The Department of Defense Adopts Category Management

Published: February 05, 2020

Federal Market AnalysisAcquisition ReformCategory ManagementContracting TrendsDEFENSEInformation TechnologyPolicy and Legislation

Defense acquisition authorities officially mandate the use of Best-in-Class contracts.

Civilian agencies have been slowly adopting the General Services Administration’s category management (CM) approach to contract administration for several years now. The Department of Defense (DOD), by comparison, has lagged behind the Civilian sector, with only a few components, in this case the U.S.  Army and the Air Force, taking halting steps toward adopting CM. To remind those still unfamiliar with CM, agencies use the approach to categorize “spending under management” in 10 areas, including facilities and construction; professional services; information technology; medical; transportation and logistics; industrial products and services; travel; security and protection; human capital; and office management. DOD also includes 9 “DOD-centric” categories shown on the graphic below.

Tracking spending in categories is intended to eliminate redundant contracts, enable the sharing of best practices across agencies, and provide common acquisition and demand management solutions. Included among these common acquisition solutions are “Best-in-Class” (BIC) contract vehicles that enable agencies to buy more like a single enterprise. To date, the DOD had not adopted an enterprise CM approach, even though the Section 809 acquisition reform panel recommended it in January 2019.

Deltek has cautioned industry since that time to prepare for an enterprise-wide shift at DOD toward CM and the use of BIC contracts. In January 2020, Deltek’s alerts became a reality when Ellen Lord, the Under Secretary of Defense for Acquisition and Sustainment, approved an update to DOD Instruction 5000.74 concerning the “Defense Acquisition of Services,” originally dated January 5, 2016. In the updated guidance, Defense acquisition authorities make it clear that from now on CM is the order of the day at DOD, including the use of BIC contracts.

Mandating that Defense services acquisitions should be arranged according the Federal Category Structure (see graphic below), the updated guidance stipulates that “existing government-wide contracts should be used to the maximum extent practicable.”

Component Portfolio Managers across the DOD are to “coordinate the procurement of key categories of services” within their component as may be appropriate and address services procurements “from an appropriate enterprise-level (e.g., DoD Component-wide, DoD-wide, or best-in-class solution) so that resulting contract awards are aligned with mission, security, performance, and cost objectives.”

Concerning information technology in particular, the guidance requires that “When acquiring commercial IT and commercial IT services (e.g., software-as-a-service, software maintenance as a service, IT maintenance, and software assurance), Functional Service Managers (i.e., those developing and guiding the requirement) must consider the DOD Fourth Estate, Federal Category Management Leadership Council-designated, best-in-class procurement vehicles, DoD-wide Joint Enterprise License Agreements (JELAs), DoD Component-level Enterprise License Agreements (ELAs), and Core Enterprise Technology Agreements.”

In other words, whereas a Defense component may have previously developed and competed a standalone contract for a given IT requirement, the FSM guiding the acquisition will now need to look at existing ELAs for software procurements and BIC contracts for services procurements first. This means that in the years to come a growing percentage of Defense IT spending is going to flow through BIC contract vehicles. Many industry partners hold places on BIC contracts, but many more do not, meaning the competitive prospects at DOD just got a whole lot more complicated for some partners, particularly small businesses, that want to do business with the DOD, but don’t have a spot on BIC contract vehicles.