OMB announces sourcing savings

on Friday, December 7, 2012

OMB announces sourcing savingsThe Office of Management and Budget (OMB) recently announced that agency spending fell dramatically in the past year, due to the implementation of more strategic sourcing practices. Business magazine Government Executive reported that spending dropped $20 billion with new procurement techniques in place.

This comes only shortly after an October report from the Government Accountability Office revealed that various agencies not practicing strategic sourcing were missing out on billions in potential savings.

Big savings due to new practices
Even though the savings have been large, OMB director Jeffrey Zients appears to be ready to add additional criteria to the system to cut costs even more. He reportedly sent a memo to agency leaders introducing to them the new Interagency Strategic Sourcing Leadership Council (SSLC), which includes seven of the agencies that make up for the most procurement spending. The memo also served to inform agencies that strategic sourcing is now a requirement, and that top officials will need to designate someone to oversee sourcing within their organization. 

Federal News Radio reported that Zients' memo explained "each of the SSLC agencies shall promote, to the maximum extent practicable, sound strategic sourcing practices within their agencies. For example, each SSLC agency shall establish an internal cross-functional strategic sourcing council to oversee the agency's related activities." The memo referred to the implementation of policies such as enforcing mandatory use of the sourcing practices, providing data to the General Services Administration and tracking spending and saving information.

Committed to strategic sourcing
While strategic sourcing can result in cost savings for the organizations and businesses that employ it, some claim it has a detrimental effect on small businesses, as the criteria used to choose vendors often lowers the number of potential contractors.

However, President Obama and his administration has remained firm on its commitment to this project. Thus far, the amount saved using new processes has surpassed the goal set by the president in 2009, Government Executive revealed. The source noted that some of the savings were found by using simple practices, such as "buying smarter and buying less."

Small businesses won't necessarily be entirely left out once the policy is fully implemented. Government Executive reported that the memo distributed to government agencies reminded officials to give special consideration to the needs of small businesses when attempting to determine where they can save on purchases.

3 comments:

Samuel Bornstein said...

You may be interested in my quote in the article by Jason Miller in FederalNewsRadio which you mentioned above. in FederalNewsRadio.com. "OMB increasing the tempo of strategic sourcing".

http://www.federalnewsradio.com/85/3146032/OMB-increasing-the-tempo-of-strategic-sourcing

Small business could be impacted

The impact of strategic sourcing on small businesses remains a growing concern. Some experts and vendors say the Federal Strategic Sourcing contract for office supplies are negatively affecting small businesses and costing the government more money.

Sam Bornstein, who is studying strategic sourcing at Kean University in New Jersey, said fast-tracking of strategic sourcing programs using blanket purchase agreements are of concern.

He said OMB's decision to move forward picks only a few winners and too many losers.

Bornstein said the office supplies BPA, which OMB says saved the government more than $140 million last year, is an example of things to come for 15 other product and service areas.

"By limiting contractor participation to only the 15 BPA awarded contractors, these non-winners suffered financial distress and had to layoff a significant number of their employees due to the lost federal sales," Bornstein said of the office supplies BPA. "My concern is for the unintended consequences, which will equate to the cost of economic loss due to the displacement of small businesses and the loss of jobs. I am suggesting a cost benefit analysis be performed to evaluate the economic impact on the U.S. economy and especially the small businesses and their employees, before these programs move forward."

Prof. Samuel D. Bornstein
Kean University School of Business
bornsteinsong@aol.com
sbornste@kean.edu

Anonymous said...

Your points are well taken. The real issue is global competitiveness and survival of the fittest. Those that are displaced need to get stronger and find a way to be more competitive or they need to go out of business. In the short term it is harsh, in the long term it will make our country stronger.

Anonymous said...

Although it may not be a one-for-one match (to jobs lost), the business picked up by the larger more efficient companies will lead to job growth for those companies. The budget reductions achieved from overspending should also help keep government employees more resistant to job loss.

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