The federal government has a long-standing policy of maximizing procurement opportunities for small businesses, including small disadvantaged businesses. To encourage the award of federal contracts to small businesses, Congress has set an annual government-wide goal of awarding not less than 23 percent of prime contract dollars to small businesses. SBA negotiates specific goals with each agency to help ensure that the federal government collectively meets this statutory goal. In addition, Congress has established statutory goals for various socioeconomic categories of small businesses. The current goals are 5 percent of prime contract and subcontract dollars are to be awarded to women-owned small businesses, 5 percent of prime contract and subcontract dollars are to be awarded to small disadvantaged businesses, 3 percent of prime contracts and subcontract dollars are to be awarded to service-disabled veteran-owned small businesses, and 3 percent of prime contract and subcontract dollars are to be awarded to small businesses in Historically Underutilized Business Zones (HUBZone). To increase small businesses’ visibility within federal agencies, in 1978 Congress amended the Small Business Act to require that all federal agencies with procurement powers establish an Office of Small and Disadvantaged Business Utilization (OSDBU), which would advocate for small businesses within the agencies. The OSDBU is managed by a director who is responsible for implementing and executing the agency’s functions and duties related to the award of contracts and subcontracts to small and disadvantaged businesses. The Small Business Act lists a number of functions that OSDBU directors are responsible for carrying out, including making recommendations to contracting officers as to whether particular contract requirements should be set aside for small businesses.business specialists, who are responsible for working with OSDBUs and agency contracting officers to advocate for small businesses. In general, a strategic sourcing effort begins with an opportunity assessment—an analysis of spending (spend analysis) and the identification of products and services for which strategic sourcing should be implemented. Spend analysis provides knowledge about how much is being spent for which products and services, who the buyers are, who the suppliers are, and where the opportunities are for leveraged buying and other tactics to save money and improve performance. Data on spending are analyzed on a continual basis to support decisions on strategic sourcing and procurement management in areas such as cutting costs and streamlining operations. Based on this analysis, organizations evaluate and prioritize commodities to create a list of top products or services to target for strategic sourcing. This list typically includes the products or services on which most of the organization’s spending is focused. In addition to spending, criteria such as potential savings and relative ease of implementation are considered. Once a product or service is selected for strategic sourcing, a general process is followed that includes steps such as developing, implementing, and managing the sourcing strategy for that product or service. A strategic sourcing initiative can involve multiple contracts. Recognizing the benefits of strategic sourcing, OMB issued a memorandum in 2005 that directed federal agencies to develop and implement a strategic sourcing effort to help control spending. This memorandum defined strategic sourcing as the “collaborative and structured process of critically analyzing an organization’s spending and using this information to make business decisions about acquiring commodities and services more effectively and efficiently.” According to the memorandum, the process helps agencies optimize performance, minimize price, increase achievement of socioeconomic acquisition goals, evaluate total life-cycle management costs, improve vendor access to business opportunities, and otherwise increase the value of each dollar. The memorandum also stated that any strategic sourcing plan must be balanced with goals for small businesses. Finally, the memorandum required agencies to identify at least three commodities that could be strategically sourced and develop agency-wide strategic sourcing plans to implement their strategic sourcing programs. In subsequent memorandums, OMB offered further guidance on implementing strategic sourcing. Most recently, in December 2012 OMB issued a memorandum reiterating the importance of strategic sourcing and emphasizing that to the extent practicable, all strategic sourcing opportunities should seek to increase participation by small businesses. In addition, the guidance created a new Strategic Sourcing Leadership Council consisting of the seven largest procurement agencies and SBA.The council was charged with leading the government’s efforts to increase the use of strategic sourcing. OMB’s guidance related to strategic sourcing and small businesses is discussed in greater detail in the next section of this report. In addition to individual agency efforts, a government-wide strategic sourcing program known as the Federal Strategic Sourcing Initiative (FSSI) was established in 2005 as a direct result of the OMB memorandum. FSSI was created to address government-wide opportunities to strategically source commonly purchased products and services and eliminate duplication of efforts across agencies. The Office of Federal Procurement Policy—the office within OMB assigned to oversee the FSSI program—is ultimately responsible for providing oversight and guidance, as well as ensuring the overall effectiveness of FSSI. In addition, there is an FSSI Program Management Office located within GSA. The mission of the