Strategic sourcing is becoming increasingly important in the public procurement sector, but many governments are still struggling to add effective strategic processes. The US General Services Administration (GSA) launched the Federal Strategic Sourcing Initiative (FSSI) in 2005 and still doesn’t have a fully effective strategy in place.
In the past, agencies negotiated public procurement contracts on a case-by-case basis and often focused on best purchase price without considering the many related costs of acquisition. An effective strategic sourcing process streamline the way all departments within an organization acquire their products and services. According to the GSA website, “Strategic sourcing is the structured and collaborative process of critically analyzing an organization’s spending patterns to better leverage its purchasing power, reduce cost and improve overall performance.”
A Unified Solution
Implementing a cross-agency system still presents a challenge in US federal procurement. “Our government is the largest purchaser in the world, but it buys as if it were 130 mid-sized businesses. We’ve got to leverage our buying power,” says Office of Federal Procurement Policy administrator Joe Jordan. Presently, there’s no platform in place that allows agencies to share prices, experiences, and other information that could improve the acquisition process. Jordan proposes a rating and review system similar to those found on travel sites that let customers share detailed feedback about hotels and restaurants.
The Challenge of Cost Reduction
Rather than looking at purchase price alone, strategic sourcing examines costs at all levels of the acquisition process. A total-cost approach highlights the areas that influence end-value, allowing procurement and acquisition professionals to improve value while also reducing costs. Budget cuts and limited resources in government agencies make this strategy more of a challenge, which is the case in the US. According to ASI Government CEO, Kimberly McCabe, agencies are trying to reduce per-hour costs, limited the time available for performance reviews and results-based discussions. “Experience is also an issue,” says McCabe. “We now have the most junior acquisition workforce ever– 34 percent of them have less than five years’ experience.”
GSA initiatives have made way for several improvements in the federal procurement process, but there’s still a long way to go before they meet their goals. Lack of experience, accompanied by budget cuts that hinder necessary training and development, are the primary obstacles.