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Increased Emphasis on 

Strategic Sourcing 

Can Result in Substantial 

Cost Savings for EPA

Report No. 14-P-0338 August 26, 2014

U.S. ENVIRONMENTAL PROTECTION AGENCY

OFFICE OF INSPECTOR GENERAL
Report Contributors: Janet Kasper 

Michael Petscavage

Richard Valliere

David Penman

Abbreviations

BPA Blanket Purchase Agreement

EPA U.S. Environmental Protection Agency

FSSI Federal Strategic Sourcing Initiative

FY Fiscal Year

GSA General Services Administration

OAM Office of Acquisition Management

OARM Office of Acquisition and Resources Management

OIG Office of Inspector General

OMB Office of Management and Budget

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Washington, DC 20460

(888) 546-8740

(202) 566-2599 (fax)

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More information at www.epa.gov/oig/hotline.html.

EPA Office of Inspector General

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Washington, DC 20460

(202) 566-2391

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 14-P-0338

August 26, 2014

Why We Did This Review

The federal government 

spends approximately 

$500 billion on goods and 

services each year to support 

its mission. Given the

increasing fiscal pressures 

facing the United States, there 

has been a renewed focus on 

maximizing efficiencies in the 

procurement process to 

achieve cost savings. One such 

initiative is the use of strategic 

sourcing as outlined in the 

Federal Strategic Sourcing 

Initiative (FSSI). 

The purpose of this review was 

to determine whether the 

U.S. Environmental Protection 

Agency’s (EPA’s) strategic 

sourcing program is gaining 

efficiencies from existing 

federal initiatives under the 

FSSI mandate and the EPA 

was identifying and taking 

advantage of strategic sourcing 

opportunities outside of FSSI. 

This report addresses the 

following EPA goal or 

cross-agency strategy:

 Embracing EPA as a highperforming organization.

For further information, 

contact our public affairs office 

at (202) 566-2391.

The full report is at:

www.epa.gov/oig/reports/2014/ 

20140826-14-P-0338.pdf

 

Increased Emphasis on Strategic Sourcing Can 

Result in Substantial Cost Savings for EPA

 What We Found

Although the Office of Management and Budget issued 

a policy memorandum on strategic sourcing in 2005 

expressing the need for agencies to leverage strategic 

sourcing to the maximum extent possible, the EPA has 

been slow in implementing such efforts. Crucial 

aspects, such as conducting spend analyses and 

developing controls to ensure maximum agency 

participation, were either not developed or conducted timely. The Office of 

Management and Budget also encouraged agencies to participate in 

governmentwide solutions, known as FSSI, and advised agencies to consider 

those being offered for commonly procured commodities first when contemplating 

acquisitions. Of the four solutions offered (print management, wireless services, 

office supplies and domestic delivery), the EPA only participated in the office 

supplies and domestic delivery solutions. The agency has been slow in 

implementing strategic sourcing due to a lack of commitment in the initial stages 

of the initiative and by proceeding cautiously as experience was gained. As a 

result, the EPA has been missing out in cost saving opportunities and improved 

efficiencies in its procurement processes.

 Recommendations and Planned Corrective Actions

We recommend that the EPA develop a plan of action to strategically source 

wireless services and print management. If the EPA’s plan is to source these 

commodities internally because it is not practicable under the FSSI initiative, we 

recommend that a price comparison analysis be performed to ensure the best 

possible pricing is negotiated. We also recommend that the EPA develop and 

implement policies and procedures to ensure that controls are in place so that all 

strategically sourced vehicles are utilized unless a valid exception is approved.

The EPA agreed with our recommendations and provided a corrective action plan 

with dates for each recommendation. 

 Noteworthy Achievements

The EPA conducted a study of the agency’s acquisition function to realize cost 

savings and increase the efficiency and effectiveness of the acquisition function 

within the EPA. The study, known as the Centers of Expertise in Contracting, 

details the challenges facing the EPA. The report identifies the value of strategic 

sourcing and estimates that, with a fully staffed strategic sourcing office, it can 

achieve potential cost savings of $30 to $60 million on an annual basis. The 

report provides recommendations on how to achieve a more efficient and effective 

acquisition process, and the EPA is currently evaluating these recommendations.

U.S. Environmental Protection Agency

Office of Inspector General

At a Glance

The EPA could save 

$30 to $60 million 

annually by fully 

implementing its 

strategic sourcing 

program.
 

August 26, 2014

MEMORANDUM

SUBJECT: Increased Emphasis on Strategic Sourcing Can Result in

Substantial Cost Savings for EPA

Report No. 14-P-0338

FROM: Arthur A. Elkins Jr. 

TO: Craig Hooks, Assistant Administrator

Office of Administration and Resources Management

This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the 

U.S. Environmental Protection Agency (EPA). This report contains findings that describe the problems 

the OIG has identified and corrective actions the OIG recommends. This report represents the opinion of 

the OIG and does not necessarily represent the final EPA position. Final determinations on matters in 

this report will be made by EPA managers in accordance with established audit resolution procedures.

