GSA Strategic Sourcing Centers On Price — And Little Else

Government procurement used to be thought of as one of the more solid sales sectors for suppliers looking for opportunities. But political pressure in Washington D.C. to cut budgets has the Office of Management and Budget siphoning off the flow of opportunity in favor of a strategy popularized in the private sector.

“Strategic sourcing isn’t anything new — a lot of companies have used it to control their costs,” says Paul St. Germain, business development executive for wholesale distribution at IBM and author of the “Facing the Force of Change” book series. “But when we get down inside of the deal, it’s clear that the government is focusing solely on price and thus, the true value of a lot of distributors is going to be taken away. Distributors have great knowledge about the products and how to create efficiencies.”  

The GSA should have been more proactive about preventing the wide range in vendor pricing, which contributed to government overspending, says Diana Potts, CEO of G&E Advisors.

“The whole idea behind the FSSI is to set pricing fairly,” and the initiative helps level the playing field, Potts says.

In the past, FSSI solutions addressed only the purchasing channels, but this next generation of FSSI will include purchasing, requisition and fourth party logistics. This, and making the FSSI programs mandatory across all federal agencies, could devastate the companies currently in the federal marketplace, Potts says.

However, there is currently no rule or mandate that says federal agencies have to purchase through the FSSI program, says Cara Battaglini, GSA spokeswoman.

“It’s an agency-by-agency decision whether to purchase through FSSI,” she says.

History of GSA Strategic Sourcing

In December of 2012, the Office of Management and Budget released a memo that outlined the establishment of a broad strategic sourcing initiative that sought to provide government-wide solutions to overspending. It called for the creation of a Strategic Sourcing Leadership Council (SSLC) chaired by the administrator for Federal Procurement Policy with representatives from the Small Business Administration, the Departments of Defense, Energy, Health and Human Services, Homeland Security, Veterans Affairs, and other agencies; as well as the branches of the military. That council was charged with recommending long-term strategic sourcing efforts as well as taking action on short-term cost reductions to save taxpayer dollars.

The memo also targeted additional procurement areas. Sectors of the cleaning industry that stand to be affected are Janitorial and Sanitation Supply (JanSan) and Maintenance, Repair and Operations supplies (MRO), both this year, and Building Maintenance and Operation (BMO) next year.

One of the top priorities outlined in the memo is to increase participation of small businesses in all strategic sourcing opportunities.

While increasing sales to small businesses sounds good on the surface, industry experts are questioning just how many small businesses could be negatively impacted by JanSan FSSI.

While the GSA’s proposal to reduce the number of BPAs to 21 is severe, the additional bundling of federal agencies into the FSSI purchasing channel could be devastating for distributors, Balek says.

“GSA’s intention is to channel as much federal business as possible through the strategic sourced option, and we estimate that 90 percent of federal business is done through those channels,” he says.

Those channels expand far beyond GSA’s reach into the entities and departments included in the SSLC. Battaglini disputes that claim, however.

“We have listed that the total federal JanSan spend is approximately $1.2 billion per year with $599 million eligible spend for the JanSan FSSI solution,” Battaglini says. “The percentage of dollars going to small business for office supplies has increased with the creation of the FSSI. We anticipate the same result for JanSan. Again, the solution for JanSan is not expected to replace 100 percent of the federal spend in this area.”