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81–423 2013

PUTTING THE STRATEGY IN SOURCING: CHALLENGES AND OPPORTUNITIES FOR SMALL BUSINESS CONTRACTORS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CONTRACTING AND 

WORKFORCE 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

JUNE 13, 2013 

Small Business Committee Document Number 113–023 

Available via the GPO Website: www.fdsys.gov 

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Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

BLAINE LUETKEMER, Missouri 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

JAIME HERRERA BEUTLER, Washington 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

DAVID SCHWEIKERT, Arizona 

KERRY BENTIVOLIO, Michigan 

CHRIS COLLINS, New York 

TOM RICE, South Carolina 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

YVETTE CLARKE, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRAD SCHNEIDER, Illinois 

RON BARBER, Arizona 

ANN McLANE KUSTER, New Hampshire 

PATRICK MURPHY, Florida 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Richard Hanna ................................................................................................ 1 

Hon. Grace Meng ..................................................................................................... 2 

WITNESSES 

Hon. Stan Z. Soloway, President & CEO, Professional Services Council, Arlington, VA ............................................................................................................ 4 

Mr. Robert A. Burton, Senior Partner, Venable LLP, Washington, DC ............. 6 

Mr. Roger Waldron, President, The Coalition for Government Procurement, 

Washington, DC ................................................................................................... 8 

Mr. Trey Hodgkins, Senior Vice President, Global Public Sector, TechAmerica, 

Washington, DC ................................................................................................... 10 

Hon. Joseph G. Jordan, Administrator, Office of Federal Procurement Policy, 

Washington, DC ................................................................................................... 21 

Mr. Jeff Koses, Director, Office of Acquisition Operations, Federal Acquisition 

Service, General Services Administration, Washington, DC ............................ 23 

APPENDIX 

Prepared Statements: 

Hon. Stan Z. Soloway, President & CEO, Professional Services Council, 

Arlington, VA ................................................................................................ 33 

Mr. Robert A. Burton, Senior Partner, Venable LLP, Washington, DC ...... 40 

Mr. Roger Waldron, President, The Coalition for Government Procurement, Washington, DC ................................................................................. 53 

Mr. Trey Hodgkins, Senior Vice President, Global Public Sector, 

TechAmerica, Washington, DC .................................................................... 71 

Hon. Joseph G. Jordan, Administrator, Office of Federal Procurement 

Policy, Washington, DC ................................................................................ 75 

Jeff Koses, Director, Office of Acquisition Operations, Federal Acquisition 

Service, General Services Administration, Washington, DC ..................... 81 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

William Balek, Director of Legislative Affairs, ISSA - The Worldwide 

Cleaning Products Association ..................................................................... 87 

Bob Griffin, GSA Schedule Consultant, Contractor and Former DOD 

Schedules Customer ...................................................................................... 100 

NOPA, Connecting the Independent Dealer Channel ................................... 104 

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(1) 

PUTTING THE STRATEGY IN SOURCING: 

CHALLENGES AND OPPORTUNITIES FOR 

SMALL BUSINESS CONTRACTORS 

THURSDAY, JUNE 13, 2013 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON CONTRACTING AND WORKFORCE, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:00 a.m., in Room 

2360, Rayburn House Office Building. Hon. Richard Hanna [chairman of the subcommittee] presiding. 

Present: Representatives Hanna, Tipton, and Meng. 

Chairman HANNA. Good morning, everyone. This hearing will 

come to order. 

This morning, we are here to talk about strategic sourcing and 

what it means for small business. Strategic sourcing is in itself neither good nor bad. It is a tool. It is how we use it that matters. 

It is not the hammer’s fault that someone uses it to cure a headache; rather, strategic sourcing at its heart is about being smarter 

about how we buy things. It means knowing what goods and services we are currently buying, who is buying these goods and services, who we are buying them from, and where they are in turn acquiring these goods and services. It means understanding what we 

actually need, rather than what we are buying. It means clearly 

communicating those needs to the marketplace. It means being 

aware of the ways the marketplace may change, either in what 

new products and services are becoming available or what other 

forces are operating in that market. When you are talking about 

the federal government, an entity that spends $516 billion throughout the year, it also means understanding that the way we buy 

things may irrevocably change that market. 

This leads to challenges we are here to discuss and address. How 

can the government buy smarter and realize the benefits small 

businesses bring to the table. I know I do not need to remind anyone here that small businesses are our job creators and innovators, 

or that the competition they bring to the government marketplace 

drives down costs and keeps our industrial base healthy. If we do 

strategic sourcing well, it can benefit small businesses and taxpayers alike. If we simply use strategic sourcing as a synonym for 

contract bundling and consolidation, it may undermine that industrial base. 

In federal contracting, we have winners and losers. No one is advocating that ever business is entitled to a contract; however, the 

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government should not act in a way that keeps small businesses 

from competing. Likewise, we cannot contract in a way that forces 

the majority of contractors out of the market for a long period of 

time and then expect those same businesses to be there when we 

need them. Make no mistake; we will need them to offer competition for the incumbent contractors if we want long-term savings. I 

hope our witnesses today will discuss both the long-term and shortterm effects of strategic sourcing. Additionally, as we discussed at 

our last hearing, not every method of procurement is suited for 

every type of purchase. The more complicated the good or service 

being bought, the harder it is to commoditize it. Given our standard strategic sourcing of services poses special challenges for small 

businesses. Therefore, I hope our witnesses will address which 

types of goods and services are suitable for strategic outsourcing. 

Truly strategic outsourcing is not simply a quest for the lowest 

price at any moment; it requires an understanding of the long-term 

dynamics of the marketplace and the power wielded by the buyer. 

As the under secretary of defense recently wrote, the first responsibility of acquisition workforce is to think. 

I hope today’s hearing will help clarify the issues surrounding 

strategic sourcing so that the government does not act in a penny 

wise and pound foolish manner. 

I want to thank your witnesses for being with us today, and I 

turn to Ms. Meng for her opening statement. 

Ranking Member Meng. 

Ms. MENG. Thank you, Mr. Chairman, for holding this important hearing. 

Our Committee has long acknowledged the critical role small 

businesses play in the $500 billion a year federal marketplace. 

When small firms are awarded contracts for government agencies, 

the result is a win-win. The government receives good value for 

their money as small companies have the dexterity to provide highquality goods and services at competitive prices. That means taxpayers’ resources are spent wisely. 

Not only do the agencies benefit by using small businesses, but 

the economy does as well. Equally important, unlike larger businesses, small businesses must often add staff to meet government 

demand for their products and services, which results in further job 

creation. With our economy continuing to recover, it is vital that 

we pursue every mechanism possible to foster job creation by the 

federal government and that extends to the procurement process. 

As more federal agencies adopt the Strategic Sourcing Initiative, 

questions are arising about whether the SSI promotes competition 

and fosters small business participation in the federal marketplace. 

With 19 agencies moving to make SSI mandatory, many small 

firms are starting to suffer. One analysis focused exclusively on 

suppliers of office products. They found that on average, small 

firms previously competing under the GSA schedule for this business lost anywhere between $20,000 and $10 million in revenue. 

The Committee has heard from a number of entrepreneurs who 

suggested that these changes are already resulting in layoffs. If 

SSI is hurting small businesses and the economy, we must examine 

this issue closely. 

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I want to make sure businesses like Data Conversion Laboratory 

in Fresh Meadows, New York, or Defender Security Services in 

Regal Park, New York, are still able to compete for federal contracts on the same playing field they are today. Small firms not included in the blanket purchasing agreement tell us they find themselves effectively locked out of a $1.5 billion market. In the meantime, large corporations, like OfficeMax and Staples, are expanding 

their presence in the federal marketplace. If small firms that had 

previously won contracts through the GSA schedule are being denied the opportunity to compete even when they could provide the 

same goods at a lower price, then we have to wonder whether SSI 

functions as intended. 

There are also concerns about whether SSI is sacrificing longterm competitiveness in order to reduce short-term costs. If the 

vast majority of small business contractors are not chosen to participate in SSI and as a result stop bidding on federal work, will 

agencies have fewer options in the future? And when prices begin 

creeping up, would not we want a larger pool of small firms to compete for a right to deliver these goods and services? 

Without a diverse range of companies in the federal market, we 

may find that over the long term, SSI has failed to reduce prices, 

but instead reduced the number of firms participating in the process. Setting aside questions about how this initiative impacts entrepreneurs, it is important that SSI not be used as a ‘‘one size fits 

all’’ approach to procurement. What works for the purchase of 

physical products may be ill suited for contracts related to services. 

Similarly, not every agency may find SSI to be a good match. 

Media reports suggest agencies are feeling increasing pressure to 

adopt the SSI standards for all purchasing decisions. Although it 

remains to be seen whether SSI saves the taxpayer money, it 

seems intuitive that if there are savings, the program should be applied only where it works, while the former GSA schedule should 

remain intact where it keeps costs low and quality high. 

All of this is not to say that the SSI program is without merit. 

We certainly do not want agencies using less efficient and more expensive procurement processes; however, if small firms that have 

been offering quality services are being locked out, even having to 

let go of staff, then it may be time to take a hard look at whether 

this initiative is achieving the desired result. 

On that note, I look forward and thank the witnesses for being 

here, and thank them for shedding light on this critical topic. I 

yield back my time. 

Chairman HANNA. Thank you. 

You each have five minutes. The light will go yellow, then red. 

We will be lenient. We want to know what you have to say. 

So with that, our first witness here today is Mr. Stan Z. Soloway. 

Mr. Soloway is president and chief executive officer of the Professional Service Council, the National Trade Association of Government Professionals and Technical Service Industry. Prior to joining 

PSC in 2001, Mr. Soloway served as deputy under secretary of defense directing acquisition reform. 

Mr. Soloway, thank you for being here. You may begin. 

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STATEMENTS OF STAN Z. SOLOWAY, PRESIDENT AND CEO, 

PROFESSIONAL SERVICES COUNCIL; ROBERT A. BURTON, 

SENIOR PARTNER, VENABLE, LLP; ROGER WALDRON, PRESIDENT, THE COALITION FOR GOVERNMENT PROCUREMENT; 

TREY HODGKINS, SENIOR VICE PRESIDENT, GLOBAL PUBLIC 

SECTOR, TECHAMERICA. 

STATEMENT OF STAN Z. SOLOWAY 

Mr. SOLOWAY. Thank you, Mr. Chairman, Ranking Member 

Meng. Thanks for the opportunity to testify and share our views 

on the potential impacts on small business of the federal government’s Strategic Sourcing Initiatives. This is a matter of significant 

interest to our community given both the unique diversity of our 

membership base and the equally unique diversity of the services 

our members provide to the federal government. 

Our membership of over 360 companies is comprised of firms of 

all sizes, including approximately 25 percent that are classified as 

small businesses, and an additional 25 or 30 percent that would be 

classified as small mid-tier firms. It is this diversity of function and 

size that provides the lens through which we have viewed strategic 

sourcing and the full range of business policies we address with the 

Congress and the administration and how they will impact all or 

portions of the federal services sector. 

In our view, structured properly, the Federal Strategic Sourcing 

Initiative (FSSI) has the potential to deliver real benefits for federal agencies and taxpayers alike. As such, we commend the Office 

of Federal Procurement Policy for making strategic sourcing a priority. Yet, while we fully support the FSSI’s intended objectives, we 

do have some concerns about its practical effects, and those concerns relate more to the way in which the term is used and understood, rather than the concept itself. 

So along those lines I would like to make a few overarching observations and conclude with four specific recommendations. 

First, we need to be clear that strategic sourcing is not one 

‘‘thing.’’ It is a set of multi-layered, flexible procurement strategies 

that evolve and change depending on the nature and complexity of 

what is being bought. For pure commodities, where cost is the primary, even sole concern, strategic sourcing can be fairly simple. 

For more complex needs, particularly higher-end services where 

quality and technical ability become more central to a decision, the 

challenges and complexities also grow substantially. For products, 

where place of performance of production is irrelevant, strategic 

sourcing may mean one thing, whereas, for services where the 

place of performance is highly relevant, the need to deliver services 

across multiple geographic regions can bring with it a different set 

of issues and challenges, especially for small business. 

These variations are not insignificant, and as the Government 

Accountability Office found in their recent report on strategic 

sourcing, our key elements are the way strategic sourcing is implemented in the private sector. Our concern is not that the senior 

leadership is unaware of these critical variations. In fact, we believe they understand them very well, but that the frontline, where 

we are seeing an increased commoditization of even the most complex needs, there are too many people who believe that the term 

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5 

really refers solely to an aggregation of buying for scale to drive 

down unit costs. Unless and until that frontline awareness and understanding is improved and enhanced, we do have concerns that 

FSSI could generate a range of unintended consequences. 

Second, strategic sourcing raises a seminal question. Is our principle objective and responsibility to optimize government operations 

or is it to optimize those operations without impacting the current 

environment for small disadvantaged HUBZone, veteran-owned, or 

woman-owned businesses? For example, is it better to have fewer 

small businesses receiving a higher volume of work from the government, or a larger number of small businesses with smaller 

shares of the volume? Is it more important to perpetuate the longstanding tenet of fiscal acquisition in which broad, continuous open 

competition is a primary goal? Or is it more important to seek optimization which almost by definition would reduce the pool of suppliers of both products and services? 

These are far more than rhetorical questions. They and their disposition are essential to assessing the future of FSSI. To their credit, the Office of Federal Procurement Policy and the Strategic 

Sourcing Leadership Council recognize this dichotomy and have 

worked hard to factor it into their planning, but a much broader 

conversation is very much needed. 

These issues have also been prominent in the discussion about 

GSA’s OASIS solicitation. Among the concerns that it has raised is 

that it will reduce the number of small business opportunities and 

that it is overly, if not principally, focused on driving down the unit 

cost of complex, professional services, and less so on overall value, 

quality, and performance. Indeed, some GSA officials stated repeatedly in public forums that driving down unit cost was their principal goal. 

To GSA’s credit, it has conducted extensive outreach to the private sector, and it does appear that they have taken to heart many 

of the comments they have received. But even as we await GSA’s 

publication of the final OASIS solicitation and their explanation of 

how they reconciled competing policy and competitive interest, concern still exists as to how the competition and implementation of 

the awards will ultimately play out. 

With all of this in mind, let me just make four basic recommendations for the road forward. First, if I could define one desired outcome from this hearing it would be to gain much more 

clarity on the question of whether the balance between the number 

of small business providers and the total dollars expended with 

small business is aligned with both the administration and 

Congress’s small business agenda. There is little doubt about the 

effectiveness of recent strategic sourcing for wireless services, 

laptops, and office supplies. Consensus on that alignment is essential to the effect of an efficient expansion of strategic sourcing however far it may go. OFPP and the Strategic Sourcing Leadership 

Council recognize this dichotomy and have worked hard to factor 

it into their planning, but as I said earlier, that conversation needs 

to be expanded. 

Second, we should develop and deploy requisite training tools to 

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sonnel involved in any specific strategic sourcing effort for other 

than the most basic commodities first complete that training. 

Third, we should be highly judicious in the use of strategic 

sourcing for services, particularly for complex services. We should 

require senior level review of significant strategic sourcing efforts 

to services to ensure that the strategies being employed are clearly 

articulated and are not overly focused on simply forcing down labor 

rates at the expense of overall quality. 

And finally, we should pursue a flexible, rather than overly prescriptive strategic sourcing initiative. Let us allow individual agencies some degree of flexibility to pursue their own agency unique 

initiatives and to develop performance measures for both agencyspecific and government-wide initiatives that will meaningfully inform the future shape expansion and/or limitations of the Federal 

Strategic Sourcing Initiative. 

Mr. Chairman, Ms. Meng, the Federal Strategic Sourcing Initiative has great potential but also requires careful attention. Absent 

answers to the questions above, it is frankly not possible to say 

with certainty what its impact on small business will be. The Office 

of Federal Procurement Policy, the SSLC, GSA, and others are to 

be congratulated for their relentless efforts to ensure that federal 

agencies buy smart and buy well, and we remain fully committed 

to working with them and with you and with individual agencies 

to ensure that we find the right balance and ensure the best possible performance on behalf of the taxpayer. 

Thank you once again for the opportunity to be here today, and 

I certainly look forward to your questions. 

Chairman HANNA. Thank you. Any members that have written 

statements may submit them for the record. 

Our second witness is Mr. Robert A. Burton. Mr. Burton is senior 

partner for the Venable LLP in Washington, D.C., where he is a 

nationally recognized federal procurement attorney. Prior to joining 

Venable, Mr. Burton spent seven years at the Office of Federal Procurement Policy serving as deputy administrator, as well as acting 

administrator for two years. 

Mr. Burton, you may begin. 

STATEMENT OF ROBERT A. BURTON 

Mr. BURTON. Chairman Hanna and Ranking Member Meng, I 

very much appreciate the opportunity today to discuss what I term 

the unattended effects of strategic sourcing in small businesses. 

