In FY 2017 the federal government spent over $300 billion on common goods and services. Realizing the need to eliminate wasteful spending and reduce unnecessary contract duplication, the government has taken on initiatives in the past few years to increase the use of common contract solutions and promote best practices.
At present 58% of governmental spending is considered “unmanaged” – that is, it happens in a decentralized manner and does not conform to the principles of category management. Statistics like this reveal unrealized savings and highlight the need for a greater priority to be placed on the concerted effort toward a collaborative buying approach at all levels of the government. Agencies that are able to make purchases based on shared intelligence and are consistent with the federal enterprise model will reduce costs and realize savings.
OMB is signaling that Category Management needs to move from a best practice in the federal government to more of a standard operating procedure across all agencies.
However, unless Category Management is viewed as the value-add tool it can be, there is a risk it will be perceived as a burden by the Acquisition and Program communities. Therefore, it is important that agencies implement Category Management in a manner that sets target goals and implementation plans with a look toward the future and a focus on sustainable value-add such as savings and workload reduction. To define Best In Class (BIC) and Spend Under Management (SUM) goals in a value-add manner, agencies should:
Forecast Future Requirements Rather than Build Goals From Historical Spending
- Build an Acquisition Forecast: Rather than setting arbitrary Best in Class (BIC) and Spend Under Management (SUM) goals based on an assumed growth from prior years, each agency should set targets based on an assessment of forecasted future contractual requirements. In other words, agencies need to move beyond looking at historical data to gain a perspective on the requirements across the enterprise and accurately project what they will procure in the coming years.
- Start with the Acquisition Forecast: Ideally, agencies should leverage an established acquisition forecast process at the agency or ‘bureau’ levels. It’s highly important that this process be collaborative and that the resulting intelligence be shared for the benefit of all employees with purchasing powers at all levels of the agency.
- Use Historical Data: To supplement, or if a forecast does not exist, a combination of analysis of historical requirements and program interviews will provide a high-level plan for upcoming acquisitions. Collecting accurate data from all sources will enable the agency to gain a comprehensive view of its procurement environment.
Build Understanding of Best In Class (BIC) Contracts and Their Benefits
- Understand the BICs: Develop an organizational comprehension of the Best in Class contracts, their scopes, and their limitations. More and more federal contracts are being designated as such, and it’s imperative that agencies have procurement professionals who can stay abreast of these developments, effectively communicate with colleagues regarding the appropriate use of BIC contracts, and champion their utilization as purchasing vehicles on an ongoing basis.
- Define BIC Value: Ensure the value of BICs is understood by both Programs and Contracting. While some in agencies understand their value, this knowledge needs to be shared and reinforced so that BIC contracts are more top-of-mind for both procurement and others in the agency. The value of BIC contracts needs to be shared in terms of savings and process streamlining opportunities.
- Train the organization: Contracting decisions are ultimately made on the ground. Make sure Contracting Officers have a thorough knowledge of the government-wide contracts available to them and a comfort in utilizing these purchasing vehicles. Training should ensure that these employees understand what their options are so they can make informed decisions.
Set Goals and Plans Based on Actionable Insights
- Identify BIC Candidates: Assess upcoming requirements to determine whether they are appropriate for BIC. The value in BIC contracts is best realized in requirements that are common across the government. Making BIC a part of day-to-day discussions will put agencies in a position to take a step back and look at the bigger picture.
- Plan for Spend Under Management: All contracting should be managed, but not everything is appropriate for BIC. For requirements not appropriate for BIC, understand what it will take to bring them ‘Under Management’ – data analysis, information sharing across the agency, and use of metrics that are defined, tracked, and publicized.
- Monitor & Analyze: Identify trends and lessons learned to continually help the organization to learn and adopt category management principles and best practices and the use of data analytics tools. These efforts should be done on a frequent and ongoing basis so that this process becomes a part of the very fiber of an agency.
In summary, it’s the lack of a comprehensive view of purchases at an enterprise level and the lack of a consolidated understanding of the value of BIC contracts that are proving to be challenges for agencies. Agencies need to take steps to better understand their purchasing requirements and build goals based on realistic assessments of future needs. Communication, collaboration, training, and the sharing of intelligence are keys to ongoing success.
If you are interested in receiving more details on how Censeo Consulting can help your organization implement category management principles and best practices, contact us today to schedule a consultation.