# Presentation: 225597

## Defense-Wide Strategic Sourcing

**Defense-Wide Strategic Sourcing**
**(DWSS)**** **

**Linda W. Neilson**
**Linda.neilson@osd.mil**
**Defense Procurement and Acquisition Policy**
**Office of the Secretary of Defense (OSD)**

**October 25, 2005**

## Outline

- General Overview
- Vision and Objectives
- Policy and Guidance
- Benefits
- Governance
- Communities of Interest
- Process
- Current Activities

## The leveraging of an organization’s buying power to obtain goods and services at better terms and conditions over the life cycle of those goods and services.

**General Overview. . . A Definition**

## One lead for DoD
Coordinates and provides insight into DoD-wide and Component activities
Establishes common processes/policies
Performs market and spend analysis to target opportunities
Establishes benchmarks
Monitors performance
Provides cross-functional SMEs
Sets enterprise capabilities/standards
Sponsors DoD-wide workforce development/ transformation
One lead for Federal Focus
Supports OMB & OFPP direction
Prepares annual OMB reports
Supports Federal activities led by
OFPP/OMB CoP, CAO Council, and ACE
Responds to SBA, GAO & Congressional inquiries & follow-up actions
One lead for Federal Focus
One voice to industry & small businesses on strategic sourcing matters

**Coordinates and provides insight into DoD-wide and Component activities**
**Establishes common processes/policies**
**Performs market and spend analysis to target opportunities**
**Establishes benchmarks**
**Monitors performance**
**Provides cross-functional SMEs**
**Sets enterprise capabilities/standards**
**Sponsors DoD-wide workforce development/ transformation**
**One lead for Federal Focus**
**Supports OMB & OFPP direction**
**Prepares annual OMB reports**
**Supports Federal activities led by**
**OFPP/OMB CoP, CAO Council, and ACE**
**Responds to SBA, GAO & Congressional inquiries & follow-up actions**
**One lead for Federal Focus**
**One voice to industry & small businesses on strategic sourcing matters**

**General Overview. . .Central Role**

## General Overview. . .Process

**Opportunity**
**Assessment**

**A systematic process that incorporates**
**Enterprise Spend Analysis, Supplier Relations Development, **
**Demand Management, and Stakeholder Requirements**
**into the sourcing process**

## General Overview. . .Stakeholders and Relationships

**Air Force**
**SSCG**

**Commodity**** Teams**

**Commodity Teams**

**Commodity**** Teams**

**Army**
**SSCG**

**Commodity Teams**

**DLA**
**SSCG**

**Commodity**** Teams**

**Commodity Teams**

**Commodity**** Teams**

**Navy**
**SSCG**

**Commodity Teams**

**Commodity ****Teams**

**Other**
**SSCG**

**Commodity Teams**

**Sourcing Governance Board**

**DoD Stakeholders**
- DPAP
- OSD(C)
- L&MR
- Defense Acquisition University

- Federal Stakeholders
- OMB/OFPP Community of     Practice (CoP)
- General Accountability Office
- Congress
- Chief Acquisition Officers (CAO) Council
- Acquisition Committee for eGov (ACE)
- Federal Acquisition Institute
- Small Business Administration

**Common Supplier Engagement**
- DBSE
- E-Strats (DOD EMALL, Pilots)
- ASAS / ARM

**Industry**

***Strategic Sourcing***

**Strategic Sourcing Directors Board**

## Vision and Program Objectives

**Program Objectives**

- Reduction in Total Cost of Ownership
- Department-wide cross-functional acquisition strategies
- Improvements in meeting socio-economic goals
- Standardization of acquisition business process
- Improved skills of DoD acquisition community

***“******To provide customers throughout the Department [of Defense] with services acquired in the most efficient and advantageous manner.”***
***Memorandum from Paul Wolfowitz, Deputy Secretary of Defense, “Acquisition of Services Review” 2/6/2003***

**Vision**

## Policy and Guidance

** ****DoD Concept of Operations**
- January 2004 DoD-wide guidance Directors Board to oversee:
- DoD-wide Commodity Strategies Development
- DoD-wide Capabilities/Technologies
- Reporting to GAO and OFPP/OMB
**DAU/FAI Resources**
- Changes to core curriculum and new courses are in development
- Skills development expected in **all **applicable career fields
- Knowledge Sharing Workspace
- Available at: _[http://](http://acc.dau.mil/strategicsourcing)__[acc.dau.mil/strategicsourcing](http://acc.dau.mil/strategicsourcing)_
**OFPP/OMB**
- 20 May 2005 Memorandum – Requires each Federal Agency/Department to:
- Encourage and implement Strategic Sourcing
- Identify at least three commodities for strategic sourcing
- Report annually to OFPP/OMB on progress
**GAO**
- GAO-04-870 recognizes Spend Analysis as Industry/Government Best Practice
- GAO-05-179 recognizes Strategic Sourcing benefits within DHS