The office responsible for implementing the recommendations is the Office of Acquisition Management, 

within the Office of Administration and Resources Management.

Action Required

In accordance with EPA Manual 2750, your office provided acceptable and complete planned corrective 

actions in response to OIG recommendations. All recommendations are resolved and no final response to this 

report is required. 

We will post this report to our website at http://www.epa.gov/oig.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460

THE INSPECTOR GENERAL
Increased Emphasis on Strategic Sourcing 14-P-0338

Can Result in Substantial Cost Savings for EPA 

 

 

Table of Contents

Chapters

1 Introduction ...................................................................................................... 1

Purpose ..................................................................................................... 1

Background................................................................................................ 1

Noteworthy Achievements ......................................................................... 3

Scope and Methodology ............................................................................ 4

2 EPA Not Participating in FSSI to the Greatest Extent Possible..................... 6

Policy Highlights the Importance of Leveraged Buying............................... 6

EPA Participation in FSSI Initiative Limited ................................................ 6

Fiscal Year 2011 FSSI Spend on Commodities Not a 

 Total Representation of Actual Spend.............................................. 7

EPA Missing Out on FSSI Savings ............................................................ 8

Recommendations..................................................................................... 8

Agency Response and OIG Evaluation............................................... 9

3 EPA Slow to Implement Strategic Sourcing ................................................... 10

Policy Issued on Implementing Strategic Sourcing..................................... 10

EPA Slow in Implementing Strategic Sourcing ........................................... 10

Lack of Early Commitment to Strategic Sourcing Delayed Progress .......... 11

EPA Not Realizing Full Benefits of Strategic Sourcing ............................... 12

Recommendations..................................................................................... 12

Agency Response and OIG Evaluation ...................................................... 13

Status of Recommendations and Potential Monetary Benefits ............................. 14

Appendices

A Agency Response to Draft Report................................................................... 15

B Distribution ....................................................................................................... 19
14-P-0338 1

Chapter 1

Introduction

Purpose

Given the increasing fiscal pressures facing the United States government, there 

has been a renewed focus on maximizing efficiencies in the procurement process 

to achieve cost savings. One such initiative is the use of strategic sourcing as 

outlined in the Federal Strategic Sourcing Initiative (FSSI). 

The U.S. Environmental Protection Agency’s (EPA’s) Office of Inspector 

General (OIG) conducted this audit to determine whether the EPA is gaining 

efficiencies from federal strategic sourcing initiatives and if the EPA is 

identifying and taking advantage of opportunities to increase strategic sourcing in 

areas not covered by federal initiatives.

Background

Strategic sourcing is defined in the FSSI as “the collaborative and structured 

process of critically analyzing an organization’s spending and using this 

information to make business decisions about acquiring commodities and services 

more effectively and efficiently.” Because the federal government spends billions 

of dollars on goods and services, the Office of Management and Budget (OMB) 

issued a memorandum in May 2005 on implementing strategic sourcing. The 

memorandum explained the need to leverage spending to the maximum extent 

possible through strategic sourcing. OMB noted that strategic sourcing helps 

agencies optimize performance, minimize price, increase achievement of socioeconomic acquisition goals, evaluate total life cycle management costs, improve 

vendor access to business opportunities, and otherwise increase the value of each 

dollar spent.

OMB required agencies to develop a spend analysis and to identify no fewer than 

three commodities (goods and services) that could be purchased more effectively 

and efficiently through the application of strategic sourcing. Each agency was 

required to develop a strategic sourcing plan. The memorandum also noted that, 

beginning in January 2006, the Chief Acquisition Officer shall report annually to 

OMB regarding, at a minimum: reductions in the prices of goods and services;

reductions in the cost of doing business; improvements in performance; and 

changes in achievement of socio-economic acquisition goals at the prime contract 

and, if possible, subcontract level.

In response to OMB’s memorandum, the General Services Administration (GSA) 

issued multiple governmentwide procurement vehicles for commonly purchased 

commodities (GSA refers to these as solutions) so that agencies could place 
14-P-0338 2

orders against them. This initiative was referred to as FSSI. The common 

commodities were:

 Express and ground domestic delivery services.

 Office supplies.

 Telecommunications expense management services.

1

 Print management.

In 2007, OMB issued a follow-on memorandum encouraging agencies to focus on 

governmentwide solutions first. The memorandum advised agencies that when 

contemplating acquisitions for express and ground domestic delivery services, 

office supplies, telecommunications expense management, or printers and copiers, 

the GSA FSSI solutions should be used first.

EPA’s Strategic Sourcing Program and Organizational Structure

The Assistant Administrator for the Office of Administration and Resources 

Management (OARM) formally initiated the EPA’s strategic sourcing program on 

May 28, 2013. OARM provides national leadership, policy and management of 

many essential support functions for the agency, including acquisition activities. 