Prior to joining the Venable law firm in 2008, I did serve as the 

deputy administrator of the Office of Federal Procurement Policy, 

referred to as OFPP. While serving in this capacity, I was closely 

involved with the first government-wide Strategic Sourcing Initiative and the development of the 2005 Office of Management and 

Budget memorandum on strategic sourcing, which, for the very 

first time, directed agencies to develop and implement appropriate 

strategic sourcing efforts. A lot of discussion with agency acquisition officials and small business advocates preceded the issuance of 

the 2005 strategic sourcing policy memorandum. The consensus 

was that any agency’s specific or government-wide Strategic 

Sourcing Initiative had to be focused not only on lowering the price 

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payer dollar spent. This means that agency’s strategic sourcing efforts had to improve the quality of performance and increase small 

business participation. 

We quickly learned that strategic sourcing is not a simple concept; rather, it requires careful analysis, planning, and implementation. We rolled out the first government-wide Strategic Sourcing 

Initiative for express and domestic delivery services because very 

few vendors provide these specialized services, no small businesses 

were impacted, and it was relatively easy for the government to effectively leverage its combined buying power for these services. But 

as we explored the use of other government-wide strategic sourcing 

vehicles, it became much more challenging, and small businesses 

expressed concerns with the use of government-wide strategic 

sourcing vehicles. Specifically, they were concerned that the consolidation of contracting vehicles across government would reduce 

competition and opportunities for small businesses. 

Today, existing and proposed government-wide strategic sourcing 

vehicles highlight some of the negative effects strategic sourcing 

can have on small businesses. For example, GSA’s recently proposed strategic sourcing vehicle for janitorial and sanitation supplies, commonly referred to as JanSan, manifests several legitimate 

concerns of small businesses. First, nothing in the JanSan strategic 

sourcing vehicle guarantees that small businesses will receive any 

significant contract dollars, even if they are awarded a blanket purchased agreement or BPA. Although GSA has set aside 8 of 15 

JanSan BPAs for small businesses, such set-asides do not necessarily guarantee small business success. Simply put, agencies are 

not required to place orders under the small business set-aside 

BPAs. 

Second, JanSan will reduce the pool of approximately 540 small 

business contractors that provide the government with janitorial 

supplies. Under JanSan, a total of only 15 BPAs can be awarded. 

This means that hundreds of vendors will be foreclosed from contracting with the government. This will be especially true if agencies are mandated to use the JanSan vehicle. Currently, small 

business vendors who fail to win a government-wide strategic 

sourcing contracting opportunity have the ability to maintain their 

businesses by competing on GSA schedule contracts or participating in other forms of open competition. 

The JanSan example highlights the importance of not making 

government-wide strategic sourcing vehicles mandatory for use by 

the agencies. And this is why OFPP did not make strategic 

sourcing vehicles mandatory in 2005 when we announced the first 

government-wide strategic sourcing effort. The mandatory use of a 

single strategic sourcing vehicle will reduce contracting opportunities for small businesses and the pool of small business contractors 

even if the vehicle incorporates small business set-asides and 

achieves small business goals. 

Finally, the government’s Strategic Sourcing Initiative was designed not only to increase small business participation, but also to 

ensure best value. The emphasis on value is a cornerstone of strategic sourcing. As discussed in the 2005 OMB strategic sourcing 

memorandum, agencies were to maximize the value of every dollar 

spent through strategic sourcing. Because some of the strategic 

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sourcing vehicles are constructed as low priced, technically acceptable procurements, the government is emphasizing price at the expense of overall value. 

In conclusion, the government should carefully plan and implement proposed strategic sourcing vehicles to ensure that savings 

are not achieved at the expense of small businesses and value for 

the taxpayers. This is particularly true in cases where cost savings 

may be short term and eliminated in the long run because of less 

competition and fewer small business contractors. 

Mr. Chairman, this concludes my statement. I will be pleased to 

answer any questions that you or members of the Subcommittee 

may have. Thank you. 

Chairman HANNA. Thank you, Mr. Burton. 

Our third witness today is Mr. Roger Waldron. Mr. Waldron is 

president of The Coalition for Government Procurement. He has 

over 25 years of government contracting experience, including a 20 

year tenure at the General Services Administration, where he held 

various positions, including acting director, chief acquisition officer. 

Mr. Waldron, you may begin. 

STATEMENT OF ROGER WALDRON 

Mr. WALDRON. Chairman Hanna, Ranking Member Meng, 

member of the Subcommittee, thank you for the opportunity to appear before you to address ‘‘Putting the Strategy in Sourcing: Challenge and Opportunities for Small Business Contractors.’’ 

The Coalition for Government Procurement is a nonprofit association of firms selling commercial services and products to the federal government. 

Coalition members include small, medium, and large business 

concerns from across the country. Coalition members account for 

approximately 50 percent of the commercial solutions purchased 

annually by the federal government and focus much of their access 

to the federal marketplace through their GSA schedule contracts. 

Effectively used, the GSA Schedules program is a highly successful strategic source for the government to leverage the marketplace 

and achieve its socioeconomic goals. Year in and year out the GSA 

Schedules program is one of the most successful government-wide 

small business contracting programs available. In a typical fiscal 

year, over 30 percent of the dollar volume of purchases under the 

GSA Schedules program goes to small business concerns. 

The fundamental keys to success of the GSA Schedules program 

for small business are: (1) continuous open seasons; and (2) ordering procedures and electronic tools that allow customer agencies to 

consider socioeconomic status when competing and placing orders. 

Although the coalition generally supports the government’s strategic sourcing efforts, we have a number of concerns about the impact of GSA’s current acquisition strategies on businesses of all 

sizes, but particularly on small companies. 

Last year, GSA proposed a mandate-based model that would 

have eliminated continuous open seasons under the GSA Schedules 

program. The coalition submitted comments opposing the closure of 

GSA schedules to new offers. A copy of our comments is attached 

to our written testimony. Coalition members remain uniformly opposed to closing the GSA schedule program to new offers as it 

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would limit opportunities for small businesses, restrict competition, 

and inhibit access to commercial innovation by the government. We 

are concerned that GSA’s strategic sourcing initiatives are being 

used to implement the demand-based model’s closure of GSA schedules to new offers. 

At the same time, the government is moving towards a mandatory use contracting model for blanket purchase agreements established under the GSA Schedules program. Mandatory use will have 

the unintended long-term consequence of reducing opportunities for 

small businesses. By its very nature, mandatory use limits access 

of the federal buyer to a small group of contractors. Mandatory use 

will restrict access to the federal marketplace for small businesses. 

Rather than imposing mandatory use terms as a means of 

leveraging the government’s volume, the coalition supports use of 

volume commitments or guaranteed minimums that are based on 

improved requirements development, which is after all commercial 

practice. Volume commitments create the economic incentives to 

offer lower prices for commercial solutions. At the same time, the 

government maintains the flexibility to access a commercial marketplace and compete opportunities for small businesses. It is a 

win-win for government and industry. 

The coalition is also concerned that the current approach to strategic sourcing includes the use of generic, government-wide blanket 

purchase agreements established under the GSA Schedules program, agreements that do not include specific requirements or volume commitments upon which effective competition can be based. 

The intermediate step of establishing such a agreements results in 

vertical contract duplication that increases bid and proposal costs 

for government and industry and definite hurts small business. 

These agreements should be limited to the maximum extent practicable. Agencies should compete task orders or establish blanket 

purchase agreements under the GSA Schedules program based on 

specific requirements, including volume commitments. This approach will enhance rational, realistic competition, competitive 

pricing, and improve deficiency. A program of agency-specific blanket purchase agreements established under the GSA schedule program will also provide greater opportunities for small business concerns. 

In summary, when effectively used, the GSA Schedules program 

is a highly successful, strategic source for government. At the same 

time, GSA schedule contracts are a powerful marketing tool for 

small business concerns when dealing with contracting offices 

across federal, state, and local governments. However, it appears 

that rather than focusing on the strengths of the program, its openness and access to the commercial marketplace, its flexible, streamlined ordering procedures and electronic tools, the current strategic 

sourcing approach closes the GSA marketplace, reduces competition, and limits access to commercial solutions and small business. 

The Coalition for Government Procurement is pleased to submit 

our written testimony for the record, and we stand ready to provide 

you with any additional input you may request. Thank you. 

Chairman HANNA. Thank you, Mr. Waldron. 

I yield to Ranking Member Meng to introduce the next witness. 

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Ms. MENG. It is my pleasure to introduce Mr. Trey Hodgkins. 

Mr. Hodgkins is the senior vice president of the Global Public Sector at TechAmerica. TechAmerica represents over 34,000 member 

businesses in the information and communications technology industry, including many small businesses. Mr. Hodgkins is a recognized expert in procurement, cyber security, and national security, 

and he has over 30 years of experience in the federal, state, and 

local government arenas. 

Welcome, Mr. Hodgkins. 

STATEMENT OF TREY HODGKINS 

Mr. HODGKINS. Good morning, Mr. Chairman and Ms. Meng. 

I appreciate the opportunity to be here. I want to thank you for letting us represent some of the challenges and opportunities small 

businesses face in the adoption of strategic sourcing by the federal 

government. 

TechAmerica is uniquely positioned, representing technology 

companies from the IT, communications, and defense industrialbased sectors, and our members range from large companies whose 

names are common household terms to the most innovative and 

agile of small technology companies from across the nation. While 

many of the companies are oriented with the government as a customer, a large number of our members are completely outside of 

the public sector and are commercial in nature, offering commercial 

items developed and manufactured in a global economy and distributed and sold around the world. The ubiquitous nature and complexity of the goods and services our members sell create unique 

perspectives on strategic sourcing in federal government contracting and I would like to share a few of those this morning. 

Before I turn to that issue, however, I would like to touch on 

something the chairman noted in his opening remarks, that the 

biggest challenge to small businesses today in the public sector 

market is the tidal wave of government unique requirements they 

face and the burdens those requirements create as they try to enter 

the market or stay in the market. Many of the commercial companies mentioned above consider the burden too significant and not 

worth the costs and risks and choose to simply forego government 

work entirely. This condition means that the government does not 

have access to many of the most innovative companies offering cutting edge technologies and software products and services focused 

on critical issues like cyber security. The condition also results in 

diminished competition and higher prices for the goods and services the government does acquire, because the burdens created by 

the government unique requirements end up as part of the cost of 

doing business and are passed along to the buyer. To address this 

and other conditions that hinder achieving best value for the taxpayer, TechAmerica would solicit the Committee’s support for a 

wholesale review of government acquisition, similar in scope and 

objective to the Section 800 Panel convened in the early ‘90s. Without such an effort, we are concerned that legislative and administrative attempts to address shortcomings in federal acquisition will 

only have limited impact at the edges of the issue. 

As taxpaying corporate citizens who employ millions of people 

around the country, the members of TechAmerica are supportive of 

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efforts like the Federal Strategic Sourcing Initiative that can derive 

savings by consolidating the acquisition of commoditized goods. We 

would caution, however, that such efforts have diminishing success 

when goods and services of a complex or diverse nature are shoehorned into these vehicles. Strategic sourcing works best when the 

offering is relatively uniform, and that is simply not the way the 

government buys information technology goods and services. 

Many of the products and services in the ICT space do not lend 

themselves well to strategic sourcing. Government does not buy 

technology in a consistent fashion either, and that further complicates any effort to fit them into such an initiative. For hardware 

items, like laptops or servers, the government does not buy them 

in large quantities, and when they buy them, they do not ask for 

a consistent configuration. One customer wants more memory, another wants a CAC card reader, and a third wants a different sized 

screen. 

For small businesses, we see two direct and immediate challenges under the strategic sourcing initiative. Many of these companies will face diminished access to the federal government market because under FSSI there will be less award winners and more 

losers. The second challenge impacts those small businesses that 

are the most innovative providers of IT goods and services, which 

are frequently offered in response to narrow, unique mission requirements or as a specialized component to a broader prime contractor activity. The offerings of these companies simply do not fit 

into the commoditized labor categories envisioned under strategic 

sourcing, and these companies will face increased market pressures 

given the requirements to drive more and more acquisitions into 

strategic sourcing. 

The One Acquisition Solution for Integrated Services (OASIS) 

GWAC was originally proposed as a new vehicle specifically for the 

acquisition of complex integrations of technology and services, but 

it was announced earlier this year that it would become part of the 

FSSI and the goods and services offered under the contract would 

be commoditized. As noted above, complex and specialized goods 

and services, like the ones small technology businesses can deliver, 

do not lend themselves well to strategic sourcing, so industry reacted with confusion and apprehension about proceeding with the 

offering. While we await the solicitation to be completed, questions 

remain about how goods and services will be commoditized in the 

future under this contract vehicle. 

Small businesses can and should compete for contracts in FSSI, 

but not all goods and services lend themselves to strategic 

sourcing. Congress should ensure that small business opportunities 

to offer innovative and unique goods and specialized services are 

preserved and that we strike a balance as we implement the FSSI. 

Thank you for the opportunity to speak to you today. I would be 

happy to answer your questions. 

Chairman HANNA. Thank you. Thank you. 

For each of you, I mean, clearly, there is general agreement that 

there are problems with the system. I was surprised, Mr. Burton, 

to hear that people can be awarded a contract and never be the 

beneficiary of anything of that contract. And Mr. Waldron, you said 

the same thing. Without minimums, this particular—so it is posSBREP-219 with DISTILLER

12 

sible to put an enormous amount of work in bidding these, understanding them, and then being successful, being pleased with that 

success, and come to nothing. For both of you, does that make any 

sense, and would you change that so that there was a guaranteed 

minimum? 

Mr. BURTON. Mr. Chairman historically, the government has 

really pushed back on guaranteed minimums. I think that will be 

difficult to do. There is a strong history of not doing that. But that 

is one thing the private sector does quite well, and that is a distinction between really private sector procurement and government 

procurement. Especially in the area of strategic sourcing, we see 

companies using guaranteed minimums. I certainly think that is 

something that could be explored. 

But I do think that the larger problem is the fact that even if 

you are successful, even if the government meets its small business 

goals, even if some of those businesses get a fair amount of work, 

the small business community as a whole is negatively impacted, 

and you are going to reduce the base of small businesses competing. And my biggest concern for the government is five years 

from now when some of these vehicles come up from recompetition, 

will any small businesses—how many small businesses will be 

around to compete? And will the prices go up at that point in time? 

So I think one of the biggest concerns, Mr. Chairman, is short-term 

savings balanced against maybe long-term increased costs and a reduced small business base. And that is true even if the small businesses are awarded opportunities on the BPAs. 

Mr. WALDRON. During my time at GSA, we actually used guaranteed minimums. We used them effectively for orders under the 

GSA Schedules program and for blanket purchase agreements. It 

enhanced competition, it created opportunity, and it created the 

right economic incentives for schedule contractors to provide price 

reductions at the order level during competition. 

I think one of the biggest challenges that the government and 

with the use of the GSA schedules is this growth of the sort of generic BPAs. So you can think of it as—I think of it and characterize 

it as vertical contract duplication. So you have the GSA schedule 

contract. The intent with those contracts is to compete task orders 

or compete BPAs and establish those BPAs generally for recurring 

requirements. But what happens is, and what has happened and 

exploded over the last few years, is you will have the GSA schedule 

contract. Then the agency or the Federal Strategic Sourcing Initiative will have a generic BPA with no guarantee of usage as Rob 

mentioned, and as a company you have to compete and expend 

funds to get on that BPA because then they are eventually going 

to compete orders under the BPA. So you have sort of three competitive events—the award of the schedule, the award of the generic BPA, and then actual competition for the real requirement at 

the task order level. 

Our members are very concerned about this growth and complexity of process. We would much rather see competition for orders at the order level and skip this intermediate process. 

Chairman HANNA. Interesting. 

The subjective nature, the more complicated the good or service 

that is being purchased, particularly Mr. Hodgkins, do you think 

SBREP-219 with DISTILLER

13 

that it is being handled appropriately? And do you believe that the 

people who are involved in designing the purchase orders or the 

bidding documents have an appropriate handle or balance? Obviously, some of you do not feel they have the right balance between 

ensuring long-term competition and making their job easier by limiting that competition. Is there in government a natural momentum to deal with those people, those companies that are larger, 

those industries that are more available to you as opposed to looking at the long-term goal, which is to ensure vibrant competition 

and yet competent competition? 

Mr. HODGKINS. Mr. Chairman, I think you perhaps are correct. 

There is a tendency to move toward companies that the government is used to dealing with. That is one of the challenges small 

businesses face. They are not necessarily a known name in the 

market. But the complexities around information technology, we 

believe that there is a dearth of organic experience in the acquisition work force in general around technologies, market trends, and 

that puts the government at a disadvantage when it is buying 

those things. 

Additionally, when you look at issues like cyber security and you 

are trying to drill down on specific capabilities or counter a specific 

risk, small businesses frequently can step in and offer those kinds 

of things that a large company, they may come in as a subcontractor to the large company or they may come in with a unique 

capability of their own. But I think that companies do have the 

ability—the government, rather, has trended toward using larger 

companies, but that is not to say that they are cutting out the 

small businesses. 

Chairman HANNA. Thank you. 

I yield to—— 

Mr. SOLOWAY. Mr. Chairman, may I make a comment on that? 

