STRATEGIC 

SOURCING

Improved and 

Expanded Use Could 

Save Billions in 

Annual Procurement 

Costs

Report to Congressional Committees

September 2012

GAO-12-919

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-919, a report to 

congressional committees 

September 2012

STRATEGIC SOURCING

Improved and Expanded Use Could Save Billions in 

Annual Procurement Costs

Why GAO Did This Study

GAO has reported that the government 

is not fully leveraging its aggregate 

buying power, and that strategic 

sourcing, a process that moves a 

company away from numerous 

individual procurements to a broader 

aggregate approach, allowed 

companies to achieve savings of 10 to 

20 percent. A similar savings rate 

applied to the federal procurement 

budget would equal more than $50 

billion dollars. In 2005, the Office of 

Management and Budget directed 

agencies to use strategic sourcing and 

established the FSSI program to 

manage governmentwide efforts. GAO 

was asked to assess (1) the extent to 

which selected agencies managed 

spending and achieved savings 

through strategic sourcing, (2) key 

challenges selected agency and FSSI 

officials face in strategically sourcing 

products and services, and (3) the 

extent to which the FSSI program

managed spending and achieved 

savings through strategic sourcing. To 

do this, GAO selected four agencies

that were among the highest in fiscal 

year 2011 procurement obligations—

DOD, DHS, VA, and Energy—and

reviewed governmentwide FSSI

efforts. For each, GAO analyzed

strategic sourcing data and policies, 

and interviewed responsible officials. 

What GAO Recommends

GAO recommends a number of actions 

OMB, DOD, and VA can take to 

achieve more savings, such as

applying strategic sourcing practices to

their highest spending procurement 

categories, and setting targets for use 

of strategic sourcing contracts. All 

three agencies concurred with our 

recommendations.

What GAO Found

Selected agencies leveraged only a fraction of their buying power through 

strategic sourcing and achieved limited savings. In fiscal year 2011, the 

Departments of Defense (DOD), Homeland Security (DHS), Energy, and 

Veterans Affairs (VA) accounted for 80 percent of the $537 billion in federal 

procurement spending, but reported managing about 5 percent or $25.8 billion 

through strategic sourcing efforts. These agencies reported savings of $1.8 

billion—less than one-half of one percent of procurement spending. While 

strategic sourcing may not be suitable for all procurement spending, leading

companies strategically manage about 90 percent of their procurements and 

report annual savings of 10 percent or more. Further, most agencies’ efforts do 

not address their highest spending areas such as services, which may provide 

opportunities for additional savings.

Selected Agencies’ Strategic Sourcing Spending and Savings Reported in FY 2011 

Note: FY = fiscal year. 

Most selected agencies and the Federal Strategic Sourcing Initiative (FSSI) 

program have not fully adopted a strategic sourcing approach. In prior work, 

GAO found that sustained leadership and effective metrics are important factors 

to implementing strategic sourcing. However, leaders at DOD have dedicated

limited resources to strategic sourcing, and leaders at VA and Energy are just 

beginning to align resources for agencywide strategic sourcing efforts. A lack of

clear guidance on metrics for measuring success has also impacted the 

management of ongoing FSSI efforts as well as most selected agencies’ efforts. 

In contrast, DHS leaders stood up a centralized office and hold senior managers 

accountable to meet goals. DHS sets targets for use of strategic sourcing 

contracts, and reported that nearly 20 percent of its fiscal year 2011 procurement 

spending was directed through strategically sourced contracts. 

The FSSI program managed little spending through strategic sourcing initiatives, 

but reported considerable savings. In fiscal year 2011, the program managed 

$339 million through several governmentwide initiatives and reported $60 million

in savings. However, total spending through the program remains low, in part, 

because the FSSI contracts have low rates of use and the program has not yet 

targeted the products and services on which the government spends the most. 

View GAO-12-919. For more information, 

contact Cristina Chaplain at (202) 512-4841 or 

chaplainc@gao.gov. 
Page i GAO-12-919 Strategic Sourcing

Letter 1 

Background 3

Most Selected Agencies Leveraged Only a Fraction of Their Buying 

Power and Achieved Limited Savings 7

Selected Agencies and the FSSI Program Continue to Face 

Challenges in Implementing Strategic Sourcing 21

Federal Strategic Sourcing Initiatives Managed a Small Amount of 

Spending and Achieved Considerable Savings, but Greater 

Savings Are Possible 31

Conclusions 37

Recommendations for Executive Action 38

Agency Comments and Our Evaluation 40

Appendix I Scope and Methodology 42

Appendix II Top 50 Governmentwide Products and Services by Dollars Obligated, 

Fiscal Year 2011 46

Appendix III Comments from the Department of Defense 49

Appendix IV Comments from the Department of Homeland Security 52

Appendix V Comments from the Department of Veterans Affairs 53

Appendix VI GAO Contact and Staff Acknowledgments 57

Related GAO Products 58

Contents
Page ii GAO-12-919 Strategic Sourcing

Tables

Table 1: Selected Agencies’ Goals for Spending Managed through 

Strategic Sourcing 10

Table 2: Implemented and Planned Federal Strategic Sourcing 

Initiatives Managed by the FSSI Program Management 

Office, Fiscal Year 2011 33

Figures

Figure 1: Broad Principles and Practices of Leading Companies’ 

Strategic Approach 4

Figure 2: Overview of the Strategic Sourcing Process 6

Figure 3: Total Procurement Spending, Spending through Strategic 

Sourcing, and Total Savings Reported by Selected 

Agencies, Fiscal Year 2011 9

Figure 4: Total Procurement Spending, Spending Through Strategic 

Sourcing, and Total Savings Reported by DOD 

Components, Fiscal Year 2011 12

Figure 5: DOD Components’ Initiatives Targeting Their Top 10 

Products and Services 16

Figure 6: FSSI Governance Structure 32
Page iii GAO-12-919 Strategic Sourcing

Abbreviations

AT&L Acquisition, Technology, and Logistics

DHS Department of Homeland Security

DLA Defense Logistics Agency

DOD Department of Defense

DPAP Defense Procurement and Acquisition Policy

FPDS-NG Federal Procurement Data System-Next Generation

FSSI Federal Strategic Sourcing Initiative

GSA General Services Administration

OFPP Office of Federal Procurement Policy

OMB Office of Management and Budget

OSD Office of the Secretary of Defense

PASS Program Acquisition and Strategic Sourcing

VA Department of Veterans Affairs

VHA Veterans Health Administration

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Page 1 GAO-12-919 Strategic Sourcing

United States Government Accountability Office 

Washington, DC 20548

September 20, 2012

The Honorable Joseph I. Lieberman

Chairman

The Honorable Susan M. Collins

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Darrell E. Issa

Chairman

The Honorable Elijah E. Cummings

Ranking Member

Committee on Oversight and Government Reform

House of Representatives

In fiscal year 2011, the federal government obligated approximately $537 

billion on products and services. 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. In prior 

reports, we found that private industry best practices in strategic sourcing, 

a process—sometimes led by a central procurement organization—that 

moves a company away from numerous individual procurements to a 

broader aggregate approach, allowed companies to achieve savings of 

10 to 20 percent of total procurement costs.1 We have also reported that 

because procurement within the federal government is generally 

decentralized, the government is not fully leveraging its aggregate buying 

power and could benefit from adoption of strategic sourcing practices. For 

example, saving even 10 percent of the total federal procurement 

spending would produce more than $50 billion in savings annually.2

 

1

GAO, Opportunities to Reduce Potential Duplication in Government Programs, Save Tax 

Dollars, and Enhance Revenue, GAO-11-318SP (Washington, D.C.: Mar. 1, 2011); Best 

Practices: Using Spend Analysis to Help Agencies Take a More Strategic Approach to 

Procurement, GAO-04-870 (Washington, D.C.: Sept. 16, 2004); Best Practices: Improved 

Knowledge of DOD Service Contracts Could Reveal Significant Savings, GAO-03-661 

(Washington, D.C.: June 6, 2003); and Best Practices: Taking a Strategic Approach Could 

Improve DOD’s Acquisition of Services, GAO-02-230 (Washington, D.C.: Jan. 18, 2002).

2

GAO-11-318SP. 

 
 

Page 2 GAO-12-919 Strategic Sourcing

In 2005, the Office of Management and Budget (OMB) directed federal 

agencies to develop and implement a strategic sourcing effort to help 

control spending. A governmentwide strategic sourcing program—known 

as the Federal Strategic Sourcing Initiative (FSSI)—was also established. 

The FSSI Program Management Office is located within the General 

Services Administration (GSA) and the program reports to OMB’s Office 

of Federal Procurement Policy (OFPP). You requested that we review the 

status of strategic sourcing efforts both at selected agencies and 

governmentwide, and identify challenges, leading practices, and potential 

for additional strategic sourcing savings. Accordingly, we assessed (1) 

the extent to which selected agencies managed spending and achieved 

savings through strategic sourcing, and whether buying power could be 

better leveraged; (2) key challenges agency and FSSI officials face in

strategically sourcing products and services; and (3) the extent to which 

FSSIs managed spending and achieved savings through strategic 

sourcing, and whether governmentwide buying power could be better 

leveraged.

To conduct our work, we reviewed strategic sourcing efforts at four 

agencies—Department of Defense (DOD), Department of Homeland 

Security (DHS), Department of Veterans Affairs (VA), and Department of 

Energy (Energy)—that were among the 10 agencies with the highest 

fiscal year 2011 procurement obligations. To more fully assess strategic 

sourcing at DOD, we reviewed the efforts of four component agencies—

Air Force, Army, Navy, and the Defense Logistics Agency (DLA)—which 

accounted for 88 percent of DOD spending in fiscal year 2011, as well as 

departmentwide efforts managed by DOD’s Program Acquisition and 

Strategic Sourcing (PASS) office, which is within DOD’s Defense 

Procurement and Acquisition Policy (DPAP) organization and reports to 

the Under Secretary of Defense for Acquisition, Technology, and 

Logistics (AT&L). We also examined governmentwide FSSI efforts 

managed by the FSSI Program Office and overseen by OFPP. We 

analyzed selected agencies’ policies and interviewed agency and 

governmentwide strategic sourcing officials to determine the status of

current and planned strategic sourcing efforts, with a focus on key 

challenges and leading practices. To identify the commodities (both 

products and services) on which the most federal procurement dollars 

were spent governmentwide and by our selected agencies, we analyzed 

fiscal year 2011 data from the Federal Procurement Data System—Next 

Generation (FPDS-NG). We determined that FPDS-NG data were 

sufficiently reliable for the purposes of our review. Further, we analyzed 

selected agencies’ fiscal year 2011 data on strategic sourcing to identify 

current or planned strategic sourcing efforts addressing these 
 

Page 3 GAO-12-919 Strategic Sourcing

commodities. We also analyzed data from selected agencies on managed 

spending—spending through their strategic sourcing contract vehicles—

and savings and other benefits from current strategic sourcing efforts. We 

did not independently validate agency spending or savings data reported 

to us by the agencies; however, we did assess information from agency 

officials about the reliability of the data and resolved some discrepancies.

We determined that these data were sufficiently reliable for the purpose of 

reporting governmentwide spending on products and services, agency 

spending, and savings reported by agencies. See appendix I for a more 

in-depth description of our scope and methodology.

We conducted this performance audit from August 2011 to September 

2012 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.

We have previously reported that because procurement at federal 

departments and agencies is generally decentralized, the federal 

government is not fully leveraging its aggregate buying power to obtain 

the most advantageous terms and conditions for its procurements.3

In the private sector, however, we have previously reported that an 

approach called strategic sourcing has been used since the 1980s to 

reduce procurement costs at companies with large supplier bases and 

high procurement costs.

