Strategic Sourcing in DoD

1. Strategic Sourcing in DoD Name Title Date

2. Agenda • What is Strategic Sourcing? • Various Definitions • Circular Framework • DoD Vision • Why is Strategic Sourcing Important? • Current Tactical Focus • Benefits • Opportunities • MILDEP-Specific Examples of Strategic Sourcing • Summary

3. What is Strategic Sourcing?

4. Strategic Sourcing is Defined as: • A collaborative and structured process of analyzing an organization’s spend and using the information to make business decisions about acquiring commodities and services more efficiently and effectively Office of Federal Procurement and Policy • A systematic process that begins with thorough analysis of spend across an enterprise and then organizes that spend focusing on selected suppliers for best results on cost, product development, quality and services Purchasing Magazine • The process of evaluating, selecting and aligning with suppliers or consortiums of suppliers to achieve operational improvements in support of an organization’s strategic objectives Commercial: United Parcel Service (UPS) Regardless of the definition, one fact is constant: strategic sourcing is just good business practices within an enterprise.

5. While There Are Several Definitions, the Tenets of Strategic Sourcing Are Similar across Organizations DoD has incorporated primary tenets into a standard approach

6. FAR Part 7* FAR Part 10* FAR Part 42* FAR Part 11* FAR Part 8,12,13,14,15,36,37* FAR Part 6,7,8,19* * Additional FAR parts may apply Strategic Sourcing Framework Current Strategy Review Opportunity Assessment – Goods and Services • Identify requirements • Review past and present business arrangements • Conduct TCO analysis Market Research Commodity • Identify qualified suppliers • Understand industry trends and cost structure Buyers Performance Management Finance SB QA Reps • Administer contract • Monitor internal performance • Integrate supplier relationship mgmt • Conduct quality analysis Strategic Sourcing Team CE Requirements Definition COTRs Maint. Buyers • Collect requirements • Standardize requirements Contracting Proj. Mgr Strategy Execution Results Lawyers PEOs Customer Warfighter Taxpayer • Follow acquisition process • Use business arrangements Sourcing Strategy Development • Determine level of competition • Develop a CONOPs We Were Doing Strategic Sourcing Before It Was All The Rage

7. Strategic Sourcing Vision and Goals Institutionalize Strategic Sourcing across the DoD Supply Chain to Better Meet Warfighter Needs and Maximize Taxpayer Value • Enhance DoD Components and Other Agency Sourcing Collaboration • Foster a Culture of Strategic Decision-Making with respect to Acquisition of Goods and Services • Leverage and Optimize Data and IT Systems to Increase Enterprise Transparency • Develop, Train, and Organize an Enterprise to Support Strategic Sourcing

8. Why is Strategic Sourcing Important?

9. Increasing Spend Decreasing Resources Tactical Focus Limited Collaboration Strategic Sourcing: Opportunity to Maximize Dollars and Resources These issues all point to one conclusion: the Department of Defense requires a new culture and approach to the acquisition of services, bringing information and people together for true collaboration.

10. Strategic Sourcing Benefits • Increased collaboration and communication • Enhanced supplier relationships and market expertise • Improved holistic views of Defense-wide requirements • Increased workforce skills, efficiency, and effectiveness • Increased understanding of small business spend and markets • Standardized business processes • Maintained workforce balance • Reduced number of duplicative business arrangements • Reduced duplication of effort Strategic Sourcing Provides Opportunities To Maximize Procurement Spend Dollars

11. Services RDT&E Goods As Total Spend Increases, So Does Our Opportunity for Strategic Sourcing Fiscal Year 2006 Total Spend = $295.0 B • DoD is targeting billions of dollars in spend for strategic sourcing • A spend analysis assesses the Breakdown of Spend in Terms of: • What was purchased (Goods, Services) • Who purchased it (Contracting Activity) • Who it was purchased from (Vendor) • How it was purchased (Contract Type, Competition) • Necessary for Identifying Strategic Focus Areas 13% 48% 39% 14% 50% 36% Fiscal Year 2007 Total Spend = $316.1 B Saving 1-3% of Total Spend Results in Billions of Dollars

12. MILDEP-Specific Examples of Strategic Sourcing

13. INSERT CASE STUDIES HERE • Insert 3 Case Studies from the 9 slides listed in Back-Up for your Briefing • Choose Case Studies you are Familiar with, can Talk to, and are Applicable to your Audience

14. Summary

15. In Conclusion… …By creating an environment of data transparency and instilling a culture of strategic decision-making and collaboration, the Department can provide strategically sourced goods and services that maximize procurement dollars, resources, and warfighter support.

