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Strategic sourcing is a team sport
Cost reduction for governmental and commercial spending
In the current federal contracting environment, perhaps more than ever before, the need for cost reduction has come into sharper focus—and with it, strategic sourcing and contract management to protect funding have become more important than ever.
- Rising pressure on strategic sourcing for cost reduction
- Teamwork in federal procurement can deliver major cost reductions
- Strategic sourcing for the win
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Rising pressure on strategic sourcing for cost reduction
The promise of strategic sourcing is that it generates billions of dollars in savings, both for governmental as well as commercial organizations. There have been some great success stories.
However, in the current federal contracting environment, perhaps more than ever before, the need for cost reduction has come into sharper focus. The emphasis on cost reductions in federal spending is on display in the new administration's proposed budget: According to Office of Management and Budget (OMB) director Mick Mulvaney, this is the "largest proposed reduction since the early years of the Reagan administration."1
Specifically, OMB has targeted 10 large spend categories (accounting for approximately $270 billion of the government's annual spend) for strategic sourcing savings through the use of category management strategies.
These categories include:
- Information technology
- Professional services
- Security and protection
- Facilities and construction
- Industrial products and services
- Office management
- Transportation and logistics
- Travel and lodging
- Human capital
Even a 5–10 percent savings realized on this $270 billion offsets a significant portion of the $54 billion in cuts and minimizes the zero-sum nature of the game.
1 White House press briefing (February 27, 2017).
Teamwork in federal procurement can deliver major cost reductions
Initial efforts by commercial enterprises to reduce costs through strategic sourcing often start with spend categories similar to those in the federal budget. However, they are usually relatively low-risk categories where poor supplier performance doesn't have the same impact on agency missions as higher-risk expense categories (weapon systems, security systems, etc.).
For federal agencies, the pressure is on. Effective cost-cutting actions can preserve programs endangered by budget cuts. This has created a new opportunity for procurement professionals to become strategic players in their respective agencies. With just a few strategic adjustments to their procurement teams, agencies can optimize the level of achievable savings while also reducing overall acquisition processing cycle times.
In a recent contributed article for Contract Management magazine, we discuss the role excellent teamwork plays in helping organizations realize the potential of strategic sourcing, and we offer specific steps for building the type of teamwork that can help you achieve cost reduction through strategic sourcing and contract management. We also identify high-impact adjustments that can pay for themselves.
Strategic sourcing for the win
Priorities in Washington have changed, budgets are being reshuffled, and programs are becoming endangered because of these priority shifts. The reshuffling of these priorities is often a zero-sum game with winners and losers. If agencies want to preserve endangered programs and jobs as priorities shift, they can free up cash by making strategic changes to their acquisition teams and positioning themselves to execute the strategic sourcing process more effectively. They can add strategic sourcing services and specialists to help programs manage the acquisition process, and equip them with standardized playbooks, tools, and templates that enable the consistent execution of the process.
This team structure helps to ensure that the right team members are performing the right tasks. It positions the acquisition process to be executed like a team sport where each of the players performs tasks suitable to his or her skill and training.
When this happens, everybody wins.