Mr. Pat Rhode, Chief, Procurement Transformation Division, US Air Force Date: August 5, 2008 Time: 10:45 – 11:45

2. AF Strategic Sourcing Initiatives Mr. Pat Rhode, Chief, Procurement Transformation Division, US Air Force Date: August 5, 2008 Time: 10:45 – 11:45

3. Outline • DoD and Strategic Sourcing • Strategic Sourcing Model • AF Initiatives • Commodity Councils • AF Results • Installation Acquisition Transformation • Emerging Demands • Questions

4. DoD and Strategic Sourcing • Strategic sourcing is mandated by the OMB and is identified by GAO as a best practice • The Department of Defense (DoD) is one of the largest, most complex purchasing organizations in the world exceeding $300 billion in FY07 • Lack of coordination across Contracting Activities has resulted in a proliferation of duplicative efforts and lack of efficiency in a strained budget environment Understand HOW and WHERE it is spending its procurement dollars! IDENTIFY opportunities to LEVERAGE its buying power and Source Strategically! DoD Needs to: The SSDB was chartered to focus on DoD Strategic Sourcing results

5. DoD and Strategic Sourcing Strategic Sourcing IS NOT Just… Strategic Sourcing IS… • The resulting contract • Leveraged buying • Contract consolidation/bundling • Contracting and procurement • About saving money • A PROCESS for systematically analyzing and developing optimal strategies for buying goods and services • DATA DRIVEN – fact-based analysis to drive decision making rather than just “hunches” • A HOLISTIC process that addresses customer needs, market conditions, organizational goals and objectives, and other environmental factors • Based on MARKET INTELLIGENCE and takes into account small business capabilities • A COLLABORATIVE, CROSS-FUNCTIONALapproach • About SUPPORTING AN ORGANIZATION’S MISSION through procured goods and services 5

6. DoD and Strategic Sourcing Strategic Sourcing Benefits Requires a collaborative effort Reduces total cost of ownership Improves management of consumption Improves operating efficiency Improves focus on socio-economic goals Provides cost savings Tactical Sourcing Strategic Sourcing Provides Opportunities To Maximize Procurement Spend Dollars -- plus a lot more

7. DoD and Strategic Sourcing Strategic Sourcing results AND potential: • In FY06, DoD targeted $4.3 Billion, or 1.5%, of the DoD total spend and achieved an estimated cost savings of $538 Million, or 12.5%! • These savings do not even count the out-year savings stemming from decreased administrative costs, less manpower requirements, improved demand management, all of which will have a multiplier effect for years to come! But what about the other 98.5% of the Spend ?

8. 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 AF and DoD Strategic Sourcing Model 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

9. AF FY08 Commodity Councils

10. AF Strategic Sourcing Results Examples of Air Force Strategic Sourcing Successes Medical Services Information Technology Aircraft Structures • Focused on developing strategies and standards for Clinical Support Services (CSS), Temporary Medical Staffing (TMS) and Medical Administrative Support Services (MASS) • Expanded to OCONUS • Addressed a baseline spend of $207M through strategic sourcing • Generated a $9M cost avoidance in FY07 • Awarded 100% of CSS and MASS to small businesses • Developed standard desktop configurations AF-wide; also adopted by OMB • Set up a quarterly enterprise buy to generate economic order quantities • Awarded 8% of FY07 spend in one initiative to small business and anticipates awarding 25% in another initiative • Generated over $150M in cost avoidance since FY03 • Contained an executed spend of $54M in the Boeing sole source strategy • Generated a $7.7M cost avoidance in FY07in the Boeing sole source strategy • Reduced ALT by 70 days as a result of reduction in synopsis and Justification and Approval (J and A) • Focused on developing sole source strategies for major vendors Cost Result Socio-Economic Result Process Result

11. AF Strategic Sourcing Results • Achieved a cost savings/avoidance of $98.8 million on a baseline spend of $2.6 billion in FY07 • Strategic sourcing focus on only 4% of the $69 billion FY07 AF spend But what about the other 96% of the Spend ?

12. Installation Acquisition Transformation (IAT) Current CONUS Installation Contracting ($15B) 71 Contracting offices/squadrons: Provide tactical support to their assigned installation customers Results of Current Construct: Redundant procurement of similar goods and services Inability to effectively strategically source AF requirements Inefficient use of contracting expertise Installation Acquisition Transformation is: AF-Enterprise Initiative Crosses traditional organization lines Enables Strategic Sourcing 12

13. Key Tenets of IAT • Maintain Customer Relationships • Continue Socio-Economic Focus • Retain Contracting Experts at Every Installation • Maintain Robust Contingency Contracting Capability • Ensure Force Development • Preserve Transparency

14. IAT Future State 788th IAG 790th IAG HQ 786th IAG IAGs 787th IAG 789th IAG From 71 tactical units to 5 strategic units 14

15. IAT and Strategic Sourcing Installation Acquisition Group Enterprise Sourcing Squadron Sourcing Acquisition Squadron Program Support Squadron Business Support Squadron Requirement Evaluation & Sourcing Flight

16. IAT and Strategic Sourcing Enterprise Sourcing Squadrons (ESS) • Conduct lifecycle acquisition of defined commodities including services • Provide multi-functional skills to develop acquisition strategy • Coordinate with FOAs and existing Air Force and DoD commodity councils • Execute strategic sourcing activities • Maintain Air Force-wide focus on defined commodity groups

17. IAT and Strategic Sourcing Requirement Evaluation & Sourcing Flight • Evaluate requirements, determine appropriate sourcing location/strategy • Identify similar requirements from multiple installations • Utilize historical spend data to identify strategic sourcing candidates • Develop sourcing teams for identified candidates

18. IAT and Strategic Sourcing AF Level Sourcing Installation Acquisition Center Enterprise Sourcing Squadrons Strategically Sourcing the Enterprise! Regional Level Sourcing Acquisition Sourcing Squadrons Installation Level Sourcing

19. Emerging Demands • Strategic Sourcing training of contracting workforce • Build Strategic Sourcing Experts • Process Re-engineering across enterprise • Greater awareness, collaboration and utilization of DoD and Federal initiatives and capabilities

20. QUESTIONS?