More Savings Could be Realized Through Strategic Sourcing

GAO recently released a report that analyzed IT services contract obligations for five federal agencies which make up 53% of the total reported FY 2013 IT services obligations. GAO reviewed DOD (including the three military services), DHS, and NASA, comparing their strategic sourcing practices to that of the commercial market.  According to GAO, leading commercial companies use strategic sourcing for 90% of their spending on IT services, which results in savings of 4-15% annually.  The agencies profiled only used strategic sourcing for 10-44% of the dollars spent on IT services during FY 2013.

DOD, DHS, and NASA have made progress in increasing strategic sourcing usage by designating officials and creating offices responsible for strategic sourcing implementation.  But GAO suggests that these agencies are still spending through hundreds of duplicative contracts, which if analyzed and strategically sourced, could save the federal government billions of dollars each year.  

GAO’s research a few years ago of contracting best practices for leading commercial companies revealed that they honed their contracting practices and strategic sourcing based on analysis of prices paid for IT services.  In order to be able to conduct such analysis, many companies had to standardize labor categories, invest in business intelligence tools, and collect contract pricing data. Currently, federal contracting and acquisition personnel do not have access to such data or tools.  Today, agency personnel interviewed by GAO cannot conduct price comparisons with other contracting officials, even within their own agency.  Contracting officers could make more informed decisions if they were able to compare the pricing they were obtaining across a spectrum of prices being paid by other offices, bureaus or agencies.

GAO recommends that agencies take the following actions to further utilize strategic sourcing and reap savings: 

• Conduct spending analysis for IT services  
• Monitoring the use of their strategic sourcing vehicle in comparison to their total spending on IT services 
• Establish utilization goals and metrics  
• Establish policies requiring the mandatory use or consideration of their preferred strategic sourcing contract vehicle  
• Take steps to monitor compliance with such policies  
• Identify methods for calculating savings and setting savings goals  

The agencies profiled concurred with GAO’s findings and recommendations.