16. Sources of Information • OSD Defense Procurement, Acquisition Policy, and Strategic Sourcing • Stuart A. Hazlett, Deputy Director for Strategic Sourcing • http://www.acq.osd.mil/dpap/ss/index.html • Strategic Sourcing Education and Training • CLC 108: Strategic Sourcing Overview & CLC 110: Spend Analysis Strategies • https://learn.dau.mil/html/clc/Clc1.jsp?cl= • Federal Strategic Sourcing Initiatives (FSSI) • http://www.gsa.gov/Portal/gsa/ep/contentView.do?bodyOnly=true&contentId=24032&contentType=GSA_BASIC

17. Back-Up: Case Studies • Select 3 and Insert into the MILDEP-Specific Examples portion of your briefing

18. Air Force: Installation Acquisition Transformation (IAT) Implementation Strategy Purpose / Scope • The current structure strains the ability of the Installation Contracting community to effectively perform its mission • Conducted a detailed business case analysis to determine the best methodology for implementing the best practice of centralized contracting • To transition localized, potentially redundant contracting at 71 CONUS locations to 5 geographic-based Installation Acquisition Groups to enable strategic sourcing • Covers FY05 $13B in Installation spend; $2B in Government Purchase Card Spend • Implementation will be phased in between FY10-FY12 What does this Mean to DoD? Why is this Important to DoD? Results • The Air Force will have better visibility into requirements and will be analyzing all available contract sources within the AF, DoD, and Federal Government to minimize duplicate efforts • In depth strategic sourcing training is being developed and could be leveraged by other services • Demonstrates strategic sourcing on a large, enterprise scale • Anticipated: • Generates cost savings/avoidance of $1 billion a year when fully operational • Enables the realization of strategic sourcing • Allows contracting to better utilize limited workforce resources • Increases multifunctional involvement in the sourcing process

19. Air Force: Acquisition Management Integration Center (AMIC) Implementation Strategy Purpose / Scope • On 9 Feb 07, ACC Program Management Squadron and ACC Contracting Squadron combined into a single acquisition center, creating the ACC AMIC • Unit continues to focus on integrating processes across a range of acquisitions with proven expertise and excellence in large-scale, complex services acquisitions • Way ahead – primed to form a solid core for the NE Region in becoming the foundation of the 786th Installation Acquisition Group • To provide strategic acquisition facilitation and management for Air Combat Command (ACC), U.S. government agencies, and allies through integrated program management and contracting support • Requirements range from multi-base or overseas operations and maintenance services to the purchase of specialized equipment for delivery to multiple installations • Annual spend is approximately $375M with total contract values exceeding $5B What does this Mean to DoD? Why is this Important to DoD? Results • AMIC provides single point control, integrated management, and a unique cradle-to-grave sustainment capability for major service acquisitions that is cost effective and responsive to the mission • A first ever “SPO” (System Program Office) and “center of excellence” dedicated to major service acquisition programs • Pioneering integrated approach provides corporate insight/oversight, superior acquisition management, unprecedented quality assurance, and reduced total life cycle contract costs • Integrated management of large-scale services acquisitions – proven capability • Managing eight AFPEO/CM requirements, five awarded in FY 07 with no protests • Technique for Assessing Acquisition Capability & Transparency (TAACT) rated ACC AMIC a “Gold +” • AF Nominee for the 2007 DoD David Packard Excellence in Acquisition Award • Top Award Fee program – documented $8.6M in program improvements against $1.6M in paid fees