OARM’s Office of Acquisition Management (OAM) is charged with overseeing 

EPA acquisitions.

OAM is responsible for planning, awarding and administering contracts for the 

agency, including issuing and interpreting acquisition regulations; administering 

training for contracting and program acquisition personnel; providing advice and 

oversight to regional procurement offices; and providing information technology 

improvements for acquisition. Under OAM, the Business Analysis and Strategic 

Sourcing service center was formed in 2011 and administers the strategic sourcing 

program. The purpose of the EPA’s strategic sourcing program is to ensure 

improved efficiencies and economies in the agency’s acquisition programs, and to 

ensure that acquisition programs deliver the best value for American taxpayers 

and the EPA. The long-term objective of the strategic sourcing program is to 

transform the EPA’s acquisition process from a tactical and reactive function to a 

strategically driven function that ensures maximum value for every acquisition 

dollar spent. The plan has five objectives but has not yet been formally finalized. 

Those five objectives are:

 Reduce the total cost of ownership for acquired goods and services.

 Optimally leverage small and disadvantaged business participation.

 Standardize and streamline acquisition business processes.

 Improve visibility about acquired goods and services.

 Establish collaborative participation and support for strategic sourcing 

within the EPA.

 

1 The telecommunications expense management services solution expired in July 2013.
14-P-0338 3

Process Involved for Strategically Sourcing Commodities

Strategic sourcing can use differing strategies to acquire commodities more 

effectively and efficiently. Strategies include leveraged buying, demand analysis 

for altering buying behavior, and achieving efficiencies through standardized 

acquisition processes. The first step, however, begins with an opportunity 

assessment.

An opportunity assessment is an analysis of spending (spend analysis) and the 

identification of products and services for which strategic sourcing should be 

implemented. The process involves collecting, classifying and analyzing 

expenditure data to reduce procurement costs and improve efficiency. Typically, 

a spend analysis is conducted on a continual basis, and based on the results 

commodities are prioritized for future sourcing efforts. The prioritization factors 

in the amounts spent on commodities, potential savings that can be realized by 

strategically sourcing the commodity, and the degree of difficulty in sourcing the 

commodity. Once a commodity is identified and targeted for strategic sourcing, 

additional steps are taken during the process and extend past contract award. The 

figure below depicts the process of strategic sourcing at the EPA. 

Source: The EPA’s Draft Strategic Sourcing Plan, September 2013.

Noteworthy Achievements

OAM was tasked to conduct a study of the EPA’s acquisition function with the 

objectives of realizing cost savings and increasing the efficiency and effectiveness 

of the acquisition function for all of EPA. The study, known as the Centers of 

Expertise in Contracting, details the challenges facing the EPA. The report

identifies the value of strategic sourcing and estimates that, with a fully staffed 

strategic sourcing office of six to 10 staff, the EPA can achieve potential cost 

savings of $30 to $60 million each year. The report acknowledges the importance 
14-P-0338 4

of a collaborative approach and provides recommendations on how to achieve a 

more efficient and effective acquisition process. Currently, OAM is in the process 

of evaluating these recommendations for a path forward. Additionally, based on 

its fiscal year (FY) 2013 spend analysis, the EPA has identified seven

commodities to potentially strategically source and is actively assessing each 

commodity for future strategic sourcing. Of those commodities, the EPA plans to 

continue using GSA’s FSSI solution for office supplies. The seven commodities 

identified are:

 Remedial Actions.

 Student Services.

 Lab Supplies.

 Facilities Operations.

 Wireless Services.

 Conference Support Services.

 Office Supplies.

Scope and Methodology

We conducted this performance audit from December 2013 through June 2014

in accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, 

appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit 

objectives.

To gain an understanding of the federal initiative for strategic sourcing, we 

reviewed OMB strategic sourcing memorandums dating from 2005 to the most 

recent one issued on December 5, 2012. We then reviewed the EPA’s strategic 

sourcing plan, internal guidance, and applicable subparts of the Federal 

Acquisition Regulation. Other documents that we reviewed were:

 Annual progress submissions to OMB detailing strategic sourcing 

activities.

 Reported savings based on usage of GSA’s FSSI vehicles.

 Reported savings for the EPA strategically sourced vehicles, including the 

methods used in calculating the internal savings.

 EPA’s FY 2011 spend analysis.

 All strategically sourced EPA Blanket Purchase Agreements (BPAs).

We interviewed pertinent headquarters contracting staff in OAM to determine 

how the EPA’s strategic sourcing program is being implemented and overseen.

We interviewed contracting staff at the regional levels to obtain a regional 

perspective of the EPA’s strategic sourcing program. We interviewed the national 
14-P-0338 5

purchase card program manager, and several other staff involved with 

government purchase cards to evaluate the controls and policies in place for

ordering strategically sourced items using a government purchase card. 

