Homeland Security and Governmental Affairs Chairman Joe Lieberman, ID-Conn., Friday hailed an announcement by the White House that it is issuing new guidance to agencies to drive better coordination across the government on federal contracts. This new guidance is part of an ongoing effort by the Administration to increase government use of strategic sourcing to encourage smarter acquisition and contracting practices.
"I commend the Administration for taking additional steps to better leverage the buying power of the federal government, said Lieberman. "Just last month the Government Accountability Office released a report prepared for our Committee showing that the federal government is way behind the private sector in coordinating its purchases through strategic sourcing practices, and as a result, we're missing out on billions of dollars annually in savings. In this era of belt-tightening, we can't afford to overlook obvious ways to make better use of tax dollars through strategic sourcing."
Strategic sourcing is the analytical assessment of needs across an agency or across the government, followed by the negotiation of contracts that provide discounted prices based on volume purchases.
The recent report by the Government Accountability Office showed that instead of leveraging the buying power of the whole federal government, agencies act more like unrelated, medium-sized businesses and often rely on hundreds of separate contracts for commonly used items, with prices that vary widely.
· The four agencies examined by GAO (the Departments of Defense, Energy, Homeland Security and the Veterans Administration) accounted for 80 percent of spending last year but reported managing only 5 percent of that spending through strategic sourcing.
· Leading companies strategically manage about 90 percent of their procurements for savings of 10 to 20 percent.
· The Department of Homeland Security used strategic sourcing at a much higher rate than the other agencies -- 20 percent of its FY 2011 spending.
· Only a small volume of spending goes through contracts established by OMB's "Federal Strategic Sourcing Initiative" (FSSI) -- $339 million out of a total $537 billion in spending in FY 2011. Even this small amount of spending generated considerable savings of $60 million.
· FSSI is underutilized. Only 15% of government-wide spending for the products and services covered by FSSI initiatives went through the FSSI contracts in FY 2011.
· The FSSI program has not targeted any of the government's top 50 products and services for strategic sourcing and therefore is missing the potential for significant savings.
The report can be viewed by clicking on the following link: http://www.gao.gov/products/GAO-12-919