20. Army - CECOM: Rapid Response (R2) Implementation Strategy Purpose / Scope • Dedicated Project Office provides subject matter technical and acquisition expertise to assist with requirement development and program management from cradle to grave • Best of best contractors selected ensure highest quality technical solutions under fair opportunity • Available to any federal agency, office, activity, or department • To provide unique and flexible acquisition and technical expertise, capable of rapidly implementing quality best value solutions through a lean process, that satisfies customer mission requirements across the entire spectrum of federal agencies • The R2 program covers engineering, technical, logistics, and training support services • The aggregate ceiling value of the eight prime IDIQ multiple award contracts is $23 Billion over eight years Why is this Important to DoD? Results • Offers the warfighters and peacekeepers a solution to rapidly acquire their immediate engineering, logistics and training requirements with support from a dedicated full service staff of technical and acquisition experts using a lean and proven process • Reduced procurement lead times • Quality performance work statements that ensure mission satisfaction • Real time access to web-enabled database for monitoring task orders • Multi disciplined program management support from cradle to grave • Ten years of program success

21. Navy - NAVFAC: Templates Implementation Strategy Purpose / Scope • SME team develops templates based on Installation Management Accounting Projects (IMAP) model (18 major annexes) • NAVFAC policy to use templates for all service acquisitions greater than $25K • Capture lessons learned and make formal template revisions as required • Obtain Contractor Services Association of America input on template effectiveness and revise templates as necessary • Capture template usage metrics • Comply with various Congressional/DoD mandates and FAR 37.602 requirements for Performance Based Services Acquisition • Reduce TIME and COST for developing a performance-based PWS • Implement established Common Output Levels (COLs) in a consistent PWS template format • Detail performance assessment methods and Contractor performance incentives (+ and -) • Describe how Contractor is measured/assessed against performance standards (Performance Assessment Plan) What does this Mean to DoD? Why is this Important to DoD? Results • Facilitates implementation of COLs across DoD • Provides opportunities to evaluate local market cost impact based on standard COLs and adds value to spend data • Serves as a tool in “Commercial Services Management” to evaluate workforce shaping (A-76, HPO, in-sourcing) to comply with NDAA 08 • Consistent terminology and definitions • Standard user guides, training, performance assessment methods and assessment levels • Solicitations / contracts look alike simplifying contractor proposal development, Government proposal evaluation, and contract administration

22. Navy: SeaPort-e Implementation Strategy Purpose / Scope • Develop and award Multiple Award IDIQ contracts using innovative acquisition techniques • Exploit existing e-business opportunities and create an automated, intuitive, web-based, e-procurement portal to provide services quickly and easily in an "amazon.com" environment • Create a web site continually refreshing customers and suppliers with new information, opportunities, training, metrics and useful links to associate sites • SeaPort-e is a web-based portal for electronically competing and awarding Task Orders from a set of Multiple Award Contracts • Scope includes Engineering, Technical, & Professional Support Services across 22 functional service areas • 1,614 prime contractors (84% small business) with a basic IDIQ MAC • Competed in one of seven geographic zones based upon principal place of performance • Allows for small business set-asides (restricted competition) • Rolling Admissions conducted annually Why is this Important to DoD? Results • The unified approach of SeaPort-e allows service procurement teams to leverage their best work products, practices, & approaches across the Navy's critical service business sector. • Simply stated, SeaPort-e provides a faster, better, & more cost-effective means of contracting for professional support services. • Awarded 1,420 Task Orders as of June 4, 2008 • Total Payment Volume at Award: $19.5 Billion as of June 4, 2008 • Percent of total dollar obligations to small business concerns at the prime level: goal: 33%, actual: 32% • Percent of total dollar obligations to small business concerns at the subcontract level: goal: 20%, actual: 20% • Streamlined acquisition process • Improved service contract management

23. Marine Corps - MARCORSYSCOM: CEOss Implementation Strategy Purpose / Scope • CEOss uses a three-tier process to support the business model • Qualifying GSA schedules • BPAs augmented with applicable DFARS and agency-specific guidance • Competitive best-value award of task orders • Functional Domains established around core areas of performance • Performance-based Contracting • Annual Open Season Process • Commercial Enterprise Omnibus Support Services (CEOss) is the primary medium for providing Advisory and Assistance Services to Marine Corps Systems Command • IDIQ business model predicated upon competitive sourcing, performance-based practices and commercial acquisition principles • Provides: Easy access to commercially available services, Reduced procurement lead time and overhead, Pre-negotiated rates, Volume discount pricing, Broad contractor access, Improved competition and performance • Over $1B in awarded value of services since inception in Aug 2002 Why is this Important to DoD? Results • Establishes a model for general services in a Multiple Award Schedule type solution • Upholds DoD’s goals for performance-based acquisition of services and appropriate acquisition planning and strategic sourcing considerations • Provides Advisory and Assistance Services from an enterprise perspective, in a dynamic and high volume environment • Maintains healthy, competitive and loyal vendor base • 30 participating Prime Vendors and over 200 subcontractors • Over 1300 customers (internal and external to Marine Corps Systems Command) • $300M+ Annual Services provided to CEOss customers • Over 200 task orders issued per year • Average 3 bidders on each Task Order • Average 18 days from requirements generation through award of task order