Additionally, we interviewed GSA officials to determine how the EPA is utilizing 

GSA’s governmentwide FSSI vehicles, how savings are calculated when an order 

is placed, and any future initiatives that may impact the EPA. 

There were no prior audits impacting the objectives of this assignment. Therefore,

follow-up on past recommendations was not conducted. 
14-P-0338 6

Chapter 2

EPA Not Participating in FSSI to the 

Greatest Extent Possible

The EPA has only participated in two of the four FSSI solutions offered. Of the 

four solutions available—domestic delivery, office supplies, print management 

and wireless services solutions—the agency only participated in the office 

supplies and domestic delivery solutions. While the EPA’s FY 2012 report to 

OMB indicates substantial use of two FSSI solutions, the data did not include 

purchase card transactions from non-FSSI vendors. In 2007, OMB issued a policy 

memorandum stating that strategic business solutions that leverage the vast 

buying power of the federal government is a top priority of the acquisition 

community and to focus on governmentwide solutions first. It advised agencies 

that when contemplating acquisitions they should first consider those being 

offered under the FSSI initiative. The EPA stated it has not participated in all 

solutions because they either were not practicable or the agency already had 

existing contracts in place for those services. By not fully participating in the 

initiative, the EPA is not receiving the benefits of savings through volume 

discounts afforded under strategically sourced vehicles. The lack of participation 

also diminishes the total collective volume for a given solution that otherwise 

would benefit all agencies.

Policy Highlights the Importance of Leveraged Buying 

OMB issued its initial strategic sourcing memorandum in May 2005. The 

memorandum explained the need to leverage spending to the maximum extent 

possible through strategic sourcing. It also stated that federal agencies are 

responsible for maximizing the value of each dollar and emphasized the need to 

purchase more effectively and efficiently through the application of strategic 

sourcing. In May 2007, OMB issued a follow-on memorandum stating that 

strategic business solutions that leverage the vast buying power of the federal 

government is a top priority for the acquisition community. The memorandum 

encouraged agencies to focus on governmentwide solutions and, when 

contemplating acquisitions, those offered under the FSSI initiative should be 

considered first.

EPA Participation in FSSI Initiative Limited

At the time our audit was conducted, we determined that the EPA had been 

participating in the office supplies and domestic delivery solutions since the 2007

memorandum, and was not participating in the print management and wireless 
14-P-0338 7

services solutions available governmentwide through the FSSI initiative.

2

Table 1 summarizes FY 2011 expenditures associated with the two solutions with 

which the EPA participated.

Table 1: EPA’s participation in FSSI solutions

Commodity description

FY 2011 total 

spending on 

commodity

FY 2011 

amount spent 

through FSSI

FY 2011 % of 

total spending on 

commodity going 

through FSSI

FSSI Domestic Delivery 2 $762,874 $762,874 100%

FSSI Office Supplies $2,413,627 $2,413,627 100%

Source: The EPA’s FY 2012 Acquisition Status Review Report.

The EPA did not participate in the FSSI solution for print management because it 

had end user service agreements in place for equipment that it already owned, and 

until recently the FSSI solution for print management did not have services for 

existing equipment. As a result, the EPA has been using internally placed 

contracts for these services. Additionally, the EPA stated that it has been 

negotiating lower pricing under its existing contract for print management and 

expects to finalize the modification to incorporate the new pricing in the near 

future.

3

For wireless services, the EPA did not participate in this solution because it was 

not offered under the FSSI initiative until May 2013. Based on the Centers of 

Expertise in Contracting report—a study conducted from April 2012 to March 

2013—the EPA had 48 contracts in place for wireless services. In reviewing its 

wireless service plans, the EPA stated it identified approximately 700 lines with 

zero usage and either disconnected or suspended those lines, for what it considers 

to be a potential cost savings of between $400,000 and $600,000 annually. The 

EPA is also developing plans to strategically place its own wireless contracts, 

once the existing ones expire, at what it says is better pricing than what the newly 

awarded FSSI solution is offering.

Fiscal Year 2011 FSSI Spend on Commodities Not a 

Total Representation of Actual Spend

While the information submitted to OMB for FY 2011 makes it appear that the 

EPA is fully utilizing the FSSI solutions for office supplies and domestic delivery, 

that is not actually the case. The EPA reported the amounts calculated and 

provided by GSA. However, that information only includes transactions ordered 

under the FSSI initiative—it does not include transactions the EPA made outside 

of the FSSI initiative, such as transactions made using the government purchase 

 

2 At the time of our audit there were four active FSSI solutions. The telecommunications management solution 

ended in 2013, while the wireless services solution began in 2013. 

3 Since the modification has not been finalized, we were not able to conduct a price comparison analysis between the 

newly negotiated EPA rates or the rates contained in the newly awarded FSSI BPA.
14-P-0338 8

card with non-FSSI vendors. For example, using the EPA’s FY 2011 spend 

analysis, we identified approximately 38,000 transactions totaling more than 

$5 million that were potentially related to office supplies. Conversely, the EPA 

reported $2.4 million in its submission to OMB with all expenditures ordered 

directly against a strategically placed vehicle. 