Chairman HANNA. Certainly. 

Mr. SOLOWAY. I think it might be helpful to step back because 

I think the question you asked is really a critical one. 

I think, first of all, if you look at the available data and you look 

across different market sectors, the trends relative to your question 

are different in different spaces. We see in certain markets in our 

membership, that our members work in, where the government is 

entirely setting aside entire categories of work, which almost 

amounts to an industrial policy where we are saying, okay, if you 

are a small business and you want to work with us, that is where 

we are going to let you work, no place else. And if you are not a 

small business and you do that work, we are not interested. That 

is not a very healthy balance either. 

I think the second piece is that when we talk about can strategic 

sourcing work, does it do this or whatever, I want to come back to 

one of the key points I tried to make in the testimony, which is 

strategic sourcing is not one thing. And so I think the issue that 

concerns us, and I think Trey was probably referring to also, is 

that there is a tendency across government today to look at everything through the prism of driving down a unit cost, rather than 

stepping back and looking at overall value, performance, and so 

forth. And the higher up the chain you go of complexity, the more 

that becomes a problematic strategy. 

SBREP-219 with DISTILLER

14 

And so strategic sourcing, you can strategically source the most 

complex requirements on the planet, but in that case you would not 

be doing it on the basis of lower unit price; you would be doing it 

on the basis of technical quality, technical history, past performance, all of these other sort of discriminators that may not be as 

applicable when you are doing it for simple commodity. So it is a 

continuum. It is a spectrum. It is not one thing, and I think our 

concern is that it is too often seen in just one category through one 

lens. 

Chairman HANNA. So it is not at all surprising to anybody here, 

I imagine, that people seek to make their job easier, rather than 

less complex. And the more difficult the job, the less likely that 

people are capable of understanding the scope and depth of it and 

breadth of it. 

Mr. SOLOWAY. Well, and that is a general acquisition challenge 

we face in government. 

Chairman HANNA. Sure. How would you change that? What 

would you focus on? 

Mr. SOLOWAY. Well, I think that there is a lot of education and 

training and development issues at stake here, and it is not just 

around strategic sourcing, but it is a good example. If you went 

across the 360-plus member companies that we represent and 

asked them what their number one concern is today in the federal 

market, a small, medium, or large company would say that everything is being bought on the basis of the low price, not on the basis 

of quality and value because it is a workforce that not only does 

not have the tools, but frankly, they are not encouraged to do that. 

No one ever got an award for paying a little bit more for something 

because they thought it might have better long-term value. When 

we think about price at the government level, we think about how 

much does it cost to operate this system? When Wal-Mart thinks 

about price, they think about what is the impact on the entire company supply chain and ability to stock shelves? So they look on an 

enterprise level rather than on the immediate level. So there is a 

lot of education and training involved here. I think it is wrapped 

up. Strategic sourcing is just one part of a bigger set of challenges. 

But I guess my point is that strategic sourcing complex services 

makes eminent sense if you understand the disciplines and the 

skills that go into doing that. And we have agencies that have done 

that. But what we see today is an increased commoditization across 

the market and the concern is that is what would bleed across, and 

people’s presumptions would therefore be incorrect. 

Chairman HANNA. And of course, simplicity, is that—correct me 

if I am wrong, but that is almost human nature. And without some 

kind of formal intervention or processes that guarantee that more 

complicated issues are handled in a more complicated, broader 

way, that is the atrophy that we are going towards. 

Mr. SOLOWAY. Potentially, that is true. Again, on the other 

hand, if we think about the government workforce, the pressures 

they are under today, all the budget reductions and budget uncertainty they face, almost all they hear now is drive your cost down. 

Drive your cost down. Drive your cost down. We make short-term 

investment decisions and no consideration for long-term cost impacts because it is all about that immediate budget and those 

SBREP-219 with DISTILLER

15 

budget pressures. And so they are getting conflicting direction and 

conflicting information also. 

Mr. WALDRON. Just on that note I would suggest that requirements development and improving requirements development for 

complex services, integration efforts, is vital at this point more 

than ever given the budgetary constraints we are operating under. 

You have got to get more value for money. It is not about low price. 

It is about well-articulated requirements. 

Chairman HANNA. Ranking Member Meng, please. 

Ms. MENG. Mr. Soloway, in your testimony you discussed how 

strategic sourcing incorporates the full spectrum of procurement 

techniques outlined in the FAR. However, you indicate that while 

the Strategic Sourcing Leadership Council understands it, that is 

not the case with those who are actually implementing the initiatives. Why do you think this disconnect exists? 

Mr. SOLOWAY. The only qualification I would give is it is the 

people who are going to be asked to implement in a lot of ways because it is just beginning to mature and roll out. 

Our organization does a survey of federal acquisition leaders 

every two years. We go out and talk to them and ask them what 

is going on in your world? What are your biggest concerns? We just 

issued—it is the tenth year we have done it, just a few months ago, 

and what we found was the same concerns come back to us from 

the acquisition leadership that they have been having for the last 

decade, which are our workforce does not have adequate training 

and skills in negotiations, in market research, in pricing. And if 

you think about the model of strategic sourcing, what really is at 

its heart is really good market research, it is really good negotiation, and it is really good pricing skills and understanding how 

pricing models work because again, back to the point of value 

versus low price, smart pricing people know that five or six percent 

more might get you a whole lot more value down the road. It might 

be very much worthwhile. 

So we have a skills deficiency, and I again think that the workforce is often under conflicting direction. On the one hand, Mr. 

Chairman, you mentioned the admonition from Secretary Kendall 

for the workforce to think. On the other hand, they are increasingly 

being driven into sort of a rigid rules-based ‘‘check the block’’ lack 

of critical thinking process to the compliance regime and other 

issues that Trey and other witnesses have raised. So there is a 

multitude of issues, which is why our view as an organization—and 

it includes our small businesses—is that done right, strategic 

sourcing can be a terrific tool. But do we have yet the workforce 

ready to implement it broadly, particularly as you move up the 

chain of complexity? 

Ms. MENG. Another question for anyone. 

GSA puts numerous upfront requirements on strategic sourcing 

vehicles that must be met if a business hopes to be awarded a 

BPA. These range from delivery method to reporting requirements. 

Do you believe that small businesses have the required capabilities 

or have the money they need to meet these types of prerequisites? 

Mr. HODGKINS. Ms. Meng, we think that many companies, not 

just small businesses—of course, the scope and scale of their struggle is increased—but all companies trying to sell the federal govSBREP-219 with DISTILLER

16 

ernment face very significant burdens trying to meet the different 

requirements, even something as simple as information collection. 

We encountered a Paperwork Reduction Act request that was an 

exemption that we opposed the exemption that was being granted 

because the government estimated that for contractors to comply 

with this one information requirement it was going to cost them 

over a billion dollars a year. There are huge costs in government 

requirements, and as I noted in my comments, we think that remains one of the significant challenges for any company trying to 

do business in the public sector. 

Mr. BURTON. Ms. Meng, I might add to those comments. 

I do think one of the things that small businesses and the government have going on here is really a noncompliance situation. 

These strategic sourcing vehicles generally are consolidated procurements and there are certain rules that the government is supposed to be following. Most notably, the government is supposed to 

be conducting market research. They are supposed to be talking to 

small businesses and asking the questions that you just asked. 

There is supposed to be justification when they decide to consolidate the procurement. They are supposed to do a written justification. We are finding that these requirements are not being followed. So it is not really just a matter of training; it is a matter 

of compliance. And I think this is a very important point; that before these vehicles are put into place, robust market research and 

a justification under the FAR are required to be completed. And I 

at least have some knowledge that those requirements are not 

being met. 

Mr. WALDRON. With regard to the government-unique requirements, there are barriers to entry for businesses and especially for 

small businesses. In the area, for example, of data collection, a lot 

of the strategic sourcing BPAs include robust additional data collection requirements, and data is not a free good. It costs the companies money to actually collect that data and report it back to the 

government. And often it is data the government already has. And 

they are essentially trying to shift the cost of that collection and 

report it back. Ultimately, I think the taxpayer pays. I mean, it 

drives prices higher and it does reduce competition and create barriers to entry. 

And another area I think that hurts businesses of all types, but 

especially small businesses, is that there has sort of been a rollback 

of commercial item contracting, which was the Federal Acquisition 

Streamlining Act in 1994 established commercial item contracting. 

The idea was to gain access to the commercial marketplace. Well, 

as the government has wanted to do since enactment, there has 

been sort of a rollback and a layering on of additional unique government laws and regulations. That is a barrier to entry to small 

businesses. That increases costs across the federal enterprise. And 

I think it is time to raise comment to take a wholesale look at the 

procurement system, and especially look at commercial item contracting because the government is missing out on increased competition, access to small businesses, and better value. Thank you. 

Ms. MENG. Thank you. I yield back. 

Chairman HANNA. Mr. Tipton. 

SBREP-219 with DISTILLER

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Mr. TIPTON. Thank you, Mr. Chairman, Ranking Member. I appreciate our panel being here today. 

I just have a couple of questions. Mr. Waldron, you just kind of 

piqued my curiosity a little bit. I come from a construction family. 

You deal in higher tech information, but I cannot help but recall 

a few years back part of the construction project was going to be 

in the Forest Service and they were building, for lack of a better 

description or a nicer description, a comfort station. And because 

of government-specific requirements, they had to get special equipment to be able to build effectively a comfort station. Do you think 

that we are making some real challenges for ourselves in terms of 

the government getting unique in requirements when we could certainly streamline that and be able to take advantage of products 

that already exists? 

Mr. WALDRON. Absolutely. That is the whole genesis and reason for being on the GSA Schedules program. It is supposed to be 

a commercial item contracting program and it provides the government with the opportunity to leverage the commercial marketplace. 

You know, the companies, in doing business out there in the commercial marketplace, they know what they sell. They know what 

requirements are. And the problem is, to your point, is the government layers on unique requirements, whether it is statutory, regulatory compliance requirements or even unique requirements in 

functionality that nobody in the commercial marketplace would do. 

And it does drive up costs. And I do not think we can really afford 

it anymore. 

Mr. TIPTON. I appreciate that. 

That is a little bit of a paradox, and Mr. Soloway, you might 

want to be able to speak to this as well because I think that point 

is well taken. You were talking about unit cost, you know, versus 

value and performance. Would you say that when we are getting 

these unique requirements that are going to be put up, are we getting more value in performance? We might, in a very unique sense, 

I guess, be able to drive down the costs, but at the same time, as 

Mr. Waldron is indicating, we are actually driving up costs on the 

other side. 

Mr. SOLOWAY. Well, I think that is a critical element, and I 

think his point about the backsliding since the mid to late ‘90s 

when we were implementing the reforms to the system, creating 

more access for commercial companies, is really at the heart of a 

lot of this. Some of the unique requirements are probably unavoidable given the agency oversight responsibilities, congressional oversight responsibilities, and so forth. So some of it is sort of an understood and accepted form of doing business, but the point of the 

commercial items changes was to reduce those unique requirements to accept, for instance, commercial audit reports rather than 

giving government unique audit access or cost accounting standards that are very different in the government than they are in the 

commercial world, and so forth. So that has changed, and it does 

drive up costs. 

I would suggest that one of the biggest issues that we have 

today—unfortunately, there are cases of it at GSA but it is also in 

other agencies—is a dramatic expansion of audit requirements. 

Now, I want to be very clear that no company doing business with 

SBREP-219 with DISTILLER

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the government, particularly companies that are working on other 

than fixed price contracts, can be surprised that they are going to 

be audited. The government has a right and a need to make sure 

that the cost submissions are correct and so forth. But the expansion of audit authority and frankly, the quality which has come 

down while the expansion has gone up, has been really dramatic. 

One very, very quick example. When you were working on a GSA 

contracted—and Roger will correct me if I get the technical details 

wrong—when you go to renew your contract, the government has 

a right to see certain information to make sure your pricing is fair 

and reasonable and that the government is getting the best possible price. That does not mean the government has access—in fact, 

the rules specifically state they do not have access to your entire 

book. If you are a large commercial company, they cannot come in 

and review all of the corporate books. 

Leaving small business aside for whom that can be an issue, I 

know two very large companies that have come very close to walking away from their GSA schedule contracts because their corporate boards have said we do not show our internal books to anybody. I mean, it is a commercial practice. So there has been an expansion and a growing intrusion by the audit community for return 

on information and quality that I think is very specious. So we are 

past the point of the value and benefit of oversight to added cost 

with very little value coming back in return. 

Mr. TIPTON. I appreciate that. 

And Mr. Hodgkins, I am about out of time but I was very curious. In your testimony, you had talked about a lot of businesses 

simply because of the complexity were just simply walking away. 

They would not even participate. Are there some recommendations? And I think Ms. Soloway just probably spoke to it a little 

bit—sorry, I am losing my voice—that, you know, some of the audit 

requirements and that. What can we do to make sure that we have 

got a better playing field and are getting people excited about having that opportunity to be able to create jobs? 

Mr. HODGKINS. Well, I think between us here at the table we 

could probably come up with dozens and dozens of examples where 

there are challenges or divergences from the ordinary commercial 

business models that most of these companies operate under. One 

that many of our members have experienced over the last year and 

a half is dealing with end-user license agreements on software. And 

I think there was pretty uniform agreement in the legal community 

that the license agreements were adequately designed so that the 

government rights were protected and the things the government 

was asserting and asking for revisions under those agreements was 

already taken care of. But what many companies have had to do 

is go through a very lengthy and bureaucratic process with GSA 

and actually revise the commercial license that you accept when 

you buy an operating system or a game for your child. Those things 

have all had to be revised if those products are to remain on a GSA 

schedule. It has been a very costly exercise, and it is an example 

my community recently experienced where we had a significant divergence from the normal commercial practice that costs a lot of 

money for the government and the companies to make the products 

remain available. 

SBREP-219 with DISTILLER

19 

Mr. TIPTON. Thank you. I yield back. 

Chairman HANNA. Thank you. 

So what we have here is kind of an exercise in the obvious; right? 

Price is definable, discernible. You can see it on a page. Everything 

after that there is an disincentive to provide a more complex, subjective, even though we would prefer value being the end result, 

not dollar signs because value is the ultimate goal, we have a system that reinforces what we would expect, and that is that nobody 

was ever punished for buying something at the cheapest possible 

price, but there is associated risk with using one’s subjective or 

imaginative or experientially-based process in coming up with 

something different. 

Do you agree that that is kind of fundamentally maybe what is 

going on here? 

Mr. BURTON. Mr. Chairman, very much so. But I wanted to add 

one point, which I do not think has been covered, and I think it 

is a fundamental point and maybe something that would not readily be identifiable. 

I think there is a benefit to having more than one strategic 

sourcing vehicle in the government for any particular commodity or 

service. There seems to be a trend right now to be going to a single 

vehicle and make it mandatory. I think that this will be a mistake 

for the government for a number of reasons, some that I have already addressed. But the point that has not been addressed is that 

there is actual benefit to competition among vehicles within the 

government. I mean, you do not want 500 of them, and the government does have a tendency to have too many of these consolidated 

procurements, but you do want more than one. And we found that 

the competition among agencies with respect to vehicles was very 

productive. It resulted in innovation, efficiencies, best practices to 

be shared among agencies. And so I would encourage the government to make sure they do not go to a mandatory, single procurement vehicle. And I think competition—— 

Chairman HANNA. Mr. Burton, you were involved in the government’s initial strategic sourcing effort, and I understand that you 

were also involved in the 2003 effort to stop bundling. Can you talk 

a little bit about the tensions between strategic sourcing and bundling and how you think they might be resolved? Or was that part 

of your explanation? 

Mr. BURTON. Very much. I mean, it is a highly related topic 

and we did try to address what we called unjustified bundling. 

There is a legal distinction between bundling and consolidated procurements. Bundling basically involves a determination that a certain commodity or service is simply unsuitable to be provided or 

performed by a small business. And so that is a high threshold to 

make that determination that something is simply unsuitable, that 

small businesses simply cannot perform or provide the commodity 

or service. 

So, but consolidated and bundling procurements both require an 

analysis and justification of why you are pulling these requirements together in one procurement. And also, both require market 

research. We found that bundling is a very difficult topic to try to 

get your hands across. Basically, agencies have done a poor job in 

justifying bundled contracts, and what we were trying to get to, sir, 

SBREP-219 with DISTILLER

20 

back in that period of time was to make sure those justifications 

were done. Make sure that if you were going to do a bundling contract, which basically is saying small businesses cannot participate, 

what we are dealing with here with the strategic sourcing vehicles 

are consolidated procurements, not bundled procurements. And so 

there are set-asides for small businesses recognized that these 

services and commodities can be provided by small businesses, 

which is good, so that is very important. But the problem is just 

ensuring enough small business participation. 

And it was a very difficult initiative. One of the things we did 

with the bundled initiative was try to ensure that if an agency did 

have a justification for a bundled procurement, and if they decided 

that small businesses could not participate, then there were some 

type of mitigation actions they took. For example, ensuring that 

prime contractors enforce their subcontracting plans which might 

involve some type of small business participation. And this is an 

area I think the government needs to focus on, is trying to enforce 

subcontracting plans by the prime contractors to ensure that small 

businesses, in fact, have some role to play. 

