Can the Government be Fixed? Well, its Procurement Habits at Least…? (Part 1)

We've previously discussed the GSA's new regulations in last Friday's piece, "An Ode to the Market."

Background: Since November 2010, federal agencies are required to complete annual GHG (greenhouse gas) "emissions inventory" assessments calculated in three different ways, called Scope levels:

  • Scope 1: All direct GHG emissions
  • Scope 2: Indirect GHG emissions from consumption of purchased electricity, heat or steam
  • Scope 3: Other indirect emissions, such as the extraction and production of purchased materials and fuels, transport-related activities in vehicles not owned or controlled by the reporting entity, electricity-related activities (e.g. T&D losses) not covered in Scope 2, outsourced activities, waste disposal. Scope 3 (includes vendor activities) is currently voluntary; federal agencies are only assessing how much of their GHG emissions are embedded in their supply chain as a result of their suppliers.

In early 2011, the White House Council on Environmental Quality (CEQ) engaged federal suppliers around benefits and challenges associated with completing GHG assessments. Like many large organizations, the federal government has yet to fully understand their own supply chain, so the CEQ was surprised to discover that their suppliers, especially their top 100 suppliers, were already completing Scope 1 & 2 GHG emissions inventories for their own operations, actually reaching into their Tier 1 set of suppliers to complete GHG assessments satisfying Scope 3 assessments. The CEQ also found that many of the top 100 suppliers track many other environmental aspects of their supply chains. According to the GSA, identifying and reducing GHG emissions provides cost savings and increases a company's international competitiveness -- although at Spend Matters we suspect this is mainly from a penalty avoidance perspective. Additionally, you could probably get the top 100 suppliers to count and measure the doorknobs in their facilities if that's what is needed to get contract renewals; meaning that merely because something is being done, it doesn't follow that is an effective or even worthwhile activity.

In 2012, based on the initial probe, the GSA broadened the scope of the program and proposed a launch of a Sustainable Supply Chain Community of Practice (SSCCP) to share information between government, industry, not-for-profits and academia on best practices in using supplier relationships to reduce environmental impacts and other factors throughout a supply chain. At the core of the mission is building a knowledge repository of checklists, tutorials and other supplier engagement tools that small and medium sized businesses can use to cost effectively improve the sustainability of their operations. The federal government's goal is increased efficiency in the federal supply chain. Read more about it here and here.

We decided to conduct an interview with Dr. Timothy M. Laseter, Professor of Practice, Darden Graduate Business School University of Virginia. Tim Laseter is among the 80 selected to participate in the launch of the SSCCP that took place at the White House on March 30, 2012. Further, he was chosen as one of four to lead and moderate the breakout discussions. Spend Matters had the pleasure of speaking with Dr. Laseter about the initiative:

Spend Matters: Can you tell us more about the bigger picture surrounding this activity?

Tim: The executive order to the GSA around the green government initiative is quite a serious effort led by pragmatic and experienced professionals. Sustainability represents a substantial change initiative and accordingly GSA is a great place to start. Since it influences over $90 billion in annual spend, the organization has the clout to lead. Change transportation from air to rail, as an example. The GSA is now reaching out to industry, NGOs and other agencies to shape the effort. And the GSA realizes that the Federal Government is behind the times and has no intention of reinventing the wheel.

Spend Matters: One concern is that the GSA will come up with standards of its own, creating yet another standard for companies to remain compliant with -- why not homologize with what is already established in Europe, for example?

Tim: Global standards are extremely complicated. With over 400 certifying organizations, product labeling, for example, is a nightmare -- and not easy for anyone to address. I suspect GSA would prefer to bring clarity to that picture rather than add another standard.

Spend Matters: Once this initiative trickles down the GSA's supply chain, our concern is that this becomes yet another page to fill out in an already thick RFP binder, and actual change is lost in the bureaucracy, while the new requirements only further entrench existing suppliers and raise the barriers to entry for new firms. Ironically, this makes it even harder for small and medium sized businesses (that the GSA intends to help) to do business with the government...

Tim: I can see how you can view it in a cynical way like that, but I am an optimist and I believe that there are real incentives to cut costs and drive change which will prevent that scenario.

Stay tuned for the next part in our interview with Tim Laseter.

- Thomas Kase

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