## Primary Benefits

**Reduction in Cost Per Unit**

**Improved Operating Efficiency**

**Improved Focus on Socio-Economic Goals**

**Pricing Improvements**
- Lower unit price
- Volume rebates
- Payment term discounts
**Supply Chain Savings**
- Cost of capital
- Warehousing costs
- Shipping costs
**Reduced Lifecycle Costs**
- Maintenance costs
- Operating costs
- Disposition costs

**Reduced Procurement-Related Operating Expense**
-   PO Processing
-   Accounts Payable
-   Receipt/Warehousing
-   Standardized procurement
-    process
**Reduced Non-Procurement Related Operating Expense**
-   Other operating efficiencies
**Performance Monitoring**
-   Structured metrics and
-    periodic review of contractor
-    performance

**Change in Consumption / Volume**

**Demand Management**
- Eliminate demand
- Reduce consumption
- Encourage substitution
- Change product mix
**Specification Review**
- Eliminate “gold-plating”
- Simplify specifications
- Alternative products

**Socio-economic Goals**
- Structured analysis of small/disadvantaged business opportunities

**Source:  Censeo Consulting Group:  Copyright Censeo Consulting Group, Inc.  - All rights reserved, 2005 – Reference must be provided for usage of this material.**

## Governance – Executive Agent Model

**Senior Procurement Executives**

**Strategic Sourcing Directors Board**

**Strategic Sourcing Directors Board consists of SSCG Leadership**
**SSCG = Strategic Sourcing Coordination Group**
**DWSS PSO provides coordination and support to SSDB**

**DWSS Program Support Office**

**Air Force**
**SSCG**

**Commodity Teams**

**Commodity Teams**

**Commodity Teams**

**Army**
**SSCG**

**Commodity Teams**

**DLA**
**SSCG**

**Commodity Teams**

**Commodity Teams**

**Commodity Teams**

**Navy**
**SSCG**

**Commodity Teams**

**Commodity Teams**

**ODAs**
**SSCG**

**Commodity Teams**

## Communities of Interest. . .Stakeholders and Relationships

**External to DoD**
**OMB/OFPP Community of Practice**
- Senior Federal Agency/Department SS Leadership
**General Accountability Office**
- Audits and Reports on Spend Analysis, Commodity Management, and Strategic Sourcing
**Chief Acquisition Officers (CAO) Council**
- Federal Agency/Department CAOs
**Acquisition Committee for eGov (ACE)**
- Federal Agency/Department eGov Initiatives & Capabilities
**Federal Acquisition Institute**
- Federal Acquisition Workforce Development and Knowledge Sharing
**Small Business Administration**
**Industry**

**Internal DoD**
**DWSS Governance Model**
- Governance Board (SGB), Strategic Sourcing Directors Board, and Component Strategic Sourcing Coordination Groups
**DPAP-Policy Office**
- Development and Coordination of DoD- wide policies, guidance, and instructions
**DoD-wide and Component Level Commodity Teams / Commodity Management Councils**
- DoD-wide Commodity Strategy Mgmt
- Ex. Admin/Clerical Support, Bearings
- Component Level Oversight/Insight
**Defense Acquisition University**
- DoD Acquisition Workforce Development  and Knowledge Sharing

## Common Commodity Selection Criteria

**Low**

**High**

**Low**

**High**

**Mission Criticality**

**Cross-DoD Overlap**

**Coordinated**
**Cross-DoD**
**Sourcing***

**Cross-DoD**
**Collaboration**
**(Best Practices)**

**Other Sourcing**
**Options**

**Service-Specific**
**Sourcing**

**Example: Administrative Services**

**Example: Professional IT Services**

**Primary Segmentation Criteria**** **
**Coordinated Sourcing**** –** commodities that may provide the most significant opportunities through DoD-wide sourcing
**Collaboration** – these commodities may provide significant opportunities for sharing knowledge and information across all services
**Service-Specific**** **– these commodities may be unique to a service and thus sourced by that service
**Other Options** – commodities that are neither mission critical nor have much overlap with other services could be contracted through GSA, for example
**Other Possible Criteria**
**Spend Volume**
**Requirements Compatibility**
**Commodity Complexity**
**Organizational Sensitivity**