Chairman HANNA. So along those lines, Mr. Waldron, the 

JanSan draft request for proposal states that the GSA is seeking 

to have FSSI winners become exclusive providers to the defense 

commissaries. So that must concern you. Does it concern you I 

guess is a more appropriate way to—— 

Mr. WALDRON. Yes, it does concern me. Again, as I indicated 

in my testimony, the idea of mandatory use, it restricts the ability 

of small businesses to compete. It closes the market and reduces 

the market to a limited number of contractors. And I also think it 

is not in the government’s best interest. It creates risk for the government from this perspective. 

Back in the dark ages when I was at GSA in the ‘90s, GSA 

schedules were a mandatory source, and ultimately, various agencies decided to use other than GSA contracts for court reporting, 

for example. And that was a breach of those contracts, and that is 

a breach of the agreement. They are putting it in this little station, 

you are going to be an exclusive source. Ultimately, the government ended up having to pay millions of dollars to various GSA 

schedule contractors for that breach. So again, mandatory use restricts competition. It creates risk for the government. I would 

much rather see real volume commitments for real requirements. 

Chairman HANNA. Well, the ultimate outcome is to reduce competition by a single source or very low number of sources in the 

long run, which also in the long run raises prices. So it is safe to 

say then generally, and does anybody disagree with this, that within the context of everything we do we need to foster competition 

broadly, deeply, and with the idea of creating more businesses, not 

reducing them? 

Mr. WALDRON. Well, that is the GSA schedules is a perfect example. It was mandatory, had maybe a couple thousand contractors 

in the early ‘90s, and $3 or $4 billion was going through the program. Today the program accounts for $50 billion in purchases on 

an annual basis and there is literally 20,000 companies who have 

contracts, both through the VA and through the GSA schedules 

competing every day for requirements, competing at the task order 

SBREP-219 with DISTILLER

21 

level. That makes your point. It is a competitive marketplace that 

grew when it was made non-mandatory and the process was 

streamlined and we went to commercial item contracting. 

Chairman HANNA. Thank you. 

Ranking Member Meng? 

Thank you very much for your testimony today. If there are no 

further questions for this panel, I want to thank all the witnesses 

for their testimony and excuse the panel. 

The second panel may now be seated. Thank you, gentlemen. 

Thank you, gentlemen, for being here today. 

Our next witness is Mr. Joseph G. Jordan. Mr. Jordan is the administrator at the Office of Federal Procurement Policy, which provides overall direction for government-wide procurement policies. 

Previously, Mr. Jordan served as the associate administrator of 

government contracting and business development at the SBA. 

Mr. Jordan, you may begin. Thank you. 

STATEMENTS OF JOSEPH G. JORDAN, ADMINISTRATOR, OFFICE OF FEDERAL PROCUREMENT POLICY; JEFF KOSES, DIRECTOR, OFFICE OF ACQUISITION OPERATIONS, FEDERAL 

ACQUISITION SERVICE, GENERAL SERVICES ADMINISTRATION. 

STATEMENT OF JOSEPH G. JORDAN 

Mr. JORDAN. Thank you. Chairman Hanna, Ranking Member 

Meng, and members of the Subcommittee, I appreciate the opportunity to appear before you today to discuss initiatives the administration is taking to both save money and maximize small business 

participation of federal procurement. 

These efforts are central to the government’s ability to get the 

best value for the taxpayer. With approximately one out of every 

$7 the government spends going to contractors, it is imperative 

that our acquisition processes enable us to get the highest quality 

goods and services for the lowest possible cost. Equally important, 

our processes must allow us to regularly tap into the creativity, innovation, and technical expertise that small businesses offer. The 

good news is that I believe both buying smarter initiatives, like 

strategic sourcing, and maximizing small business opportunities, 

play together to maximize value for the taxpayer. 

Prior to becoming administrator for Federal Procurement Policy, 

as you said Mr. Chairman, I served as associate administrator for 

government contracting and business development at the Small 

Business Administration. In that role, I was charged with increasing small business federal contracting opportunities. I am proud of 

the progress that SBA made during my tenure to help agencies increase opportunities for small businesses as we drove the largest 

two-year increase against small business contracting goals in more 

than a decade. These efforts include partnering with Congress, including this Committee, on the historic Small Business Jobs Act. 

Supporting small businesses is especially important during this 

critical time as agencies strive to meet mission needs with increasingly tight budgets. From fiscal year 2011 to fiscal year 2012, agencies reduced contract spending by more than $20 billion, the largest 

single year dollar decrease in federal contract spending on record. 

SBREP-219 with DISTILLER

22 

Over this same period, with strong leadership attention, agencies 

were able to increase the percentage of eligible contract dollars 

awarded to small businesses. My experience at SBA reinforced my 

belief that small business contracting is a win-win. These businesses get the revenue they need to create jobs and grow the economy, while the government gets access to some of the most innovative companies in our supply chain. 

Our efforts to identify better buying practices that save money 

and increase opportunities for small business led us to place greater emphasis on strategic sourcing. Strategic sourcing, which the 

private sector has long recognized as a successful business practice, 

requires agencies to bring their spend under management. 

Efforts to date illustrate the substantial savings that strategic 

sourcing offers. Government-wide strategic sourcing of items, such 

as office supplies and domestic shipping services, has achieved 

nearly $300 million in direct and indirect savings since fiscal year 

2010. And agency-level strategic sourcing of goods like IT and medical equipment have saved hundreds of millions more. Equally important, these efforts demonstrate that agencies can increase their 

spending with small business and simultaneously reap the benefits 

of strategic sourcing. 

We are not seeking to strategically source everything the government buys, nor will every strategic sourcing decision mean fewer 

participants. The goal is to maximize value for the taxpayer and 

that will take different forms depending on the commodity being 

purchased and the government’s cost drivers in that space. Our 

government-wide strategic sourcing of office supplies is a compelling example. Thirteen of the 15 winning vendors are small businesses, including three service-disabled veteran-owned small businesses. According to GSA, total dollars going to small business increased from 67 percent prior to implementation of the strategic 

sourcing solution to almost 80 percent now. 

Many small businesses expressed concern that strategic sourcing 

could harm their participation in the federal marketplace. However, the administration is working to ensure that competitive 

small businesses can engage in strategic sourcing, and I am confident that these businesses of whom there are many will not only 

hold their own but do even better, and those small businesses that 

are currently less competitive will have opportunities to get in the 

game in the future by taking steps to strengthen themselves. 

There are several additional things that the administration is 

doing to increase opportunities for small businesses at the same 

time as we work to maximize the value of strategic sourcing. First, 

agencies are required to seek increased participation by small businesses when pursuing strategic sourcing. Last December, OMB 

issued a blueprint for improving acquisition through strategic 

sourcing, which specifically requires that all proposed strategic 

sourcing agreements must baseline small business use under current strategies and set goals to meet or exceed that baseline participation under the new strategic sourcing vehicles. 

Secondly, government-wide strategic sourcing decisions will be 

made by a council that includes the Small Business Administration, so small businesses are ensured of a seat at the table. 

SBREP-219 with DISTILLER

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Third, we are actively promoting the use of tools, such as those 

provided by the Small Business Jobs Act, to facilitate greater small 

business participation on contract vehicles that have been strategically sourced. 

OFPP is committed to ensuring that agencies remain vigilant in 

their efforts to buy smarter and achieve best value for our taxpayers. OFPP is equally committed to ensuring that agencies provide maximum opportunities for small businesses in federal contracting and subcontracting, so that they may flourish and apply 

their talents to the many pressing demands facing our government. 

We must pursue these important goals in harmony, as we have 

been doing and will continue to do. 

I would be pleased to address any questions you may have. 

Chairman HANNA. Thank you, Mr. Jordan. 

Our next witness is Mr. Jeff Koses. He is the director of acquisition operations, which manages a large portion of the schedule programs at the General Services Administration, and he is the business line leader for the multiple awards schedule. 

Mr. Koses, you may begin. 

STATEMENT OF JEFF KOSES 

Mr. KOSES. Good morning, Chairman Hanna, Ranking Member 

Meng, members of the Subcommittee. 

Thank you for the opportunity to discuss GSA’s accomplishments 

under the Federal Strategic Sourcing Initiative, or FSSI, and our 

efforts to modernize the Multiple Award Schedules program. As 

America’s buyer, GSA contracts with the private sector to provide 

commercial services and products that support federal agencies. We 

strive to acquire the best possible deal for the taxpayer and to increase small business opportunity. 

For many years, strategic sourcing has been a best practice in 

the private sector. The Government Accountability Office has found 

in a series of audits that the federal government can save billions 

of dollars through the application of strategic sourcing principles. 

A 2012 OMB memo on strategic sourcing, amongst other things, 

directed GSA to establish 10 new strategic sourcing solutions, five 

each in 2013 and 2014. GSA is working closely with OMB and the 

agencies making up the Strategic Sourcing Leadership Council, including the Small Business Administration. FSSI seeks to leverage 

the federal government’s collective buying power in order to efficiently and effectively utilize taxpayer dollars and to increase dollars spent with small business. 

There are four primary benefits associated with strategic 

sourcing: reduced costs per unit, decreased consumption, improved 

operating efficiency, and improved focus on socioeconomic goals. 

The office supplies, our OS2 solution, has served as a test case for 

this generation of federal strategic sourcing. OS2 has resulted in 

direct savings of $88.7 million on spending of $607.9 million 

through April 2013. This savings is calculated as the difference between what agencies spend through strategic sourcing and what 

they would have spent had they received the nonstrategic sourcing 

prices. 

OS2 provides greater pricing transparency. OS2 contractors report transactional data on all program sales. This information proSBREP-219 with DISTILLER

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vides us insight into agency spending behavior. GSA has used this 

data to show their contractors pricing item by item. After GSA 

shared this data, every one of the OS2 contractors sharply reduced 

their prices, a potential savings of over $12 million annually beginning this month. 

Key successes of the OS2 program include an increase from 67 

percent to the high 70s percent of dollars spent with small business; a decrease from more than 250 percent to 10 percent price 

variability; a reduction in contract duplication and administrative 

costs. 

GSA is working towards establishing strategic sourcing solutions 

for fiscal year 2013 in the areas of wireless rate plans and devices 

awarded last month; last desktop publisher software; print management phase 2; maintenance, repair, and operations supplies; 

janitorial and sanitation supplies. 

When we research a potential solution, small business impact is 

foundational. Acting Administrator Tangherlini has made clear expanded opportunity for small business is a crucial strategic 

sourcing success metric. It is one that we monitored closely. 

For both the janitorial-sanitation supplies and the maintenance, 

repair, and operations supplies, we are setting aside the majority 

of awards for small business, and we broke the categories down in 

ways that maximize small business opportunities. 

GSA believes the Multiple Awards Schedules program represents 

the best opportunity for well prepared, highly competitive small 

businesses in government procurement. Small businesses represent 

about 80 percent of all schedule vendors, and about 34 percent of 

the dollars go to small business. More importantly, most agencies 

have a higher percentage of spending with small business when 

they use schedules. 

Still, we believe there is substantial room for improvement in the 

schedules program. Over the last year, we have worked diligently 

with both small business and federal agencies, asking for input on 

how the schedules program can better meet their needs. We received, and are working to implement, many of the important suggestions we have heard. Similarly, we are eager to hear your input 

as we work to achieve taxpayer savings and grow small business 

success. 

One area of such success is our training in the discretionary setaside rule, a result of Section 1331 of the Small Business Jobs Act 

of 2010. 

To date, we have trained more than 9,700 members of the acquisition workforce on properties of schedules and utilization of small 

business. Since last April, we have seen nearly 16,000 requests for 

quotes or 19 percent set-asides for small business through GSA’s 

e-Buy system. For the month of April, this increased to 22-1/2 percent, great progress as the buying season kicks into a high. 

As we look to the future, GSA will continue to focus on strategic 

sourcing, modernizing the schedules program, improving our pricing and tools, collecting the information and data that will help 

save taxpayer dollars. GSA will continue being a leader in opening 

dialogue with industry and our program will remain a doorway to 

opportunity for highly competitive small businesses. 

SBREP-219 with DISTILLER

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On behalf of GSA, thank you for this opportunity to appear before the Committee, and I would be happy to answer your questions. 

Chairman HANNA. Well, you gentlemen sat here through the 

previous panel. It sounds like something that should be more of a 

debate than a panel discussion because clearly there is a large difference of opinion between what you believe you are producing and 

the direction you are going in, the direction that the previous panel 

feels you are going. 

I have a transcript from a recent JanSan MRO Industry Day at 

which you had employees representing your office. I would like to 

ask you whether their statements accurately reflect the position of 

your office to be fair. 

First, staff suggested that the JanSan and MRO contracts would 

become mandatory sources for the winners of future service contracts. I am concerned that such an approach would decimate the 

subcontracting market, as well as the prime contracting market. 

Do you support the making of JanSan and MRO contracts mandatory for other federal agencies—and federal contractors, rather? 

Further, OFPP staff suggested that anyone who did not develop a 

JanSan or MRO contract could simply sell off something else to the 

government, which I find particularly strange and troubling. I am 

hoping that you understand the challenges these industries are involved in, and this is not making it any easier for them. Perhaps 

either of you would like to comment on that. Maybe Mr. Jordan 

first. 

Mr. JORDAN. Sure, Mr. Chairman. 

In terms of the comments themselves, it is difficult for me to, 

without context, react to them one by one. What I will say is in 

terms of I think what you are getting at is concerns around potential mandating of vehicles, whether it is JanSan or any of the future vehicles that are strategically sourced. 

OMB guidance, which we put out last December, does clearly say 

the vehicles that agencies create and that the Strategic Sourcing 

Leadership Council approves should be mandated when appropriate. And I think that is important. I think that not speaking to 

JanSan specifically, because I think there are still steps to go, and 

Jeff can talk about where GSA is in the leadership of that particular commodity category, but overall, strategic sourcing in certain categories—it is different in every category what is going to be 

the cost driver, the savings driver, like I said, but in certain categories, it is about ensuring that the government buys not as 30 

midsize businesses and gets pricing accordingly, but buys what we 

are—the largest purchaser of goods and services in the world. And 

so in those commodities, where you can really leverage our scale, 

you can drive significant taxpayer savings by getting volume-based 

discounts. We want to do that. And you only do that if you put in 

all that time and give the winners the spend that they agree to. 

Now, there are a number of ways to do that. There is tiered pricing, as opposed to some of the guarantees you talked about. There 

is just overall good commodity management and principles, but I 

do think that in certain categories, in order to maximize the value 

of these vehicles, it is appropriate to mandate their use. 

Chairman HANNA. For example? 

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Mr. JORDAN. I think without getting into any specific money because we have not gotten to the maturity level. I mean, this effort 

is in a crawl-walk-run—— 

Chairman HANNA. But it is a subjective process by definition, 

I think. Maybe not. Certainly a lot of it is. Who decides and how 

do you decide what is appropriate or is not appropriate? And that 

process? 

Mr. JORDAN. Sure. I think there are two things. One, as I mentioned in my testimony, a significant piece of strategic sourcing is 

done at the agency level where currently you have various components or offices within the same agency with different contracts 

with the exact same vendor for the exact same products that wildly 

vary in pricing, sometimes different terms and conditions. And if 

that agency stands up an agency-wide and enterprise-wide agreement, they would expect that their various components use that as 

opposed to create duplicative and potentially less optimal agreements and put their spend through that. 

Secondly, on who makes the decision on these government-wide 

vehicles, it is their Strategic Sourcing Leadership Council, which is 

comprised of the seven largest spending agencies who collectively 

spend about 92 percent of our—— 

Chairman HANNA. What is your role on that leadership council? 

Will OFPP have to approve any FSSI initiatives? Has your office 

approved OASIS or OASIS, OSB, JanSan, and MRO? 

Mr. JORDAN. Okay. Let me see if I got them all. 

Chairman HANNA. A few acronyms, I know. 

Mr. JORDAN. Yeah. I’m with that. Let me go in order. 

Chairman HANNA. Okay. 

Mr. JORDAN. I tried to mentally capture all that. 

What is my role? I am the chairman of the Strategic Sourcing 

Leadership Council. 

Will OFPP approve the vehicles that are submitted? Yes. And 

there is a three stage process with key decision points at each 

stage. First is we say—somebody on the council will say, or maybe 

an outside member—we will identify potential opportunity. We 

think there is an opportunity for strategic sourcing in commodity 

area or service area X. And we will say, yes. You have presented 

enough data to show there may be an opportunity. We form a commodity team comprised of the Strategic Sourcing Leadership Council members, as well as non-SSLC agencies that have considerable 

spend. Again, SBA is a formal member of the SSLC and participates in all this. The commodity team then does an analysis and 

says we think that there is a particular solution. It may be a new 

contract. It may be driving more utilization through a current or 

set of current vehicles, or it may simply be standardizing terms 

and conditions. And we would say, yes, that sounds like the right 

agreement. The SSLC would make that decision. Then they would 

then, if it is a new contract, which is I think where your question 

was going, they would engage with the vendor and that is where 

it is important that the vendors are bidding based on some understanding of what volume they are actually going to get. 