Agencies act more like many unrelated medium-sized businesses and 

often rely on hundreds of separate contracts for many commonly used 

items, with prices that vary widely.

4

 

3

Leading companies we reviewed found they 

could save billions of dollars and improve the quality of the products and 

services received by using strategic sourcing. The companies did not 

follow the exact same approach as they differed in the manner and 

degree to which they employed specific practices. However, in 2004, we 

identified four broad principles that were critical to successfully carrying 

GAO-11-318SP. 

4

GAO-11-318SP. 

Background
 

Page 4 GAO-12-919 Strategic Sourcing

out the companies’ strategic approach.5

Figure 1: Broad Principles and Practices of Leading Companies’ Strategic Approach

See figure 1 for the principles 

and practices.

We reported that the support and commitment of senior management was 

viewed as essential to facilitating the companies’ efforts to reengineer 

their approaches to acquisition. Once top leaders were committed to 

taking a strategic approach, the companies took a hard look at how much 

they were spending and with which vendors. By arming themselves with 

this knowledge, the companies could identify opportunities to leverage 

 

5

GAO-04-870. 
 

Page 5 GAO-12-919 Strategic Sourcing

their buying power, reduce costs, and better manage their suppliers. 

Companies also instituted a series of structural, procedural, and role 

changes aimed at moving away from a fragmented acquisition process to 

a more efficient and effective enterprisewide process. Recent work by 

GAO and others has confirmed that these practices are still critical. For 

example, a recent survey of leading commercial firms found that senior 

leadership support remains key to ensuring that companies follow the 

strategic sourcing process and take ownership of savings goals. 

Companies we spoke with recently confirmed that knowledge of spending 

and of the relevant markets continues to be very important, and that a 

centralized procurement approach remains critical to their ability to 

ensure knowledge sharing and consistent procurement tactics.

A strategic sourcing effort begins with an opportunity assessment—an 

analysis of spending and the identification of products and services for 

which strategic sourcing should be implemented. Spend analysis provides 

knowledge about how much is being spent for which products and 

services, who the buyers are, who the suppliers are, and where the 

opportunities are for leveraged buying and other tactics to save money 

and improve performance. Data on spending are analyzed on a continual 

basis to support decisions on strategic sourcing and procurement 

management in areas such as cost cutting, streamlining operations, and 

reducing the number of suppliers. Based on this analysis, organizations 

evaluate and prioritize commodities to create a list of top products or 

services to target for strategic sourcing. This list typically includes the 

products or services on which most of the organization’s spending is 

focused. In addition to spending, criteria such as potential savings and 

relative ease of implementation are considered.

Once a commodity—a product or service—is selected for strategic 

sourcing, a standardized process is followed to develop, implement, and 

manage the sourcing strategy for that product or service. See figure 2 for 

key steps in the strategic sourcing process.
 

Page 6 GAO-12-919 Strategic Sourcing

Figure 2: Overview of the Strategic Sourcing Process 

Strategic sourcing can encompass a range of tactics for acquiring 

products and services more effectively and efficiently. In addition to 

leveraged buying, strategic sourcing tactics include managing demand by 

changing behavior, achieving efficiencies through standardization of the 

acquisition process, and managing supplier relationships. Private 

companies reported measuring the success of their strategic sourcing 

programs in various ways. For example, companies reported looking for 

reductions in the total cost of ownership and other forms of savings.

Recognizing the benefits of strategic sourcing, OMB issued a 

memorandum in 2005 that implemented strategic sourcing practices.6

 

6

Office of Management and Budget, Memorandum for Chief Acquisition Officers, Chief 

Financial Officers, and Chief Information Officers on Implementing Strategic Sourcing 

(Washington, D.C.: 2005).

This memorandum defined strategic sourcing 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.” According to 

the memo, the process helps agencies optimize performance, minimize 

price, increase achievement of socio-economic acquisition goals, 

evaluate total life cycle management costs, improve vendor access to 

business opportunities, and otherwise increase the value of each dollar 
 

Page 7 GAO-12-919 Strategic Sourcing

spent. Agencies were directed to develop and implement strategic 

sourcing efforts based on the results of spend analyses and identify at 

least three commodities that could be purchased more effectively and 

efficiently through strategic sourcing.

In addition to individual agency efforts, a governmentwide strategic 

sourcing program—known as the FSSI—was established in 2005, as a 

direct result of the OMB memo. FSSI was created to address 

governmentwide opportunities to strategically source commonly 

purchased products and services and eliminate duplication of efforts 

across agencies. OFPP—the office within OMB assigned to oversee the 

FSSI program—is ultimately responsible for providing oversight and 

guidance as well as ensuring the overall effectiveness of FSSI. The FSSI 

mission is to encourage agencies to aggregate requirements, streamline 

processes and coordinate purchases of like products and services to 

leverage spending to the maximum extent possible. Federal strategic 

sourcing contract vehicles can be based on the existing multiple award 

schedules—contracts for similar or comparable goods and services, 

established with more than one supplier, at varying prices—which are 

available for use governmentwide and are managed by GSA and VA. 

However, not all acquisitions using these schedules are considered 

strategic sourcing; rather the FSSI program has identified specific 

initiatives which follow the structured strategic sourcing process to be 

included as FSSIs.

The four agencies we reviewed—DOD, DHS, Energy, and VA—together 

accounted for 80 percent of the total $537 billion federal procurement 

spending in fiscal year 2011, but reported managing less than 5 percent, 

or $25.8 billion, through agencywide strategic sourcing contracts. From 

these efforts, the four agencies reported achieving a combined savings of 

$1.8 billion, or less than one-half of one percent of total federal 

procurement spending. While strategic sourcing may not be suitable for

all procurement spending, this percentage of managed spending and 

savings is very low compared to leading companies which generally 

strategically manage about 90 percent of their procurement spending and 

achieve savings of 10 to 20 percent of total procurements annually.

According to DOD officials, DOD procurement spending and savings 

through strategic sourcing contracts in fiscal year 2011 may be 

underreported, as DOD currently tracks departmentwide initiatives on an 

ad hoc basis. When strategic sourcing contracts were used, selected 

agencies generally reported savings ranging from 5 percent to over 20 

percent of spending through strategically sourced contracts. Further, most 

Most Selected 

Agencies Leveraged 

Only a Fraction of 

Their Buying Power 

and Achieved Limited 

Savings
 

Page 8 GAO-12-919 Strategic Sourcing

of the four agencies’ current and planned strategic sourcing efforts do not 

address their highest spending areas, the majority of which exceed $1 

billion and most of which are services. As a result, opportunities exist for 

agencies to realize significant savings by applying strategic sourcing in 

these areas.

OMB directed agencies to implement strategic sourcing practices in 2005, 

but taken together, the agencies we reviewed have leveraged only a 

fraction of what could potentially be managed and saved through strategic 

sourcing. DOD, DHS, Energy, and VA accounted for 80 percent of the 

total federal procurement spending for fiscal year 2011, but reported 

managing less than 5 percent, or $25.8 billion, through strategic sourcing 

efforts, and achieving a combined savings of $1.8 billion. The four 

agencies varied widely in the level of spending managed through 

strategic sourcing. For example, in fiscal year 2011, of the agencies we 

reviewed, DHS reported the highest percentage of its total procurement 

spending, nearly 20 percent, being managed through strategic sourcing 

contracts. By contrast, VA reported the lowest at 1.4 percent. Figure 3 

compares spending and savings through strategic sourcing at the four 

agencies.

Selected Agencies 

Reported Managing a 

Fraction of Their 

Procurement Spending 

through Strategic Sourcing
 

Page 9 GAO-12-919 Strategic Sourcing

Figure 3: Total Procurement Spending, Spending through Strategic Sourcing, and 

Total Savings Reported by Selected Agencies, Fiscal Year 2011

Note: Overall spending for DOD in fiscal year 2011 was $375 billion. DOD procurement spending 

total as shown is based on Army, Navy, Air Force, and DLA spending only, which together accounted 

for 88 percent of DOD total spending. 

According to some agency officials, not all of their procurement spending 

may be addressable through strategic sourcing. For example, DHS 
 

Page 10 GAO-12-919 Strategic Sourcing

considers some spending related to natural disasters such as hurricanes 

and earthquakes to be unaddressable through strategic sourcing. In 

another instance, Energy officials stated that they consider less than a 

third of Energy’s total procurement spending to be addressable through 

strategic sourcing. However, while some spending may not be suitable for 

strategic sourcing, the percentage of spending selected agencies report 

managing through strategic sourcing is small compared to the amount 

leading companies are managing strategically. Industry groups recently 

reported that leading companies they surveyed strategically manage 

approximately 90 percent of their procurement spending centrally. 

Moreover, leading companies we spoke with in 2012 reported that setting 

goals and using metrics to measure managed spending is important. By 

contrast, only a few of our selected agencies have set goals for the 

amount of spending managed through strategic sourcing (see table 1). 

Table 1: Selected Agencies’ Goals for Spending Managed through Strategic 

Sourcing

Agency Goal

Department of Defense None specified

Air Force 50 percent of Installation Operations and 

Maintenance spending (approximately $12 billion 

annually) by 2015

Army None specified

Navy None specified

Defense Logistics Agency None specified

Department of Homeland Security None specifieda

Department of Veterans Affairs

 

None specified 

Department of Energy 2.5 percent of the anticipated $10 billion of 

contractor spending for fiscal year 2012

Source: Selected agencies.

a

In fiscal year 2011, DHS set a utilization goal of 35 percent, which resulted in achieving 20 percent of 

procurement spending through strategic sourcing contracts. 

At DOD—the federal government’s largest procurer of products and 

services— the Army, Navy, Air Force, and DLA together reported 

spending almost 6 percent, or $19 billion, through strategic sourcing 

contracts. In addition, the Defense Program Acquisition and Strategic 

Sourcing (PASS) office, which coordinates strategic sourcing efforts 

across the department, was unable to provide us with a comprehensive 

list of departmentwide strategic sourcing initiatives, and indicated that 

there are likely more strategic sourcing initiatives that are not accounted 

Managed Spending and Savings 

Varied Greatly within DOD
 

Page 11 GAO-12-919 Strategic Sourcing

for because departmentwide initiatives are reported on an ad hoc basis.

7

The proportion of procurement spending being managed through 

strategic sourcing varied widely among the military departments and DLA 

(see fig. 4). For example, the Army spent more than $125 billion on 

products and services in fiscal year 2011, but reported that only $280 

million, or less than a quarter of one percent of procurement spending, 

was strategically sourced. In contrast, DLA spent $36 billion on goods 

and services in fiscal year 2011, and reported that 46 percent or $16 

billion was strategically sourced. According to DOD officials, it is to be 

expected that a high percentage of DLA’s spending is suitable for 

strategic sourcing because DLA’s unique mission is to supply high 

volume products that are bought across DOD, such as uniforms and food. 

Although DLA’s spending represents only 10 percent of DOD’s total 

procurement spending, DLA’s strategic sourcing efforts demonstrate that 

when DOD approaches procurement from a departmentwide level, it can 

achieve successful outcomes. In addition, PASS officials reported savings 

of $889 million in fiscal year 2011 from one initiative that leveraged 

departmentwide spending on enterprise software. Specifically, the 

initiative consolidates DOD commercial software, information technology 

hardware, and services requirements to obtain lower prices from 

information technology providers. Figure 4 provides reported fiscal year 

2011 procurement spending, and strategic sourcing information for the 

military departments and DLA.

However, they provided information on a limited number of 

departmentwide strategic sourcing initiatives that together represented 

more than $1 billion of spending and over $900 million in savings in fiscal 

year 2011.

 

7

PASS officials told us that for fiscal years 2005 through 2008, they collected information 

on departmentwide and component initiatives in the course of preparing annual reports on 

strategic sourcing to OMB; however they do not currently have a process in place to 

identify and track DOD-wide initiatives. 
 

