GAO has been assessing strategic sourcing and the potential value of applying these techniques to federal acquisitions for more than a decade. In 2002, GAO reported that leading companies of that time committed to a strategic approach to acquiring services—a process that moves a company away from numerous individual procurements to a broader aggregate approach—including developing knowledge of how much they were spending on services and taking an enterprise-wide approach to As a result, companies made structural changes services acquisition.with top leadership support, such as establishing commodity managers— responsible for purchasing services within a category—and were better able to leverage their buying power to achieve substantial savings. Strategic sourcing can encompass a range of tactics for acquiring products and services more effectively and efficiently. In addition to leveraged buying, tactics include managing demand by changing behavior, achieving efficiencies through standardization of the acquisition process, evaluating total cost of ownership, and better managing supplier relationships. We have particularly emphasized the importance of comprehensive spend analysis for efficient procurement since 2002. Spend analysis provides knowledge about how much is being spent for goods and services, who the buyers are, who the suppliers are, and where the opportunities are to save money and improve performance. Private sector companies are using spend analysis as a foundation for employing a strategic approach to procurement. We have previously reported that because procurement at federal departments and agencies is generally decentralized, the federal government is not fully leveraging its aggregate buying power to obtain the most advantageous terms and conditions for its procurements. Agencies act more like many unrelated, medium-sized businesses and often rely on hundreds of separate contracts for many commonly used items, with prices that vary widely. Recognizing the benefits of strategic sourcing, the Office of Management and Budget (OMB) issued a memorandum in 2005 that implemented strategic sourcing practices. Agencies were directed to develop and implement strategic sourcing efforts based on the results of spend analyses. In addition to individual agency efforts, a government-wide strategic sourcing program—known as the Federal Strategic Sourcing Initiative (FSSI)—was established in 2005. FSSI was created to address government-wide opportunities to strategically source commonly purchased products and services and eliminate duplication of efforts across agencies. The FSSI mission is to encourage agencies to aggregate requirements, streamline processes, and coordinate purchases of like products and services to leverage spending to the maximum extent possible. At the time of our 2012 report, four FSSI efforts were ongoing— focused on office supplies, domestic delivery of packages, telecommunications, and print management—and three were planned related to SmartBUY, Wireless plans and devices, and publication licenses. In our September 2012 report, we found that most of the agencies we reviewed leveraged a fraction of their buying power through strategic sourcing. More specifically, in fiscal year 2011, the Department of Defense (DOD), Department of Homeland Security (DHS), Department of Energy, and Department of Veterans Affairs (VA) accounted for 80 percent of the $537 billion in federal procurement spending, but reported managing about 5 percent of that spending, or $25.8 billion, through strategic sourcing efforts. Similarly, we found that the FSSI program had only managed a small amount of spending through its four government- wide strategic sourcing initiatives in fiscal year 2011, although it reported achieving significant savings on those efforts. Further, we found that most selected agencies’ efforts did not address their highest spending areas, such as services, which provides opportunities for significant savings. We found that when strategically sourced contracts were used, agencies generally reported achieving savings. For example, selected agencies generally reported savings ranging from 5 percent to over 20 percent of spending through strategically sourced contracts. In fiscal year 2011, DHS reported managing 20 percent of its spending and achieving savings of $324 million. At the government-wide level, the FSSI program reported managing $339 million through several government-wide initiatives in fiscal year 2011 and achieving $60 million in savings, or almost 18 percent of the procurement spending it managed through these initiatives. After strategic sourcing contracts are awarded, realizing cost savings and other benefits depends on utilization of these contracts. We found that only 15 percent of government-wide spending for the products and services covered by the FSSI program went through FSSI contracts in fiscal year 2011. Agencies cited a variety of reasons for not participating, such as wanting to maintain control over their contracting activities, or because the agency had unique requirements. FSSI use is not mandatory and agencies face no consequences for not using FSSI contract vehicles. There are a variety of impediments to strategic sourcing in the federal setting but several stood out prominently in our 2012 review.agencies faced challenges in obtaining and analyzing reliable and detailed data on spending as well as securing expertise, leadership support, and developing metrics. Data: Our reports have consistently found that the starting point for strategic sourcing efforts is having good data on current spending and yet this is the biggest stumbling block for agencies. A spending