That is where it differs from the GSA schedule that you heard 

a lot about. The prices on the GSA schedule are simply ceiling 

prices or list prices. You would never walk on the dealer’s lot and 

SBREP-219 with DISTILLER

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say, yep, I will take that car for what it says in the window. You 

would negotiate. Well, we want to try to have some of that 

prenegotiation, based on not you buying one car but us buying a 

fleet. And so that is where you would do that precommitment. 

Chairman HANNA. But you understand the concerns of the previous panel; if you continue to buy your fleet from that group, eventually you will run out of the opportunity to enjoy competition from 

other groups because you will have effectively, because you control 

so much of the marketplace, eliminated the opportunity to have 

competition some time down the line. 

Mr. JORDAN. Yes. Very fair point. 

Chairman HANNA. So, I mean, you generally agree with the previous panel in terms of their concerns in the long run? 

Mr. JORDAN. I believe the first—one of the panelists said it best 

where strategic sourcing is absolutely a good thing, and as I believe 

your statement said, or but as your statement said, it is a tool. If 

it is used well, it is a good thing. If it is used not well, it will not 

be a good thing. And so it is important in any of these categories 

to understand the market dynamics and do exactly what you say. 

What is the right set of vendors to have on a vehicle? Then, what 

is the right period for that contract to cover such that anybody who 

was unsuccessful at the beginning, especially small businesses, 

have a chance to recompete and get back on, but we give enough 

volume to the winners that it justifies the low price. 

Chairman HANNA. Do you believe that the people in purchasing 

and acquisition have the latitude to be comfortable to understand 

the dynamic differences between value and purchase price—value 

meaning total—— 

Mr. JORDAN. Sure. 

Chairman HANNA.—of everything including purchase price? 

And how do they enjoy that latitude? How do you reinforce that, 

if you do? 

Mr. JORDAN. Yes. I believe that the Federal Acquisition Regulation, the FAR, gives them the right latitude to choose whichever 

method is appropriate in a particular procurement, be it low price 

technically acceptable or best value. I think that, like with everything, it is important to do training around, you know, understanding how to make that decision. 

Chairman HANNA. We have heard there is a lack of training or 

lack of understanding about what that means. 

Mr. JORDAN. Well, we always want to increase both the quality 

and the ineffectiveness of our training, and we work very hard with 

the Defense Acquisition University and the Federal Acquisition Institute to do that. One of the important points of strategic sourcing 

is, again, having an enterprise view of a commodity category so 

that we do not force numerous contracting officers to engage in a 

one-off contract, creating potentially duplicative and different 

terms and conditions in their contracts. 

Chairman HANNA. Thank you. 

Ranking Member Meng. 

Ms. MENG. Thank you to our witnesses for being here. 

I have a question for Mr. Jordan. 

The plan for the new OASIS contract divides the requirements 

into two different contracts—one for large businesses with subconSBREP-219 with DISTILLER

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tracting goals and another exclusively for small businesses. However, this vehicle appears to be another attempt to disguise contract bundling as the structure prevents small businesses from 

competing for half of the contract, which is valued at $10 billion. 

Why or how can OFPP step in to ensure that small businesses 

have greater access to this contract? 

Mr. JORDAN. Well, I will let Jeff speak to OASIS. It is not one 

of the SSLC covered vehicles at this point, so I do not have perfect 

insight into how it is being created or those types of things. I can 

speak to your question about how is OFPP looking to ensure that 

we do not have bundling. We incorporate the right strategic 

sourcing principles. 

Bundling, as was said in the previous panel, is pretty clearly defined as taking two or more contracts that have been or could be 

performed by small businesses and putting them together into a 

contract that is no longer suitable for small business performance. 

As we have seen in all of the vehicles we have done thus far, that 

is just not true. Office supplies, if it were bundled, would mean no 

small business participation. Instead, we saw small business participation go up from about two-thirds to over three-quarters. 

Wireless is a good example of where all of the vendors originally 

before strategic sourcing were large businesses. We were able to 

carve out the wireless telecommunication expense management 

services, a piece of that business where small businesses could handle it, and we elevated them to have a prime level on that. So we 

would like to apply those same sources across the board. 

In any vehicle, or in many vehicles I guess I should say, there 

is likely a whole bunch of the requirements that small businesses 

can do, and there are potentially some that they cannot. And so it 

is okay to have a mix of small and large businesses in the supplier 

pool in any of these categories as long as when two or more of the 

small businesses can do it. We are using that, and that is where 

the Section 1331 set-aside that Congress gave us that authority 

has been very helpful, and we will continue to push that. It is 

where the small business goals and SBA’s Dashboard and Goaling 

Scorecard is very helpful. And obviously, given my background at 

SBA and now my CO of OFPP, I care personally and we care as 

an office passionately about ensuring that we can both save money 

and increase the small business utilization. 

Ms. MENG. Thank you. 

Mr. Koses, under GSA’s proposed JanSan and MRO vehicles, 15 

vendors will receive BPAs. While the majority of these have been 

set aside for small businesses, the number does not begin to include the thousands of businesses that currently contract with the 

federal government in those industries. While GSA has indicated 

that more businesses might be on-ramped to the JanSan, there has 

been no firm commitment by GSA as to when that will, and if it 

will occur. So can you definitely state whether or not more businesses will be added to the contract and when in the duration of 

that contract will it occur? 

Mr. KOSES. Absolutely. And may I take the OASIS question 

first and then also answer the JanSan question? 

In terms of OASIS, we have put tremendous effort and focus on 

the key point that Mr. Burton raised earlier—that of a robust marSBREP-219 with DISTILLER

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ket research industry engagement strategy. Key to us has been ensuring that we remove geographic barriers and have a very broad 

outreach. We have used an Internet-based platform, GSA Interact, 

featuring weekly blogs from the program manner, featuring several 

opportunities for one-on-one meetings between industry and government leaders, and two different rounds of white papers, trying 

to ensure that we have actively listened to small business. Not just 

GSA, but the agencies working with us to create the vehicle. 

And so with well over 100 one-on-one meetings with industry, we 

have specifically talked the question—what is the best small business strategy? We had that conversation with SBA as well, and 

overwhelmingly, that message was we want to see two different vehicles—one set aside for small business, one not. We want to see 

a crossover feature because part of what we are after is wildly successful small businesses under OASIS, and if some of them outgrow the size standard, they now will have the ability to crossover 

to the OASIS prime vehicle. 

We have tried to use that same type of engagement strategy 

through our FSSI efforts as well. Again, we have used GSA Interact to create Internet-based chatrooms to discuss, to define, to pursue the goals. We have had our program managers doing weekly 

checks, trying to bring industry to the table and hear and identify 

these small business issues and trying to ensure that the different 

federal agencies have been side by side with GSA listening to those 

industry messages. 

In both of those cases, we have posted a draft request or draft 

solicitation. The purpose of the draft is to get comment, to get feedback, because we do not pose that we know all the answers. We 

are pointing out the best information that we have had and we are 

asking for validation, for correction, for suggested improvements. 

We heard definite suggestions for improvement in OASIS. We 

heard definite suggestions for improvement in JanSan and MRO. 

We did hear messages that 15 was the wrong number of vendors, 

and we have had that conversation with the commodity team. 

When we post the revised solicitation this summer, the number 

will be marginally higher than 15. We are still finalizing, but we 

have gotten the sense that we did not define the group and the 

breakdowns exactly correctly. We do not have the exact number of 

vendors, but we are in the general neighborhood. 

Ms. MENG. In general, for either witness, how do you perceive 

the balance between the goal of saving the federal government 

money and the desire to contract with small businesses? I believe 

that it is essential that GSA work with small businesses and reach 

the 27 percent goal, but I also understand in the short term the 

cost of these contracts can seem higher. How can we ensure that 

we are striking the right balance? 

Mr. JORDAN. From an overall perspective, I think that the goals 

of saving the taxpayer money and increasing our utilization of 

small business are absolutely mutually reinforcing. I have seen it 

over and over again that you can absolutely use small business and 

save money. It means buying smarter, standardizing terms and 

conditions, taking administrative costs out of the system. You mentioned earlier, Congressman, that when small businesses bid, they 

have those bid and proposal costs. If we can take some of that out 

SBREP-219 with DISTILLER

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of the system by not making them compete for all these duplicative 

vehicles, it can be helpful. 

We have seen it in office supplies. We have seen it in wireless. 

We have seen it in the market research we are doing on additional 

categories, so that is why I am a fervent believer that we can both 

save the taxpayers considerable amounts of money and increase 

our utilization of small businesses. Like I said, there will be, when 

you do this type of effort, there will be winners and losers. We need 

to ensure that those decisions are made in a transparent way, in 

a fair way, based on quantitative metrics that everybody understands. 

And then for the folks who are unsuccessful, not just leave them 

alone; engage them in additional training, create the right onramps 

and off-ramps for the vehicles that have been set up; use all the 

tools at our disposal to make those small businesses that were unsuccessful even more competitive next time. And that is how you 

reinvigorate the system overall. 

Mr. KOSES. In addition, we talked a little bit about the market 

research component. One of the core questions that we keep asking 

industry is what is it that the governments do that is adding cost 

to the process? How are we buying that is more expensive for you, 

and how do we start changing? And that leads to some very good 

conversations with the commodity team as we wrestle with what 

can we change and try and fine tune and address some of our longstanding requirements. In our office supplies example, we recognize 

two big cost drivers that harmed small business were on overnight 

delivery time and a very low minimum order. Both of those were 

things we changed coming out of those conversations. 

In our print management solution, much like wireless, we were 

looking at an industry that had been dominated by large business, 

and we saw where small business could start playing a really critical role and help us save money in the process. We built a solution 

that we called a fleet assessment. It was all about trying to go in 

and get a handle on what solutions actually are there? What is the 

agency inventory? How much are we printing today? You know, the 

biggest cost in printing is actually making that decision to hit the 

print button and run the pages through the machine. 

Well, we have learned through our industry engagement that we 

buy way too much. We buy too many machines, too much gold plating. And by creating that role for small business to do the fleet assessment, to help us figure out what is our inventory, what is our 

print behavior today, we are setting the stage by using small business for savings over time. 

Ms. MENG. Thank you. I yield back. 

Chairman HANNA. Thank you. 

This is somewhat of a declarative statement but feel free to answer it. If JanSan becomes mandatory, the 500-plus companies who 

did not win BPAs awards will not be able to maintain their contracts. They will not be able to make the required $25,000 minimum sales each year. So I ask, what happens to these companies 

if that is the case? And what do you plan to do about it? If you 

want to say something, fine. That would be great. 

Mr. KOSES. In our office supplies example, we have had sales 

under the schedule program that average about $700 million a year 

SBREP-219 with DISTILLER

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over the last three years. Collectively, in that time period, sales 

through our FSSI have been about 30 percent of that total. We 

have not seen the entire market move over to the strategic sourcing 

solution. We, frankly, would like to see a lot more of it move over. 

Chairman HANNA. And it is not even—office supplies, as you 

know, are not mandatory now. 

Mr. KOSES. Correct. 

Chairman HANNA. Okay. Thank you. 

So you recognize there is a problem with that minimum and that 

you may become your own worst enemy by effectively eliminating 

people from the marketplace that we want to thrive. 

Mr. KOSES. I fully understand the concern, Congressman. We do 

not believe that this will ever be a 100 percent solution. In talking 

to agencies, we are talking about the core areas where we are targeting, and we would like to see most of the spend able to concentrate through that vehicle. But if we start saying every situation, no exceptions, no waivers, everything goes through this beyond the payout, we are going to create a program that does not 

make sense. 

Chairman HANNA. So what solutions are you working towards 

then? 

Mr. KOSES. We are working to define the core items that the 

government buys the most frequently or that are the most critical 

for our operations. To start that with several thousand core items, 

between the market basket and extended catalogue, to define what 

is the appropriate delivery time and ordering level. But recognize, 

there are going to be exceptions. There are going to be the agencies 

that need something immediately that require the overnight delivery, that require a low purchase or some other exception, and they 

still will have the schedule to choose from. 

Chairman HANNA. For the OASIS and OASIS OSB contracts, I 

understand that GSA is not allowing new small businesses’ teams 

to compete. As you know, the 2010 Job Act amended the Small 

Business Act to require that any solicitation for multiple award 

contracts above $2 million solicit offers from small business concerns and teams or joint ventures. 

Now, I have seen the e-mail that you sent our staff on that issue. 

However, I am having trouble understanding why when the law is 

explicit that GSA feels its contracting strategy is more important 

than the law. Could you please explain that rational and how you 

intend to address it? Mr. Koses. 

Mr. KOSES. Absolutely, Mr. Chairman. 

We believe that OASIS is being designed with the needs, with 

the interests of small business and small business opportunity in 

mind. We have tried to develop a very clear, a very straight forward concept and evaluation methodology. We believe central is 

OASIS is about integration of professional services, so the contractors who will be successful will need to demonstrate that they have 

been able to integrate professional services, that they know how to 

do it, that they have the relationships. Not that they have to have 

them in place today, but they know how to set them up. The know 

how to make them happen. We are very confident that there will 

be a lot of teaming under OASIS. We are just saying you do not 

SBREP-219 with DISTILLER

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have to have your team created today; you have to show us you 

know how to create a team and that you have done so successfully. 

Chairman HANNA. How do they go about that if they are not 

already in the process? I mean, how do you encourage new businesses to engage in that? Or do you? 

Mr. KOSES. When we are talking about professional, highly 

technical, integrated services that cross numerous disciplines, we 

think it is important that you be able to show us past success at 

having done so; that you have successfully integrated smaller 

projects; that you have successfully performed similar types of 

work. It will be very difficult for this to be a first government contract, but it will be a tremendous opportunity for small businesses 

to come in the door as team members or subcontractors to the 

prime contract holders. 

Chairman HANNA. Of course, our interpretation would be that 

the law says otherwise. You understand that? 

Mr. KOSES. Chairman, we are confident that we are reading the 

law appropriately, but we look forward to continuing to work with 

your staff as we continue the market research. 

Chairman HANNA. Thank you. Thank you both very much. 

Any further questions? 

I guess we have sat here and we have heard—this has been, I 

think, a productive two and three quarter hours or one and three 

quarter hours. Generally, I take that we are all here in earnest and 

that we want to produce the best value for the government, and 

that is in and of its nature a difficult thing to do because it is subjective. But to the extent that the goal of this Committee is to 

broaden opportunity across a wide variety of disciplines, companies, et cetera, I think it is safe to say that we can agree that the 

elimination over time of competition through whatever means is 

not a goal that any of us share. So you have heard what the previous panel members said. I just ask that you commit to analyzing 

the long-term consequences of strategic sourcing and how it affects 

competition and small businesses and all that that entails. I will 

leave you with that. 

Thank you very much for your time today. If there are no further 

questions for the witnesses, I want to thank our witnesses for being 

here today and state that this is an issue the Subcommittee will 

be continuing to monitor carefully. We owe it to the taxpayers to 

make sure we maintain a viable small business industrial base so 

that we can protect competition and innovation in federal contracting. I want to make sure that the strategic source contracts 

being proposed capitalize on all that small businesses have to offer 

in order to achieve long-term savings, rather than focusing on 

short-term gains and savings over long-term growth and savings. 

I ask unanimous consent that members have five legislative days 

to submit statements and supporting materials for the record. 

Without objection, so ordered. Thank you all. 

[Whereupon, at 11:46 a.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

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Chairman Hanna, Ranking Member Meng and members of the 

subcommittee, thank you for conducting today’s hearing and for the 

invitation to share the Professional Services Council’s (PSC) views 

about the potential impacts on small businesses of the federal government’s strategic sourcing efforts. This is a matter of significant 

interest to PSC given both the unique diversity of our membership 

base and the equally unique diversity of the services our members 

provide to the federal government. 

Introduction 

PSC is the nation’s largest association of companies providing 

services of all kinds to the federal government. Our membership of 

nearly 360 companies is comprised of firms of all sizes, including 

approximately 25 percent that are classified as small businesses in 

their fields, and an additional 25–30 percent that would be classified as smaller mid-tier firms—those companies that occupy the exceptionally challenging portion of the market in which they are no 

longer eligible for treatment as a small business and must now 

compete in the unrestricted federal procurement market. 

It is this diversity of functions and sizes that provides the lens 

through which we view strategic sourcing initiatives. In all of our 

work, our goal is to provide input and insights to both the legislative and executive branches on a wide array of business policies 

and how they will impact all, or portions of, the federal services 

sector. Since services now accounts for almost 56 percent of the 

contract spending at the Defense Department and closer to 75 percent in the civilian agencies, it is essential that the government 

fully understand and assess the ways its actions and policies will 

affect the marketplace of firms that are so critical to the government’s operations. Indeed, the government’s goal should be to foster an environment of robust competition, high performance, agility, innovation, balanced opportunities for companies of all sizes, 

and accountability. It is with those objectives in mind that we approach federal procurement policy issues like strategic sourcing. 

