government translates to missions accomplished. And when government works better, the economy does, too.

Timothy W. Cooke is CEO of ASI Government.

(Image via HieroGraphic/Shutterstock.com)

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