Transformation initiatives in US federal government procurement seem to be very active lately, and it actually seems somewhat encouraging. I was checking out the latest quarterly White House briefing slides by Beth Cobert, Deputy Director for Management in the Office of Management and Budget (which you can access here), and I was shocked by the extent to which the president's management agenda resembled something I'd see in the private sector—similar to a steering committee presentation for a Global Business Services (GBS) organization with procurement playing a major role. Here is the current snapshot of the agenda.
There seem to be the right ingredients here for some good spend management:
- External stakeholder satisfaction: innovation and growth – check
- Effectiveness, efficiency, and “world class” performance – check
- Strategic sourcing and benchmarking – check
- Shared services and productivity improvement – check
- Talent management and culture of excellence – check
- Smarter IT delivery – and check!
Then came some additional slides on the following:
- Dashboards for project/savings tracking. $1.7 billion in IT savings.
- Self-service portals for various stakeholders (veterans, small/diverse suppliers, etc.)
- Invoice error rate (called “improper payments”) tracking dashboard (currently at 3.5 percent - down from 5.42 percent in 2009)
- Improvement programs for shared services, regulatory reform, real estate footprint reduction, innovation, employee engagement, etc. Three case studies of pilot programs from different agencies were highlighted to show some activities going in the right direction. All good stuff.
Then, the head of the GSA, Dan Tangherlini, dove into the details of the various strategic sourcing initiatives (he seems to be a very smart and competent fellow). Our sister site for public sector, Public Spend Forum, has covered many of these topics in detail, but here are some interesting observations:
- $300 million in savings have been realized over the last four years. For third-party spending of $462 billion in the fiscal year 2013 (down from $516 billion in 2012 according to a Bloomberg report), the $75 million savings per year certainly isn’t much (1-2 basis points – and a few orders of magnitude less than what is seen in the private sector). As an aside, if you want to play around with a free hosted spend analysis tool/service on US government spending, check out USA Spending. However, be forewarned that it's a government site and has been criticized for being inaccurate.
- Still, within office supplies, price savings were 65 percent. In the private sector, procurement folks get nervous when they see savings over 20-30 percent in terms of money that was previously sitting on the table. But, hey, it’s a start, and maybe look at this as a glass half full.
- Contract duplication was also cited as being reduced by 40 percent. Supplier/contract re-use is certainly a big theme in many current efforts. It’s a pragmatic strategy to provide better visibility and coordination as a starting point for improvement.
- In that spirit, a “prices paid portal” has also been piloted. This is just good old fashioned spend analysis 101 – item level pricing variance analysis.
- Finally, the GSA is partnering with OMB and the Strategic Sourcing Leadership Council (SSLC) to pilot the use of category management, not just within an acquisition platform called CAP (Common Acquisition Platform) as discussed here on Public Spend Forum, but more broadly, as FAS Commissioner Thomas Sharpe writes about here. I would highly recommend reading about his proposed category management strategy – it seems very well thought out. Of course, I love the “guided buying” aspect to the CAP that Commissioner Sharpe says is “a technology platform and strategy that will help deliver the benefits of category management and it will guide buyers through every step of the full acquisition process.” I wrote about this guided buying concept back in 2008 in The Purchasing & Supply Chain Management Handbook. As a taxpayer, I’m excited that this strategy is being pursued.
As a practical matter, since the GSA is basically a sort of super shared services organization for the federal government, and since it wants to improve the utilization of its contracts by federal agencies well beyond the roughly 10 percent of applicable spend that it currently commands, it will need to elevate its perceived value on many fronts.
It’s a complex problem that is too broad for this already lengthy blog post, but we’ll cover it down the road. Suffice it to say that although savings and spend under management don’t currently look so good, the government at least seems to acknowledge the problem and is working hard to address it. So much so that they’ve set up a virtual suggestion box at the CAO website. It’ll be interesting to see how this pans out. Still, many people may say that there’s really no place to go but up, especially since the GSA public relations disaster when recent GSA retiree (and recipient of six-figure pension) Jeffrey Neeley and some of his crew were partying it up in Vegas. Although I always like a good Colbert parody like this one on the events, there was a more serious piece in the Washington Post recently that got into some of the real back stories going on (see the reader comments from some insiders if you’re into such drama). It’s a cautionary tale for CPOs to make sure that you know exactly who on your staff is doing what, because it can roll uphill too, and it doesn’t take much to get yourself brought down these days.
So, what’s the bottom line on all this? You can draw your own conclusions, but I’m at least encouraged by the invisible hand creeping its way into federal procurement. Obviously the vision and strategies are far outstripping the execution, but with more private sector procurement leadership moving into the federal government (rather than just vice versa, if you catch my drift), let’s hope that knowledge transfer will be swift and effective. On the flip side, corporate practitioners should take an inventory of all the public sector activity (e.g., the category management vision from FAS) and use it internally, saying, “Hey, if even the government is getting on board with category management, shouldn’t we?!” Let’s hope so.