Proper Use of Strategic Sourcing 

We strongly support the premise that the government should be 

using strategic sourcing, in the truest meaning of the term which 

encompasses a universe much larger than the Federal Strategic 

Sourcing Initiative (FSSI), for the vast majority of its procurements. If structured properly FSSI has the potential to deliver real 

benefits for federal agencies and taxpayers alike. As such, we commend the Office of Federal Procurement Policy for making strategic 

sourcing a priority and we support how many agencies have properly applied these techniques to specific sourcing opportunities. 

Yet, while we fully support the FSSI’s intended objectives, we have 

significant concerns about its practical effects. Those concerns relate more to the way in which the term is used and understood and 

how the initiatives are implemented across the government than to 

the concept itself. 

Strategic sourcing is not one ‘‘thing.’’ It is a set of multi-layered, 

flexible procurement strategies that evolve and change depending 

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1 ‘‘Strategic Sourcing: Leading Commercial Practices Can Help Federal Agencies Increase Savings When Acquiring Services;’’ GAO–13–417, 04/15/13. Available at: http://www.gao.gov/products/GAO-13-417 

on the nature and complexity of what is being bought. For pure 

commodities, strategic sourcing can be fairly simple and straightforward; for more complex needs, particularly higher-end services, 

the challenges and complexities grow substantially. For products, 

where place of performance or production is irrelevant, there are 

often plenty of options for small business utilization; for services, 

where place of performance is very relevant, the need to deliver 

services over geographic regions as one way of reducing overall 

costs poses a number of challenges to balancing the efficiencies of 

strategic sourcing with the goal of appropriate reliance on small 

businesses. In some cases, when basic quality may be adequate, 

price becomes the principal driver; in other cases, quality is of 

greater importance, and is as important, or more important, than 

price. 

What Are the Objectives of Strategic Sourcing? 

We must first come to a common agreement on the ultimate objectives driving strategic sourcing in the federal market. If the objective is solely and specifically to optimize government operations, 

that will drive one set of responses. If, however, the objective is to 

optimize government operations without impacting current socioeconomic or other acquisition policy goals, then additional considerations must be taken into account. These questions are more than 

rhetorical and both can lead to perfectly rational, yet different conclusions. They go to the heart of today’s hearing and to the heart 

of a number of other elements of federal acquisition policy and 

practice. 

For example, is it better to have fewer small businesses receiving 

a higher volume of work from the government or a larger number 

of small businesses with a smaller share of the volume? After all, 

if the government were to optimize its use of strategic sourcing, as 

the term is understood and applied throughout the commercial 

world, the former is the more likely outcome, as we have already 

seen with the federal strategic sourcing of commodities such as office supplies. 

The same questions are raised when it comes to the government’s objective of conducting full and open competitions for its 

procurements. Under the GSA Schedules, for example, there is a 

broad array of suppliers that can be easily accessed by any government customer. Almost by definition, strategic sourcing will reduce 

the number of those suppliers. In the commercial world, that is the 

norm. As the Government Accountability Office (GAO) noted in its 

April report on the use of strategic sourcing in the commercial sector, companies often carefully conduct market research on industry 

capabilities, select one or two suppliers and stick with them, and 

manage them aggressively for many years.1 But in the government 

environment, constant competition is a central tenet of the procurement process and expanding the breadth of firms capable of competing for federal work is a continuous goal. 

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Any evaluation of strategic sourcing must also take into account 

the impact on the industrial base, since limiting private sector participation in federal procurements has the potential to erode portions of the federal industrial base. When only a few companies are 

awarded contracts under a strategic sourcing initiative and dozens, 

if not hundreds, of companies are excluded from regularly competing for opportunities, how will the depth and breadth of the supplier base be affected? This dynamic is generally of less concern 

when the sourcing is of commodities since, by definition, they tend 

to be more widely available and the barriers to market entry are 

modest. But it becomes far more pronounced when the services 

being procured through strategic sourcing are complex or highly 

technical, involve capabilities and skills that are in short supply 

across the economy, and for which opportunities outside of government are plentiful. 

These dynamics are important considerations. The objectives of 

the federal strategic sourcing initiative, and the level of support for 

retaining it in its current form or expanding it to additional commodities and services, will hinge on policymakers’ ability to agree 

on the objectives of the initiative and the policy trade-offs that are 

willing to be made. 

The Key Question 

This statement provides our perspective on these concerns and 

seeks to establish a framework for the ongoing debate around the 

key question of today’s hearing: will strategic sourcing harm small 

business? 

In the end, the answer to that question comes back to the desired 

outcomes of the initiative and how we measure success. Today 

there is no consensus on the answer to this question, either in Congress or across the agencies. For some, the most important goal is 

to reduce government costs and increase quality only. For others, 

the goal is to reduce government costs and increase quality while 

doing no harm and engendering no changes to the current marketplace. Still others believe that, while efficiency is important, the 

government’s first and foremost priority must be to protect its vital 

role in fostering small and small disadvantaged, veteran, womanowned, or HUBZone businesses. 

Each of these perspectives is valid. But the differences they reflect clearly underpin this hearing and other debate and discussion 

about strategic sourcing generally and the more focused FSSI specifically. 

Thus, if I could define one desired outcome from this hearing, it 

would be to find a clear consensus on this key question so as to determine the future of strategic sourcing. 

Will Strategic Harm Small Business? It Depends. 

It is impossible to say for certain whether federal strategic 

sourcing does, or does not, present a threat to the overall small 

business community. Clearly where companies sit in the marketplace drives their view of that question. But as the government 

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2 ‘‘The Balancing Act: Acquisition in an Unabated Crisis;’’ The 2012 PSC Acquisition Policy 

Survey, December 2012. Available at: http://www.pscouncil.org/i/p/Procurement—Survey/c/p/ 

ProcurementPolicySurvey/Procurement—Policy—S.aspx?hkey=835b11ac-Ofe7-4d23-a0e0- 

b98529210f7e 

moves away from the low hanging fruit of strategically sourcing 

commodity products and toward strategic sourcing of services, the 

evaluation of the risk to small businesses ultimately depends on 

the depth and sophistication of the government’s understanding of 

strategic sourcing itself. 

In other words, strategic sourcing, in the truest sense of the 

word, incorporates the full spectrum of procurement techniques 

outlined in the Federal Acquisition Regulation (FAR)—from lowest 

price, technically acceptable (LPTA) to full cost-technical tradeoffs, 

also known as ‘‘best value,’’ and strategic sourcing’s manifestations 

vary across that spectrum. This fact appears to be relatively well 

understood at the most senior levels of government and within the 

Strategic Sourcing Leadership Council (SSLC). But on the front 

lines, where the initiatives are actually implemented, that level of 

awareness and understanding is not overtly evident. 

To many people across government, strategic sourcing is immediately translated into bulk buying to gain economies of purchasing 

scale—a far too simplistic interpretation of ‘‘real’’ strategic 

sourcing. Nonetheless, this perception is consistent with the disturbing and overwhelming trend we are witnessing in virtually 

every agency toward lowest price, minimally technically acceptable 

contract awards, even for complex requirements. Unless and until 

that limited knowledge and understanding is substantially reversed and acquisition workforce skills are meaningfully enhanced, 

the effectiveness of what could otherwise be a very smart and 

thoughtful initiative could well be sharply limited and its impacts, 

including but not limited to small business, could be negative. 

This point also came through clearly in the GAO report on the 

use of strategic sourcing in the commercial marketplace. GAO reported that strategic sourcing is increasingly being used across the 

commercial sector for everything from basic commodities to sophisticated and complex services. But as GAO also pointed out, the consideration that go into how strategic sourcing is implemented vary 

according to levels of complexity, risk and total cost. Similarly, 

GAO reported that, in the commercial sector, quality is often the 

most critical consideration, since the level of quality of a product 

or service can make or break a company. While that same philosophy is a fundamental underpinning of the FAR, recent surveys, 

including PSC’s 2012 Biennial Acquisition Policy Survey,2 have 

made clear that, across government, there is a growing default to 

lowest price awards in which quality is only a minor consideration. 

Likewise, grave concern exists among acquisition leaders and professionals about their workforce’s current capabilities to do effective 

market research or conduct effective negotiations, two skills that 

are central to the development and implementation of an effective 

federal strategic sourcing effort. 

GAO also identified another crucial differentiator between the 

way strategic sourcing is implemented in the commercial world and 

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the way the federal government often operates—the way each defines ‘‘cost.’’ In the commercial world, cost is generally defined as 

the total enterprise-wide, life-cycle impact of the act. For example, 

when a company like Wal-Mart makes decisions as to whether to 

invest in a new logistics information system, their focus is not only 

on how much it will cost to build and operate that system, but also 

includes careful analyses of how that new system will impact productivity and efficiency elsewhere in the company, from asset visibility to stocking shelves in stores. Admittedly, that type of analysis can be very complicated but it is essential to understanding 

the full impact on their organization before implementing a strategic sourcing approach. 

Too often in the government, however, ‘‘cost’’ is defined solely as 

the cost of the product or service being acquired, and is not viewed 

through that broader, more relevant, prism. Moreover, the very 

manner in which agency budgets are built can frequently inhibit 

the consideration of total cost. For example, when the Defense Department was beginning its effort to insource some work being performed by contractors, initial cost analyses only looked at the cost 

to the DoD component’s budget, not the cost to the overall defense 

or federal budgets. In today’s fiscal environment, with sequestration in place and even short-term budget clarity elusive, we see a 

wide range of cases in which immediate, highly localized cost reductions are being implemented even though they are likely to result in higher long-term agency-wide costs. 

Another example is the OASIS procurement at GSA. One of the 

concerns that it has raised is that it is overly focused on driving 

down the unit cost of complex professional services and less so on 

overall value, quality and performance improvements. Indeed, some 

GSA officials stated repeatedly in public forums that the principal 

goal of OASIS is to drive down the labor hour costs of companies 

that provide complex, high-end, professional services. While reductions in hourly labor rates may or may not be justified in some 

areas, little was said about how OASIS would both drive efficiency 

and improve the quality of service. In both cases, small businesses 

were or would be disproportionately impacted by shortsighted efforts to drive down costs, as they typically have less ability to endure decreased margins driven by artificial price pressures than do 

larger firms—particularly for firms operating solely in the federal 

space. 

To GSA’s credit, their extensive and continuous outreach to the 

private sector has been exceptional and it appears that they have 

taken to heart many of the comments that have been offered. Even 

while we await GSA’s publication of the final OASIS solicitation 

and their explanation of how they reconciled competing policy interests, concern still exists as to how the competition and the implementation of the awards, which GSA has identified as part of 

FSSI, will play out. 

The Road Forward 

As I noted at the outset, PSC recognizes the potential benefits 

of the FSSI. We strongly support the initiative and applaud the 

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creation of the Strategic Sourcing Leadership Council and the OMB 

memorandum that guides their work. However, we do have concerns that too rapidly expanding the FSSI can, and likely will, have 

deleterious impacts on both government and its supplier base, 

prominently including small business. Done right, strategic 

sourcing can be a win-win; done wrong, it is more likely to be a 

lose-lose. 

Thus, we would make the following recommendations as the initiative moves forward: 

1) Ensure the alignment of policy and programmatic objectives. 

There is little doubt about the effectiveness of recent strategic 

sourcing efforts for wireless services, laptops, and office supplies. 

But the question of whether the balance between the number of 

small business providers and the total dollars expended with small 

business is aligned with both the administration’s and Congress’s 

small business agendas is unclear. That alignment is essential to 

the effective and efficient expansion of strategic sourcing. 

2) Develop and deploy the requisite training tools to the workforce without delay and require that all acquisition personnel involved in any specific strategic sourcing effort for other than the 

most basic commodities first complete the training. 

3) Be highly judicious in the use of strategic sourcing for services, particularly for complex services. Moreover, require senior 

level (even up to the SSLC) review of significant strategic sourcing 

efforts for services to ensure the strategies being employed are 

clearly articulated and are not overly focused on simply forcing 

down labor rates at the expense of overall quality. 

4) Pursue a flexible, rather than overly prescriptive, FSSI. Allow 

individual agencies some degree of flexibility to pursue their own, 

agency-unique, strategic sourcing initiatives and develop performance measures for both agency-specific and government wide initiatives that generate visibility into overall efficiencies, performance 

outcomes, small business impacts and other factors that will meaningfully inform the future shape, expansion and/or limitations of 

the FSSI. 

Conclusion 

Mr. Chairman, members of the committee, this hearing offers an 

important opportunity to discuss and explore a rapidly expanding 

government-wide initiative. The Office of Federal Procurement Policy, the SSLC, GSA and others are to be congratulated for their relentless efforts to ensure that federal agencies buy smart and buy 

well. That challenges to their work remain should come as no surprise. PSC is fully committed to working with them, and with you, 

to find the right balance and the best path forward for the government and the taxpayer in finding a clear consensus on the objective 

of the Federal Strategic Sourcing Initiative; that consensus will 

then, in large part, drive and govern the future of the government’s 

appropriate use of strategic sourcing. 

I look forward to answering any questions you may have. 

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1TechAmerica is the leading voice for the U.S. technology industry—the driving force productivity growth and job creation in the United States and the foundation of the global innovation 

economy. Representing premiere technology companies of all sizes, we are the industry’s only 

trade association dedicated to advocating for the ICT sector before decision makers at the state, 

federal and international levels of government. With offices in Washington, D.C., Silicon Valley, 

Brussels and Beijing, as well as regional offices around the U.S., we deliver our members top 

tier business intelligence and networking opportunities on a global scale. We are committed to 

expanding market opportunities and driving the competitiveness of the U.S. technology industry 

around the world. For more information, visit www.techamierica.org. 

Chairman Hanna, Ranking Member Meng and Members of the 

Panel, my name is Trey Hodgkins and I am the Senior Vice President for Global Public Sector at TechAmerica. I want to thank you 

for the opportunity to testify this morning regarding challenges and 

opportunities small businesses face in the adoption of strategic 

sourcing by the Federal government. 

TechAmerica 1 is uniquely positioned representing companies 

from the information technology (IT), communications and defense 

industrial base sectors and our members range from large companies whose names are household terms, to the most innovative and 

agile of small technology companies from across the Nation. While 

many of the companies are oriented with the government as a customer, a large number of our members are completely outside of 

the public sector and are commercial in nature, offering commercial 

items developed and manufactured in a global economy and distributed and sold around the world. The ubiquitous nature and complexity of the goods and services our members sell offer unique perspectives on strategic sourcing in Federal government contracting 

and I would like to share a few of those this morning. 

Before I turn to that issue, however, I would like to take this opportunity to reiterate for the committee that the single biggest 

challenge to success for small business in the public sector market 

is the tidal wave of government unique requirements they face and 

the burdens they create. Many of the commercial companies mentioned above consider the burden too significant and not worth the 

costs and risks and choose to simply forego government work entirely. This condition means that the government does not have access to many of the most innovative companies offering cutting 

edge technologies and software products and services focused on 

critical issues like cybersecurity. The condition also results in diminished competition and higher prices for the goods and services 

the government does acquire, because the burdens created by the 

government unique requirements end up as part of the cost of 

doing business and are passed along to the buyer. To address this 

and other conditions that hinder achieving best value for the taxpayer, TechAmerica would solicit the Committee’s support for a 

wholesale review of government acquisition, similar in scope and 

objective to the Section 800 Panel convened in the early 90s. Without such an effort, we are concerned that legislative and administrative attempts to address shortcomings in Federal acquisition 

will have only limited impact at the edges of the issue. 

Strategic Sourcing 

As taxpaying corporate citizens who employ millions of people 

around the country, the members of TechAmerica are supportive of 

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efforts like the Federal Strategic Sourcing Initiative (FSSI) that 

can derive savings by consolidating the acquisition of commoditized 

goods. We could caution, however, that such efforts have diminishing success when goods and services of a complex or diverse nature are shoe-horned into these vehicles. Strategic sourcing only 

works when the customer has uniform and relatively rigid acquisition requirements, and that is simply not the way the government 

buys information technology goods and services. 

For small businesses, we see two direct and immediate challenges under the strategic sourcing initiative. Many of these companies—particularly the thousands of companies selling information technology goods and services are resellers on GSA schedules—will face diminished access to the Federal government market because under FSSI, there will be less award winners and more 

losers. The second challenge impacts those small businesses that 

are the most innovative providers of IT goods and services which 

are frequently offered in response to narrow, unique mission requirements or as a specialized component of a broader prime contractor activity. The offerings of these companies simply do not fit 

into the commoditized labor categories envisioned under strategic 

sourcing and these companies will face increased market pressures, 

given requirements to drive more and more acquisitions into strategic sourcing. 

Many of the products and services in the ICT space do not lend 

themselves well to strategic sourcing. Government does not buy 

technology in a consistent fashion either and that further complicates any effort to fit them into such an initiative. For hardware 

items like laptops or servers, the government does not buy them 

in large quantities and when buying them, it does not ask for a 

consistent configuration. One customer wants more memory; another wants a CAC card reader, and a third wants a different sized 

screen. 

