ecom_shutterstock_30916309_editThe General Services Administration (GSA) has embarked on a quest to use a commercial best practice called Strategic Sourcing. According to the GSA website these are the benefits:

FSSI solutions provide easy access to its procurement vehicles, which offer business intelligence, best practice solutions, and greater discounts with volume increases. Additional benefits include that they:

• Fulfill OMB’s requirement for cross-government FSSI participation
• Assist with socioeconomic goals
• Collect and analyzes data
• Identify trends
• Re-engineer business processes
• Replicate cost-saving business processes
• Share lessons learned and best practices
• Realize cost efficiencies
• Streamline the procurement process
• Drive additional discounts

Let’s examine these benefits. (Concepts with a high degree of overlap are combined.)

  • “Easy access to procurement vehicles.” This is not unique to FSSI. DOD EMALL, GSA Advantage!, amazon.com and many others provide easy access. Both DOD EMALL and GSA Advantage! have focused on highlighting small business offerings, environmentally friendly offerings, items on sale and a model that walks the novice through the procurement process without them even knowing it.
  • “Business intelligence,” “collect and analyzes data,” and “identify trends.” FSSI does not offer this in and of itself. Consolidating data into a single collection point and application of BI tools is how good BI will happen. FPDS-NG, PCOLS and (again) DOD EMALL and GSA Advantage! provide data consolidation opportunities already, but BI does not happen without analysis. There is no guarantee that the Federal Government will do so here given other missed opportunities.
  • “Best practice solutions” and “assist with socio-economic goals.” Strategic Sourcing has become a best practice in the private sector for good reason. A corporation has a duty unto itself to increase its profit margin. A corporation has no duty to support socio-economic programs, avoid favoritism, justify even minor decisions in writing, or follow rules outside of those dictated by commercial contract law. This is not true for the public sector. The financial impact of strategic sourcing on these other requirements has not been assessed. This country has worked so hard to create jobs. Doesn’t this seem antithetical?It may be true that if all you have to pick from are companies fitting the desired socio-economic targets your organization’s statistics will benefit. But the other half of this equation (and the real basis for such goals) is to create business opportunities for small and disadvantaged businesses who could be elbowed out by their larger, deep pocketed competitors. FSSI is blocking small and disadvantaged businesses from participation in the Federal market space, except for a few chosen vendors out of hundreds.
  • “Fulfill OMB’s requirement for FSSI participation.” This is not a benefit, it’s a policy. Perhaps it is a benefit for GSA in the “atta-boy” department.
  • “Re-engineer business processes,” “replicate cost-saving business practices,” “share lessons learned and best practices,” and “realize cost efficiencies” are all nuanced phrases meaning essentially the same thing. Continual Process Improvement is the responsibility of every Government organization and if FSSI will do these things then it has a place in the tool kit. But because you paid a lower price for a pencil or a bucket you have not necessarily saved the collective Government (and us taxpayers) any money if the Department of Labor is spending more on unemployment benefits.
  • “Streamline the procurement process.” Now we’re getting somewhere. FSSI will do this because it downselects from hundreds of potential suppliers to just a few. Fewer contracts to manage should mean that contract actions happen faster and more accurately. It will cost the Government less to manage fewer contracts. Even the GSA Schedule program will benefit from this as schedule holders in the FSSI targeted areas will let the schedules lapse (or be forced out) due to poor sales performance, resulting in fewer contracts to manage. But if most of the suppliers leave the Schedule program what happens when it’s time to recompete FSSI? FSSI requires a vendor to be a schedule holder to participate. Will those forced out or choosing to leave be interested in spending their corporate time and funds to get a new schedule on the off chance they may win a scarce seat at the next FSSI banquet table?
  • “Drive additional discounts.” This should be true. If the FSSI vendors are few in a vast market then volume should drive the prices down. Smaller and smaller margins should be possible when there are many, many sales. How low will they be able to go? In 2012 the average net profit margin in office supplies was 11.8%. Can the 15 successful vendors live with 9%? Or 5%? Time will tell. And then there’s the impact on jobs to consider.

So what is the alternative? Invest in improvements to DOD EMALL and GSA Advantage! that steer orders to small businesses and ensure the customer gets the exact item they need. Make the use of these two eCommerce platforms mandatory for procuring commercial items. Don’t manage these commercial items as National Stock Numbers (NSNs) since they are continually and immediately available from commercial inventories. Let everyone play in these two market spaces. Let market forces shape the competition. Set benchmarks for vendors so that when they achieve certain sales levels they will automatically drop their prices. Give every company that has a stake in office supplies, janitorial supplies and equipment and maintenance, repair and operations supplies and equipment an even playing field.

What are your thoughts? Do you agree with the idea of investing in these improvements to drive customer satisfaction? Share your ideas below.