24. Defense Logistics Agency:Strategic Material Sourcing Implementation Strategy Purpose / Scope • Develop annual population of NSNs to focus attention on increasing long-term contract coverage • Annual population is based on drivers: Top Demand items, Top Sales items, Top items impacting customer readiness • Establish annual goals for: LTC Growth, LTC obligation rate increase, Timely renewal of expiring LTCs • Increase Long-Term Contracting (LTC) Coverage • Reduce inventory from LTCs • Increase inventory savings from $221K at the end of FY99 to $352 million by FY11 • Improve throughput to develop a more agile and responsive supply chain to support customer requirements Why is this Important to DoD? Results • Measurable savings gained through reduced inventory levels • Increased availability of parts via LTCs with reduced lead-times • More agile supply systems through improved supply chain from customer requirements to delivery • Reduced weapon system ownership costs through inventory savings and price stability from LTCs • Inventory Savings from inception through FY08 Q2 = $231.8 Million • 120,029 SMS NSNs on LTC as of June 30, 2008 • LTC Obligation Rate of 58.2% as of June 30, 2008 • Other SMS LTC measurable gains as of June 30, 2008: • ALT: 1.4 days • PLT: 31.3 days • Material Availability: 91.5%

25. Defense Logistics Agency: Supplier Relationship Management Implementation Strategy Purpose / Scope • To build two-way relationships with key suppliers, across the DLA Enterprise, as a way to evaluate and manage supplier capability and jointly solve problems • To forge collaborative industry relationships between the Defense Logistics Agency (DLA) and key strategic business partners • To establish DLA as a seamless partner in the overall supply chain linking our suppliers with our customers • Evaluate spend analysis of each supplier annually • Recommend new SSAs/SCAs • Critical weapon systems support • Unique Sole Source items • Long standing relationship as a supplier • Supplier interest in establishing Alliance • Develop annual population of NSNs to focus • attention for increasing long-term contract coverage • Annual population is based on drivers: Top Demand items, Top Sales items, Top items impacting customer readiness • Each Supply Chain establishes annul goals for: LTC Growth, LTC obligation rate increase, Timely renewal of expiring LTCs Why is this Important to DoD? Results • 28 Strategic Supplier Alliances • 64,384 SSA NSNs on LTC • 22 Supply Chain Alliances • 42,251 SCA NSNs on LTC • Use of best practices among Alliance Stakeholders such as One Pass Pricing • Use of collaborative forecasting tools such as the Supplier Requirements Visibility Application Tool to improve product availability and production • Improved relationships and/or partnerships with key suppliers • Decreased lead times • More efficient and accurate information regarding supply availability • Fewer out of stock items • Reduced Inventory • Integration of suppliers into business processes • Strengthened customer confidence

26. DISA: Enterprise Collaboration Services Implementation Strategy Purpose / Scope • Based on the commercial service provider model with two service providers competing for market share within the DoD • Pay only for those services actually provisioned to the Government with the idea of fostering a competitive environment between service providers • To pilot and procure separate web-accessible, commercially-managed collaboration services for unclassified and classified networks in support of the Department of Defense under the NCES program • Requirements: • Web Conferencing (i.e. Audio, Video, Recording, Text Messaging, File Transfer) • Instant Messaging (i.e. Group chat, Chat rooms) Why is this Important to DoD? Results • Users have two choices on their unclassified & classified workstations from which to choose • DoD’s decisions to pay the two providers based on frequency with which their services are utilized has encouraged vendors to provide reliable, secure, capabilities that best meet users requirements • Adopting existing technology brings these capabilities to the user faster • Collaboration brings cost savings to DoD • Service-based, commercially managed, and commercially hosted capability on a DoD network • The feasibility of the DoD using a commercially-managed and hosted service that does not require pre-installed client software or client software licenses • Services that are reliable, easy to use, and that require minimum user and administrator training