The One Acquisition Solution for Integrated Services (OASIS) 

GWAC is a live example of the shoehorning of acquisitions into a 

strategic sourcing vehicle. Originally proposed as a new vehicle 

specifically for the acquisition of complex integrations of technology 

and services, it was announced earlier this year that it would become part of FSSI and the goods and services offered under the 

contract would be commoditized. As noted above, complex and specialized goods and services, like the ones small business can deliver, do not lend themselves well to strategic sourcing, so industry 

reacted with confusion and apprehension about proceeding with the 

offering. While the Draft RFP is out for review and a Final RFP 

is under development, industry remains concerned about how goods 

and services will be treated in the future under this contract vehicle. 

Small business can and should compete for contracts in FSSI, 

but not all goods and services lend themselves to strategic 

sourcing. Congress should ensure that small business opportunities 

to offer innovative and unique goods and specialized services are 

preserved and that we strike a balance as we implement the Federal Strategic Sourcing Initiative. 

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Thank you again for the opportunity to speak with you this 

morning. I would be happy to answer your questions. 

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EXECUTIVE OFFICE OF THE PRESIDENT 

OFFICE OF MANAGEMENT AND BUDGET 

WASHINGTON, D.C. 20503 

www.whitehouse.gov.OMB 

STATEMENT OF 

THE HONORABLE JOSEPH G. JORDAN 

ADMINISTRATOR FOR FEDERAL PROCUREMENT POLICY 

OFFICE OF MANAGEMENT AND BUDGET 

BEFORE THE 

SUBCOMMITTEE ON CONTRACTING AND WORKFORCE 

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF REPRESENTATIVES 

June 13, 2013 

Chairman Hanna, Ranking Member Meng, and members of the 

Subcommittee, I appreciate the opportunity to appear before you 

today to discuss initiatives the Administration is taking to both 

save money and maximize small business participation in federal 

procurement. These efforts are central to the government’s ability 

to get the best value for the taxpayer. With approximately one out 

of every seven dollars the government spends going to contractors, 

it is imperative that our acquisition processes enable us to get the 

highest quality goods and services for the lowest possible cost. 

Equally important, our processes must allow us to regularly tap 

into the creativity, innovation, and technical expertise that small 

businesses offer to help agencies accomplish their missions. The 

good news is that I believe buying smarter initiatives like strategic 

sourcing reinforce both the goal of maximizing small business opportunities and value for the taxpayer. 

Buying smarter and maximizing opportunities for small 

businesses 

Prior to becoming Administrator for Federal Procurement Policy, 

I served as Associate Administrator for Government Contracting 

and Business Development at the Small Business Administration 

(SBA). In that role, I was charged with increasing federal contracting opportunities for small businesses, including small disadvantaged businesses, women-owned small businesses, servicedisabled veteran owned small businesses (SDVOSB), and small 

business contractors working in Historically Underutilized BusiSBREP-219 with DISTILLER

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ness Zones (HUBZones). I am proud of the progress that SBA made 

during my tenure to help agencies increase opportunities for small 

businesses as we reversed the downward trend in small business 

goal achievement and drove the largest two-year increase against 

these goals in more than a decade. These efforts included 

partnering with Congress, including this Committee, on the historic 

Small Business Jobs Act (SBJA). This Act strengthened the statutory framework for small business contracting by, working with 

senior agency leaders to keep agencies focused on those activities 

that can deliver the most significant improvements in the shortest 

amount of time, such as by expanding the use of set-asides, and developing a more transparent, data-driven small business scorecard 

process that holds the government accountable to the taxpayer. 

These efforts also included an aggressive campaign to root out 

waste, fraud and abuse in small business contracting programs to 

ensure that benefits from these programs flow to the intended recipients. 

Supporting small businesses is especially important during this 

critical time as agencies strive to meet mission needs within increasingly tight budgets. Over the past four years, agencies dramatically reversed the unsustainable annual growth rate in acquisition that saw contract spending grow by an average of 12 percent 

per year from 200 through 2008. From Fiscal Year (FY) 2011 to FY 

2012, agencies reduced contract spending by more than $20 billion, 

the largest single year dollar decrease in Federal contract spending 

on record. Over this same period, with strong leadership attention, 

agencies were able to increase the percentage of eligible contract 

dollars awarded to small businesses. That said, there is much left 

to be done to ensure we meet our small business goals year after 

year and provide meaningful contract opportunities in these challenging economic times. My experience at SBA reinforced my belief 

that small business contracting is a win/win. These businesses get 

the revenue they need to create jobs and grow the economy, while 

the government gets access to some of the most innovative companies in our supply chain. I appreciate the continued help of this 

Committee, including important legislative changes that removed 

caps on the use of set-asides for women-owned small businesses. 

To build on the progress we are achieving to date, we must take 

better advantage of the mutually reinforcing practices that foster 

both greater small business participation and help us get better results from our federal contracts. These include: 

• Conducting effective market research so that small businesses 

are aware of potential opportunities and agencies can find capable 

small businesses; 

• Developing clearer requirements through the collaborative efforts of program and contracting personnel so that vendors can better understand agency needs and make informed decisions as to 

whether and when they compete for work; 

• Giving interested sources sufficient time to develop quality proposals; and 

• Taking better advantage of technology to make doing business 

with the government easier and less costly. 

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The priorities of the Office of Federal Procurement Policy (OFPP) 

are shaped around strengthening these ties. We are working with 

SBA, other federal agencies, private sector experts, and others who 

follow and represent the interests of small business to shape policies and identify best practices that allow agencies to buy smarter 

through the use of proven strategies for cutting costs and increasing quality while simultaneously strengthening our relationship 

with contractors, especially small business suppliers. 

Taking greater advantage of strategic sourcing 

Our efforts to identify better buying practices that save money 

and increase opportunities for small business led us to place greater emphasis on strategic sourcing. Strategic sourcing refers to the 

structured and thoughtful process of critically analyzing spending 

across organizations and using this information to achieve price 

savings, administrative cost reductions, and improved contract performance. 

Strategic sourcing, which the private sector long recognized as a 

successful business practice, requires agencies to look at the factors 

that most directly affect their ability to optimize value for the taxpayer, such as the level of customer demand, the way in which this 

demand is currently being met, variance in prices paid for similar 

goods and services with the same or different vendors, and the 

agency’s commodity management practices. Through these efforts, 

agencies drive inefficiencies out of their buying processes. In some 

cases, agencies achieve savings by leveraging demand to attain volume-based pricing discounts and eliminate duplicative contracts, in 

other cases by standardizing terms and conditions across contracts, 

or simply through smarter commodity management. 

Efforts to date illustrate the substantial savings that strategic 

sourcing offers. Government-wide strategic sourcing of items such 

as office supplies and domestic shipping services achieved nearly 

$300 million in direct and indirect savings since FY 2010. And 

agency-level strategic sourcing of goods like IT and medical equipment have saved hundreds of millions more. The Department of 

Homeland Security, for example, saved over $386 million in FY 

2012 by pooling purchases for a wide range of products across the 

Federal Emergency Management Agency, the Coast Guard, Customs and Border Protection, and other components. 

Equally important, these efforts demonstrate that agencies can 

increase their spending with small businesses and simultaneously 

reap the benefits of strategic sourcing. Our government-wide strategic sourcing of office supplies is a compelling example. By engaging the small business community as part of its market research, 

the General Services Administration (GSA), which served as the 

executive agent for this sourcing event, learned that the specifications in two planned requirements could hamper small business 

participation: overnight delivery (which can give an advantage to 

large firms who operate their own trucking fleets) and very small 

minimum order amounts (which increases administrative costs). 

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nated the requirement for next day delivery and instead provided 

for three or four day delivery and increased the minimum order 

size to enable small business to reduce administrative costs. GSA 

also divided the office supplies strategic sourcing acquisition 

(‘‘OS2’’) into three functional areas, one was set aside for small 

businesses and another (for toner) was set aside for SDVOSBs. 

These steps enabled small businesses to make highly competitive 

bids without diluting the benefits of pooling agency demand. Thirteen of the fifteen winning vendors were small businesses, including three SDVOSBs. 

The results from smart acquisition planning and careful consideration of small business needs are both telling and impressive. According to GSA, total dollars going to small businesses increased 

from 67 percent prior to implementation of the strategic sourcing 

solution to 76 percent through the solution, and in recent months, 

the number has approached 80 percent. According to GSA’s analysis, through April 2013, actual savings from OS2 totaled over $88 

million, or more than 14 percent under baseline costs. 

Many small businesses expressed concern that strategic sourcing 

could harm their participation in the federal marketplace. However, the Administration is working to ensure that competitive 

small businesses can engage in strategic sourcing. Based on the 

types of experiences I have just described and, even more importantly, the steps we are taking to move the initiative forward, I am 

confident that competitive small businesses—of which there are 

many—will not only hold their own, but do even better. And, those 

small businesses that are currently less competitive will have opportunities to get in the game in the future by taking steps to 

strengthen themselves. 

Here are several key steps that the Administration is taking to 

increase opportunities for small businesses at the same time as we 

work to maximize the value of strategic sourcing: 

Agencies are required to seek increased participation by small 

businesses when pursuing strategic sourcing. Last December, OMB 

issued a blueprint for improving acquisition through strategic 

sourcing. M–13–02 (December 5, 2012). This document clearly articulates that all strategic sourcing opportunities shall seek to increase participation by small businesses. It specifically requires 

that all proposed strategic sourcing agreements must baseline small 

business use under current strategies and set goals to meet or exceed 

that baseline participation under the new strategic sourcing vehicles. 

These requirements are designed to ensure that small business 

participation is actively considered throughout acquisition planning—first by identifying how agencies currently use small businesses in meeting requirements for a particular commodity, second, 

by identifying vendors that could provide the commodity and the 

relative presence of small businesses in the market and then by receiving input from industry, particularly small businesses, to consider how requirements or business practices might be adjusted to 

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ness-friendly strategies have been used successfully in commodity 

categories where small business participation was traditionally not 

as strong, such as print management and wireless telecommunications [expense management] services. 

Government-wide strategic sourcing decisions will be made by a 

council that includes the Small Business Administration (SBA). M– 

13–02 established the Strategic Sourcing Leadership Council 

(SSLC) to facilitate the organized expansion of strategic sourcing. 

Under my direction, the seven largest buying agencies (the Departments of Defense, Energy, Homeland Security, Health and Human 

Services, and Veterans Affairs, the General Services Administration, and the National Aeronautics and Space Administration) 

along with the SBA have been working together and forming teams 

of commodity experts to analyze current spending and potential 

savings opportunities across the government in areas such as 

desktops and laptops, information technology software, janitorial 

and sanitation supplies and building maintenance and operations 

services. 

It is important to emphasize that OMB created the SSLC to ensure that our strategic sourcing efforts are measured and focused. 

We are not seeking to strategically source everything the government buys, nor will every strategic sourcing decision mean fewer 

participants. The goal is to maximize value for the taxpayer and 

that will take different forms depending on what the spend analysis reveals in terms of the nature of the commodity and the government’s cost drivers. 

In some cases, commodity teams may recommend developing 

new, government-wide strategic sourcing vehicles to drive spending 

through a smaller number of vehicles that include contract-wide 

tiered pricing, or other appropriate strategies, to reduce prices as 

cumulative sales volume increases. However, in other cases, the decision may involve standardizing terms and conditions among existing vehicles so that we are better positioned for a sourcing event 

in the future. In all cases, agencies will require vendors to provide 

sufficient pricing, usage, and performance data to enable the government to improve its commodity management practices and monitor vendor performance and pricing changes throughout the life of 

the contract to ensure the benefits of strategic sourcing are maintained. 

For its part, SBA will continue to ensure this effort is providing 

maximized opportunities for small business contractors. Procurement Center Representatives continue to work with agencies and 

vendors to build awareness of any future sourcing events. SBA district offices and resource partners will train small businesses on 

how to most effectively compete. And all agencies are held accountable for meeting their small business contracting goals through 

SBA’s annual scorecard. 

The Administration is actively promoting the use of tools to facilitate greater small business participation on contract vehicles 

that have been strategically sourced. Many strategic sourcing vehicles are built around multiple award contracts that allow multiple 

vendors to offer their products and services and compete for orders 

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as needs arise. Thanks to the SBJA, agencies can now take greater 

advantage of tools to increase the participation of small businesses 

as prime contractors. These include reserves to increase the number of small business contract holders on the underlying multiple 

award contracts and set-asides at the order level. Both of these 

tools should help increase the amount of total spending that goes 

to small businesses on both government-wide and agency-wide vehicles that have been strategically sourced where it is not suitable 

to make a total business set-aside. 

In addition, we are actively exploring how agencies can take advantage of ‘‘on ramps’’ and ‘‘off ramps.’’ These tools allow agencies 

to enter into longer deals that are often required to get better 

prices and terms and conditions while giving small businesses that 

did not receive an award initially an opportunity to get onto the 

vehicle as slots open up, as may be the case where a current small 

business contractor no longer qualifies as a small business or 

where a current contract holder is routinely not participating when 

the agency asks for quotes or offers. 

Finally, we are taking advantage of opportunities for small businesses to pool their capabilities and become more competitive in responding to agency needs. In the case of office supplies, for example, one of the awardees was a consortium comprised of more than 

100 individual small business participants. 

Moving Forward 

OFPP is committed to ensuring that agencies remain vigilant in 

their efforts to maintain fiscal discipline through a forward-leaning 

but measured application of smarter buying tools to achieve the 

best value for our taxpayers. OFPP is equally committed to ensuring that agencies provide maximum opportunities for small businesses in federal contracting and subcontracting, so that they may 

flourish and apply their talents to the many pressing demands facing our government. We must pursue these important goals in harmony, as we have been doing and will continue to do. 

While there is work ahead, we are making important progress. 

With agency leadership and continued management attention coupled with the steps I have outlined above, there is every reason to 

believe that strategic sourcing can generate positive results from 

our contracts and also foster greater small business participation. 

We look forward to working with you and other members of Congress on these important endeavors. 

I would be pleased to address any questions you may have. 

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Good morning Chairman Hanna, Ranking Member Meng, and 

Members of the Subcommittee. My name is Jeffrey Koses and I am 

the Director of Acquisition Operations of the U.S. General Services 

Administration’s (GSA) Federal Acquisition Service (FAS), General 

Supplies and Services portfolio. 

I want to thank you for the opportunity to discuss GSA’s accomplishments under the Federal Strategic Sourcing Initiative (or 

FSSI), our efforts to modernize the Multiple Award Schedules 

(MAS) program to keep pace with federal agency needs and industry changes, and small business success with GSA’s governmentwide contracts (GWACs). As America’s buyer, GSA contracts with 

the private sector to provide commercial services and products that 

support Federal agencies. We strive to acquire the best possible 

deal for the taxpayer and to increase small business opportunity as 

part of helping federal agencies operate more efficiently. 

Several highlights of GSA’s success in ensuring significant small 

business participation while delivering high value contracts include: 

• 76 percent of dollars went to small business in GSA’s strategically sourced solution for office supplies 

• 34 percent of dollars awarded through the GSA Multiple 

Award Schedule (MAS) going to small business; 

• More than 19 percent of Request for Quotes (RFQs) set-aside 

through GSA’s E-Buy System for small businesses on MAS as a result of the Small Business Jobs Act of 2010; 

• An A+ small business rating for GSA by the Small Business 

Administration for two consecutive years; and 

• 25 percent of all dollars awarded between GSA’s Alliant and 

Alliant Small Business contracts are going to small businesses. 

Strategic Sourcing 

For many years, strategic sourcing has been a best practice in 

the private sector, and has resulted in significant savings. The Government Accountability Office (GAO) has found in a series of audits 

that the federal government can save billions of dollars through the 

application of strategic sourcing principles. In 2005, under former 

President Bush, the Office of Management Budget (OMB) launched 

a formal effort to promote strategic sourcing across government 

through a memorandum to Chief Acquisition Officers. 

Strategic sourcing received a renewed emphasis across government through a December 2012 memo from former Acting Director 

of OMB Jeffrey Zients creating a Strategic Sourcing Leadership 

Council (SSLC) comprised of the seven largest spending agencies, 

as well the Small Business Administration (SBA). This memorandum, among other things, directed GSA to establish 10 new 

strategic sourcing solutions: five each in 2013 and 2014. To achieve 

this ambitious goal, GSA is working closely with OMB and the 

agencies making up the SSLC. The agencies participating in these 

efforts have strongly emphasized the importance of meeting their 

small business utilization objectives; GSA couldn’t agree more. 

FSSI seeks to leverage the federal government’s collective buying 

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power in order to efficiently and effectively utilize taxpayer dollars 

and to increase dollars spent with small business. 

The Office Supplies (OS2) solution has served as the test case for 

this generation of federal strategic sourcing. GSA has used OS2 to 

realize substantial benefits for taxpayers. In audit GAO–12–178, 

GAO confirmed that agencies were saving money through the FSSI 

OS2 program. 