Page 12 GAO-12-919 Strategic Sourcing

Figure 4: Total Procurement Spending, Spending Through Strategic Sourcing, and 

Total Savings Reported by DOD Components, Fiscal Year 2011
 

Page 13 GAO-12-919 Strategic Sourcing

Selected agencies’ reported savings added up to $1.8 billion in fiscal year 

2011—less than one-half of one percent of total federal procurement 

spending. We previously reported that some companies achieved 

reported savings of 10 percent to 20 percent of their total procurement 

costs through the use of a strategic approach to buying products and 

services.8 DHS reported fiscal year 2011 savings of $324 million. At DOD, 

the military departments and DLA reported a total of $213 million in 

savings for fiscal year 2011. The PASS office is just starting to collect 

some data on departmentwide strategic sourcing savings and could not 

definitively report savings through departmentwide strategic sourcing in 

fiscal year 2011. However, based on information provided, DOD achieved 

$900 million in savings from agencywide efforts. We have previously 

reported that DOD has not fully collected and assessed cost savings and 

other information from strategic sourcing initiatives.9

When strategic sourcing contracts were used, agencies generally 

reported rates of savings ranging from 5 percent to over 20 percent of 

spending through those contracts. For example, the Navy reported 

spending $145 million and achieving savings of $30 million through 

strategic sourcing in fiscal year 2011; these reported savings are almost 

21 percent of the spending through strategic sourcing vehicles. However, 

spending through strategic sourcing was a tiny fraction of the Navy’s total 

procurement spending (0.1 percent). If the Navy were to direct even 10 

percent of its total procurement spending of $105 billion through strategic 

sourcing vehicles, and achieved savings equivalent to 21 percent of the 

spending directed through strategic sourcing vehicles, it would save over 

$2 billion. In another example, the Air Force reported spending $2.4 

billion and achieving savings of $126 million through strategic sourcing in 

fiscal year 2011. These reported savings are equal to 5 percent of the 

spending through strategic sourcing. If the Air Force were to strategically 

source even 10 percent of its total procurement spending of $65 billion, 

and achieved savings equivalent to 5 percent of the spending through 

strategic sourcing vehicles, it would save $339 million.

Energy and VA 

officials reported $335 million and $56 million in savings respectively for 

their strategic sourcing efforts in fiscal year 2011.

 

8

GAO-03-661. 

9

GAO, Follow-up on 2011 Report: Status of Actions Taken to Reduce Duplication, 

Overlap, and Fragmentation, Save Tax Dollars, and Enhance Revenue, GAO-12-453SP 

(Washington, D.C.; Feb. 28, 2012). 

Savings Reported from 

Limited Strategic Sourcing 

Efforts Indicate Potential 

for Generating Additional 

Savings
 

Page 14 GAO-12-919 Strategic Sourcing

DOD training materials highlight the importance of prioritizing spending 

categories by looking at total spending dollars, among other criteria; 

specifying that a priority list can be developed by identifying those top 

spend categories that comprise 80 percent of the organization’s total 

procurement spending. While some agencies such as DHS have 

implemented initiatives that address top spend categories, current and 

planned initiatives at the other agencies we reviewed do not address the 

categories that represent their highest spending, the majority of which 

exceed $1 billion and most of which are for services rather than products. 

Consequently, agencies are leaving large segments of spending 

unmanaged, particularly in the area of services. We found that as the 

amount of spending managed through strategic sourcing at selected 

agencies increased, reported savings generally increased.

In fiscal year 2011, more than half of the procurement spending at the 

four agencies we reviewed was used to acquire services. However, we 

found that strategic sourcing efforts addressed products significantly more 

often than services. Officials reported that they have been reluctant to 

strategically source services for a variety of reasons, such as difficulty in 

standardizing requirements or a decision to focus on less complex 

commodities that can demonstrate success. Leading companies we 

spoke with have focused their efforts on services in the past 5 to 7 years 

because of the growth in spending in that area, and have achieved 

significant savings. For example, officials at one leading company told us 

that they developed standardized regional labor rates to allow strategic 

sourcing of services. Strategic sourcing leading practices at private 

companies suggest that it is critical to analyze all procurement spending 

with equal rigor and with no categories that are off limits. In addition, 

achieving savings requires a departure from the status quo. An industry 

group recently surveyed companies and reported that companies have 

successfully strategically sourced categories of services spending that 

have been off limits or controversial for most procurement organizations, 

such as information technology, professional services, technical services, 

and facilities management.10

 

10Resources Global Professionals Supply Chain Management briefing presented at the 

Institute of Supply Management conference, May 2012. 

Selected agencies are procuring many of 

the same types of services, such as professional services, and are 

missing opportunities to coordinate efforts. For example, DOD conducted 

a spend analysis in 2010 that identified knowledge-based services such 

Strategic Sourcing Efforts 

at Most Agencies We 

Reviewed Are Not 

Addressing the Highest 

Spending Categories 

Offering the Most Potential 

for Savings
 

Page 15 GAO-12-919 Strategic Sourcing

as engineering management services and logistics management services 

as the largest portfolio of spending being procured by all the DOD 

components.

Of the four agencies we reviewed, only DHS reported addressing the 

majority of its top 10 spending categories of products and services. In 

contrast, VA reported implemented initiatives in 3 of its top 10 spending 

categories. Energy reported departmentwide initiatives for one of its top 

10 categories of spending – operation of Government-Owned ContractorOperated Research and Development Facilities, which comprises a large

percentage of the agency’s total procurement spending – but officials 

noted that some of their components have strategic sourcing efforts in 

those top 10 spending categories where virtually all of the spending is 

concentrated at one component. Because of this concentration, Energy 

officials did not believe greater efficiencies could be achieved by sourcing 

those commodities at a departmentwide level. At DOD, PASS officials 

could not provide a comprehensive list of departmentwide initiatives and 

therefore, we could not fully assess their efforts to address the 

department’s highest spending categories through departmentwide 

strategic sourcing efforts.

The DOD components varied in the extent to which their efforts address 

their top spending categories. Of the components we reviewed, only DLA 

reported initiatives addressing the majority of their highest spending 

categories (see fig. 5). According to Navy officials, they choose products 

and services for strategic sourcing by examining their top spending 

products and services and eliminating those that they do not consider to 

be good candidates for strategic sourcing. Through this analysis, Navy 

officials identified engineering and technical services as a good candidate 

for strategic sourcing and stated they planned to create a commodity 

team in the fourth quarter of fiscal year 2012 to develop an initiative in this 

area. In addition, the Air Force reported completing multiple spend 

analyses to identify and establish commodity councils, and also to 

prioritize strategic sourcing initiatives within these commodity councils. Air 

Force officials reported that strategic sourcing opportunities were 

prioritized based on a value/complexity trade-off.
 

Page 16 GAO-12-919 Strategic Sourcing

Figure 5: DOD Components’ Initiatives Targeting Their Top 10 Products and Services

Of the top spending categories that DOD components reported targeting 

through implemented strategic sourcing initiatives, only two are services. 

However, leading companies and DHS have successfully tackled some 

high-spend and complex services that are comparable to DOD’s high 

spend services. For example, DHS has implemented a strategic sourcing 

initiative for engineering and technical services, which is also in the top 10 
 

Page 17 GAO-12-919 Strategic Sourcing

spending categories for the Army, Air Force and Navy. DOD 

acknowledges the need to better manage services spending. A DOD 

instruction is in place that requires each service acquisition executive in 

the military departments to collaborate with other senior officials to 

determine key categories of services that can be strategically sourced, 

and to dedicate full-time commodity managers to coordinate procurement 

of these services.11

Agency officials stated that not all categories of spending are good 

candidates for strategic sourcing. However, industry sources, government 

guidance, and our prior work have identified a range of strategic sourcing 

tactics that are appropriate for various types of government products and 

services. For example, some military officials have cited weapon systems 

as one category that they do not consider to be good candidates for 

strategic sourcing. While weapon systems are highly specialized items 

that have a long development cycle, we have identified where weapon 

systems acquisition could benefit from some strategic sourcing practices, 

such as supplier relationship management.

These officials are also responsible for conducting 

periodic spend analyses of their procurement data. DOD officials told us 

that the appointment of a senior manager for the acquisition of services at 

each of the military departments and defense agencies is in progress, but 

that it will take some time to fully achieve this change.

12 In a 2005 memo on strategic 

sourcing, DOD stated that enhancing relationships with suppliers 

minimizes costs, as DLA has done through long-term contracts. Further, 

DOD cited the need for improving long-term strategic relationships with 

suppliers in its 2010 Better Buying Power memo, and directed 

components to participate in an agencywide pilot to develop preferred 

supplier relationships.13

In addition, the Better Buying Power memo acknowledged a need for a 

cohesive and integrated strategy for acquiring services, many of which 

 

11DOD Instruction 5000.02, issued in 2008, establishes a simplified and flexible 

management framework for translating capability needs and technology opportunities 

based on approved capability needs into stable, affordable, and well-managed acquisition 

programs that include weapon systems, services, and automated information systems. 

12GAO, Best Practices: DOD Can Help Suppliers Contribute More to Weapon Systems 

Programs, GAO/NSIAD-98-87 (Washington, D.C.: Mar. 17, 1998).

13On September 14, 2010, the Undersecretary for Acquisition, Technology, and Logistics 

issued a memo called Better Buying Power: Guidance for Obtaining Greater Efficiency 

and Productivity in Defense Spending.
 

Page 18 GAO-12-919 Strategic Sourcing

are among the highest spending categories for DOD. The memo cited the 

use of more than 100,000 contract vehicles held by more than 32,200 

contractors and also stated that contract support services spending at 

DOD represented more than 50 percent of its total contract spending in 

2009. However, the memo was not clear how strategic sourcing would be 

incorporated into their ongoing efforts in this area. Similarly, the Defense 

Business Board issued a report in January 2011 recommending that DOD 

target high value areas for cross-military department coordination.14 The 

report noted that strategic sourcing savings of even one percent at the 

department would equate to billions of dollars.

Some of the four agencies have implemented many initiatives covering a 

wide range of products or services, while others report only a few 

initiatives that address a limited number of products or services. As of 

fiscal year 2011, the four agencies we reviewed reported initiatives that 

have been implemented or planned targeting nearly 750 products and 

services—ranging from ammunition to architecture and engineering 

services to seating. In addition to the initiatives that have already been 

implemented at the four agencies, officials reported a total of 85 efforts 

planned for fiscal years 2012 through 2016. Many initiatives include 

multiple products or services. For example, DHS reported, for fiscal year 

2011, 42 implemented departmentwide initiatives that covered 

approximately 270 products and services, ranging from software to

professional and program management support services. By contrast, VA 

reported 4 initiatives covering flags, hearing aids, wireless devices, and 

affiliate negotiation teams. At the Department of Energy, the majority of 

spending through strategic sourcing is led by the management and 

operating contractors who operate and maintain most of their 

government-owned facilities, such as national laboratories. Energy 

officials told us that labs managed by the National Nuclear Security 

Administration require their contractors to collaborate to produce 

contracting vehicles for common products and services used across the 

 

14Defense Business Board Report to the Secretary of Defense on Strategic Sourcing, 

January 2011. 

Selected Agencies’ 

Strategic Sourcing Efforts 

Varied Widely

Initiatives Address a Range of 

Products and Services
 

Page 19 GAO-12-919 Strategic Sourcing

program. However, national labs managed by the Office of Science do 

not. The Office of Environmental Management began implementing an 

initiative modeled on National Nuclear Security Administration’s approach 

in 2012.

At DOD, PASS officials were unable to definitively report how many 

initiatives were ongoing as of fiscal year 2011. However, they did provide 

information on a limited number of ongoing departmentwide initiatives. 

