OMB directs agencies to begin buying commodities strategically

The Office of Management and Budget this week expanded the concept of enterprise software licensing to commodities.

In a memo to CIOs, chief acquisition officers and chief financial officers, OMB deputy director for management Clay Johnson instructed agencies to implement strategic sourcing effective Oct. 1.

“Strategic sourcing is the collaborative and structured process of critically analyzing an organization’s spending, and using this information to make business decisions about acquiring commodities and services more effectively and efficiently,” Johnson said in the memo. “This process helps agencies optimize performance, minimize price, increase achievement of socioeconomic acquisition goals, evaluate total lifecycle management costs, improve vendor access to business opportunities and otherwise increase the value of each dollar spent.”

This effort is a variation of the SmartBuy software initiative. Under SmartBuy, the General Services Administration or another agency negotiates a governmentwide deal for popular software titles to obtain the lowest price and best terms and conditions based on volume purchases.

Some agencies already are using strategic sourcing to obtain lower costs on commonly bought commodities. In 2004, the Homeland Security Department used strategic sourcing to save $14 million in buying boats, energy and weapons, according to a recent report by the Government Accountability Office.

But GAO found that DHS officials are having problems because of a lack of comprehensive data to gain an accurate and detailed understanding of what the agency is spending on commodities over time.

That is part of the reason OMB is putting the chief acquisition officer in charge of this effort.

Through an intra-agency group, acquisition, IT and financial managers should identify at least three commodities, not including software, which could be purchased under this effort in fiscal 2006. IT, acquisition and financial managers also will identify a point of contact to lead this effort, and develop a strategy to implement strategic sourcing that includes:

  • Governance

  • Goals and objectives

  • Performance measures

  • Communications strategy

  • Training strategy.

OMB also wants chief acquisition officers to submit a report by January 2006 to the Office of Federal Procurement Policy that addresses how strategic sourcing led to lower prices for goods and services, reduction in the cost of doing business, improvement in performance and change in achievement of socioeconomic acquisition goals at the prime contract and, if possible, the subcontract level.

“Agencies shall develop methodologies for establishing baseline data and subsequent changes to this baseline, and shall consistently apply this methodology throughout the strategic sourcing process,” Johnson said.

OFPP also may identify several commodities that could be bought through governmentwide strategic sourcing and it will establish an interagency structure for managing the acquisition of these commodities.

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