OFPP fixing unintended consequences of 1990s procurement reform

The federal government’s procurement system is not designed for optimal performance.

That was the understatement of the week by Anne Rung, the administrator of the Office of Federal Procurement Policy.

But Rung, who was speaking at the quarterly President’s Management Advisory Board meeting in Washington Friday, wasn’t just complaining about the situation that has led to more than 3,300 contracting offices across the world, huge price discrepancies among agencies when buying similar goods and services, and huge duplication across the government.

“I think a lot of well-intentioned acquisition reform legislation has had some unintended consequences,” Rung said. “At one point, in [the Clinton administration’s] Reinventing Government, they called for an end to government monopolies and they were talking about different functional areas. But one of the areas they were referring to was the General Services Administration being the sole entity to purchase IT acquisitions. So, they wanted to bring that authority back to the agencies. One of the unintended consequences was that we have this massive proliferation of duplicative contracts across government. So, we now have this model that we have to do something with.”

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Rung’s perspective opens the door a little bit on the thinking by the Obama administration about what’s driving category management.

Few doubt the government could be more efficient. Few would argue that initiatives such as strategic sourcing or spend management wouldn’t benefit the government.

The question that continues to come back is how to address the industrial base that has grown up under this flawed and broken model.

OFPP says category management would help control about $270 billion across 10 super categories, which are the basis for the category management initiative.

“No one has tried it on this scale,” Rung said. “In the U.K., they are talking about $14 billion in spend. Boeing and other companies like Macy’s are much smaller. So how do you really tackle $270 billion in common spend? How do you bring some organization and transparency into this space?’

Beth Cobert, OMB’s deputy director for management, said the data around these 10 super-categories is the key to changing agency buying behavior.

As part of that data collection effort, Rung said OFPP spent the last three months coming up with a methodology to track spending across these 10 categories.

OFPP created a three-tiered approach, with level three being a mature approach, which includes a governmentwide solution with full-time category management.

The first one to start reaching for tier three will be IT. OMB is hiring a full-time IT category manager with a goal of having that person in place by July. It also launched an interagency software team and by June will issue standard configurations for 80 percent of the requirements for laptops and desktops. OMB also will issue IT policy guidance by July around category management.

“We want to set a goal for ourselves as part of a dashboard that we present to the President, who asked for quarterly where we are with spend under management. We think that will be a good incentive for our agencies,” Rung said.

President Barack Obama met with GSA and OFPP in February to talk about category management.

Rung said the first job of this new category manager will be to dig through the spending data to get an even more accurate total for IT spending.

“This is a very rough cut. I know this is not accurate,” she said. “We don’t know the spend. This $270 billion will change.”

Ellen Herbst, the Commerce Department chief financial officer, said her agency took on the idea of category management internally in a cost-savings effort.

“The cost avoided, if you will, was not obvious enough to the individual program managers on the mission side. We recognized we need to do a much better communications job to sell them on the benefits,” she said. “It takes work to collect this data, come up with requirements that everybody will agree to and, frankly, force people down the chute of these contracts.”

And the data Commerce discovered was dramatic. Herbst said 88 percent of the agency’s transactions were under the Simplified Acquisition Threshold—meaning less than $150,000—but that only accounted for 18 percent of the total spend.

She said what the acquisition folks saw from this data is the ability to let someone else deal with these commodity buys so they can focus on the more complex, mission- critical procurements. Herbst said these changes are letting Commerce put its best people on its most critical, complex buys instead of having them focus on the little things.

Laura Stanton, director of program management for the Common Acquisition Platform at the General Services Administration, said the IT hallway under the Category Management effort is slowly building users and information. She said the hallway is seeing between 75 and 100 new users a week.

“We are planning on putting in tools and digital services that would allow somebody to immediately go into the transaction area,” she said. “We are looking at how do we build this in a thoughtful way. How do we also put the tools in place so somebody could put together their cost estimates, using data from other agencies, so they can see if they are paying more or out of sync with others?”

Rung said one of OFPP’s metrics for the success of category management will be how many contracting officers and others take advantage of all the data in the category hallways.

“I recognize some of us are only here for a few years. How do we institutionalize category management?” she said. “It’s at least a five-year process. So, are there regulations we should be thinking about? How do we embed this within the organizations?”

History has shown the best way to institutionalize anything in to government is through a combination of policy/oversight and a true demonstration of value, which must come soonest.

This post is part of Jason Miller’s Inside the Reporter’s Notebook feature. Read more from this edition of Jason’s Notebook.