Within DOD, the military departments and DLA varied in the number of 

efforts that they have implemented and the types of products and 

services that have been addressed. For example, the Air Force reported 

17 implemented initiatives whereas the Army reported 8 and the Navy 

reported 7 implemented initiatives. These initiatives include products, 

such as taxiway lighting and maritime coatings, and services, such as 

clinical support services and integrated logistics support services.

We found that agencies with more mature strategic sourcing programs—

those with more implemented initiatives—managed more spending 

through strategic sourcing than those with less mature efforts. For 

example, DHS had the most initiatives and had the highest percentage of 

spending through strategic sourcing of the four selected agencies we 

reviewed. Conversely, VA officials reported the fewest initiatives and the 

lowest amount of spending managed through strategic sourcing of the 

agencies we reviewed. To support strategic sourcing efforts, DHS stood 

up a strategic sourcing office at its headquarters to centralize strategic 

sourcing efforts when the department was created in 2003, and its 

strategic sourcing program has been operating under an implemented 

management directive since 2004. We reported in 2004 that VA had 

success with a few initiatives.15

Additionally, Energy’s major programs—National Nuclear Security 

Administration, Office of Science, and Office of Environmental 

Management—have ongoing strategic sourcing efforts and require some 

contractors operating their facilities to strategically source; however, 

However, since that time they do not 

appear to have expanded their use of strategic sourcing. According to VA 

officials, efforts were stymied by a lack of reliable data. However, they are 

in the process of ramping up to add resources and increase their strategic 

sourcing efforts.

 

15GAO-04-870. 

Agencies’ Management of 

Strategic Sourcing Efforts
 

Page 20 GAO-12-919 Strategic Sourcing

Energy is still working to centralize its management of strategic sourcing 

initiatives and create an agencywide strategic sourcing program. In 2010, 

the Deputy Secretary of Energy cited further opportunities to leverage the 

department’s buying power through a more centralized and less 

fragmented approach, but according to Energy officials, steps have only 

recently been taken to take advantage of those opportunities. For 

example, the Office of Environmental Management created a partnership 

in January 2012 with the National Nuclear Security Administration’s 

Supply Chain Management Center. Under this partnership, the 

Environmental Management contractors have begun working with the 

Supply Chain Management Center to create a cooperative strategic 

sourcing solution that achieves efficiencies and economies of scale, and 

increases productivity and cost savings. In 2012, the Office of Science 

conducted a review of the National Nuclear Security Administration’s 

Supply Chain Management Center process and concluded that it does 

not make financial or practical sense for their labs to leverage existing 

efforts or establish a similar organization. They fulfill this function using 

their previously established Integrated Contractor Purchasing Team. We 

recently recommended that the Secretary of Energy assess whether the 

National Nuclear Security Administration and the Office of Science are 

taking the necessary steps to address challenges limiting implementation 

of cost savings efforts.16

Efforts across DOD components varied but in general are not mature. 

Army officials reported that the Army is currently aligning and allocating 

strategic sourcing responsibilities in partnership with the Army’s Senior 

Services Manager. In 2011, the Assistant Secretary of the Army issued a 

memo establishing a strategic sourcing board structure and program. The 

Air Force has been incorporating some aspects of strategic sourcing into 

its procurement practices for over a decade and its efforts are the most 

mature.

They agreed with our recommendation and are 

taking steps to address it.

The Office of the Secretary of Defense (OSD) relies on each military 

department to develop its own strategic sourcing efforts. The Defense 

Business Board reported in 2011 that DOD had not incorporated 

agencywide strategic sourcing into its operations and business practices. 

 

16GAO, Department of Energy: Additional Opportunities Exist to Streamline Support 

Functions at NNSA and Office of Science Sites, GAO-12-255 (Washington D.C.: Jan. 31, 

2012). 
 

Page 21 GAO-12-919 Strategic Sourcing

Rather, PASS officials told us that they conduct a detailed and 

comprehensive spending analysis, which they provide to the military 

departments so that they may determine which products and services 

they should address. Using this detailed spend analysis to select 

commodities that could be strategically sourced across DOD is not their 

primary goal; instead, PASS officials told us that they used it to identify 

and develop goals set forth in the Better Buying Power memo, which 

addresses productivity and efficiency initiatives such as increasing 

competition and reducing the use of high-risk contract vehicles. DOD 

guidance has not made clear how efforts related to the Better Buying 

Power memo link specifically to strategic sourcing initiatives. Military 

service officials told us that they would welcome guidance on strategic 

sourcing efforts from the PASS office, which is the organization 

responsible for championing strategic sourcing policy and initiatives for 

the department. The PASS office is currently updating its departmentwide 

strategic sourcing concept of operations, and is revising additional 

guidance which will include a process for regular review of DOD 

component and departmentwide proposed strategic sourcing initiatives. 

PASS officials stated that additional direction from DPAP or AT&L may be 

needed.

Selected agencies and the FSSI program, which manages 

governmentwide strategic sourcing initiatives, continue to face common 

challenges which prevent them from fully adopting a strategic sourcing 

approach to procurement. A lack of leadership investment has prevented 

several agencies from transforming their procurement organizations to 

allow for enterprisewide strategic sourcing, as leading companies have 

done. For example, leaders at DOD and the Army have not devoted 

resources to set up the necessary organizational structures for strategic 

sourcing. In addition, agencies are still challenged to obtain and analyze 

reliable and detailed agencywide spending data, which hinders their 

ability to identify and study the strategic sourcing opportunities offering 

the most potential benefits. Finally, the FSSI program and selected 

agencies face challenges in communicating information for new and 

ongoing initiatives as well as establishing and meeting utilization goals to 

measure the effectiveness of these efforts and to realize cost savings. 

Where agencies have overcome some of these challenges, strategic 

sourcing results have improved. For example, DHS has established a 

centralized strategic sourcing office, identified opportunities in high spend 

areas despite data deficiencies, and taken steps to manage and monitor 

ongoing efforts. DHS is currently managing nearly 20 percent of its total 

procurement spending through strategic sourcing contracts and in fiscal 

Selected Agencies and 

the FSSI Program 

Continue to Face 

Challenges in 

Implementing 

Strategic Sourcing
 

Page 22 GAO-12-919 Strategic Sourcing

year 2011 met its goal of 35 percent of spending on relevant products and 

services directed through the strategic sourcing contracts.

Leaders at DOD and Energy have not committed to creating a 

procurement organization that views spending and makes strategic 

sourcing decisions at an agencywide level. DHS has created a 

centralized strategic sourcing organization and VA has initiated some 

reorganization in 2012, but it is too early to tell whether recent 

realignment efforts within VA will be successful. Each of these four 

agencies must overcome challenges posed by insufficient leadership 

support, including failure to dedicate resources and lack of management 

action to address disincentives to strategic sourcing. However, all four 

agencies reported they have begun to adopt some practices aimed at 

addressing these challenges.

At a few agencies, leadership has not devoted sufficient resources to 

allow for strategic sourcing to be conducted at a departmentwide level. 

Strategic sourcing programs can be structured in various ways that 

require varying levels of resources. For example, DHS established a 

strategic sourcing program office, located in the Office of the Chief 

Procurement Officer, which includes DHS’s Director of Strategic Sourcing 

and nine additional staff members. This office coordinates with the 

components to identify opportunities and develop agencywide contracts 

that apply strategic sourcing principles. VA reported that in response to a 

proposal from Veterans Health Administration (VHA) personnel, VA 

leadership has recently committed to support the VHA in hiring 

approximately 150 full time personnel who will establish commodity 

management teams to identify departmentwide strategic sourcing 

opportunities and develop improved requirements packages, among other 

duties. Similarly, the Air Force reported that roughly 125 employees within 

its Enterprise Sourcing Group are involved in cross-functional strategic 

sourcing that leverages installation spending across 71 sites. 

The structure of an agency’s strategic sourcing program will determine 

the amount of dedicated resources that are needed; however, in two 

cases we found large agencies with only one or two full time employees 

who were expected to coordinate strategic sourcing across the entire 

organization. The Army, which managed more annual procurement 

spending than any other government agency in fiscal year 2011, currently 

does not have a formal strategic sourcing program office. The strategic 

sourcing function presently lies within the Policy and Oversight

Directorate under the Deputy Assistant Secretary of the Army for 

Except for DHS, 

Leadership Commitment 

Has Been Lacking, but 

Improvements Are Under 

Way

Dedication of Resources
 

Page 23 GAO-12-919 Strategic Sourcing

Procurement, which has committed only one staff person at a quarter 

time to managing its strategic sourcing. Moreover, at the OSD level, DOD 

has allocated one Deputy Director and one full-time staff member to its 

PASS office. The failure of agency leaders to devote resources to 

strategic sourcing has been a recurring issue. For example, in 2009, the 

FSSI program reported that many strategic sourcing staff cited resource 

constraints as the main barrier to implementation of strategic sourcing in 

their organizations. During our review we observed that agencies that 

have committed more resources to managing departmentwide strategic 

sourcing efforts were better able to maintain data on their agencies’ 

current strategic sourcing initiatives. This is a necessary step for 

coordinating and managing purchases agencywide—identified in our prior 

work as critical to taking a strategic approach to procurement. For 

example, DHS maintains a published list of available departmentwide 

strategic sourcing vehicles, while Army officials told us it was difficult for 

them to supply information on all initiatives because strategic sourcing 

data—even on Army-wide efforts—are not kept centrally and would 

require a data call.

Agency officials mentioned several disincentives that can discourage 

procurement and program officials from proactively participating in 

strategic sourcing, and at many agencies, these disincentives have not 

been fully addressed by leadership. Key disincentives identified by 

agency officials include the following:

• A perception that reporting savings due to strategic sourcing could 

lead to program budgets being cut in subsequent years,

• Difficulty identifying existing strategic sourcing contracts that are 

available for use as there is no centralized source for this information,

• A perception that strategically sourced contract vehicles may limit the 

ability to customize requirements,

• A desire on the part of agency officials to maintain control of their 

contracting,

• Program officials’ and contracting officers’ relationships with existing 

vendors, and

• The opportunity to get lower prices by going outside of strategically 

sourced contracts.

For example, a key disincentive to implementing efforts and tracking and 

reporting savings is a perception that program budgets may be cut as a 

result of producing savings. Agency officials stated that a reluctance to 

track and report savings for fear of budget reductions contributes to

underreporting of savings. Military officials reported a perception that any 

money saved will be taken from the next year’s budget. Navy officials 

Management Action to 

Counteract Disincentives 
 

Page 24 GAO-12-919 Strategic Sourcing

stated that several of their commands have expressed concerns that 

tracking and reporting savings could trigger another round of budget 

reductions and that the issue is frequently raised during their meetings 

with Navy senior management. DOD leadership has not yet addressed 

this perception for strategic sourcing efforts. 

Leaders at some agencies have proactively introduced practices that 

address these disincentives to strategically source. For example, DHS 

and VA reported increasing personal incentives for key managers by 

adding strategic sourcing performance measures to certain executives’ 

performance evaluations. In addition, several agencies including DOD, 

DHS, and VA have instituted policies making use of some strategic 

sourcing contracts mandatory or mandatory “with exception,” although the 

extent to which these policies have increased use of strategic sourcing 

vehicles is not yet clear. Some agencies have made use of automated 

systems to direct spending through strategic sourcing contracts. For 

example, FSSI issued a blanket purchase agreement through its office 

supplies initiative which included provisions requiring FSSI prices to be 

automatically applied to purchases made with government purchase 

cards. VA reported that its utilization rate for the office supplies FSSI 

contracts increased from 12 percent to 90 percent after these measures 

took effect. Officials from a number of agencies reported that they 

expected shrinking budgets will prompt leadership to provide additional 

requirements or incentives to strategically source. In fact, VA and Navy 

officials reported renewed attention to strategic sourcing as a potential 

tool to deal with budget cuts.