**Sourcing approaches based on****spend characteristics**

**Example: Aircraft Maintenance**

## Commodity Strategic Sourcing Process

**Profile**
**Commodity**

**Conduct Supply Market Analysis**

**Develop Commodity Strategy**

**Issue RFx & Negotiate**

**Implement & Manage Performance**

**1**

**2**

**3**

**4**

**5**

**Baseline Analysis**
- Overview of Commodity (definition, usage, stakeholders, mission criticality, etc.)
- Spend Summary Existing Sourcing Strategy and Initiatives
- Existing Contracts Analysis
- Existing Sourcing Strategy & Initiatives
- Business Process and Policy
- Total Cost of Ownership
**Commodity Requirements**
- Customer Needs Analysis/Requirements
- Socio-Economic Requirements
- Regulatory and Process Related Requirements
- Estimated Volume Requirements
**Market Analysis Findings and Opportunities**
- Market overview (segments, size)
- Key trends
- Small Business Capabilities
- Comparison of market capabilities to requirements
- Potential Sourcing Levers

**SUMMARY OF ANALYSES PERFORMED**

**Commodity Goals and Objectives (Includes scope, usage, mission criticality)**
**Business Need/Case for Change**
- A. Requirements
- B. “As Is” Environment (sourcing strategy, process, technology)
- C. “To Be” Environment (sourcing strategy, process, technology)
- D. Benefits
**Commodity Sourcing Strategy (strategy and tactics)**
**Business Case **
**Acquisition Strategy**
**Implementation Plan**

**COMMODITY STRATEGY**

## Current DoD Activities

**Materiel Commodity **
**Management**
**OSD Led**

**Services Commodity **
**Management**
**OSD Led**

**Air Force**
**Purchasing Supply Chain Management (PSCM)**
- Materiel
- 8 Commodities
- Managed by AFMC
**Information Technology**
- Strategic buying of IT equipment
- Managed by SAF(AQ)

**Army**
**Purchasing and Supply Management (PSM)**
- Materiel
- 5 Commodities (planned)
- Managed by AMC
**Office Supplies**
- Strategic BPAs posted on DoD EMALL
- Managed by ACA

**Navy**
**Program Management Support Services**
- 151 contracts awarded
- Maximum of $1.3 Billion per year for 5 years
- Managed by NAVSEA
**eFSC**
- Facilities Maintenance
- Electronic Task Ordering via DoD EMALL
- Managed by NAVFAC

**DLA**
**Supplier Relationship Management**
- 25+ Strategic Supplier Alliances
**Fuels Management**
- Consolidated purchase point for DoD fuels

**Wireless Services**
- EA: Army

**Administrative Services**
- EA: Navy

**Medical Services**
- EA: Army

**Bearings**
- Led by OSD (L&MR SCI)

**Microelectronics**
- Led by OSD (L&MR SCI)

## Current DoD Activities. . .Details

**Administrative-Clerical Support Services**
- Evaluated by a DoD Wide Commodity Council
- Scope: Philadelphia, Washington DC Metro, Norfolk Regions
- Initially, 100% Small Business Set-aside
**Wireless Services**
- Evaluated by a DoD-wide Commodity Council
- Each Service responsible to determine & pilot most optimal solution
- Army and Air Force: Working to develop a joint strategy
- Navy: FISC-San Diego and NMCI alternatives underway
- DoD-Wide Commodity Council to evaluate Service pilot results
**Other Commodities Under Consideration**
- Medical Services
- Bearings
- Microelectronics

## Current DoD Activities. . . DAU

**Community of Practice in development**
- _[https://](https://acc.dau.mil/strategicsourcing)__[acc.dau.mil/strategicsourcing](https://acc.dau.mil/strategicsourcing)_

## Current DoD Activities. . . DAU

**Current DoD Activities. . . DAU**

**Continuous Learning Modules in Development**
**Module 1: Strategic Sourcing Overview**
- Chapter 1 – Introduction to Strategic Sourcing
- Chapter 2 – The Strategic Sourcing Process
- Chapter 3 – Building a Successful Strategic Sourcing Program
**Module 2: Spend Analysis Strategies**
- Chapter 1 – Spend Analysis Overview
- Chapter 2 – Data Collection
- Chapter 3 – Spend Profiling
**Open to all: http://clc.dau.mil/**

## Questions?