Growing confusion over category management sparks Hill interest

The Office of Federal Procurement Policy is trying really hard to educate agencies and vendors alike about what exactly category management really is.

As Anne Rung, the OFPP administrator, said April 28 at the Coalition for Government Procurement spring conference, “Category management is one of the most significant reform efforts underway in the federal contracting space. What I like about category management is it’s really driven around what are the business needs of the agency and customers, and our category leads are really CEOs, really thinking about how to help agencies meet their mission needs rather than ‘can I make sure these 10 things have happened, or occurred, or if we’ve received this kind of reporting from our contractors.’ So I’m really struck by that.”

Part of Rung and the General Services Administration’s message over the last year has been that category management is not about contract consolidation or driving toward centralization, but rather giving contract officers the best information to make a decision before buying a product or service.

Category management is about creating transparency about best practices and identifying the best solutions for every agency procurement problem.

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But these messages seem to be stuck in low-gear as vendors and now some lawmakers are questioning the real motivation behind category management.

Reps. Steve Chabot (R-Ohio) and Nydia Velazquez (D-N.Y.), chairman and ranking member of the Small Business Committee respectively, wrote a letter to GSA Administrator Denise Turner Roth in early April asking for more details on how GSA is ensuring category management doesn’t impact small businesses. The lawmakers also expressed concern about GSA’s own small business contracting accomplishments.

“While category management has been billed as the strategy that can get agencies the lowest price, all evidence the committee has seen points to the contrary. In fact, in many cases the multiple award schedule (MAS) contract holders continue to provide lower prices versus those offered by category management contract holders. However, agencies cannot often buy at the lower price as these other contracts have been made mandatory vehicles by their agency. Ultimately, this means agencies pay more than necessary for goods and services,” the lawmakers wrote. “Additionally, decisions by GSA have reduced the overall number of businesses that have been able to compete for contracting opportunities. Many of the new contracting vehicles coming out of GSA have bundled so many goods together in one contract that a lot of small businesses do not have the capabilities to bid for it, despite having previously provided some of the goods or services under the MAS contracts. As a result the number of small firms serving as suppliers to the government in certain areas has gone from the hundreds to just a few handfuls.”

Rep. Nydia Velazquez (D-N.Y.), is the ranking member of the Small Business  Committee.
Rep. Nydia Velazquez (D-N.Y.), is the ranking member of the Small Business Committee.

Now Chabot and Velazquez may be confusing category management with strategic sourcing as the administration’s seven-year-old initiative for things such as office supplies or janitorial services seem to fit the committee’s concerns more than category management.

But this is a microcosm of the problem. Category management is not strategic sourcing on steroids — that much should be clear, but it’s not.

Instead some in industry and now on Capitol Hill believe the Obama administration is painting stripes on the lame horse that is the Federal Strategic Sourcing Initiative (FSSI) and now calling it a zebra. FSSI has found limited success and some believe have more severely impacted the federal supplier base than anyone thought it would.

Vendors also are concerned that through category management OFPP is trying to return to the days before the Brooks Act.

What’s the Brooks Act? Well, it’s the 1972 law that required agencies to look at qualifications of a bidder, not just price. It changed the federal procurement process for the next 35 years. Some are concerned that category management will return agencies to focusing only on lowest price.

These are similar to the ongoing concerns at the Defense Department and its perceived use of lowest-price technically acceptable (LPTA) for too many contracts.

Rob Burton, a partner with the law firm Crowell & Moring and a former OFPP deputy administrator, said the small business community is “deeply concerned” about shrinking opportunities in the face of category management.

“Since the 1990s, we’ve been driving the federal procurement system to be more commercial-like. That has been an acquisition reform policy goal. The competing interest is Congress and others don’t want you to actually be like the private sector. Your mission isn’t to make a profit, and there are socioeconomic goals that are viewed by certain policy makers as more important than arguably just cost savings,” Burton said at the conference. “I fully appreciate the challenge here because you have to balance these competing interests and I think it’s really very difficult.”

The idea of shrinking opportunities is the second part of the letter from Chabot and Velazquez. The lawmakers question GSA’s own small business contracting accomplishments.

“While each year GSA has high levels of dollars awarded to small firms, these numbers continue to be inflated as a result of exclusions to the agency’s base,” the congressmen said. “In the last fiscal year, GSA excluded approximately 60 percent of the total dollars spent by the agency when it calculated the eligible small business dollars. Based on this data, GSA awarded only 18 percent of its dollars to small businesses rather than the 44 percent published in the Small Business Goaling Report.”

According to the Federal Procurement Data System (FPDS), GSA excluded about $5.5 billion out of $9.16 billion in spending, and 26 percent of all contract actions in fiscal 2015 from those that it counted as small business eligible.

Now GSA wasn’t the worst in government. The U.S. Agency for International Development excluded 61 percent of its dollars and 65 percent of its actions, while the Transportation Department excluded 74 percent of its dollars and 43 percent of its contract actions.

A GSA spokeswoman said the administrator has not yet responded to the lawmakers’ letter.

Kevin Youel Page, the deputy commissioner of GSA’s Federal Acquisition Service, said his organization has heard the concerns about category management and strategic sourcing.

That is why as FAS sets up the Acquisition Gateway under category management and helps the category teams, which are led by experts from across the government, make and implement decisions, small business participation is at or near the top of the priority list.

“We are focused on reducing duplication and finding other ways to decrease administrative costs,” Youel Page said. “We are trying to encourage people to stop talking about savings in terms of price because it gets people upset in a needless way. We would expect each category to looking for category unique or specific metrics they should be tracking. Category-by-category, they will look how to move toward public policy outcomes.”

He said GSA is talking with industry to ensure its schedule contracts are competitive and the best possible option.

“We’ve embraced the use of Interact to try to create additional channels of communication around specific procurement actions and in general about how to move categories of spending or subcategories of spending forward,” Youel Page said. “As we evolve in the future, we want to make sure when we are having a conversation about how to improve our outcomes in a category that that is a conversation between program staff, contract staff and industry because you in industry often have great ideas beyond those that we are thinking about in any of the parts of government that are working on the problem.”

Youel Page said he expects in the near future the Acquisition Gateway will host these broad discussions to make the procurements better.

It will be critical over the next year for OFPP to educate and ensure the goals of category management are clearly articulated within industry and especially on Capitol Hill. Otherwise, all the work setting up categories and putting assorted commodity contracts in place over the last year could be at risk.

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