The FSSI program and selected agencies generally cited the Federal 

Procurement Data System—Next Generation (FPDS-NG)—the federal 

government’s current system for tracking information on contracting 

actions—as their primary source of data, and noted numerous 

deficiencies with this data for the purposes of conducting strategic 

sourcing research. Agencies reported that when additional data sources 

A Few Agencies Have 

Conducted Opportunity 

Analyses Despite a Lack of 

Reliable Agencywide 

Spending Data

Obtaining and Analyzing 

Spending Data
 

Page 25 GAO-12-919 Strategic Sourcing

are added, incompatible data and separate systems often presented 

problems. We have previously reported extensively on issues agencies 

faced in gathering data to form the basis for their spend analysis.17

Officials at several agencies noted that the lack of trained acquisition 

personnel made it difficult to conduct an opportunity analysis and develop 

an informed sourcing strategy. For example, Army officials cited a need 

for expertise in strategic sourcing and spend analysis data, and OMB 

officials echoed that a key challenge is the dearth of strategic sourcing 

expertise in government. VA and Energy also reported this challenge. A 

few agencies have responded to this challenge by developing training on 

strategic sourcing for acquisition personnel. For example, the Air Force 

noted that they instituted training related to strategic sourcing because it 

is necessary to have people who are very strong analytically to do the 

front end work for strategic sourcing, and these are the hardest to find. 

The training course gives acquisition personnel strong analytical skills to 

perform steps like market evaluation. VA has also begun to develop 

training to address this challenge.

However, some agencies have been able to make progress on 

conducting enterprisewide opportunity analyses despite flaws in the 

available data. For example, both the FSSI Program Management Office 

and DHS told us that current data, although imperfect, provide sufficient 

information for them to begin to identify high spend opportunities. DHS 

has in fact evaluated the majority of its 10 highest-spend commodities 

and developed sourcing strategies for seven of those based on its 

analysis of primarily FPDS-NG data.

 

17GAO, Opportunities to Reduce Potential Duplication in Government Programs, Save 

Tax Dollars, and Enhance Revenue, GAO-11-318SP (Washington, D.C.: Mar. 1, 2011); 

Defense Acquisitions: Tailored Approach Needed to Improve Service Acquisition 

Outcomes, GAO-07-20 (Washington, D.C.: Nov. 9, 2006); Homeland Security: Successes 

and Challenges in DHS’s Efforts to Create an Effective Acquisition Organization, 

GAO-05-179 (Washington, D.C.; Mar. 29, 2005); Best Practices: Using Spend Analysis to 

Help Agencies Take a More Strategic Approach to Procurement, GAO-04-870, 

(Washington, D.C.: Sept. 16, 2004); and Best Practices: Improved Knowledge of DOD 

Service Contracts Could Reveal Significant Savings, GAO-03-661 (Washington, D.C.: 

June 6, 2003). 

Availability of Strategic 

Sourcing Expertise
 

Page 26 GAO-12-919 Strategic Sourcing

Agency officials listed several challenges that they commonly face in 

developing the sourcing strategy for a product or service. As with the 

opportunity analysis stage, imperfect data and a lack of expertise also 

pose challenges to agencies when developing a sourcing strategy. This 

phase requires study of various types of information; for example, data on 

the agency’s requirements and historical and projected demand for the 

product or service. Some agencies have found additional information on 

existing suppliers and contracts to also be important in identifying 

commodities to target for strategic sourcing. For example, the Air Force 

also considers data on the number of contracts, the number of purchasing 

locations, the number of transactions, the number of suppliers, and 

estimated total cost savings for each potential commodity, among other 

factors. Several agencies have historically turned to contractors to 

perform this step; however some have recently decided to increase 

internal expertise in this area. For example, the FSSI Program 

Management Office reported hiring two new staff with relevant expertise 

to help with this process.

A few agencies also reported challenges specifically with meeting 

requirements unique to government procurements. Government 

procurements must meet specified socioeconomic goals; for example, 

agencies are expected to award a certain portion of their contracts to 

small businesses. Organizations representing small businesses have 

expressed concern that federal strategic sourcing reduces contracting 

opportunities for small businesses. However, while acknowledging that 

reducing the number of vendors providing a product or service means 

that some vendors will be unable to participate, agency officials reported 

finding ways to conduct strategic sourcing efforts that allow for maximum 

feasible small business participation. For example, DHS, VA, and Air 

Force officials told us they collaborated with small business advocates 

early in the acquisition planning stage to ensure they conducted market 

research that would help determine how to maximize small business 

participation. In addition, Federal Strategic Sourcing Initiatives to date 

have generally awarded a number of contracts to small businesses. For 

example, of 15 contracts awarded for an initiative focusing on office 

supplies, 13 were awarded to small businesses, and these businesses 

received over 70 percent of office supplies spending through that initiative 

Agencies Report 

Challenges in Executing 

Individual Strategic 

Sourcing Initiatives

Developing the Sourcing 

Strategy 
 

Page 27 GAO-12-919 Strategic Sourcing

in fiscal year 2011. Another initiative targeting print management services 

awarded 5 of 11 contracts to small businesses. Several agency small 

business utilization officials with whom we spoke were generally satisfied 

with FSSI and agency efforts to involve small businesses in strategic 

sourcing. 

Officials at all of our four selected agencies discussed challenges in 

getting buy-in among those who would be using the strategic sourcing 

contracts to purchase products or services. Buyers can face a number of 

disincentives to using strategic sourcing vehicles, as outlined above. In 

addition to creating structures that provide incentives for participation in 

strategic sourcing, several agencies incorporate practices into individual 

strategic sourcing efforts to increase stakeholder buy-in. OMB, DHS, and 

Air Force officials reported that one such practice is involving 

stakeholders early in the process. For example, Air Force officials said 

that in order for strategic sourcing to be successful, the cross-functional 

commodity team must include the organization that is funding the 

acquisition. DHS officials added that in order to have support with all 

levels of personnel involved, it is important to have the end users in the 

room when making procurement decisions. Similarly, the program 

manager for GSA’s planned FSSI covering wireless rate plans and 

devices personally conducted extensive outreach with agencies to 

understand their technical requirements and encourage customer 

involvement. In response, agencies have sent representatives from 

offices of both the Chief Information Officer and the Chief Acquisition 

Officer to work with the team in developing the acquisition strategy.

Challenges in Ensuring Utilization 

After strategic sourcing contracts are awarded, realizing cost savings and 

other benefits depends on utilization of these contracts. Agency officials 

indicated that a key challenge with strategic sourcing is communicating 

new contracting options. For example, Navy officials expressed that even 

though they have templates for communication that can be used when 

rolling out an initiative, it is really people who determine whether the 

communication will be effective. In addition to putting together a 

communication plan to alert government purchase card users that use of 

the office supplies FSSI was now required, Air Force officials conducted 

random telephone calls to ensure these users knew of the existence of 

the policy. Air Force officials believed that these communication efforts 

led to a 50 percent increase in FSSI usage from March to April 2011.

Implementing and Managing 

Strategic Sourcing Efforts
 

Page 28 GAO-12-919 Strategic Sourcing

To improve the existing FSSI efforts, GSA applied lessons learned from 

previous initiatives to increase buy-in and utilization. The first generation 

of the office supplies initiative did not have a high utilization rate, and 

officials attributed this, in part, to a failure to publicize the effort. As a 

result, GSA increased its outreach efforts for the second iteration of the 

initiative and developed an implementation kit—a pre-packaged 

communications campaign to help implement the FSSI. The kit included a 

five-step implementation process, sample communications and policy 

memos, and reporting templates. In fiscal year 2011, an estimated 13 

percent of governmentwide spending on office supplies went through 

second generation office supplies initiative contracts, up from less than 1 

percent of similar spending through first generation contracts in fiscal year 

2009.

Using Goals and Metrics to Measure Progress

Failure to set goals and difficulty in measuring the utilization of strategic 

sourcing contracts also present a critical challenge. A lack of detailed 

data on spending makes it difficult for agencies to track utilization of 

existing strategic sourcing contracts. FPDS-NG provides spending data 

by product service code, but the products and services targeted by most 

strategic sourcing initiatives are only a subset of these much broader 

categories. Further, FPDS-NG lacks information on transactions below a 

certain dollar threshold. Even where agencies have improved their data 

on spending through strategically sourced contracts—for example, a FSSI 

blanket purchase agreement requires vendors to provide detailed line 

item data on spending—they continue to lack data that allows them to 

reliably identify spending on these products and services that go to 

contractors outside of strategically sourced contracts. Inability to track this 

spending makes tracking utilization imprecise, but the FSSI program, VA, 

and DHS have all begun tracking utilization data—though imperfect—and 

are using utilization rates as one metric to manage strategic sourcing 

efforts. VA officials acknowledged that regular monitoring of strategically 

sourced spending is what creates the incentive to stabilize savings 

following the initial drop in spending, which is crucial to continued 

success.

Agencies are equally challenged to produce other metrics—such as 

spending through strategic sourcing contracts and savings—that can be 

used to monitor progress. However, agencies will be increasingly called 

upon to produce metrics as the use of strategic sourcing expands. For 

example, in 2012 OMB issued a new cross-cutting management 

improvement goal, which calls for agencies to strategically source at least 
 

Page 29 GAO-12-919 Strategic Sourcing

two new products or services in both 2013 and 2014 that yield at least 10 

percent savings. Agencies will need to measure savings to document 

their progress toward this goal. However, although recognizing the need 

for guidance on how agencies are to measure savings, OMB has not yet 

issued such guidance.

The strategic sourcing savings figures reported to us by agency officials 

were calculated using a variety of savings methodologies; for example, 

the difference in the paid price versus the price from ordering the same 

product or service from GSA schedule contracts. Other examples for 

calculating savings include totaling GSA management fees avoided 

because GSA schedules were not used for the procurement, and 

comparison of the prices paid on the contracts before strategic sourcing 

and after. Often several methodologies were used even within agencies. 

We recently reported that Energy’s guidance on calculating procurement 

cost savings gave its maintenance and operations contractors 

considerable flexibility in choosing the methods for estimating savings, 

and therefore estimates could vary widely.18 For example, one laboratory 

estimated a $9 million savings from a software purchase in 2010 using its 

preferred estimation method. By other methods used elsewhere in 

Energy, however, the site estimated that its savings could have been as 

high as $35 million. We recommended that Energy clarify its guidance on 

estimating cost savings from streamlining efforts.

19 Energy officials 

agreed with our recommendation and stated they have clarified their 

guidance on developing savings estimates. In addition, our recent reports 

highlighted the difficulties that agencies face when calculating acquisition 

savings. Specifically, we found that agencies reported billions of dollars in 

overstated and questionable savings in response to OMB’s Acquisition 

Savings Initiative due to differing methods of calculating savings as well 

as confusion as to what should be included as savings.

20

 

18

We also found 

that when calculating savings from various efforts including strategic 

GAO-12-255. 

19GAO-12-255. 

20GAO, Federal Contracting: OMB’s Acquisition Savings Initiative Had Results, but 

Improvements Needed, GAO-12-57 (Washington, D.C.: Nov. 15, 2011). 
 

Page 30 GAO-12-919 Strategic Sourcing

sourcing, VA had double counted savings on different efforts and had not 

accounted for the cost of implementing other efforts.21

In addition to savings, leading companies that we spoke with have 

identified a variety of metrics they use to measure return on strategic 

sourcing investments, such as the spending under management, 

reductions in total cost of ownership, and efficiencies due to streamlined 

processes. Agency officials have identified, but have not quantified, some 

of these other benefits to strategic sourcing. Officials acknowledge that 

strategic sourcing efforts can produce administrative cost savings, but 

they are difficult to quantify. For example, DHS reported that 

consolidating procurements using agencywide contracts streamlines the 

acquisition process and saves the department significant administrative 

costs; however, DHS does not quantify these savings. Strategic sourcing 

efforts can also achieve efficiencies by changing buying behavior and 

managing demand for products and services. For example, OSD officials 

reported the Navy has been innovative in incorporating demand 

management into its approach for buying wireless services. Navy’s 

wireless effort is down to eight plans and eight devices, and the service is 

now doing demand analysis.

