Leveraging Buying Power

1. Leveraging Buying Power Strategic Sourcing Joe Taylor Procurement Policy Division USDA Office of Procurement & Property Management April 19, 2005

2. Context • GAO Report Draft “Agencies Can Achieve Significant Savings on Purchase Card Buys” March 2004 • Agencies could save $300 million if discounts of 10% were received from major vendors • Agencies reviewed: USDA, VA, DOD, DOI, DOJ

3. Why aren’t agenciesseeking discounts?

4. GAO cited “Lack of Management Focus”as the reason agencies were not aggressively pursuing savings

5. Context (Cont) • GAO report, “Use of Spend Analysis,” discusses the need to institutionalize continuous spend analysis to achieve savings

6. USDA e-Alliance • Partnership with USDA agencies and GSA to leverage buying power

7. USDA Strategy • Conduct ongoing spend analysis • Select FSS supplies/services to compete • Conduct market research • Compete, and negotiate discounted blanket purchase agreements • Host BPAs, e-catalogs & ordering on USDA Advantage (partnership with GSA) • Implement and manage BPAs

8. 1. Conduct Spend Analysis • Identify data sources • Purchase Card Management System • Payment Systems • FPDS NG • Vendors • VISA

9. Spend Analysis (Cont.) • Analyze available data: • Merchant • Dollar amount • MCC • NAICS Code • Product Codes • Budget Object Code • Level 3 data, if available

10. Spend Analysis (Cont.) Segment spend: • Supplies, e.g., • Office supplies • Hardware • Scientific supplies and equipment • Services, e.g., • Domestic delivery • Telecommunications

11. 2. Select best opportunities for savings and other goals • Items used by all or most agencies • High dollar amount & transaction volume • Federal Supply Schedule items • P-card acceptance

12. 3. Conduct Market Research • Talk to • Vendors • Users • Sister organizations • Buyers • Review • Trade publications • GSA Schedules • Similar agreements

13. 4. Compete and Negotiate BPAs • Use E-Buy • Keep process simple • Make a single award if possible

14. 4. Compete and Negotiate BPAs Why make a single award? • Intensify the competition to get a better deal • Maximize what contractors have to lose and what they have to gain

15. Use Standard RFQ Template (One or Two Pages) • USDA BPA RFQ for ________________________ • GSA Schedule No. and SINS covered • Description of the work • Extent of obligation of the government • Delivery or performance requirements including reporting • Substitution of JWOD items for like products if applicable • Acceptance of credit card • Team arrangements • Statement that GSA schedule conditions apply • Evaluation and award criteria • How many BPA’s to be awarded

16. 5. Host BPAs and on-line ordering on USDA Advantage • Utilize existing GSA technology • Customize to focus on USDA BPAs • Fast to implement • Vendors already pass FSS catalog data to GSA electronically • Users don’t have to be trained on each vendor’s ordering website or register at multiple sites

17. Only USDA BPAs

18. 6. Implement and Manage BPAs • Implementation plan for each BPA • Loading catalog data • BPA use promotion • Quarterly reports including sales and discounts • Annual management meetings with vendor

19. USDA BPA Examples • Office Supplies • Single award to Boise Cascade • Overnight desktop delivery • Increased JWOD sales • $28 million in FY04 • 10% Discount saved $2.8 million • Domestic Delivery Services • Single award to FedEx • $14 million annually • 18% discount • $.5 million saved 1st half FY 05

20. USDA BPA Examples (Cont) • Hardware • Over 100,000 items • 750 JWOD items • BPA Ready for award • Business Cards • Seattle Lighthouse for the Blind • Formats pre-approved by OC • On-line business card set-up and ordering • BPA ready for award

21. USDA BPA Examples (Cont) • Custom Products • Delaware Industries for the Blind • Ready for award • BPAs in process • Scientific supplies and equipment • Wireless • Procurement Training

22. Performance Goals • Savings through reduced prices compared to GSA Schedule prices or to what agencies could negotiate with smaller buying power. • Increased rebates through increased purchase card use • Improved vendor performance such as faster delivery than standard industry practice. • Reduced training costs compared to using multiple vendor ordering sites. • Reduced purchasing processing costs compared to using purchase orders, multiple vendor ordering sites, or other mechanisms.

23. Joe Taylor Procurement Policy Division Office of Procurement and Property Management 202-401-0787 joe.taylor@usda.gov