analysis reveals how much is spent each year, what was bought, from whom it was bought, and who was purchasing it. The analysis also identifies where numerous suppliers are providing similar goods and services—often at varying prices—and where purchasing costs can be reduced and performance improved by better leveraging buying power and reducing the number of suppliers to meet needs. The FSSI program and selected agencies generally cited the Federal Procurement Data System-Next Generation (FPDS-NG)—the federal government’s current system for tracking information on contracting actions—as their primary source of data, and noted numerous deficiencies with these data for the purposes of conducting strategic sourcing research. Agencies reported that when additional data sources are added, incompatible data and separate systems often presented problems. We have previously reported extensively on issues agencies faced in gathering data to form the basis for their spend analysis. However, some agencies have been able to make progress on conducting enterprise-wide opportunity analyses despite flaws in the available data. For example, both the FSSI Program Management Office and DHS told us that current data, although imperfect, provide sufficient information for them to begin to identify high spend opportunities. DHS has in fact evaluated the majority of its 10 highest-spend commodities and developed sourcing strategies for seven of those based on its analysis of primarily FPDS-NG data. Further, we have previously reported that the General Services Administration estimated federal agencies spent about $1.6 billion during fiscal year 2009 purchasing office supplies from more than GSA used available data on spending to support 239,000 vendors.development of the Office Supplies Second Generation FSSI, which focuses office supply spending to 15 strategically sourced contracts. Expertise: Officials at several agencies also noted that the lack of trained acquisition personnel made it difficult to conduct an opportunity analysis and develop an informed sourcing strategy. For example, Army officials cited a need for expertise in strategic sourcing and spend analysis data, and OMB officials echoed that a key challenge is the dearth of strategic sourcing expertise in government. VA and Energy also reported this challenge. A few agencies have responded to this challenge by developing training on strategic sourcing for acquisition personnel. For example, the Air Force noted that it instituted training related to strategic sourcing because it is necessary to have people who are very strong analytically to do the front-end work for strategic sourcing, and these are the hardest to find. The training course facilitates acquisition personnel in obtaining the strong analytical skills to perform steps like market evaluation. VA has also begun to develop training to address this challenge. Leadership commitment: We also found in 2012 that most of the agencies we reviewed were challenged by a lack of leadership commitment to strategic sourcing, although improvements were under way. We have reported that in the private sector, the support and commitment of senior management is viewed as essential to facilitating companies’ efforts to re-engineer their approaches to acquisition as well as to ensuring follow through with the strategic sourcing approach. However, we found in 2012 that leaders at some agencies were not dedicating the resources and providing the incentives that were necessary to build a strong foundation for strategic sourcing. Metrics: A lack of clear guidance on metrics for measuring success has also impacted the management of ongoing FSSI efforts as well as most selected agencies’ efforts. We found that agencies were challenged to produce utilization rates and other metrics—such as spending through strategic sourcing contracts and savings achieved— that could be used to monitor progress. Several agencies also mentioned a need for sustained leadership support and additional resources in order to more effectively monitor their ongoing initiatives. Agency officials also mentioned several disincentives that can discourage procurement and program officials from proactively participating in strategic sourcing, and at many agencies, these disincentives have not been fully addressed by leadership. Key disincentives identified by agency officials include the following: A perception that reporting savings due to strategic sourcing could lead to program budgets being cut in subsequent years, Difficulty identifying existing strategic sourcing contracts that are available for use as there is no centralized source for this information, A perception that strategically sourced contract vehicles may limit the ability to customize requirements, A desire on the part of agency officials to maintain control of their Program officials’ and contracting officers’ relationships with existing The opportunity to get lower prices by going outside of strategically sourced contracts. Leaders at some agencies have proactively introduced practices that address these disincentives to strategically source. For example, DHS and VA reported increasing personal incentives for key managers by adding strategic sourcing performance measures to certain executives’ performance evaluations. In addition, several agencies including DOD, DHS, and VA have instituted policies making use of some strategic sourcing contracts mandatory or mandatory “with exception,” although the extent to which these policies have increased use of strategic sourcing vehicles is not yet clear. Some agencies have made use of automated systems to direct spending through strategic sourcing contracts.