Several agencies mentioned a need for sustained leadership support and 

additional resources in order to more effectively monitor ongoing 

initiatives. For example, DOD’s PASS office—with only two people to 

advocate strategic sourcing policy and coordinate communication of

component initiatives—does not track current strategic sourcing efforts at 

the component or departmentwide level. Some agencies that have 

developed metrics such as contract utilization rates report using those 

metrics to increase ongoing communication with leadership and maintain 

leadership investment. For example, VA officials said that they collect 

utilization metrics for the FSSIs and brief the Deputy Secretary on those 

metrics monthly.

 

21GAO, VA Health Care: Methodology for Estimating and Process for Tracking Savings 

Need Improvement, GAO-12-305 (Washington, D.C.: Feb. 27, 2012). 
 

Page 31 GAO-12-919 Strategic Sourcing

The FSSI program has adopted some leading practices for strategic 

sourcing, such as creating the structure and processes necessary to 

implement and monitor efforts. Through the end of fiscal year 2011, the 

program had only managed a small amount of spending through its four 

governmentwide strategic sourcing initiatives; however it reported 

achieving significant savings on those efforts. In fiscal year 2011, the 

FSSI program managed $339 million through these governmentwide 

initiatives and reported achieving $60 million in savings. However, the 

program faces key challenges in obtaining agency commitments to use 

new FSSIs and in increasing the level of agency spending directed 

through FSSI vehicles. For example, only 15 percent of governmentwide 

spending for the products and services covered by the FSSI initiatives 

went through the FSSI contracts in fiscal year 2011. Successfully 

addressing these challenges could help the FSSI program achieve 

greater governmentwide savings and efficiencies. In addition, the FSSI 

program has not yet targeted any of the government’s 50 highest spend 

products and services for strategic sourcing, and therefore is missing the 

potential for more significant strategic sourcing savings and other benefits 

governmentwide.

The FSSI program reports to OMB’s Chief Acquisition Officers Council 

through its Strategic Sourcing Working Group. The Working Group, 

comprised of representatives of various agencies, vets and approves 

initiatives and sourcing strategies, and establishes the standards, 

processes, and policies governing FSSI. The FSSI Program Management 

Office supports the Working Group and coordinates the efforts of 

executive agents to implement individual FSSI initiatives. See figure 6 for 

the FSSI program governance structure.

Federal Strategic 

Sourcing Initiatives 

Managed a Small 

Amount of Spending 

and Achieved 

Considerable Savings, 

but Greater Savings 

Are Possible

The FSSI Program 

Governance Structure 

Allows for Interagency 

Collaboration on FSSIs
 

Page 32 GAO-12-919 Strategic Sourcing

Figure 6: FSSI Governance Structure

The FSSI Program Management Office is located within the GSA’s 

Federal Acquisition Service. In addition, each of the four implemented 

strategic sourcing initiatives is also managed by GSA’s Federal 

Acquisition Service staff. The FSSI Program Management Office provides 

guidance and oversight, reviews information and recommendations, and 

makes strategic program decisions. This structure has allowed the FSSI 

program to assess opportunities for procuring certain products and 

services, develop and implement sourcing strategies to leverage 

governmentwide buying power, and manage the strategic sourcing 

efforts. Agency representatives participate in developing and managing 

FSSIs through membership in commodity teams. 
 

Page 33 GAO-12-919 Strategic Sourcing

In fiscal year 2011, the FSSI program managed $339 million through 

governmentwide initiatives and achieved approximately $60 million in 

savings, or almost 18 percent of the procurement spending it managed 

through these initiatives. As of fiscal year 2011, four initiatives had been 

implemented. The domestic delivery services and office supply 

initiatives—originally implemented in 2006 and 2007, respectively - are in 

their second iterations. The wireless telecommunications expense 

management initiative has been in place since 2008. The first print 

management initiative contracts were awarded near the end of fiscal year 

2011, and initial efforts focused on assessing agencies’ use of print 

output devices. Given the timing of the first contract award in late fiscal 

year 2011, FSSI Program Management Officials reported that no 

spending was yet managed through the contracts in that fiscal year. The 

number of agencies participating in the initiatives varied widely. For 

example, the FSSI Program Management Office reported that as of fiscal 

year 2011, five agencies participated in the Wireless Telecommunications 

Expense Management Services initiative, while 95 participated in the 

Domestic Delivery Services II initiative. Table 2 describes four 

implemented and two planned governmentwide strategic sourcing 

initiatives.

Table 2: Implemented and Planned Federal Strategic Sourcing Initiatives Managed by the FSSI Program Management Office, 

Fiscal Year 2011

Initiative Description

Date 

implemented

Governmentwide 

spending on 

applicable products 

and services

Spending 

through 

strategic 

sourcing

Savings

reported by FSSI 

Program 

Management

Office 

Office Supplies—

Second Generation 

Offers a catalogue of 

consumable office supplies

June 2010 $1.6 billion $202 million $24 million

Domestic Delivery 

Services—Second 

Generation 

Offers delivery service for 

small packages

August 2009 $505 million $109 million $31 million

Telecommunications 

Expense 

Management 

Services 

Optimizes wireless rate 

plans, reduces billing errors, 

and increases visibility into 

spending

January 2008 $100 million $28 million $5 million

Print Management Reduces equipment needed 

for printing, copying, 

scanning, and faxing, and 

includes print behavior and 

continuous process 

improvement components

September 2011 Spending not yet 

under management in 

fiscal year 2011

Spending not 

yet under 

management in 

fiscal year 2011

Spending not yet 

under 

management in 

fiscal year 2011

The FSSI Program 

Managed a Small Amount 

of Fiscal Year 2011 

Spending through Several 

Federal Strategic Sourcing 

Initiatives and Reported 

Achieving Considerable 

Savings
 

Page 34 GAO-12-919 Strategic Sourcing

Initiative Description

Date 

implemented

Governmentwide 

spending on 

applicable products 

and services

Spending 

through 

strategic 

sourcing

Savings

reported by FSSI 

Program 

Management

Office 

SmartBUY Leverages buying of 

commercial off-the-shelf 

software and services

Planned for fiscal 

year 2012

Not managed under 

the FSSI program in 

fiscal year 2011

Not managed 

under the FSSI 

program in 

fiscal year 2011

Not managed 

under the FSSI 

program in fiscal 

year 2011

Wireless Offers rate plans and 

wireless devices 

Planned for fourth 

quarter, fiscal 

year 2012

Not applicable as 

contracts were not yet 

awarded in fiscal year 

2011

Not applicable 

as contracts 

were not yet 

awarded in 

fiscal year 2011

Not applicable as 

contracts were 

not yet awarded 

in fiscal year 2011

Source: GAO analysis of GSA data.

SmartBUY is an existing federal procurement vehicle that was started in 

2003 and leverages the government’s buying power to reduce the cost of 

commercial off-the-shelf software and services. As of the end of fiscal 

year 2011, SmartBUY was not classified as a Federal Strategic Sourcing 

Initiative, but the Strategic Sourcing Working Group in June 2012 formally 

accepted it as an FSSI Initiative. The FSSI Program Management Office 

plans that going forward, the FSSI SmartBUY will develop strategies to 

address as many large software publishers as possible. The planned 

initiative targeting wireless rate plans and devices will aim to deliver 

acquisition savings due to lower purchasing costs as well as operational 

savings through improvement of processes and information.

FSSI program officials that manage the governmentwide strategic 

sourcing initiatives told us that before contracts are awarded, obtaining 

spending commitments—especially from top spending agencies—is 

important in negotiating discounted prices and implementing a successful 

strategic sourcing effort. However, they noted that getting agency 

commitments to use the FSSI initiatives sometimes can be a challenge. 

Even agencies that are part of strategic sourcing commodity teams 

sometimes do not commit to using the resulting FSSI contracts. For 

example, DOD representatives participated in the commodity team for the 

Office Supplies II effort, and DOD spending represented a large portion of 

the total federal government spending on office supplies. However, prior 

to Office Supplies II implementation, DOD committed only to continue 

support of the FSSI for office supplies, but did not specifically commit to 

using Office Supplies II contracts. By contrast, other agencies such as VA 

provided the FSSI program with letters of intent that committed the 

agencies to use the Office Supplies II contracts once awarded. This 

The FSSI Program Faces 

Challenges in Getting Top 

Spending Agencies to 

Commit to 

Governmentwide Strategic 

Sourcing Contracts
 

Page 35 GAO-12-919 Strategic Sourcing

information was used by the FSSI program to negotiate better prices with 

vendors.

PASS officials acknowledged that although DOD participates in 

commodity teams for the Federal Strategic Sourcing Initiatives, the 

department has not fully committed to certain FSSI contracts for a variety 

of reasons, including having more sophisticated requirements or different 

mission needs than those of civilian agencies, and having existing 

contract vehicles in place when some FSSI initiatives were implemented.

A PASS official said that the department would more likely commit to 

current and planned FSSI contracts if those contracts showed significant 

savings/best value over established DOD contracts, to include the cost of 

administration, fees, and transition. Officials added that they may also be 

more likely to commit to FSSI contracts if FSSI initiatives addressed 

products or services not previously addressed by DOD, or if the FSSI 

program selected products or services with more significant spending.

Although reported spending through FSSI vehicles has increased from 

fiscal year 2009 to fiscal year 2011, spending through the vehicles 

continues to be limited. Only $339 million, or 15 percent, of 

governmentwide spending for the products and services covered by the 

FSSIs went through the vehicles in fiscal year 2011. However, where 

spending went through FSSI vehicles, the program reported savings 

equivalent to almost 18 percent of the spending through those vehicles. 

Although not all spending is suitable for strategic sourcing, if even 1 

percent of total federal procurement spending were directed through the 

FSSIs and achieved savings equivalent to 18 percent of that spending, 

the federal government could save over $900 million.

Agencies cited a variety of reasons for not participating in the 

governmentwide FSSI initiatives. Some agencies told us they were more 

likely to engage in agencywide strategic sourcing than to participate in a 

governmentwide effort because they

• want to maintain control over their contracting,

• have unique requirements, or

• can get lower prices outside of the FSSI contract vehicles.

For example, Energy officials told us their buyers are purchasing some 

items through Office Supplies II, but also have gotten lower prices on 

other items from current vendors by comparing prices.

The FSSI Program Faces 

Challenges to Achieve 

Greater Governmentwide 

Savings and Efficiencies 

through Increased Use of 

Strategic Sourcing 

Contracts
 

Page 36 GAO-12-919 Strategic Sourcing

FSSI use is not mandatory and agencies face no consequence for not 

using the FSSI contract vehicles. According to OFPP and GSA officials, 

they have not made use of FSSI contracts mandatory governmentwide—

preferring instead to establish FSSI contract vehicles that agencies will 

want to use. However, though GSA is the sponsoring agency, only 28 

percent of its own office supply spending in fiscal year 2011 went through 

Office Supplies II. Agencies can mandate FSSI use agencywide, and the 

Air Force, Navy, DHS, and VA have issued policies making at least 

consideration of some FSSI use mandatory. GSA officials indicated that 

they are revisiting whether mandatory use policies would benefit the 

current FSSI initiatives.

