The Government Accountability Office released a report today detailing how the government is leaving at least $50 billion on the table annually by not taking advantage of strategic sourcing — “a process that moves an organization away from numerous individual procurements to a broader aggregate approach,” according to the report.
The federal government spends roughly $537 billion on federal procurement spending each year, yet just a small fraction of that is managed with strategic sourcing efforts. Four agencies — Defense, Homeland Security, Energy and Veterans Affairs — manage 80 percent of the overall procurement budget, but only 5 percent of their spending is managed with strategic sourcing, the report found.
“While strategic sourcing makes good sense and holds the potential to achieve significant savings, federal agencies have been slow to embrace it, even in a time of great fiscal pressure,” the report reads.
The basic idea behind the Federal Strategic Sourcing Initiative — launched in 2005 — is collaboration among the agencies: collaboration to bargain for the best price on contracts and collaboration to share best purchasing practices. But the initiative was only applied to a small amount of federal procurement spending in 2011, according to the report.
In the private sector, companies with detailed strategic sourcing strategies have created savings of at least 10 percent. The report found, in limited cases, federal agencies have mirrored this success. The four governmentwide strategic sourcing initiatives in 2011 returned “significant savings.” And those initiatives didn’t even touch the highest spending areas.
“We found that most selected agencies’ efforts did not address their highest spending areas, such as services, which may provide opportunities for significant savings,” the report reads.
More recently, the report highlights several examples of agencies’ shifting approach to procurement. In the past few months, DOD began assessing the need for additional resources to support strategic sourcing efforts and VA reported it “had taken steps to better measure spending through strategic sourcing contracts.”
And last year, the Office of Management and Budget released a cross-agency priority goal statement, calling for agencies to strategically source at least two new products in 2013 and 2014 that return at least a 10 percent cost reduction.
GAO tracks ongoing savings from the initiative at a website, and the report mentioned OMB and other agencies had agreed with its recommendations to continue moving toward strategic sourcing efforts.