Leveraging Buying PowerLeveraging Buying Power

Strategic Sourcing Strategic Sourcing

Joe TaylorProcurement Policy Division

USDA Office of Procurement & Property Management

April 19, 2005

ContextContext

GAO Report Draft “GAO Report Draft “Agencies Can Achieve Agencies Can Achieve Significant Savings on Purchase Card Significant Savings on Purchase Card Buys” Buys” March 2004March 2004

Agencies could save $300 million if Agencies could save $300 million if discounts of 10% were received from discounts of 10% were received from major vendorsmajor vendors

Agencies reviewed: USDA, VA, DOD, Agencies reviewed: USDA, VA, DOD, DOI, DOJDOI, DOJ

Why aren’t agenciesWhy aren’t agenciesseeking discounts?seeking discounts?

GAO cited GAO cited ““Lack of Management Focus”Lack of Management Focus” as the reason agencies were not as the reason agencies were not aggressively pursuing savingsaggressively pursuing savings

Context (Cont)Context (Cont)

GAO report, “GAO report, “Use of Spend Analysis,” Use of Spend Analysis,” discusses the need to institutionalize discusses the need to institutionalize continuous spend analysis to achieve continuous spend analysis to achieve savingssavings

USDA e-AllianceUSDA e-Alliance

Partnership with Partnership with USDA agencies and USDA agencies and GSA to leverage GSA to leverage buying powerbuying power

USDA StrategyUSDA Strategy

1.1. Conduct ongoing spend analysis Conduct ongoing spend analysis

2.2. Select FSS supplies/services to competeSelect FSS supplies/services to compete

3.3. Conduct market research Conduct market research

4.4. Compete, and negotiate discounted Compete, and negotiate discounted blanket purchase agreementsblanket purchase agreements

5.5. Host BPAs, e-catalogs & ordering on Host BPAs, e-catalogs & ordering on USDA Advantage (partnership with GSA)USDA Advantage (partnership with GSA)

6.6. Implement and manage BPAsImplement and manage BPAs

1. Conduct Spend Analysis1. Conduct Spend Analysis

Identify data sourcesIdentify data sources– Purchase Card Purchase Card

Management Management SystemSystem

– Payment SystemsPayment Systems– FPDS NGFPDS NG– Vendors Vendors – VISAVISA

Spend Analysis (Cont.)Spend Analysis (Cont.)

Analyze available data:Analyze available data:– MerchantMerchant– Dollar amountDollar amount– MCCMCC– NAICS CodeNAICS Code– Product CodesProduct Codes– Budget Object CodeBudget Object Code– Level 3 data, if availableLevel 3 data, if available

Spend Analysis (Cont.)Spend Analysis (Cont.)

Segment spendSegment spend::

Supplies, e.g.,Supplies, e.g.,– Office suppliesOffice supplies– HardwareHardware– Scientific supplies and Scientific supplies and

equipmentequipment

Services, e.g.,Services, e.g.,– Domestic deliveryDomestic delivery– TelecommunicationsTelecommunications

2. Select best opportunities 2. Select best opportunities for savings and other goalsfor savings and other goals

Items used by all or Items used by all or most agenciesmost agencies

High dollar amount & High dollar amount & transaction volumetransaction volume

Federal Supply Federal Supply Schedule itemsSchedule items

P-card acceptanceP-card acceptance

3. Conduct Market Research3. Conduct Market Research

Talk to Talk to – VendorsVendors– UsersUsers– Sister organizationsSister organizations– BuyersBuyers

Review Review – Trade publicationsTrade publications– GSA SchedulesGSA Schedules– Similar agreementsSimilar agreements

4. Compete and Negotiate BPAs4. Compete and Negotiate BPAs

Use E-BuyUse E-Buy

Keep process simpleKeep process simple

Make a single award Make a single award if possible if possible

4. Compete and Negotiate BPAs4. Compete and Negotiate BPAsWhy make a single award?Why make a single award?

• Intensify the competition to get a better Intensify the competition to get a better dealdeal• Maximize what contractors have to lose Maximize what contractors have to lose and what they have to gainand what they have to gain