In 2012, OMB released a Cross-Agency Priority Goal Statement which 

requires agencies to increase their agencywide strategic sourcing efforts 

and also requires agencies to increase their use of FSSI contracts by at 

least 10 percent in both fiscal years 2013 and 2014, unless they can 

establish that their current spending patterns on related products are 

more cost-effective. This is a positive step and may help to increase 

agency use of FSSI contracts; however, the guidance does not include 

information on how agencies will be held accountable for meeting these 

goals and it is too early to tell what effect the establishment of this goal 

will have.

Many of the governmentwide highest-spending categories of products 

and services exceed $10 billion, and therefore offer great opportunities for 

savings if they can be strategically sourced successfully. In fiscal year 

2011, federal spending on the top 50 products and services was $283 

billion, or 53 percent of total government procurement spending. 

Appendix II identifies the fiscal year 2011 highest governmentwide 

spending categories.

Current governmentwide strategic sourcing initiatives do not address any 

of the top 50 governmentwide products and services, in part because the 

FSSI program excludes some of them from consideration for 

governmentwide strategic sourcing. The FSSI program evaluates 

products and services based on savings potential, diversity of customer 

pool, and ease of implementation. In its fiscal year 2011 analysis of 

spending, before considering products and services for a 

governmentwide initiative, the program removed those considered 

unsuitable for strategic sourcing, including

• mission-critical products and services,

The FSSI Program Has Not 

Targeted High Spending 

Categories of Products and 

Services Offering the Most 

Potential for Savings 

Governmentwide
 

Page 37 GAO-12-919 Strategic Sourcing

• products and services for which DOD alone or two or fewer 

departments accounted for 80 percent or greater of funding, and

• construction, architect/engineering, and building maintenance 

services.

Consequently, only about one quarter of total spending—or $129 billion—

remained open for consideration for a governmentwide initiative.

Officials told us that where spending on a product or service is 

concentrated among just a few agencies, a better approach would be for 

these agencies to collaborate to strategically source it rather than 

establish a governmentwide effort. However, many high-spending 

categories of services with spending spread more broadly across 

agencies are also not currently being targeted. FSSI Program 

Management Officials acknowledged that services comprise a high 

volume of governmentwide procurement spending, and that the FSSI 

program cannot ignore them for much longer. 

Current FSSI contracts address products and services that have relatively 

low spending when compared to those that are among the top 50. For 

example, all products procured under the Office Supplies II FSSI 

combined would rank 134th in fiscal year 2011 federal procurement 

spending. FSSI officials reported that they selected FSSI products and 

services for reasons other than a high spending level, which included 

agency adoption and standard purchase requirements across 

government. For example, FSSI officials explained that the current FSSIs, 

including Office Supplies II, were selected to demonstrate that strategic 

sourcing could be successful with simpler commodities before they 

pursued more complicated products and services. They also may select a 

product or service that an agency has already been considering to build 

on momentum. For example, an upcoming FSSI initiative for publication 

licenses was chosen because of interest by the Library of Congress. The 

Library of Congress will also lead the initiative, which will be the first time 

that GSA will not be the executive agent for an FSSI effort, but this FSSI 

only addresses an estimated $500 million to $600 million in federal 

procurement spending.

Current fiscal pressures and budgetary constraints have heightened the 

need for agencies to take full advantage of strategic sourcing and other 

efficiencies. Government agencies and commercial firms tend to have 

more spending managed through strategic sourcing efforts when they 

incorporate leading practices such as using their spend analysis to inform 

Conclusions
 

Page 38 GAO-12-919 Strategic Sourcing

their selection of products and services for strategic sourcing, devoting 

resources to strategic sourcing efforts, and measuring the benefits of 

ongoing efforts. These practices drive efficiencies and yield benefits 

beyond savings, such as increased business knowledge. 

Governmentwide strategic sourcing efforts have been initiated, and the 

four federal agencies we reviewed have improved and expanded upon 

their use of strategic sourcing to achieve cost savings and other benefits, 

but some agencies’ leaders, such as OSD and the Army, have not made 

a sufficient commitment to strategic sourcing, investing limited resources 

and failing to establish goals and performance metrics. Energy’s 

experience has been similar to DOD’s, and we have recently made 

related recommendations to the Secretary of Energy.22 DHS and DLA 

have shown that agencies can successfully target high spend 

commodities for strategic sourcing. Despite these examples, selected 

agencies’ current efforts and the FSSIs fall well short of addressing most 

of the federal procurement spending. Perennial high spend areas such as 

services offer the biggest potential for savings but have been largely 

ignored in strategic sourcing efforts. Focusing only on low risk, low return 

strategic sourcing strategies diminishes the government’s ability to fully 

leverage its enormous buying power and achieve other efficiencies. Until 

top-spending federal entities, especially DOD and the FSSI program, 

better incorporate strategic sourcing leading practices, increase the 

amount of spending through strategic sourcing, and direct more efforts at 

high spend categories, billions of dollars in potential savings may be 

missed, denying agencies a valuable tool for maximizing their ability to 

carry out critical missions under tight budgets.

To improve departmentwide strategic sourcing efforts at DOD, we 

recommend that the Secretary of Defense direct the Office of Acquisition, 

Technology, and Logistics to take the following five actions:

• Issue direction that

• sets goals for spending managed through strategic sourcing 

vehicles,

• establishes procedures for the identification and tracking of 

departmentwide and component strategic sourcing efforts through 

the PASS office,

 

22GAO-12-255. 

Recommendations for 

Executive Action
 

Page 39 GAO-12-919 Strategic Sourcing

• implements the PASS office strategic sourcing guidance,

• links strategic sourcing to its Better Buying Power memorandum, 

and

• establishes metrics, such as utilization rates, to track progress 

toward these goals.

• Evaluate whether the current resources of OSD’s PASS office are 

sufficient to enable the office to fulfill its strategic sourcing mission.

• Evaluate existing acquisition strategies for DOD’s current 

departmentwide acquisitions, and where these represent a strategic 

sourcing approach, ensure that data on these programs are submitted 

to the PASS office.

• Identify and evaluate the best way to strategically source DOD’s 

highest spending categories of products and services (e.g., 

governmentwide vehicles, interagency collaboration, departmentwide 

vehicles).

• Identify and submit to the FSSI program a list of products and 

services that, if developed as FSSIs, present the best opportunities for 

future DOD participation.

To improve strategic sourcing efforts at the Army, and in light of 

significant potential savings and performance improvements, we 

recommend that the Secretary of Defense take the following action:

• Evaluate whether the resources that the Army’s Policy and Oversight 

Directorate has allocated to strategic sourcing are sufficient to enable 

the Directorate to fulfill its strategic sourcing mission.

To help ensure that VA’s strategic sourcing efforts further reflect leading 

practices, and in light of significant potential savings and performance 

improvements, we recommend that the Secretary of Veterans Affairs 

direct strategic sourcing staff to take the following two actions:

• Based on analysis of agencywide spending, evaluate the best way to 

strategically source VA’s highest spending categories of products and 

services (e.g., governmentwide vehicles, interagency collaboration, 

agencywide vehicles).

• Set goals for spending managed through strategic sourcing, and 

establish metrics, such as utilization rates, to monitor progress toward 

these goals.

To help ensure that government strategic sourcing efforts further reflect 

leading practices, and in light of significant potential savings and 

performance improvements, we recommend that the Director of OMB 

direct the Administrator of OFPP to take the following two actions:
 

Page 40 GAO-12-919 Strategic Sourcing

• Issue an updated memorandum or other direction to federal agencies 

that includes guidance on calculating savings (including administrative 

cost savings) and establishes additional metrics to measure progress 

toward goals.

• Direct the FSSI Program to report on the program’s assessment of 

whether each top spend product and service governmentwide is 

suitable for an FSSI, with a plan to address those products or services 

that are suitable for strategic sourcing.

We sent copies of a draft of this report to DOD, Energy, DHS, VA, GSA, 

and OMB. In its written comments (reproduced in appendix III), DOD 

concurred with our recommendations and stated it would take action to 

adopt them. DHS comments (reproduced in appendix IV) emphasized the 

agency’s commitment to improving and expanding its use of strategic 

sourcing. In its written comments (reproduced in appendix V), VA 

concurred with our recommendations and gave additional information on 

its strategic sourcing activities. As acknowledged in VA’s letter, it did not 

provide this data in response to requests made during our review, and 

therefore we were unable to evaluate this additional data. 

OMB staff provided oral comments concurring with our recommendations 

and stated they are developing guidance designed to accomplish the 

intended results in collaboration with a new senior level interagency 

governance group. In their oral comments, OMB staff also noted that our 

report compares the percent of spending through strategic sourcing to 

total procurement spending, rather than to spending on the products and 

services for which strategic sourcing is applicable. In response, we 

revised our draft report to more explicitly acknowledge that not all 

spending is suitable for strategic sourcing. However, during our review we 

observed that agencies held different views on whether certain categories 

of products and services are addressable through strategic sourcing, and 

our recommendations aim to encourage agencies to make this 

determination for each high spend product or service through a structured 

analysis. 

DOD also provided technical comments which we considered and 

incorporated into the report as appropriate. Energy and GSA provided 

only technical comments, which we considered and incorporated into the 

report as appropriate.

Agency Comments 

and Our Evaluation
 

Page 41 GAO-12-919 Strategic Sourcing

As agreed with your offices, unless you publically announce the contents 

of this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Director of OMB; the 

Administrator of OFPP; the Administrator of General Services; and the 

Secretaries of the Departments of Homeland Security, Energy, Veterans 

Affairs, and Defense, as well as the Secretaries of the Air Force, Army, 

and the Navy, and the Director of DLA. This report will also be available 

at no charge on GAO’s website at http://www.gao.gov.

If you or your staff have any questions about this report or need additional 

information, please contact me at (202) 512-4841 or chaplainc@gao.gov. 

Contact points for our Offices of Congressional Relations and Public 

Affairs may be found on the last page of this report. Staff 

acknowledgments are provided in appendix VI. 

Cristina Chaplain

Director

Acquisition and Sourcing Management
Appendix I: Scope and Methodology

Page 42 GAO-12-919 Strategic Sourcing

We were asked to review the status of strategic sourcing efforts both at 

selected agencies and governmentwide, and identify challenges, leading 

practices, and potential for additional strategic sourcing savings. 

Accordingly, we assessed: (1) the extent to which selected agencies 

managed spending and achieved savings through strategic sourcing, and 

whether buying power could better be leveraged, (2) key challenges 

agency and Federal Strategic Sourcing Initiative (FSSI) officials face in 

strategically sourcing products and services, (3) the extent to which 

FSSIs managed spending and achieved savings through strategic 

sourcing, and whether governmentwide buying power could better be 

leveraged.

To evaluate agency strategic sourcing efforts, we selected for review four 

agencies—Department of Defense (DOD), Department of Homeland 

Security (DHS), Department of Veterans Affairs (VA), and Department of 

Energy (Energy)—among the top ten in fiscal year 2011 procurement 

obligations that accounted for 80 percent of total federal procurement 

spending. In addition, to more fully assess strategic sourcing at DOD, we 

reviewed the efforts of four component agencies—Air Force, Army, Navy, 

and the Defense Logistics Agency (DLA)—which accounted for 88 

percent of DOD fiscal year 2011 spending, as well as departmentwide 

efforts managed by DOD’s Defense Program Acquisition and Strategic 

Sourcing (PASS) office, which reports to the Under Secretary of Defense 

for Acquisition, Technology, and Logistics (AT&L).

We requested and analyzed data on active and planned agencywide 

strategic sourcing initiatives, and any other efforts they might have begun, 

but discontinued. We asked the agencies for fiscal years 2009 through 

2011 information on:

• Federal Procurement Data System—Next Generation (FPDS-NG) 

Product Service Codes associated with the initiatives

• spending through their strategic sourcing vehicles

• amount of savings achieved

• amount of any savings through means other than cost reduction or 

avoidance1

• methods for calculating savings

 

1

Other means of achieving savings—often referred to as soft savings—include demand 

management, changes in buying behavior, process improvements, or use of less 

resources (including staff time) in processing transactions.

