OFPP and category management: Pressing the pause button

On Oct. 7, the Office of Federal Procurement Policy (OFPP) published, in the Federal Register, a proposed new Office of Management and Budget Circular No. A-XXX, “Implementing Category Management for Common Goods and Services.” The public comments on the draft circular were due on Nov. 7. The Coalition’s comments can be found here.

The proposed circular contemplates a governmentwide reorganization of procurement operations; mandating that every executive branch agency use category management for the acquisition and management of common goods and services. It would institutionalize new management structures, entities, processes, roles and responsibilities for procurement professionals and organizations across the federal government. Although the Coalition generally supports OMB’s efforts to improve the management and operation of the federal acquisition system, especially efforts to reduce unnecessary contract duplication, the circular raises any number of significant legal, policy and operational issues. By way of example, here are three:

Centralization of Acquisition Management

The hallmark of the proposed circular is centralization of acquisition management authority in and through OFPP and OMB. The proposed circular mandates that agencies use category management principles and practices including directing how agencies must organized to acquire and manage common goods and services. At the same time, OFPP/OMB is asserting the authority to issue category management policies and procedures that will impact directly the determination of agency needs and specific actions in the award or administration of procurements. The OFPP Act, 41 U.S.C.1121(f), however, limits OFPP’s authority to be involved directly in certain agency procurement decisions. This raises questions regarding the statutory authority for category management as currently proposed.

Best in Class Contracts

Consistent with its drive toward centralization, the proposed circular provides that OMB will designate “Best In Class” (BIC) mandatory contracts for use governmentwide. This approach raises significant concerns for customer agencies and contractors. BIC means OMB will be picking winners and losers (agencies and contractors) on a governmentwide basis, resulting in a government market that is centrally managed market. What will the impact be on competition, innovation and small businesses? Moreover, the BIC selection criteria is based largely on government unique practices rather than best in class commercial practices. For example, the BIC selection criteria will vendor transactional data reporting (TDR), a non-standard, non-commercial practice.

Advertisement

Significantly, the circular does not cite any statutory authority for OMB’s designation of mandatory BIC contracts. OMB authority is limited to designating governmentwide IT contracts (GWACs) for use pursuant to the Clinger-Cohen Act, 40 U.S.C. 11302(e).

Performance Metrics

The proposed circular also seeks to identify metrics for assessing the performance of category management. Of note, it sets forth “savings” and “Spend Under Management” as performance metrics. These metrics, however, are overly broad, subjective measures that are not necessarily related to performance outcomes or determining the value of category management.

To the extent “savings” fails to include both direct and indirect costs of category management implementation, then total cost of acquisition simply cannot be determined accurately. The emphasis on measuring savings through price also raises concerns that the category management is a low price, technically acceptable management approach.

Further, the definition of “Spend Under Management,” is unclear from the language of the proposed circular. It appears to focus on process driven, compliance measures rather than mission outcomes/value. Additionally, the use of terminology “Spend Under Management” sends a clear message to agencies regarding the mandatory nature of category management.

Time to Pause and Reflect

In response to the significant questions and concerns surrounding the proposed circular, there was at least one joint industry association request and one congressional request to extend the due date for comments. The extension requests, however, were denied and the proposed circular appears to be moving apace. That OMB and OFPP are seeking to mandate a governmentwide acquisition management reorganization in the closing days of the administration is difficult to understand, especially given that category management is in its infancy and the outcomes/results are unclear, at best.

This rush to implement and institutionalize category management does not advance our common goal of improving the procurement system to deliver best value mission support for customer agencies and the American people. There are simply too many uncertainties and unanswered questions surrounding category management to proceed in haste.

Now is the time for OFPP to press the pause button on category management.