FSSI program is to encourage agencies to aggregate contract requirements, streamline processes, and coordinate purchases of like products and services to leverage spending to the maximum extent possible. Four government-wide initiatives had been implemented as of fiscal year 2012: office supplies, print management, telecommunications expense management services, and domestic delivery services. Office supplies offers a catalogue of consumable office supplies; print management reduces equipment needed for printing, copying, scanning, and faxing; telecommunications expense management services works to optimize wireless telecommunications expenses and plan selection; and domestic delivery services offers delivery service for small packages. We have previously reported on strategic sourcing. For example, we found in September 2012 that the agencies we reviewed—DOD, DHS, and the Departments of Veterans Affairs and Energy—leveraged only a fraction of their buying power through strategic sourcing and achieved limited savings. DOD and the Department of Veterans Affairs evaluate the best ways to strategically source their highest spending categories. These agencies agreed with the recommendation and have since told us that they are analyzing spending data. However, they had not completed this analysis as of August 2013. We also found that a few agencies had experienced challenges in meeting requirements unique to government procurements, such as meeting small business goals. However, while acknowledging that reducing the number of vendors providing a product or service means that some vendors will be unable to participate, agency officials reported finding ways to conduct strategic sourcing efforts that allow for maximum feasible small business participation. GAO, Strategic Sourcing: Improved and Expanded Use Could Save Billions in Annual Procurement Costs, GAO-12-919 (Washington, D.C.: Sept. 20, 2012). At DOD, the review included four components: Air Force, Army, DLA, and Navy. OMB and GSA have developed guidance on strategic sourcing that emphasizes the importance of including small businesses and small disadvantaged businesses. In addition, our review of documentation for three ongoing government-wide strategic sourcing initiatives showed that GSA considered the inclusion of small and disadvantaged businesses in the strategic sourcing process. Our review of agency-wide strategic sourcing initiatives at each of five agencies showed that the agencies also generally considered the inclusion of small and disadvantaged businesses. Both OMB and GSA have issued guidance on strategic sourcing that discusses the importance of including small businesses and small disadvantaged businesses. Since 2005, OMB’s Office of Federal Procurement Policy has issued five memorandums on carrying out strategic sourcing: 2005 memorandum: This memorandum laid out the general framework for establishing and implementing agency-wide strategic sourcing programs. The memorandum called for the creation of a strategic sourcing governance structure, goals (including small business goals), and performance measures, among other things. It also indicated that agencies should develop baseline data on such factors as small business spending and report annually on changes in relation to the baseline. 2007 memorandum: This memorandum listed some accomplishments or “best practices” from selected agencies’ strategic sourcing initiatives, including some involving small businesses. For example, the memorandum noted that DOD reported in fiscal year 2006 that 41 percent of $4.3 billion awarded through strategic sourcing went to small businesses. The memorandum also strongly encouraged agencies to participate in government-wide initiatives, such as the office supplies initiative. December 2006 and March 2008 memorandums: These memorandums provided guidance on the information that should be included in annual strategic sourcing reports for fiscal years 2006 and 2007, respectively. The memorandums asked agencies to provide, among other things, goals and performance measures used to assess the agencies’ strategic sourcing activity and the methodologies used to calculate them. The goals and measures generally were to include the impact on small business. 2012 memorandum: This memorandum established the Strategic Sourcing Leadership Council to lead the government’s efforts to increase the use of government-wide strategic sourcing of goods and services. SBA was included in the council because of the role small businesses play in federal procurement. The memorandum required the designation of a Strategic Sourcing Accountable Official at 24 agencies to coordinate agencies’ internal strategic sourcing activities. It also placed added responsibilities on GSA to promulgate requirements, regulations, and best practices for acquiring and using strategic sourcing initiatives, among other things. In addition, the memorandum stated that to the maximum extent practicable, all strategic sourcing opportunities should seek to increase participation by small businesses and that all proposed agreements must establish a baseline for small business use under current strategies and set goals to meet or exceed that baseline under the new vehicles. GSA issued guidance (an FSSI Concept of Operations) in May 2008 on the structure, management, and operations of government-wide strategic sourcing initiatives. For example, the guidance suggested that in the governance of strategic sourcing initiatives, a small business representative, such as an OSDBU official or small business specialist, be involved early to ensure that small businesses’ concerns are addressed throughout the process. GSA’s guidance sets out four core goals for government-wide strategic sourcing initiatives.