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 43 GAO-12-919 Strategic Sourcing

To avoid double counting, we excluded agency data on spending and 

savings achieved through FSSIs, and limited our analysis to the data 

provided on their agencywide initiatives. We did not independently verify 

this information that agencies reported to us, but we did assess 

information from agency officials about the reliability of the data and 

resolved some discrepancies. We determined that these data were 

sufficiently reliable for the purposes of analyzing agency-reported 

strategic sourcing spending and savings data.

To identify the products and services with the highest federal 

procurement spending—both governmentwide and by our selected 

agencies—we analyzed fiscal year 2011 data from the FPDS-NG. To 

assess the reliability of the FPDS-NG, we reviewed existing 

documentation and electronically tested the data to identify obvious 

problems with completeness or accuracy. We determined that these data 

were sufficiently reliable for the purpose of reporting governmentwide and 

agency spending on products and services.

At the selected agencies and the General Services Administration (GSA), 

we interviewed strategic sourcing officials to determine the status of 

current and planned governmentwide and agencywide strategic sourcing 

efforts, with a focus on key challenges and leading practices. Specifically, 

we asked about

• governance structure,

• obstacles to strategic sourcing,

• enablers or good practices in strategic sourcing,

• agencywide initiatives,

• participation in governmentwide initiatives,

• spend analysis, and

• savings and potential other benefits from strategic sourcing efforts.

We also obtained and reviewed agency strategic sourcing policies and 

other documentation, including spend analyses, where applicable. In 

addition, we reviewed previous GAO reports on leading company 

practices for strategic sourcing as well as related reports on acquisition, 

contract management, government streamlining, and duplication, overlap, 

and fragmentation in the federal government. We also reviewed work 

papers from a 2012 engagement on best commercial practices for

acquiring services. In addition, we examined related testimony before 

various congressional committees. Furthermore, we reviewed the 

Defense Business Board 2011 Report to the Secretary of Defense on 

Strategic Sourcing, as well as literature from industry sources on 
Appendix I: Scope and Methodology

Page 44 GAO-12-919 Strategic Sourcing

successful strategic sourcing efforts. To examine how agencies consider 

small businesses in the strategic sourcing process, we interviewed 

personnel at DHS and VA Offices of Small and Disadvantaged Business 

Utilization and the Air Force Office of Small Business. We also analyzed 

selected data to determine the number of small businesses participating 

in strategic sourcing efforts and the level of spending directed to small 

business contractors.

To evaluate governmentwide strategic sourcing, we examined the FSSI 

efforts led by GSA and overseen by the Office of Federal Procurement 

Policy (OFPP). We interviewed strategic sourcing officials at GSA to 

determine the status of current and planned FSSI initiatives, again looking 

at challenges and leading practices. We sought information on topics 

similar to those discussed with officials at our selected agencies, and 

obtained and reviewed FSSI documentation, including spend analysis. 

Similarly to the selected agencies, we requested and analyzed GSA fiscal 

years 2009-2011 information on Product Service Codes, governmentwide 

spending, and governmentwide savings associated with the FSSIs. In 

addition, we used the results of prior work on the Office Supplies II FSSI.2

To assess OFPP’s oversight of strategic sourcing, we met with OFPP 

officials to discuss

We did not independently verify the FSSI information GSA reported to us, 

but we did assess information from agency officials about the reliability of 

the data and resolved some discrepancies. We determined that these 

data were sufficiently reliable for analyzing reported governmentwide 

FSSI spending and savings data.

• the agency’s role in advancing the FSSIs,

• the agency’s role in facilitating agency participation in the FSSIs,

• consistency across agencies in estimating strategic sourcing savings, 

and

• selection of goods and services for future FSSIs.

We also obtained and reviewed OFPP documentation, including 

memoranda promoting increased use of strategic sourcing, and observed 

a monthly meeting of OFPP’s Chief Acquisition Officers Council, Strategic 

Sourcing Working Group.

 

2

GAO-12-178. 
Appendix I: Scope and Methodology

Page 45 GAO-12-919 Strategic Sourcing

We conducted this performance audit from August 2011 to September 

2012 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.
Appendix II: Top 50 Governmentwide Products 

and Services by Dollars Obligated, Fiscal Year 

2011 

Page 46 GAO-12-919 Strategic Sourcing

1. Aircraft, Fixed Wing

2. Engineering and Technical Services

3. Other Automatic Data Processing and Telecommunications Services

4. Other Professional Services

5. Logistics and Support Services

6. Drugs and Biologicals

7. General Health Care Services

8. Operation of Government-Owned Facilities: Government-Owned 

Contractor-Operated Research and Development Facilities

9. Liquid Propellants and Fuels, Petroleum Base

10. Aircraft, Rotary Wing

11. Program Management/Support Services

12. Construction of Structures and Facilities: Miscellaneous Buildings

13. Destroyers

14. Guided Missiles

15. Combat, Assault, and Tactical Vehicles, Tracked

16. Airframe Structural Components

17. Automatic Data Processing Software

18. Guard Services

19. Gas Turbines and Jet Engines, Aircraft, Prime Moving; and 

Components

20. Construction of Structures and Facilities: Office Buildings

21. Miscellaneous Aircraft Accessories and Components

Appendix II: Top 50 Governmentwide 

Products and Services by Dollars Obligated, 

Fiscal Year 2011
Appendix II: Top 50 Governmentwide Products 

and Services by Dollars Obligated, Fiscal Year 

2011 

Page 47 GAO-12-919 Strategic Sourcing

22. Systems Engineering Services

23. Other Management Support Services

24. Submarines

25. Defense Aircraft: Operational Systems Development

26. Facilities Operations Support Services

27. Fuel Oils

28. Precious Metals Primary Forms

29. Technical Assistance

30. Dairy Food and Eggs

31. Construction of Structures and Facilities: Other Non-Building Facilities

32. Miscellaneous Communications Equipment

33. Automated Information System Design and Integration Services

34. Maintenance Repair and Rebuilding of Equipment: Aircraft and 

Airframe Structural Components

35. Medical and Surgical Instruments, Equipment, and Supplies

36. Lease or Rental of Facilities: Office Buildings

37. Space Vehicles

38. Automatic Data Processing Systems Development and Services

39. Other Administrative Support Services

40. Trucks and Truck Tractors, Wheeled

41. Ground Effect Vehicles

42. Defense Missile and Space Systems: Advanced Development
Appendix II: Top 50 Governmentwide Products 

and Services by Dollars Obligated, Fiscal Year 

2011 

Page 48 GAO-12-919 Strategic Sourcing

43. Maintenance, Repair or Alteration of Real Property: Miscellaneous 

Buildings

44. Combat, Assault, Tactical Vehicles, Wheeled

45. Other Research and Development: Applied Research and Exploratory 

Development

46. Air Charter for Things

47. Nuclear Reactors

48. Passenger Air Charter Service

49. Other Research and Development: Basic Research

50. Maintenance Repair and Rebuilding of Equipment: Communication, 

Detection and Coherent Radiation Equipment
Appendix III: Comments from the Department 

of Defense

Page 49 GAO-12-919 Strategic Sourcing

Appendix III: Comments from the 

Department of Defense
Appendix III: Comments from the Department 

of Defense

Page 50 GAO-12-919 Strategic Sourcing
Appendix III: Comments from the Department 

of Defense

Page 51 GAO-12-919 Strategic Sourcing
Appendix IV: Comments from the Department 

of Homeland Security

Page 52 GAO-12-919 Strategic Sourcing

Appendix IV: Comments from the 

Department of Homeland Security
Appendix V: Comments from the Department 

of Veterans Affairs 

Page 53 GAO-12-919 Strategic Sourcing

Appendix V: Comments from the Department 

of Veterans Affairs
Appendix V: Comments from the Department 

of Veterans Affairs 

Page 54 GAO-12-919 Strategic Sourcing
Appendix V: Comments from the Department 

of Veterans Affairs 

Page 55 GAO-12-919 Strategic Sourcing
Appendix V: Comments from the Department 

of Veterans Affairs 

Page 56 GAO-12-919 Strategic Sourcing
Appendix VI: GAO Contact and Staff 

Acknowledgments

Page 57 GAO-12-919 Strategic Sourcing

Cristina Chaplain, (202) 512-4841, or chaplainc@gao.gov

In addition to the contact named above, W. William Russell, Assistant 

Director; Joseph Fread; Laura Greifner; Julia Kennon; John Krump; Leigh 

Ann Nally; Michael Palinkas; Ralph Roffo; Roxanna Sun; and Ann Marie 

Udale made key contributions to this report.

Appendix VI: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments
Related GAO Products

Page 58 GAO-12-919 Strategic Sourcing

Managing for Results: GAO’s Work Related to the Interim Crosscutting 

Priority Goals under the GPRA Modernization Act. GAO-12-620R. 

Washington, D.C.: May 31, 2012.

Follow-up on 2011 Report: Status of Actions Taken to Reduce 

Duplication, Overlap, and Fragmentation, Save Tax Dollars, and Enhance 

Revenue. GAO-12-453SP. Washington, D.C.: February 28, 2012.

VA Health Care: Methodology for Estimating and Process for Tracking 

Savings Need Improvement. GAO-12-305. Washington, D.C.: February 

27, 2012.

Department of Energy: Additional Opportunities Exist to Streamline 

Support Functions at NNSA and Office of Science Sites. GAO-12-255. 

Washington D.C.: January 31, 2012.

Strategic Sourcing: Office Supplies Pricing Study Had Limitations, but 

New Initiative Shows Potential for Savings. GAO-12-178. Washington, 

D.C.: December 20, 2011.

Federal Contracting: OMB’s Acquisition Savings Initiative Had Results, 

but Improvements Needed. GAO-12-57. Washington, D.C.: November 15, 

2011.

Streamlining Government: Key Practices from Select Efficiency Initiatives 

Should Be Shared Governmentwide. GAO-11-908. Washington, D.C.: 

September 30, 2011.

Opportunities to Reduce Potential Duplication in Government Programs, 

Save Tax Dollars, and Enhance Revenue. GAO-11-318SP. Washington, 

D.C.: March 1, 2011.

Contracting Strategies: Data and Oversight Problems Hamper 

Opportunities to Leverage Value of Interagency and Enterprisewide

Contracts. GAO-10-367. Washington, D.C.: April 29, 2010.

Defense Acquisitions: Tailored Approach Needed to Improve Service 

Acquisition Outcomes. GAO-07-20. Washington, D.C.: November 9, 

2006.

Homeland Security: Successes and Challenges in DHS’s Efforts to 

Create an Effective Acquisition Organization. GAO-05-179. Washington, 

D.C.: March 29, 2005.

Related GAO Products
Related GAO Products

Page 59 GAO-12-919 Strategic Sourcing

Best Practices: Using Spend Analysis to Help Agencies Take a More 

Strategic Approach to Procurement. GAO-04-870. Washington, D.C.: 

September 16, 2004.

Contract Management: High-Level Attention Needed to Transform DOD 

Services Acquisition. GAO-03-935. Washington, D.C.: September 10, 

2003.

Best Practices: Improved Knowledge of DOD Service Contracts Could 

Reveal Significant Savings. GAO-03-661. Washington, D.C.: June 9, 

2003.

Best Practices: Taking a Strategic Approach Could Improve DOD’s 

Acquisition of Services. GAO-02-230. Washington, D.C.: January 18, 

2002.

Best Practices: DOD Can Help Suppliers Contribute More to Weapon 

Systems Programs, GAO/NSIAD-98-87. Washington, D.C.: March 17, 

1998.

(120999)
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