Category Management

In December 2014, OFPP issued a memorandum that directs agencies to  take specific actions to implement category management, an approach  which is intended to manage entire categories of spending across  government for commonly purchased goods and services. As a result, the agencies were  missing opportunities to leverage their buying power and more effectively  acquire IT services. Overall agency adoption of the FSSIs,  however, has remained low, resulting in reduced potential savings. FSSIs Achieved Savings and Other Benefits, but Low Federal Agency Spending through the FSSIs Continues to Limit Potential Savings

From fiscal year 2011 to fiscal year 2015, GSA reported that agencies  spent almost $2 billion through the FSSIs and achieved an estimated total  of $470 million in savings, an overall savings rate of about 25 percent. In fiscal year 2015, GSA reported that agencies spent $462 million  through the FSSIs and saved $129 million, a savings rate of 28 percent. Had agencies spent the entire $4.5 billion of addressable spending  through the FSSIs and achieved a similar savings rate of 28 percent, we  estimate that up to $1.3 billion in fiscal year 2015 savings could have  been achieved (see figure 3). In addition to accountability,  federal internal control standards call for agencies to monitor and  evaluate results. Because  Information Retrieval does not collect transactional data from all of its  vendors, it lacks the data needed to calculate savings based on price. Consequently,  ensuring that small business concerns are appropriately addressed under  the category management initiative is the fourth key lesson learned. But unlike leading  companies that use their strategic sourcing vehicles 90 percent of the  time, federal agencies directed less than 10 percent of their spending on  the goods and services offered under the FSSIs, resulting in a missed  opportunity to potentially have saved billions of dollars over the last 5  years. Recommendations for Executive Action

To better promote federal agency accountability for implementing the  FSSI and category management initiatives, we recommend that the  Administrator of Federal Procurement Policy take the following four  actions:
Ensure that transition plans are submitted and monitored as required  by FSSI guidance and guidance governing specific category  management initiatives;
Update the Leadership Council charter to establish an expectation  that Leadership Council agencies develop agency-specific targets for  use of the solutions approved;
Revise the 2015 category management guidance to establish a  process for setting targets and performance measures for each  Leadership Council agency’s adoption of proposed FSSIs and  category management solutions and ensure agency specific targets  and measures are set; and
Report on agency specific targets and metrics as part of the category  management CAP goal. OMB and GSA concurred with our recommendations to  improve oversight and accountability of FSSI and category management  efforts. OMB staff stated that  for example, the Office Supplies FSSI has been designated as a best in  class solution, which will require agencies to submit transition plans. Appendix I: Summary of Federal Strategic Sourcing Initiatives Included in Our Review

Appendix II: Objectives, Scope, and Methodology

We were asked to examine the Federal Strategic Sourcing Initiative  (FSSI) program and lessons learned. This report addresses (1) the extent  to which savings and other benefits have been achieved by the FSSI  program, and (2) lessons, if any, from the Office of Federal Procurement  Policy (OFPP) and General Services Administration (GSA)  implementation of the FSSI program and the extent to which those  lessons have been incorporated into OFPP’s category management  initiative. To determine what lessons, if any, from OFPP and GSA implementation  of the FSSI program and the extent to which those lessons have been  incorporated into OFPP’s category management initiative we reviewed  the seven current FSSIs and conducted interviews with GSA and Library  of Congress officials responsible FSSI implementation, as well as GSA  officials and OFPP staff responsible for oversight.
Why GAO Did This Study

Each year, federal agencies obligate over $400 billion on goods and services, but they miss out on savings when they do not leverage their collective buying power. In 2005, the Office of Management and Budget (OMB) directed agencies to leverage spending through strategic sourcing. In 2014, OFPP, an office in OMB, announced its category management initiative, which is intended to further streamline and manage entire categories of spending across the government more like a single enterprise.
GAO was asked to examine the current status of the FSSI program and the extent to which OFPP has incorporated lessons learned from the program into its category management initiative. This report addresses (1) savings and other benefits the FSSI program has achieved, and (2) lessons identified and incorporated into OFPP's category management initiative. GAO analyzed FSSI spending, savings, and adoption data for all seven active FSSIs for fiscal years 2011 through 2015; reviewed OMB, OFPP, Leadership Council, and GSA strategic sourcing and category management guidance; and interviewed GSA and FSSI program officials and OFPP staff.

What GAO Found

From fiscal year 2011 through 2015, federal agencies reported spending almost $2 billion through the Federal Strategic Sourcing Initiatives (FSSI) GAO reviewed and reported an estimated total of $470 million in savings. Federal agencies' low use of the FSSIs, however, diminished the potential savings that could have been achieved. For example, in fiscal year 2015, federal agencies spent an estimated $6.9 billion on the types of goods and services available through these FSSIs. Of this amount, $4.5 billion was considered “addressable” and could have been spent through the FSSIs, but just $462 million was. While total savings reported for fiscal year 2015 came in at $129 million—a savings rate of 28 percent—had all of the agencies directed their addressable spending through FSSIs, up to $1.3 billion in savings could have been achieved, assuming the same savings rate. See figure.
GAO found that FSSI use has been low, in part, because Leadership Council agencies, a cohort of large federal agencies responsible for FSSI governance, directed only 10 percent of their collective spending to the FSSIs. FSSI guidance requires agencies to develop plans to transition from existing agency vehicles to FSSIs, but Office of Federal Procurement Policy (OFFP) staff and General Services Administration (GSA) officials stated such plans were not collected or used to monitor FSSI use. Ensuring agencies submit these plans and monitoring them is consistent with internal control standards to evaluate and hold agencies accountable for performance.
OFPP's category management initiative largely incorporates key lessons learned from the FSSIs into guidance, such as addressing small business concerns and obtaining data on prices paid. OFPP, however, has not yet ensured that agency-specific targets and performance measures for adoption of FSSI and category management solutions are set. Until OFPP takes action to do so, it is at risk of agencies underutilizing existing FSSI and category management solutions and, in turn, of diminished cost savings.

What GAO Recommends

To increase potential savings, GAO is making 6 recommendations, including that OFPP ensure agencies submit transition plans, monitor their use, and ensure agency specific targets and performance metrics to measure adoption of FSSI and category management solutions are set. OMB and GSA concurred with the recommendations.