Trump to apply category mgmt. to save $18 Billion by FY2020

Goal: apply to 60% of fed’l agencies’ “common spend”

      Under President Trump’s management agenda, category management will be applied across the board to save $18 billion by fiscal 2020 on common goods and services that the agencies buy.

      The goal is to apply category management to 60% of spending on items and services that the agencies commonly buy by the end of 2020.

      Currently, agencies pay a variety of prices for the same or similar items and services. Under category management, there would be only “best in class” offerings, and presumably overall prices would be reduced.

Impact on small businesses

      The move may hurt small business federal contractors, who have ongoing concerns with category management and its forerunner, strategic sourcing.

      Both policies, when applied to a category such as cleaning supplies or office furniture, have tended to result in significantly fewer small businesses having access to contracts in that category. The select number of small businesses who do maintain such access get robust awards.

      Small Business Administration officials shared those concerns with the current and former administrations, according to John Shoraka, SBA’s associate administrator for government contracting and business development under President Obama.

      “If you have only 15 to 20 small businesses on one of these vehicles, what happens to the thousands of other small businesses left out? How competitive will the market be in five years when possibly many of those firms have left the market?” Shoraka told Set-Aside Alert in a 2017 interview.

      He said the shift from strategic sourcing to category management was a broader approach that alleviated some of the concerns, but not all.

President’s Management Agenda

      President Trump’s management agenda released in March stated that the Defense Dept. and the Office of Management and Budget will lead in delivering on the goal of increasing adoption of category management.

      “By the end of FY 2020, the government will achieve $18 billion in savings for taxpayers by applying category management principles—or smart decision-making where agencies buy the same kinds of goods and services through best value contract solutions—to 60% of common spend,” the management agenda indicated.

      However, there is an apparent discrepancy. In a chart on page 35 of the president’s agenda, it states that by fiscal 2020 the government will increase the proportion of common goods covered by category management to 70%. OMB officials said they could not immediately explain the discrepancy.

      In addition, President Trump intends to eliminate 50,000 duplicative contracts, potentially saving “hundreds of millions of dollars,” according to the management agenda.

“Common Spend” at $303B a year

      Also in the management agenda, the White House estimated that in fiscal 2017 agencies spent about $303 billion on contracting for common requirements, with about 42% of that under category management.

      The areas under category management included $95 billion in governmentwide enterprise contracts (32%) and $32 billion (10%) on agencywide enterprise contracts.

      The White House also charted federal agencies’ progress in bringing spending under better management control, and in using “best-in-class” contracts.

      Those charts showed that the Energy Dept. has the greatest “Spend Under Management” at $21 billion, followed by DOD, $17 billion; Veterans Affairs, $17 billion; Defense Logistics Agency, $11 billion; Army, $8 billion; Navy, $7 billion; Homeland Security, $6 billion; Air Force, $6 billion and Health & Human Services, $5 billion.

      GSA, Office of Personnel Management and the EPA had the greatest increases in use of best-in-class contracts, but no dollar amounts were shown.

Agency actions

      The management agenda outlines key actions to be carried out by federal agencies to fulfill the category management goal:

• Establish annual goals to use governmentwide and/or agencywide acquisition vehicles while meeting small business and other statutory socio-economic goals;
• Develop strategies to improve communication with vendors, especially mission-critical vendors;
• Implement best practices to eliminate inefficient purchasing and consumption behaviors; and
• Share transactional data across the government, including prices paid, terms and conditions.

Category management team leaders

      Additional details on category management goals on the Performance.gov website identify the team leaders for category management as John H. Gibson III, chief management officer for DOD, and Lesley Field, deputy administrator for federal procurement policy and shared services policy officer at OMB.

      The website also indicates that savings and cost avoidance for category management is being measured based on increased use of Best In Class solutions. It says those solutions on average produce 10-15% savings.

More information:
President’s Management Agenda: https://bit.ly/2JPPYwU
Performance.gov: https://www.performance.gov/CAP/CAP_goal_7.html

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