Strategic Sourcing Failures: Is the US Federal Government Failing to Implement Savings?

There are many definitions of the phrase "strategic sourcing." For many in the procurement world, it refers to a specific phase-gate sourcing process (often 5, 7 or 9 steps depending on the specific flavor being employed). For those within IT, "strategic sourcing" is a phrase tossed around by analysts to make buying IT goods and services sound more important (please excuse our cynicism but how Gartner and Forrester, among other tech shops, have usurped and basterdized the phrase over the years still irks those in the actual procurement profession). Within the federal sector, a "strategically sourced" contract refers to one that has gone through a specific public-sector variant of a strategic sourcing event.

This brings us to the specific news that the US Federal Sector is getting a failing grade at implementing strategic sourcing savings according to some new analysis. Specifically, "Four federal agencies that conduct 80 percent of the government's procurement activity are not taking advantage of strategic sourcing contracts and potentially missing out on savings in billions of dollars," according to a Federal News Radio story. Further, "Auditors found DHS [one department] spent 20 percent of its budget on strategic sourcing contracts and saved about 2.3 percent, while the Pentagon spent 5.8 percent of its budget through strategic sourcing vehicles and saved 0.06. DOE [another department] used strategic sourcing for 9.3 percent of its acquisition budget and saved 1.34 percent, while the VA [another department] spent 1.4 percent of its budget through strategic sourcing and saved 0.32 percent."

In total, "across the government, agencies spent $537 billion on procurement, using 5 percent of their budgets on strategic sourcing and saving 0.4 percent, auditors said." Whether you call this a "strategic sourcing failure" – which we believe is a misnomer – or a failure to implement savings is in the eye of the spend holder. But regardless, if such failures happened in the private sector, and preferred contracts existed but which were not employed by the business, we all know that heads would fly.

- Jason Busch

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