Our prior work has shown how leading companies use strategic sourcing—a process that moves an organization away from making numerous individual procurements to purchasing through a broader aggregate approach—to manage up to 90 percent of their procurements and achieve savings of 10 to 20 percent on the goods and services they buy. A strategic sourcing effort begins after an opportunity is identified, usually through a spend analysis. Spend analyses provide knowledge about how much is being spent for given products and services, who the buyers and suppliers are, and where opportunities exist for leveraged buying and other tactics to save money and improve performance. Based on such analysis, organizations evaluate and prioritize commodities for strategic sourcing. In 2013, we identified five foundational principles critical to carrying out an effective strategic sourcing approach: maintaining spend visibility, centralizing procurement, developing category strategies, focusing on total cost of ownership, and regularly reviewing strategies and tactics. Within those principles, leading companies highlighted the importance of identifying the most cost effective sourcing vehicles, clearly defining and communicating policies in order to eliminate unapproved purchases, or “rogue buying,” and ensuring that spending goes through approved contracts. Taken together, these principles enable companies to identify market trends, share knowledge about suppliers, make more informed contracting decisions, and take advantage of opportunities to save money and buy more efficiently. See appendix III for a full list of leading companies’ foundational principles for strategic sourcing. Since 2005, OMB has issued several memorandums to establish a framework, standards, and governance for government-wide strategic sourcing efforts. In its May 2005 memorandum, OMB defined strategic sourcing as the “collaborative and structured process of critically analyzing an organization’s spending and using this information to make business decisions about acquiring commodities and services more effectively and efficiently,” and directed agencies to take action to leverage and control government spending through strategic sourcing. In response to OMB direction, the Department of the Treasury and GSA, with support from OFPP, partnered to launch the FSSI program in November 2005 to strategically source commonly purchased products and services. The FSSI program was chartered under the purview of the Chief Acquisition Officer’s Council and the Strategic Sourcing Working Group with OFPP ultimately responsible for providing oversight and guidance as well as ensuring the overall effectiveness of the program. The Working Group, comprised of representatives of various agencies, was responsible for vetting and approving initiatives and sourcing strategies, and establishing standards, processes, and policies. The FSSI Program Management Office within GSA was established to support the Working Group and coordinate the efforts of the agencies designated as executive agents to implement individual FSSI initiatives; provide guidance and oversight; review information and recommendations; and makes strategic program decisions. In December 2012, OMB issued guidance that formalized a governance structure, provided additional requirements, and identified key characteristics of federal strategic sourcing efforts. For example, key characteristics included the use of tiered pricing or other appropriate strategies to reduce prices as cumulative sales volume increases, and contractual requirements with vendors to provide sufficient pricing, usage, and performance data to enable the government to improve commodity management practices on an ongoing basis. Noting that the majority of federal spending is driven by a small number of large agencies, OMB established the Strategic Sourcing Leadership Council (Leadership Council) and called on the seven largest and highest spending agencies and the Small Business Administration to take a leadership role on strategic sourcing. The Leadership Council is chaired by the Administrator of OFPP and comprised of representatives from the Departments of Defense (DOD), Energy, Health and Human Services, Homeland Security, and Veterans Affairs; GSA; the National Aeronautics and Space Administration (NASA); and the Small Business Administration. See appendix IV for key provisions from the 2012 OMB strategic sourcing memorandum. The Leadership Council is expected to propose plans and management strategies to maximize the use of strategic sourcing efforts. For example, in 2013, the Leadership Council established a three step key decision point process for developing, approving, and overseeing the FSSIs which is described in GSA’s FSSI guidance. The Leadership Council must provide approval at each step in order for a prospective FSSI to progress through the strategic sourcing process and obtain the requisite designation. Figure 1 summarizes the key decision point process. For the first key decision point, any interested agency can present a high level opportunity analysis for a commodity which they believe may be a FSSI candidate. If the Leadership Council approves the candidate at the first key decision point, a commodity team is formed to develop and refine the commodity strategy and develop a solution strategy. If the Leadership Council approves the second key decision point, the commodity team is allowed to execute the strategy. After execution, the commodity team is to summarize the solution and assess success. If the new solution proves valuable, then it is approved at the third decision point and given “FSSI” designation and, it is to become mandatory to the maximum extent