Strategic Sourcing

A Government Accountability Office report issued this week finds that "improved and expanded use" of strategic sourcing "could save billions in annual procurement costs."

The report -- dated Sept. 20 -- states that GAO reviewed strategic sourcing efforts at four agencies -- the Defense, Homeland Security, Veterans Affairs and Energy departments -- "that were among the 10 agencies with the highest fiscal year 2011 procurement obligations."

With regard to the Pentagon, GAO "reviewed the efforts of four component agencies -- Air Force, Army, Navy, and the Defense Logistics Agency (DLA) -- which accounted for 88 percent of DOD spending in fiscal year 2011, as well as department-wide efforts managed by DOD's Program Acquisition and Strategic Sourcing (PASS) office, which is within DOD's Defense Procurement and Acquisition Policy (DPAP) organization and reports to the Under Secretary of Defense for Acquisition, Technology, and Logistics (AT&L)," the report states. Further:

According to DOD officials, DOD procurement spending and savings through strategic sourcing contracts in fiscal year 2011 may be underreported, as DOD currently tracks department-wide initiatives on an ad hoc basis. When strategic sourcing contracts were used, selected agencies generally reported savings ranging from 5 percent to over 20 percent of spending through strategically sourced contracts. Further, most of the four agencies' current and planned strategic sourcing efforts do not address their highest spending areas, the majority of which exceed $1 billion and most of which are services. As a result, opportunities exist for agencies to realize significant savings by applying strategic sourcing in these areas.

GAO found that "managed spending and savings varied greatly within DOD," according to the report, which adds:

At DOD -- the federal government's largest procurer of products and services -- the Army, Navy, Air Force, and DLA together reported spending almost 6 percent, or $19 billion, through strategic sourcing contracts. In addition, the Defense Program Acquisition and Strategic Sourcing (PASS) office, which coordinates strategic sourcing efforts across the department, was unable to provide us with a comprehensive list of department-wide strategic sourcing initiatives, and indicated that there are likely more strategic sourcing initiatives that are not accounted for because department-wide initiatives are reported on an ad hoc basis. However, they provided information on a limited number of department-wide strategic sourcing initiatives that together represented more than $1 billion of spending and over $900 million in savings in fiscal year 2011.

The proportion of procurement spending being managed through strategic sourcing varied widely among the military departments and DLA. . . . For example, the Army spent more than $125 billion on products and services in fiscal year 2011, but reported that only $280 million, or less than a quarter of one percent of procurement spending, was strategically sourced. In contrast, DLA spent $36 billion on goods and services in fiscal year 2011, and reported that 46 percent or $16 billion was strategically sourced. According to DOD officials, it is to be expected that a high percentage of DLA's spending is suitable for strategic sourcing because DLA's unique mission is to supply high volume products that are bought across DOD, such as uniforms and food. Although DLA's spending represents only 10 percent of DOD's total procurement spending, DLA's strategic sourcing efforts demonstrate that when DOD approaches procurement from a department-wide level, it can achieve successful outcomes. In addition, PASS officials reported savings of $889 million in fiscal year 2011 from one initiative that leveraged department-wide spending on enterprise software. Specifically, the initiative consolidates DOD commercial software, information technology hardware, and services requirements to obtain lower prices from information technology providers.

Read the GAO report.