The EPA did not report all purchases for office supplies and domestic delivery 

services because it does not have the capability to link government purchase card 

transactions to specific BPAs in its systems. Currently, the only way to crossreference purchase card transactions to specific BPAs is through logs maintained 

by each individual purchase card holder (for FY 2012, there were 1,370 active 

purchase card holders). These logs are held independently of each other and are 

not linked to a database. Given the large number of card holders, crossreferencing each transaction in this manner to ensure that an acquired commodity 

received the correct pricing is a daunting task. 

EPA Missing Out on FSSI Savings

By not fully participating in FSSI, the EPA is not receiving the benefits of savings 

through volume discounts afforded under strategically sourced vehicles. While the 

EPA is only one agency, the lack of participation across the federal sector can 

diminish GSA’s negotiating ability for future follow-on agreements. With 

increased participation, all agencies can realize greater cost savings when 

commodities do not lend themselves to internal sourcing. 

Additionally, the EPA does not have reasonable assurance that it is receiving the 

negotiated pricing established in the FSSI vehicles when government purchase 

cards are the method of payment. Until a system or method is developed to link 

these transactions, the EPA will not be able to perform in-depth analyses on 

spending, which could diminish its negotiating stance for future awards. 

Recommendations 

We recommend that the Assistant Administrator for Administration and 

Resources Management: 

1. Develop a plan of action to strategically source wireless services and print 

management. If the plan is to source these commodities internally because 

it is not practicable under the FSSI initiative, perform a price comparison 

with established pricing under the FSSI solution(s) to ensure the best 

possible pricing is negotiated.

2. Develop a system or method to link purchase card transactions to BPAs. 
14-P-0338 9

Agency Response and OIG Evaluation

OARM agreed to take corrective action in response to recommendations 1 and 2

and provided completion dates of November 2014 and October 2014, 

respectively. We believe that the proposed corrective actions, along with the 

planned completion dates, meet the intent of the recommendations. These 

recommendations will remain open pending completion of the proposed 

corrective actions. The complete agency response to the draft audit report is in

appendix A.
14-P-0338 10

Chapter 3

EPA Slow to Implement Strategic Sourcing 

Although OMB issued a policy memorandum on strategic sourcing in 2005 

expressing the need for agencies to leverage strategic sourcing to the maximum 

extent possible, the EPA has been slow in implementing strategic sourcing. 

Crucial aspects, such as conducting spend analyses and developing controls to 

ensure maximum agency participation, were either not developed or not 

conducted timely. Additionally, to date the EPA has only strategically sourced

one commodity. In OMB’s 2005 memorandum, it explained the need to leverage 

spending to the maximum extent possible through strategic sourcing. The 

memorandum noted that strategic sourcing helps agencies optimize performance, 

minimize price, and otherwise increase the value of each dollar spent. Due to a 

lack of commitment in the initial stages of the initiative and by electing to proceed 

cautiously, the EPA has been missing out in cost saving opportunities and 

improved efficiencies in its procurement processes. According to the EPA, it 

could save $30 to $60 million annually by fully implementing its strategic 

sourcing program.

Policy Issued on Implementing Strategic Sourcing

OMB issued its initial strategic sourcing policy memorandum in May 2005. The 

memorandum explained the need to leverage spending to the maximum extent 

possible through strategic sourcing. OMB also noted that strategic sourcing helps 

agencies optimize performance, minimize price, increase achievement of socioeconomic acquisition goals, evaluate total life cycle management costs, improve 

vendor access to business opportunities, and otherwise increase the value of each 

dollar spent. The memorandum required agencies to develop a spend analysis and 

to identify no fewer than three commodities that could be purchased more 

effectively and efficiently through the application of strategic sourcing. It also 

required that each agency develop a strategic sourcing plan with the following 

elements: (1) strategic sourcing governance, (2) goals and objectives, 

(3) performance measures, (4) communication strategy, and (5) training strategy.

EPA Slow in Implementing Strategic Sourcing

Although OMB issued a memorandum on strategic sourcing in 2005 requiring 

federal agencies to enhance strategic sourcing efforts, the EPA has been slow in 

implementing a program. The approach taken in implementing its efforts was 

cautious—to act as experience was gained. This tactic was communicated in the 

EPA’s 2006 Annual Strategic Sourcing Progress Report, which stated:

The EPA’s vision is to proceed cautiously and learn from these 

initial endeavors. As experience is gained and successes are 
14-P-0338 11

achieved, the agency will expand the program to include additional 

commodities. The EPA’s strategic sourcing team will continue to 

conduct opportunity analyses for the next phase of strategically 

sourcing commodities. Additionally, the agency will closely follow 

the FSSI efforts related to copiers, cell phone service, domestic 

delivery services and IT hardware.