Use Standard RFQ TemplateUse Standard RFQ Template(One or Two Pages)

USDA BPA RFQ for ________________________

• GSA Schedule No. and SINS covered

• Description of the work

• Extent of obligation of the government

• Delivery or performance requirements including reporting

• Substitution of JWOD items for like products if applicable

• Acceptance of credit card

• Team arrangements

• Statement that GSA schedule conditions apply

• Evaluation and award criteria

• How many BPA’s to be awarded

5. Host BPAs and on-line ordering 5. Host BPAs and on-line ordering on USDA Advantageon USDA Advantage

Utilize existing GSA technology Utilize existing GSA technology

Customize to focus on USDA BPAsCustomize to focus on USDA BPAs

Fast to implement Fast to implement

Vendors already pass FSS catalog Vendors already pass FSS catalog data to GSA electronicallydata to GSA electronically

Users don’t have to be trained on Users don’t have to be trained on each vendor’s ordering website or each vendor’s ordering website or register at multiple sitesregister at multiple sites

Only USDA BPAs

6. Implement and Manage BPAs6. Implement and Manage BPAs

Implementation plan for each BPAImplementation plan for each BPA– Loading catalog dataLoading catalog data– BPA use promotionBPA use promotion

Quarterly reports including sales and Quarterly reports including sales and discountsdiscounts

Annual managementAnnual management

meetings with vendormeetings with vendor

USDA BPA ExamplesUSDA BPA ExamplesOffice SuppliesOffice Supplies– Single award to Boise CascadeSingle award to Boise Cascade– Overnight desktop deliveryOvernight desktop delivery– Increased JWOD salesIncreased JWOD sales– $28 million in FY04$28 million in FY04– 10% Discount saved $2.8 million10% Discount saved $2.8 million

Domestic Delivery ServicesDomestic Delivery Services– Single award to FedExSingle award to FedEx– $14 million annually$14 million annually– 18% discount 18% discount – $.5 million saved 1$.5 million saved 1stst half FY 05 half FY 05

USDA BPA Examples (Cont)USDA BPA Examples (Cont)

HardwareHardware– Over 100,000 itemsOver 100,000 items– 750 JWOD items750 JWOD items– BPA Ready for awardBPA Ready for award

Business CardsBusiness Cards– Seattle Lighthouse for the BlindSeattle Lighthouse for the Blind– Formats pre-approved by OCFormats pre-approved by OC– On-line business card set-up and On-line business card set-up and

orderingordering– BPA ready for awardBPA ready for award

USDA BPA Examples (Cont)USDA BPA Examples (Cont)

Custom ProductsCustom Products– Delaware Industries for the BlindDelaware Industries for the Blind– Ready for awardReady for award

BPAs in processBPAs in process– Scientific supplies and equipmentScientific supplies and equipment– WirelessWireless– Procurement TrainingProcurement Training

Performance GoalsPerformance GoalsSavingsSavings through reduced prices compared to GSA through reduced prices compared to GSA Schedule prices or to what agencies could Schedule prices or to what agencies could negotiate with smaller buying power.negotiate with smaller buying power.

Increased rebatesIncreased rebates through increased purchase through increased purchase card usecard use

Improved vendor performanceImproved vendor performance such as faster such as faster delivery than standard industry practice.delivery than standard industry practice.

Reduced training costsReduced training costs compared to using multiple compared to using multiple vendor ordering sites.vendor ordering sites.

Reduced purchasing processing costsReduced purchasing processing costs compared to compared to using purchase orders, multiple vendor ordering using purchase orders, multiple vendor ordering sites, or other mechanisms.sites, or other mechanisms.

Joe TaylorJoe Taylor Procurement Policy Division Procurement Policy Division

Office of Procurement and Property Office of Procurement and Property ManagementManagement

202-401-0787

joe.taylor@usda.gov