The Office of Management and Budget has outlined several aggressive steps ahead for expansion of strategic sourcing, stirring fears among small business owners.

Under strategic sourcing, federal agencies consolidate their buying power to increase efficiency and lower costs, usually by working with a small number of vendors offering the best deals. While some small businesses make the cut, many others may be left out.

OMB’s Jeffrey Zients, deputy director for management, distributed a memo on Dec. 5 that ordered 24 federal agencies to each designate a Strategic Sourcing Accountable Official with the authority to coordinate the agency’s internal strategic sourcing activities and participation in governmentwide efforts. The names are due by Jan. 15.

The OMB memo also ordered creation of a new Strategic Sourcing Leadership Council to consider strategic sourcing contracts, including contracts that could be made mandatory for agencies to use. The council replaces a working group set up by agency chief acquisition officers.

The new council is led by Joe Jordan, administrator of the Office of Federal Procurement Policy, and includes the seven agencies with the highest spending on contracting, including the departments of Defense, Veterans Affairs and Homeland Security, NASA and General Services Administration, as well as the Army, Navy, Air Force and the Defense Logistics Agency. The Small Business Administration is part of the council to represent small businesses, Zients said in the memo.

OMB wants the council to identify by March 2013 at least five products or services that could be suitable for bulk buying under contracts that could be made mandatory.

Currently, the Federal Strategic Sourcing Initiative encompasses blanket purchase agreements awarded in five categories on the GSA’s supply schedules. The categories include office supplies and furniture, print management and domestic delivery services.

For Schedule 75 office supplies, 15 small businesses were named on the purchasing agreement. Many of those vendors have participating dealer agreements with over 120 small businesses, according to GSA. Even so, hundreds of vendors were left out.

Zients said the office supply initiative has saved the government $140 million in two years because of lower prices.

Samuel Bornstein, Kean University professor of accounting and taxation who has been researching Schedule 75 office supplies, said contractors left off the blanket purchasing agreement have lost jobs.

“My concern is that OMB will use the Schedule 75 (implementation) as a template for all Federal Strategic Sourcing Initiative blanket purchase agreement implementations,” Bornstein told Set-Aside Alert. This would result in “great financial distress” for the non-winners and be a monopoly for the winners, he added.

Bornstein recommends that the government perform a cost-benefit analysis before implementing additional strategic sourcing agreements.

More information:
OMB memo http://goo.gl/9J3zL