A road map for federal strategic sourcing: new, more collaborative sourcing critically analyzes an organization's spending and allows agency leaders to make effective, efficient business decisions.(Office of Management and Budget)

On May 20, 2005, the U.S. Office of Management and Budget (OMB) issued a memorandum to chief acquisition officers (CAOs), chief financial officers (CFOs), and chief information officers (CIOs) concerning the importance of implementing strategic-sourcing initiatives. Under the provisions of the memo, this triumvirate, led by the CAO, is "responsible for the overall development and implementation of the agency strategic sourcing effort." This is an important first step in attaining a world-class commercial strategic-sourcing capability within the government.

In preparing this article, we assessed commercial approaches to enterprise-wide strategic sourcing and supply chain management and examined their application in the federal government. The result is a road map of the governance and methods needed to respond to the OMB directive.

What Does the OMB Memo Require?

The memo requires that the CAO/CFO/CIO development team do the following:

* Identify, by October 1, 2005, three commodities that could be purchased more efficiently through strategic sourcing.

* Develop an agency-wide strategic-sourcing plan (SSP) that includes establishment of a strategic-sourcing council (SSC), as well as communications and training strategies.

* Report annually, starting in January 2006, to the Office of Federal Procurement Policy (OFPP) to help it target commodities for strategic sourcing government-wide.

How Significant Is This?

This is a milestone in federal contracting history. The directive is from the deputy director for management of OMB, rather than the more typical source, the OFPP. Most strategic-sourcing recommendations, such as those from the Government Accountability Office (GAO), suggest that the procurement organization is responsible for these initiatives. OMB clearly places shared responsibility with these three "chiefs," so agencies will need to develop new governance models and methods to comply.

We have developed a solution, drawing on the commercial experience of strategic-sourcing experts at Acquisition Solutions, Inc., and the work of government agencies that have already embarked on this transformation. We describe this solution as a series of steps and illustrate the governance and skills models. However, implementation of strategic sourcing is not necessarily a linear progression but a comprehensive reengineering of a business process.

By presenting our solution step by step, we demonstrate key elements of a successful strategic-sourcing program. Taking the steps in this order would be optimal, but as a practical matter, an organization could begin with a few commodity councils and then build the governance structure. Strategic sourcing is a new way of doing …