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Maximizing Savings Through Strategic Sourcing: Procurement Policy Insights

Learn how to leverage buying power and strategic sourcing to achieve significant savings in procurement. Explore ways to conduct spend analysis, select best opportunities, compete, and negotiate blanket purchase agreements.

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Maximizing Savings Through Strategic Sourcing: Procurement Policy Insights

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  1. Leveraging Buying Power Strategic Sourcing Joe Taylor Procurement Policy Division USDA Office of Procurement & Property Management April 19, 2005

  2. Context • GAO Report Draft “Agencies Can Achieve Significant Savings on Purchase Card Buys” March 2004 • Agencies could save $300 million if discounts of 10% were received from major vendors • Agencies reviewed: USDA, VA, DOD, DOI, DOJ

  3. Why aren’t agenciesseeking discounts?

  4. GAO cited “Lack of Management Focus”as the reason agencies were not aggressively pursuing savings

  5. Context (Cont) • GAO report, “Use of Spend Analysis,” discusses the need to institutionalize continuous spend analysis to achieve savings

  6. USDA e-Alliance • Partnership with USDA agencies and GSA to leverage buying power

  7. USDA Strategy • Conduct ongoing spend analysis • Select FSS supplies/services to compete • Conduct market research • Compete, and negotiate discounted blanket purchase agreements • Host BPAs, e-catalogs & ordering on USDA Advantage (partnership with GSA) • Implement and manage BPAs

  8. 1. Conduct Spend Analysis • Identify data sources • Purchase Card Management System • Payment Systems • FPDS NG • Vendors • VISA

  9. Spend Analysis (Cont.) • Analyze available data: • Merchant • Dollar amount • MCC • NAICS Code • Product Codes • Budget Object Code • Level 3 data, if available

  10. Spend Analysis (Cont.) Segment spend: • Supplies, e.g., • Office supplies • Hardware • Scientific supplies and equipment • Services, e.g., • Domestic delivery • Telecommunications

  11. 2. Select best opportunities for savings and other goals • Items used by all or most agencies • High dollar amount & transaction volume • Federal Supply Schedule items • P-card acceptance

  12. 3. Conduct Market Research • Talk to • Vendors • Users • Sister organizations • Buyers • Review • Trade publications • GSA Schedules • Similar agreements

  13. 4. Compete and Negotiate BPAs • Use E-Buy • Keep process simple • Make a single award if possible

  14. 4. Compete and Negotiate BPAs Why make a single award? • Intensify the competition to get a better deal • Maximize what contractors have to lose and what they have to gain

  15. Use Standard RFQ Template (One or Two Pages) • USDA BPA RFQ for ________________________ • GSA Schedule No. and SINS covered • Description of the work • Extent of obligation of the government • Delivery or performance requirements including reporting • Substitution of JWOD items for like products if applicable • Acceptance of credit card • Team arrangements • Statement that GSA schedule conditions apply • Evaluation and award criteria • How many BPA’s to be awarded

  16. 5. Host BPAs and on-line ordering on USDA Advantage • Utilize existing GSA technology • Customize to focus on USDA BPAs • Fast to implement • Vendors already pass FSS catalog data to GSA electronically • Users don’t have to be trained on each vendor’s ordering website or register at multiple sites

  17. Only USDA BPAs

  18. 6. Implement and Manage BPAs • Implementation plan for each BPA • Loading catalog data • BPA use promotion • Quarterly reports including sales and discounts • Annual management meetings with vendor

  19. USDA BPA Examples • Office Supplies • Single award to Boise Cascade • Overnight desktop delivery • Increased JWOD sales • $28 million in FY04 • 10% Discount saved $2.8 million • Domestic Delivery Services • Single award to FedEx • $14 million annually • 18% discount • $.5 million saved 1st half FY 05

  20. USDA BPA Examples (Cont) • Hardware • Over 100,000 items • 750 JWOD items • BPA Ready for award • Business Cards • Seattle Lighthouse for the Blind • Formats pre-approved by OC • On-line business card set-up and ordering • BPA ready for award

  21. USDA BPA Examples (Cont) • Custom Products • Delaware Industries for the Blind • Ready for award • BPAs in process • Scientific supplies and equipment • Wireless • Procurement Training

  22. Performance Goals • Savings through reduced prices compared to GSA Schedule prices or to what agencies could negotiate with smaller buying power. • Increased rebates through increased purchase card use • Improved vendor performance such as faster delivery than standard industry practice. • Reduced training costs compared to using multiple vendor ordering sites. • Reduced purchasing processing costs compared to using purchase orders, multiple vendor ordering sites, or other mechanisms.

  23. Joe Taylor Procurement Policy Division Office of Procurement and Property Management 202-401-0787 joe.taylor@usda.gov

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