While the 2006 annual progress report stated that EPA would expand the 

program, it was not until May 28, 2013, that the program was formally initiated. 

While the EPA developed a draft strategic plan and has been following the draft 

in the interim, as of May 2014 the strategic plan had not been finalized or 

approved. Furthermore, the EPA did not conduct its first comprehensive spend 

analysis until June 2012 and it was not until March 2014 that the EPA completed 

its next spend analysis for FYs 2012 and 2013. 

Since OMB’s 2005 memorandum, the EPA has only strategically sourced one 

commodity. On March 12, 2008, the EPA awarded two BPAs for laboratory 

supplies. However, those BPAs were allowed to expire in March 2013 without 

follow-on vehicles being issued. As a result, as of June 2014, the EPA did not

have the ability to leverage its buying power with regard to laboratory supplies.

Additionally, the strategically sourced BPAs were not used for the majority of 

laboratory supply purchases. In 2012, the EPA reported to OMB that a total of 

$24,665,889 had been expended for laboratory supplies in FY 2011. Of that, the 

EPA reported that 37 percent, or $9,126,379, was expended through strategically 

sourced vehicles. In analyzing the two strategically sourced BPAs, we determined 

that neither BPA had an obligation history associated with it in the EPA’s 

financial system. After obtaining and reviewing the calculations the EPA 

submitted for its reporting purposes, we could not substantiate the total

expenditures or the expenditures reported through the use of a strategically 

sourced vehicle because the transactions were made via government purchase 

cards. As discussed in chapter 2, government purchase card transactions cannot be 

linked to a particular BPA in EPA systems. As such, the EPA does not have 

reasonable assurance that it ever received the negotiated pricing contained in the 

two BPAs.

Lack of Early Commitment to Strategic Sourcing Delayed Progress

The EPA has been slow in implementing strategic sourcing due to a lack of 

commitment in the initial stages of the initiative and by electing to proceed 

cautiously as experience is gained. Prior to 2011, no specific office or service 

center was tasked with implementing strategic sourcing, which contributed to the 

EPA’s lack of a unified, cohesive effort in implementing its program agencywide.

In addition, the EPA has provided limited direction to and communication with 

regional contracting and program offices. Although the EPA’s strategic sourcing 
14-P-0338 12

plan has a communications strategy, the EPA’s dissemination of information in 

this area has been inadequate. In meeting with staff from one EPA region, we 

were told that the communication on strategic sourcing is not at the levels needed 

to ensure an effective program, and when communication was provided it was 

usually repetitive in nature. Since virtually all aspects of strategic sourcing are 

centered in headquarters and because there are no regional points of contact, the 

program may be unable to fully develop and accommodate regional needs. 

The EPA did not have controls, such as purchase card restrictions, in place to 

monitor the usage of its strategically placed laboratory supplies BPAs. 

Consequently, as reported in EPA’s annual progress report, those BPAs accounted

for just 37 percent of all laboratory supplies that EPA purchased in FY 2011.

Another contributing factor impeding the program is a lack of resources. Despite 

the fact that the EPA’s Centers of Expertise in Contracting report indicated that 

six to 10 staff members were needed to fully operate the program, there are 

currently only two full-time staff members assigned to carry out the day-to-day 

operations of strategic sourcing. Due to minimal staff, critical aspects—such as 

conducting spend analyses and developing controls for vehicle usage—were not 

developed or conducted in a timely manner.

EPA Not Realizing Full Benefits of Strategic Sourcing

Given the increasing fiscal pressures facing all federal agencies, there has been an 

increased effort to maximize efficiencies in procurement processes to achieve cost 

savings. By not fully developing its strategic sourcing program in the initial stages 

of the initiative, the EPA has been missing out in cost saving opportunities and 

improved efficiencies in its procurement processes. The EPA’s Centers of 

Expertise in Contracting Study estimated that the EPA could save $30 to 

$60 million annually by fully implementing its strategic sourcing program. 

However, the EPA will not realize these potential cost savings unless a greater 

emphasis is placed on strategic sourcing. We believe these are funds that could be 

put to better use if strategic sourcing were fully implemented.

Recommendations 

We recommend that the Assistant Administrator for Administration and 

Resources Management, to achieve the estimated $30 to $60 million in annual 

cost savings:

3. Develop and implement policies and procedures to ensure that controls are 

in place so that all strategically sourced vehicles are utilized unless a valid 

exception is justified.
14-P-0338 13

4. Develop a collaborative approach to strategic sourcing to best ensure ideas 

from all contracting and program offices are considered agencywide and 

strategic sourcing activities are implemented in a uniform manner.

5. Evaluate OAM priorities and determine whether resources can be 

allocated from lower priority work to the strategic sourcing program.

