Procurement

GAO urges agencies to learn from private-sector purchasing

handshake

Agencies could save money on acquiring services by following the lead of major corporations, according to a study by the Government Accountability Office released on May 15.

Companies saved anywhere from 4 percent to 15 percent during the previous year by strategically sourcing the full range of services they buy, instead of using numerous individual purchases. Agencies buy many of the same services, including facilities management, engineering, and information technology.

However, said GAO, companies' "keen analysis of spending, coupled with central management and knowledge sharing about the services they buy, is key to their savings." (Read GAO's report here.)

GAO said corporate analysis of spending patterns encompass two essential variables: the complexity of the service and the number of suppliers for that service. The agency said that with those two variables for any given service, companies tailor their tactics to fit the situation. They do not treat all services the same, according to GAO.

In general, the study said corporate tactics fall into four basic categories: (1) standardize requirements, (2) understand cost drivers, (3) leverage scale, and (4) prequalify suppliers.

For example, Walmart negotiates better prices on basic commodity services using its sheer size to promise high-volume orders. On the other hand, when the services are sophisticated and have only a few providers, Dell provides an example of understanding the factors that most influence prices – labor rates in this case – and targeting negotiations to reduce them.

"Federal agencies have sizable opportunities to leverage leading commercial practices to lower costs and maximize the value of the services they buy," the study found.

GAO noted that in September 2012, it reported large procurement agencies like the Department of Defense and Veterans Affairs leveraged only a fraction of their buying power through strategic sourcing and faced challenges analyzing reliable data on spending, securing leadership support, and applying this approach to acquiring services. At the time, GAO recommended these agencies and the Office of Management and Budget (OMB) issue guidance, develop metrics and take other actions.

Potential savings from such practices, said GAO, could be significant. Even if the savings were a mere 4 percent, when applied to the $307 billion spent by federal agencies on services in fiscal year 2012 that would cut $12 billion. GAO said it has made recommendations in previous reports to help agencies strengthen strategic sourcing practices, with which agencies concurred and have planned actions under way.

About the Author

Mark Rockwell is a senior staff writer at FCW, whose beat focuses on acquisition, the Department of Homeland Security and the Department of Energy.

Before joining FCW, Rockwell was Washington correspondent for Government Security News, where he covered all aspects of homeland security from IT to detection dogs and border security. Over the last 25 years in Washington as a reporter, editor and correspondent, he has covered an increasingly wide array of high-tech issues for publications like Communications Week, Internet Week, Fiber Optics News, tele.com magazine and Wireless Week.

Rockwell received a Jesse H. Neal Award for his work covering telecommunications issues, and is a graduate of James Madison University.

Click here for previous articles by Rockwell. Contact him at mrockwell@fcw.com or follow him on Twitter at @MRockwell4.


Featured

  • Cybersecurity

    DHS floats 'collective defense' model for cybersecurity

    Homeland Security Secretary Kirstjen Nielsen wants her department to have a more direct role in defending the private sector and critical infrastructure entities from cyberthreats.

  • Defense
    Defense Secretary James Mattis testifies at an April 12 hearing of the House Armed Services Committee.

    Mattis: Cloud deal not tailored for Amazon

    On Capitol Hill, Defense Secretary Jim Mattis sought to quell "rumors" that the Pentagon's planned single-award cloud acquisition was designed with Amazon Web Services in mind.

  • Census
    shutterstock image

    2020 Census to include citizenship question

    The Department of Commerce is breaking with recent practice and restoring a question about respondent citizenship last used in 1950, despite being urged not to by former Census directors and outside experts.

Stay Connected

FCW Update

Sign up for our newsletter.

I agree to this site's Privacy Policy.