practicable. Because the key decision point process is relatively new, it has not been fully applied to all of the current FSSIs in our review. For example, Janitorial and Sanitation Supplies and Maintenance, Repair, and Operations Supplies are listed on GSA’s FSSI website although they have not been formally approved as FSSIs at the third key decision point. After determining the scope and the total government-wide spending on the commodities covered by the proposed solution, the commodity team is to refine the scope by establishing a baseline for the amount of spending that can potentially be addressed by the solution. This baseline, referred to as addressable spend, is to be used to measure FSSI adoption by calculating the amount of actual spending through the FSSI compared to the total addressable spend and is required for approval at the second key decision point. Addressable spend may identify some spending as non-addressable to accommodate agency needs or unique circumstances such as existing agency contractual arrangements where termination costs would be prohibitive and legislative or other authorities unique to an agency. If an agency seeks to exclude a portion of spending from the addressable spend total, the agency must provide the basis for the exclusion to the commodity team. If resolution is not reached at the commodity team level, the request for exclusions will be presented to the Leadership Council for discussion and resolution. Using the approved addressable spend as a baseline, Leadership Council agencies are required to provide the lead agency with non-binding commitment letters stating an agency’s intended volume of purchases through the proposed solution, for purposes of negotiation and pricing, prior to award. These letters do not obligate the agency to use a solution if, for example, the pricing, terms, and conditions, are not aligned with expectations. Nonetheless, the lead agency is to describe how each Leadership Council agency will transition from existing vehicles to the new solution. The lead agency is also responsible for ongoing management of the FSSI including keeping prices competitive, monitoring vendor performance, tracking agency adoption, and managing to performance metrics including savings and small business achievement against benchmarks, among other things. According to OMB’s addressable spend guidance, identifying addressable spend, determining conditional commitment levels, and measuring adoption rates are critical to the success of strategic sourcing. Further, the Leadership Council is to continuously monitor information on performance and promote agency adoption, among other things. To assist their effort, GSA established the FSSI Program Management Office to monitor overall FSSI program usage for all commodities, to collect and analyze performance data, and to provide an assessment to the Leadership Council. The office is also tasked with disseminating best practices, providing guidance on performance measures and data collection, and recommending improvements to the FSSIs. In addition to formalizing the governance structure for government-wide strategic sourcing efforts, OMB also identified an interim CAP goal for strategic sourcing in February 2012. CAP goals were introduced in the fiscal year 2013 federal budget and focused on 14 major issues including strategic sourcing. The strategic sourcing CAP goal statement for fiscal years 2013 and 2014 directed agencies to increase their use of FSSI vehicles by at least 10 percent in both fiscal years 2013 and 2014. For fiscal years 2014-2015, OMB established new measures for the strategic sourcing CAP goal to measure Leadership Council agency savings, adoption, small business use, and reduction in duplication. Further, federal agencies have also initiated strategic sourcing efforts that do not fall within the purview of the FSSI program. For example, the Department of Veterans Affairs reported that its strategic sourcing efforts generated $1.4 billion in cost avoidances in fiscal year 2015, including savings from pharmaceutical purchases and medical supplies. The Department of Homeland Security reports that it saved $466 million in fiscal year 2015 through a range of agency- and government-wide strategic sourcing vehicles including FSSIs. In December 2014, OFPP issued a memorandum that directs agencies to take specific actions to implement category management, an approach which is intended to manage entire categories of spending across government for commonly purchased goods and services. The memorandum notes that despite some progress in implementing strategic sourcing efforts, agencies continue to duplicate procurement efforts and award contracts for similar services to the same vendors, which imposes significant costs on contractors and agencies. In May 2015, the Leadership Council approved government-wide category management guidance which describes category management as a fundamental shift from the practice of handling purchasing, pricing analysis, and vendor relationship management in thousands of procurement units across government. According to the guidance, the federal government will “buy as one” under category management by creating common categories of products and services across agencies and manage each category as a mini-business with its own set of strategies, led by a category manager and supporting senior team with expertise in their assigned category. This approach includes not only strategic sourcing, but also a broader set of strategies, such as developing common standards in practices and contracts, improved data analysis and information sharing to better leverage the government’s buying power and reduce unnecessary contract duplication.