6. Increase awareness of the strategic sourcing program by:

a. Developing and assigning regional points of contact.

b. Developing informational packets to be disseminated to 

headquarters and regional offices to ensure that all acquisition 

personnel, including purchase card holders and approvers, are 

adequately informed on the strategic sourcing requirements and 

initiatives. 

7. Approve and finalize a strategic sourcing plan, by the Chief Acquisition 

Officer, that will be administered agencywide.

Agency Response and OIG Evaluation

OARM agreed to take corrective action in response to recommendations 3 through 

7 and provided a completion date of December 2014 for recommendation 3, and a 

completion date of October 2014 for recommendations 4 through 7. We believe 

that the proposed corrective actions, along with the planned completion dates, meet 

the intent of the recommendations. These recommendations will remain open 

pending completion of the proposed corrective actions. The complete agency 

response to the draft audit report is in appendix A.
14-P-0338 14

Status of Recommendations and 

Potential Monetary Benefits

RECOMMENDATIONS

POTENTIAL MONETARY 

BENEFITS (in $000s)

Rec. 

No.

Page 

No. Subject Status1 Action Official

Planned 

Completion 

Date

Claimed 

Amount

Agreed-To 

Amount

1 8 Develop a plan of action to strategically source 

wireless services and print management. If the plan 

is to source these commodities internally because 

it is not practicable under the FSSI initiative, 

perform a price comparison with established pricing 

under the FSSI solution(s) to ensure the best 

possible pricing is negotiated.

O Assistant Administrator for 

Administration and 

Resources Management

11/30/14

2 8 Develop a system or method to link purchase card 

transactions to BPAs.

O Assistant Administrator for 

Administration and 

Resources Management

10/31/14

3 12 Develop and implement policies and procedures to 

ensure that controls are in place so that all 

strategically sourced vehicles are utilized unless a 

valid exception is approved.

O Assistant Administrator for 

Administration and 

Resources Management

12/31/14

4 13 Develop a collaborative approach to strategic 

sourcing to best ensure ideas from all contracting 

and program offices are considered agencywide 

and strategic sourcing activities are implemented in 

a uniform manner.

O Assistant Administrator for 

Administration and 

Resources Management

10/31/14 $60,000 $60,000

5 13 Evaluate OAM priorities and determine whether 

resources can be allocated from lower priority work 

to the strategic sourcing program.

O Assistant Administrator for 

Administration and 

Resources Management

10/31/14

6 13 Increase awareness of the strategic sourcing 

program by: 

a. Developing and assigning regional points of 

contact.

b. Developing informational packets to be 

disseminated to headquarters and regional 

personnel to ensure that all acquisition 

personnel, including purchase card holders 

and approvers, are adequately informed on 

the strategic sourcing requirements and 

initiatives.

O Assistant Administrator for 

Administration and 

Resources Management

10/31/14

7 13 Approve and finalize a strategic sourcing plan, by 

the Chief Acquisition Officer, that will be 

administered agencywide.

O Assistant Administrator for 

Administration and 

Resources Management

10/31/14

1 O = Recommendation is open with agreed-to corrective actions pending. 

C = Recommendation is closed with all agreed-to actions completed. 

U = Recommendation is unresolved with resolution efforts in progress.
14-P-0338 15

Appendix A

Agency Response to Draft Report

July 24, 2014

MEMORANDUM

SUBJECT: Response to Office of Inspector General Draft Audit Report No. OA-FY14-0070 

“Increased Emphasis on Strategic Sourcing Can Result in Substantial Savings to 

EPA,” dated June 13, 2014

FROM: Craig E. Hooks, Assistant Administrator

TO: Janet Kasper, Director

Contract and Assistant Agreement Audits

Office of the Inspector General

Thank you for the opportunity to respond to the issues and recommendations raised in the Office of

Inspector General Draft Audit Report No. OA-FY14-0070 "Increased Emphasis on Strategic Sourcing

Can Result in Substantial Cost Savings for EPA" dated June 13, 2014. The Office of Administration 

and Resources Management agrees with audit findings, and for all recommendations we have provided

corrective actions and completion dates in Attachment 1hereto.

Ifyou have any questionsregarding this response, please contact John Bashista, Director, Office of

Acquisition Management at 202-564-4310 or Lisa Maass, OAM's Audit Follow-up Coordinator, at 202-

564-2498.

Attachment
14-P-0338 16

ATTACHMENT I-RECOMMENDATION DISCUSSION

Recommendation #1: Develop a plan of action to strategically source wireless services and print

management. If the plan is to source these commodities internally because it is not practicable under 

the Federal Strategic Sourcing Initiative (FSSI) initiative, perform a price comparison with established 

pricing under the FSSO solution(s) to ensure the best possible pricing is negotiated.

OARM agrees with this recommendation. OARM began the process of strategically sourcing the

agency's wireless services in FY13. Part of that process included performing a price comparison

between the Federal Strategic Sourcing Initiative and the negotiated rates under EPA's existing

contracts for these commodities.In the 3rd quarter of FY14, OARM finalized renegotiation of its

agreements with AT&T and Verizon at rates better than those currently available through FSSI.

