Transforming the Marketplace: Simplifying Federal Procurement to Improve Performance, Drive Innovation, and Increase Savings

This Administration has made significant progress on strengthening Federal acquisition practices, reducing red-tape, and providing greater benefit for taxpayer dollars. Executive departments and agencies have cut contracts that are no longer necessary or affordable, – resulting in over $55 billion in savings in just FY 2013 alone – launched new efforts to pool the Government’s buying power through strategic sourcing, and implemented other smart buying strategies to deliver better value for the American people.

While we have made tremendous progress, there is a critical need for a new paradigm in Federal procurement. The overwhelming feedback from industry and other stakeholders is that the sheer complexity of the Federal contracting space is leading to less innovation, higher costs, and weaker performance.  We have more than 3,300 contracting units across the Federal Government, but there’s very little sharing of information and best practices and very little collaboration across our organizations. The result is that we have a lot of duplicative efforts. For example, in FY 2013 we had more than 23,000 awards for HR training and services alone. Further, we have no central unit to share pricing information. When we’ve looked at pricing, we see huge price differences for the same exact item – sometimes as much as a 300% price difference.  We must transform the marketplace and create a new model for Federal contracting that’s based on sharing information, best practices, and increased collaboration between Federal agencies, and between agencies and industry.

Today, I issued the guidance to agencies, Transforming the Marketplace: Simplifying Federal Procurement to Improve Performance, Drive Innovation, and Increase Savings, that describes ongoing actions to address these concerns and directs a series of specific agency actions that build upon the Administration’s ongoing effort to create a more innovative, efficient, and effective acquisition system to support the needs of a 21^st century Government.

Using the President’s Management Agenda’s pillars of effectiveness and efficiency as guiding principles, there are three core elements driving this new approach.

• Buying as One through Category Management. We are implementing a new vision for purchasing, one that fundamentally shifts from managing purchases and price individually across thousands of procurement units to managing entire categories of purchases across Government collaboratively. This approach, called category management, is used extensively in industry and in the United Kingdom. In the Federal contracting space, it can be best accomplished by managing the more than $270 billion in annual spend for commonly purchased goods and services – over half of the Federal Government’s overall spend. By bringing common spend under management, including collecting prices paid and other key performance information that allow easy comparisons, we will ensure that agencies get the same competitive price and quality of performance when they are buying similar commodities under similar circumstances. We will also free up agency acquisition personnel to focus on complex agency-specific procurements.
• Deploying Talent & Tools Across Agencies & Growing Talent Within Agencies to Drive Innovation. Opening the acquisition system to greater innovation is critical to ensuring the best results from our contracts.  We must embrace practices that encourage new and better ways of thinking and expand access to the most innovative companies.  As part of this effort, within 180 days of the date of this memorandum, the Office of Federal Procurement Policy (OFPP) will work with the Office of Science and Technology Policy (OSTP) and other agencies to develop a plan for increasing digital acquisition capability, and the U.S. Digital Services, in partnership with OFPP, will pilot a program to train agency personnel in digital IT acquisitions and deploy trained personnel back to their agencies to encourage innovative acquisition practices Government-wide.  OMB will also work with OSTP and agency officials, including those responsible for research and development programs, to identify additional opportunities as well as incentives and mechanisms to pilot innovative contracting models.
• Building Stronger Vendor Relationships. Early, frequent, and constructive engagement with industry leads to greater innovation and better outcomes. Such engagement is particularly important for complex, high-risk procurements, including those for large IT projects. We’ve taken several steps toward that end, including the launch of our first online national dialogue with industry earlier this year, and a pilot for a new tool for vendors to provide constructive feedback on agency acquisitions. These were important first steps. But we need better customer-facing tools and more ways to get feedback from industry on a regular basis. Smarter IT use it a key component to improving supplier relationships and Federal acquisition. To help companies enter the Federal marketplace and find agencies looking for their services, GSA has already begun to design improved online tools for vendors to more easily find opportunities to compete for contracts. Another key component is removing regulatory barriers to innovation. Within 180 days of this memorandum, OFPP, will make recommendations to the Deputy Director for Management on specific actions that can be taken to reduce burden in commercial item acquisitions, especially for small businesses.  Finally, relationships with vendors are still managed individually across thousands of procurement units through hundreds, if not thousands, of individual contracts. One company, for example, may have several thousand contracts with the Federal Government – yet it’s possible that no one entity would manage the relationship with that company government-wide. This approach makes it challenging for both the acquisition workforce and the vendor community to drive improved outcomes, control costs, and ensure transparency. We propose to manage key vendor relationships as a single enterprise. Mirroring other governments and industry, who focus on vendor, supplier, and performance relationships, OFPP will, within 90 days of the date of this memorandum, develop a plan to recruit the Federal Government’s first Vendor Manager for top IT commercial contractors.

Utilizing the information and feedback we received from industry (including through the first-ever Government-sponsored “Open Dialogue” on Federal Procurement), agencies, and state and international governments, today’s guidance reflects a collaborative effort from all spectrums of the acquisition world to develop a more robust, simplified Federal marketplace that benefits vendors, buyers, customers and, most importantly, the American taxpayers.

Anne Rung is the Administrator for the Office of Federal Procurement Policy at the Office of Management and Budget.