On June 1, 2010, GSA awarded BPAs to 15 contractors, 13 of 

whom were small businesses. Of these, 11 qualified under a socioeconomic subcategory. There are 5 women owned small businesses, 

2 service disabled veteran owned small businesses, 3 small disadvantaged, and 1 disadvantaged woman-owned small business. In 

the office supplies industry, there are some consortia made up as 

coops of individual small businesses. One of the winners was a consortia, with over 100 individual small businesses participating in 

OS2. 

OS2 has resulted in direct savings of $88.7 million on spending of $607.9 million through April 2013. This savings is calculated as 

the difference between what agencies spend through strategic 

sourcing and what they would have spent had they received nonstrategic sourcing pricing. 

GSA found that the FSSI had the added benefit of lowering 

prices charged by non-OS2 vendors. Prices for non-OS2 vendors are 

10 percent lower, against a standard industry benchmark, than 

they were in 2010. This improved pricing has resulted in further 

savings of over $98 million beyond what’s been directly saved 

through OS2. 

One of, if not the most significant, new element of OS2 is the 

ability to have greater transparency into pricing and how taxpayer 

dollars are being spent to drive even greater savings. OS2 contractors are required to report transactional data on all program sales. 

This level of financial information collection provides us for the 

first time with a deep vision into agency spending behavior. Over 

the last several months, GSA used this data to show contractors 

their pricing item by item, compared with their competitors. This 

empowered FSSI Office Supply contractors to understand their 

competitive position, and in many cases go back to their suppliers 

and strike better deals. After GSA shared this data, every one of 

the OS2 contractors sharply reduced prices. If the same ordering 

pattern holds for the period June 2013 through May 2014 (same 

contractor, same item and same quantity) there would be a savings 

of $12 million as a result of these price reductions. 

Key successes of OS2 program include: 

• An increase from 67 percent to over 76 percent of dollars spent 

with small business. 

• A decrease from more than 250 percent to 10 percent in price 

variability (the difference between high and low price for the same 

item). 

• A reduction in contract duplication and administrative costs, a 

reduction in bid and proposal costs for industry, and an increase 

in time for acquisition professionals to work on mission priorities. 

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• Greater accountability of vendors for meeting performance 

goals. 

• Knowledge and experience to help agencies implement future 

strategic sourcing solutions. 

Based on OMB’s direction, GSA is working towards establishing 

strategic sourcing solutions for Fiscal Year 2013 in the areas of: 

• Wireless rate plans and devices (awarded May 20, 2013) 

• Large Desktop Publisher Software 

• Print Management Phase 2 

• Maintenance, Repair, and Operations Supplies, and 

• Janitorial and Sanitation Supplies, 

GSA is exploring many other potential solutions for Fiscal Year 

2014, and will announce these areas as the Strategic Sourcing 

Leadership Council approves standup of a Government-wide commodity team. 

In conducting the commodity or service overview for strategic 

sourcing, one of our foundational questions addresses the impact of 

the solution on small business. Acting Administrator Tangherlini 

has made clear that expanded opportunity for small business is a 

crucial strategic sourcing success metric that will be monitored 

closely. 

We include the opportunity to expand percent of dollars going to 

small business, directly or as subcontractors, as a foundational element of strategic sourcing, and we are committed to ensuring small 

business opportunity all along the path of strategic sourcing. GSA 

believes strategic sourcing and small business success not only are 

not mutually exclusive, but can actively be harmonized. 

GSA has taken several specific steps to ensure small business opportunity, standardize process, simplify rules, show an open and 

transparent process, and demonstrate that the competition is fair. 

In the case of both Janitorial and Sanitation Supplies and our 

Maintenance and Repair Operations Supplies strategic sourcing 

initiatives, we are setting aside the majority of the awards for 

small business and we have broken down these categories in ways 

that maximize the opportunities for small business success. 

GSA’s commitment to small business goes well beyond FSSI. We 

have received an A+ rating from the Small Business Administration for 2010 and 2011, and we look forward to building further on 

these successes. 

Multiple Award Schedules 

GSA believes that the Multiple Award Schedules (MAS) program 

represents the best opportunity for well-prepared, highly competitive small businesses anywhere in the government procurement 

world. Small businesses represent an estimated 80 percent of all 

MAS vendors, and approximately 34 percent of the $38 billion dollars in sales go to small businesses. More importantly, when agencies use the MAS program the majority of users have a higher perSBREP-219 with DISTILLER

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centage of spending that goes to small business than when they 

use other acquisition vehicles. 

Federal agencies tell GSA that they use schedules because it 

saves them time and money. Agencies can experience up to a 50 

percent time savings using schedules over more traditional procurement practices. Still, we believe that there is substantial room 

for improvement in the MAS program. 

Over the last year, we have worked diligently with both small 

businesses and federal agencies, asking for input on how the MAS 

program can better meet their needs and how GSA can improve its 

support. We received and are working to implement many of the 

important suggestions yielded in these industry and agency conversations. Similarly, we are eager to hear your input as we work 

towards the common goals of achieving taxpayer savings and ensuring small business opportunity. 

When small businesses are informed, properly trained and ready 

to compete they succeed. For example, on GSA’s National Information Technology Commodity Program, GSA awarded 44 BPAs to 

small businesses under schedule 70 for IT Commodities and ancillary services. The goals of this program are to drive down the cost 

of acquisition, and establish a more efficient and cost-effective buying process. We are only six months into the program, but the preliminary results are positive: federal agencies are reporting significant savings, an improved, easier to use process, and excellent customer service. 

To achieve greater savings, GSA must have greater visibility into 

key data across the MAS program. We know data is not a free 

good. However, if we extrapolate from the Office Supplies example 

and can achieve the same results on our other product based schedules, it could result in significant savings. 

In addition, by making the right transactional data available to 

small business, we can help them be more competitive and make 

good decisions about when and how to pursue federal business. 

Small Business Set-Asides 

One area of success for small business under the Multiple Award 

Schedules program is through our training focused on the discretionary set-aside rule, which came about as a result of section 1331 

of the Small Business Jobs Act of 2010. Since April 1, 2012, 

through GSA’s e-Buy system, we have set aside 15,942 Requests for 

Quotation (RFQ) (more than 19 percent) for small business. For the 

month of April 2013, we set aside 22.5 percent of all RFQs—great 

progress as the buying season kicks into high gear. 

GSA employs several methods to deliver our training, including 

classroom training, webinars, blogs, Continuous Learning Modules 

in the Federal Acquisition Institute (FAI) and Defense Acquisition 

University (DAU) portals, and GSA’s YouTube channel. 

To date, we have trained more than 9,700 members of the acquisition workforce on proper use of Multiple Award Schedules and 

the utilization of Small Business, resulting in 32,071 Continuous 

Learning Points being issued to acquisition workforce members. 

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The government-wide and industry interest in this training is 

growing; more than 1,000 people participated in a recent GSA web 

training on ‘‘GSA Schedules and Small Business Utilization.’’ 

We are very proud of our work to ensure the successful implementation of Section 1331. However, the true measure of success 

lies in the results, we are looking to see an increase in the percent 

of dollars going to Small Business. 

Government-Wide Contracts (GWACS) 

In early 2009, GSA awarded two sets of contracts to create a 

GWAC. These contracts, known as Alliant and Alliant Small Business, were designed for long term planning of large scale customized IT solution while strengthening opportunities for small 

businesses. 

To date, small businesses have won $1.3 billion under Alliant 

Small Business—25.9 percent of all dollars awarded between the 

two programs. 

In addition, under the prime Alliant contract, small businesses 

have been awarded $534 million in subcontracts. 

We are looking to replicate these successes with a new government-wide contract vehicle that would provide for integrated professional services. We see our proposed One Acquisition Solution 

for Integrated Services (OASIS) contract as a key to simplifying the 

acquisition of integrated professional services, and moving us to 

common labor category definitions, thus furthering a better dialogue within government and between government and industry. 

Conclusion 

At GSA, it is our goal to be good stewards of taxpayer dollars. 

This includes a focus on increasing small business opportunities for 

vendors committed to delivering the best value to the taxpayer. 

As we look to the future, GSA will continue to focus on strategic 

sourcing, modernizing the schedules program, improving our pricing and tools, raising our standards, offering the best training and 

customer service we can, and collecting the information and data 

that will help save taxpayer dollars. GSA will continue being a 

leader in opening dialogue with industry and our program will remain a doorway to opportunity for highly competitive small business. 

On behalf of GSA, thank you for this opportunity to appear before the committee and I would be happy to answer your questions. 

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June 19, 2013 

To: Chairman of the House Contracting and Workforce 

Subcommittee 

From: Bob Griffin, GSA Schedule Consultant, Contractor 

and Former DOD Schedules Customer 

Subject: Additional Input Re: Strategic Sourcing utilizing 

the GSA FSSI BPA and the GSA Multiple Award Schedule 

(MAS) Program 

Dear Congressman Hanna, 

I attended the June 13, 2013 hearing on Strategic Sourcing 

which you conducted and found it to be very beneficial and constructive. I thank you for that. 

I did want to bring to your attention a few more pertinent details 

concerning GSA FASs past performance in this area as well as 

their current policies which quite frankly effect businesses of all 

sizes but particularly Small Business. Lets look at two areas: 

1. GSAs internal numbers on FSSI Generated Savings in the Office Supplies area 

2. The concept and reality of maintaining ‘‘continuously open’’ 

GSA Schedule Solicitations 

FSSI Generated Savings Numbers: 

On June 13, 2013, Mr. Koses of GSA, FAS stated in his testimony to your subcommittee that the GSA Office Supplies FSSI initiatives had generated $88 million dollars in savings. That number 

was based on a spend of approximately $600 million and an average discount (as compared to GSA Schedule Pricing) of 12.7%. 

On June 18, 2013 at his Senate Confirmation hearing, Mr. 

Tangherlini, GSAs Acting Administrator, stated in his testimony 

that the GSA Office Supplies FSSI initiatives had generated $127 

million dollars in savings. 

This morning, June 9, 2013, I went into GSAs own Strategic 

Sourcing Metrics website at https://strategicsourcing.gov and found 

Office Supplies Savings through FSSI of $2.7 million based on 

Spend through FSSI of $17.4 million based on October 2012 data. 

Which number is correct?? I think we also need to remember 

that those providing these numbers are the same individuals that 

provided a Demand Based Model (DMB) savings of $26 million to 

Congressman Graves in an early 2013 hearing. This number then 

was reduced to the range of $3.6–$6 million dollars due to your 

staff’s estimates and GSAs recalculations. GSA has also been cited 

by GAO on past instances where GSAs numbers were far off the 

mark on estimating potential savings. I have been involved with 

GSA, FAS as a Schedules Customer, Contractor and Consultant for 

more than 25 years and their numbers are rarely correct. I have 

generated FOIA requests in this and other areas as of May 22nd 

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and have not yet received those results to further amplify this 

point. 

You also need to understand that GSA, FAS is basing their prediction/forecast of a 12.7% average discount on Office Supplies 

FSSI OS1 and OS2 as compared with typical GSA Schedule 75 

Contractor pricing. This in my judgement is based on incomplete 

pricing data as far as actual Schedule Purchase Prices may have 

been. GSA Schedule Pricing as awarded is a Maximum Not To Exceed Price. Schedule Contractors are authorized to provide Spot 

Discounts off awarded pricing and Quantity and Volume Discounts. 

If you look at the wording of almost all product and services RFQs 

that appear on GSA Ebuy or come agency direct, you will see wording that Contractors are ‘‘highly encouraged’’ to give additional 

pricing discounts in this RFQ. This was a norm in prior years on 

orders that exceeded the Maximum Order Threshold or MOT but 

has in recent times been a standard request regardless of the size 

of the order. This means that GSA does not have the pricing information necessary to make the claim of a 12.7% savings. If they had 

the information they would already be using it in their new Price 

Right Pricing Tool. They are not. They are developing the concept 

using Delivery Services Pricing. 

Maintaining ‘‘Continuously Open’’ GSA Schedule Solicitations: 

Lets look at GSA, FASs record on GSA Schedule 75 Office Supplies. On October 1, 2010, GSA Schedule 75 was closed with a notice that it would be reopened on October 1, 2012 to receive new 

offers. In September 2012, after industry had repeatedly inquired, 

they were told that Schedule 75 would remain closed and that its 

status would be reviewed again in 2013 for reopening on October 

1, 2013. That is not the whole story though. In early 2010, Schedule 75 was refreshed or revised and contract wording was placed 

in the solicitation that stated that in order to meet the new pricing 

metric the offeror would have to provide 3 high volume invoices in 

the past 3 months from the Most Favored Customer for each and 

every product that was to be offered on the Schedule. This in effect 

closed the Schedule 75 to many offerors who formerly would have 

qualified. So in reality this schedule was barely open months before 

closing on October 2010. I remember attending a GSA schedule 

presentation at 26 Federal Plaza in New York City that Spring and 

asking the reason for the change which no other schedule had put 

in place. The presenter who was a Schedule 75 Contracting Officer 

stated that ‘‘that’s just the way it is.’’ I might add that the GSA 

National Admin Services and Office Supplies Center in New York 

City is currently using that pricing language in all its product 

schedules. 

Had that pricing language been in place for the past 10 years 

Schedule 75 Office Supplies would have bee a very small schedule 

dominated by large business and most if not all of the current FSSI 

BPA Small Business Contractors would not have even gained a 

Schedule 75 contract let alone won an FSSI BPA. 

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On June 12, 2013 I provided Ms. Emily Murphy, your stellar 

Senior Contracting Council, with two new examples that are anti 

small business and very restrictive that will in fact allow GSA to 

tell you that the GSA Schedules Program remains ‘‘continuously 

open’’ with the exception of Schedule 75. However, they will be 

‘‘continuously open’’ in name only for Small Business and Large 

Business alike. These two items of contract language changes to 

GSA schedule offer qualifications are probably the most significant 

in the past 20 years and definitely have an effect on the ‘‘continuously open’’ status of Schedules. This is analogous to a store owner 

changing his admission policy from store capacity of 50 with an 

entry fee of $25 to a store capacity of 5 with an entry fee of $2500. 

The store remains ‘‘continuously open’’ but realistically open to only 

a few. It’s a game of semantics with the American people being the 

loser. 

The first of these two items is called ‘‘Full Products and Broad 

Services Offerings’’. It states that a GSA Schedule offeror or prospective new contractor must provide a full and broad offering on 

services and/or products. Offerors will not be accepted with only 

limited item/offering (product, labor category, training course, or 

fixed-price services) unless it represents a total solution for the 

Special Item Number (SINs). This will have a direct effect on existing Schedule Contractors who may very well have to cross this new 

requirements bridge on contract extension as well as brand new 

offerors that cannot meet this standard. This is particularly true of 

Small Business. Going back to the Office Supplies Schedule 75, we 

had the ability to offer a FULL CATALOG OFFER OR a PARTIAL 

CATALOG OFFER (although the same can be said for other Product Schedules). In the area of services Schedules, some schedule 

SINS may have 9–12 tasks or subtasks included within the SIN description. Does this new standard mean that a business must be 

able to provide and have provided all 9–12 subtask skills? This 

falls squarely on the back of Small Business. 

The second of these two items is called ‘‘Fair and Reasonable 

Pricing’’. It states that in order to determine fair and reasonable 

pricing, the Contracting Officer may consider many factors, including pricing on competitor contracts, historical pricing and currently 

available pricing in other venues. Offers which provide Most Favored Customer pricing, but which are not highly competitive will 

not be found fair and reasonable and will not be accepted. This is 

huge for existing contractors who will in fact have to start over on 

pricing and of course the new contract offerors or applicants. This 

also falls squarely on the back of Small Business. Just what is 

highly competitive pricing? What type of pricing was being negotiated and awarded by GSA Contracting Officers in the past? Ms. 

Murphy should be able to provide valuable insight on that point 

from an historical perspective. 

Both items are major paradigm changes in the GSA MAS Schedule Program and have appeared in the semi-annual January/June 

Schedule Refresh/Revision Process. They are very broad, undefined 

and frankly hard to get your arms around. This is exactly what 

GSA, FAS desires as it will give Contracting Officers more discretion in making the decision as to which company makes it and 

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which doesn’t once again setting the new tempo of the ‘‘continuously open’’ GSA MAS Schedules program. 

Just how do those that are not able to attain a GSA Schedule 

have the opportunity to participate in level II which would be ‘‘bidding on and winning’’ an FSSI BPA.? They don’t. You not only need 

to look at what happens to your base of already awarded GSA 

Schedule Contractors who drop out of the program or do not at 

least bid on FSSI BPAs like OS2 but also these new offerors or applicants who can’t even begin in the process. The process as is currently optimizes only a very few companies, while many other 

qualified and eager companies are denied entry. 

I appreciate the opportunity to provide you with this additional 

detailed information. Thank you again for holding these subcommittee hearings. GSA, FAS has always seemed to believe that 

they are less accountable and subject to oversight since they generate much of their own funding due to their collection of the Industrial Funding Fee. They clearly need the level of oversight and 

supervision that your Subcommittee provides. 

Bob Griffin 

SBREP-219 with DISTILLER

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SBREP-219 with DISTILLER


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SBREP-219 with DISTILLER


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Æ 

SBREP-219 with DISTILLER


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