Those changes are currently in the process of being rolled out, and should be completed by

November 2014.

OARM renegotiated its print contract in March 2014 to reflect industry-wide structure (black and

white vs. color) and the rates are now lower than FSSI's offering. Since previously FSSI did not

offer rates for agency-owned equipment, FSSI pricing was not comparable since EPA owns its

equipment. As a result, EPA did not consider FSSI pricing in the past. Additionally, a

memorandum to encourage changes in behavior including reduced printing, and reduced color

printing, double-sided printing, and less desk-top printing will be distributed agency-wide. In

August 2014, OARM anticipates establishing an agency-wide Print Commodity Team to

determine the best approaches for managing both ongoing and future additional strategic sourcing

printing efforts at EPA.

Recommendation #2: Develop a system or method to link purchase card transactions to

BPAs.

OARM agrees with this recommendation. OARM is in the process ofimplementing PaymentNet

agency-wide. This automated purchase card system bas a robust electronic purchase log feature

which includes a drop down button and comment box allowing users to note whether the

transaction was made using a Blanket Purchase Agreement. If a BPA was used,the BPA number

must be annotated. Conversely, if a BPA was not used and should have been, cardholders will be

required to justify why in the comment section of the purchase log. This process will enable EPA

to validate data already being captured via GSA FSS and other agency-wide BPAs. Additionally,

PNET will provide cardholders with uniform platform for recoding justification for non-use of

agency-wide strategic sourcing purchasing vehicles. The PNET system will be deployed and will

be mandatory for all purchase card users effective October 2014.

Recommendation #3:Develop and implement policies and procedures to ensure that controls are

in placeso that allstrategically sources vehicles areutilized unless a valid exception isapproved.

OARM agrees with this recommendation. OARM is currently in the process of developing a

policy to make strategically sourced vehicles mandatory, if appropriate, depending on the goods

or services required and the sourcing strategy used. This policy will include an exception process

requiring users to justify reasons for not using a strategically sourced vehicle, although in some
14-P-0338 17

cases, the justification may be an exception for usage set forth in the contract vehicle. This policy

document will be published agency-wide by December 2014.

Recommendation #4: Develop a collaborative approach to strategic sourcing to best ensure ideas

from all contracting and program offices are considered agency-wide and strategic sourcing

activities are implemented in a uniform manner.

OARM agrees with this recommendation. OARM has developed, vetted, and finalized an

agency-wide Strategic Sourcing Plan which includes specific processes, roles, and 

responsibilitiesto ensure a strong collaborate approach. This Strategic Sourcing Plan will

be disseminated across the agency by October 2014.

Recommendation #5: Evaluate OAM priorities and determine whether resources can be allocated

from lower priority work to the strategic sourcing program.

OARM agrees with this recommendation. OARM/OAM is in the process of conducting a

reorganization through which it will better align its personnel and functions to support the

accomplishment of the agency's mission. As a part of this process, OARM/OAM agrees to 

evaluate whether resources can be allocated from lower priority work to the strategic sourcing

program. The reorganization is to be completed by October 2014.

Recommendation #6: Disseminate broader awareness of the program by:

a. Developing and assigning regional points of contact.

b. Developing informational packets to be disseminated to regional personnel to

ensure that all acquisition personnel, including purchase card holders and

approvers, are adequately informed on the strategic sourcing requirements and 

initiatives.

OARM agrees with these recommendations. OARM is developing a communications and

marketing plan forthe strategic sourcing program. Formal implementation will begin by October

2014. This plan will include headquarters and regional stakeholders for each commodity, as

applicable.
14-P-0338 18

Recommendation #7: Approval and finalize a strategic sourcing plan, by the Chief 

Acquisition officer, that will be administered Agency-wide.

OARM agrees with this recommendation. OARM has developed, vetted, and finalized an

agency-wide Strategic Sourcing Plan which includes specific processes, roles, and

responsibilities to ensure a strong collaborate approach. The Strategic Sourcing Plan will be

disseminated across the agency by October 2014.
14-P-0338 19

Appendix B

Distribution

Office of the Administrator

Assistant Administrator for Administration and Resources Management

Agency Follow-Up Official (the CFO)

Agency Follow-Up Coordinator

General Counsel

Associate Administrator for Congressional and Intergovernmental Relations

Associate Administrator for External Affairs and Environmental Education

Principal Deputy Assistant Administrator, Office of Administration and Resources Management

Director, Office of Acquisition Management, Office of Administration and Resources

Management

Director, Office of Policy and Resource Management, Office of Administration and 

Resources Management

Deputy Director, Office of Policy and Resource Management, Office of Administration and 

Resources Management

Director, Office of Regional Operations

Audit Follow-Up Coordinator, Office of Administration and Resources Management