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Dan Gordon and Strategic Sourcing

April 11, 2012

In many ways, I respect Mr. Daniel Gordon.  It is commendable that he undertook a task as daunting as reforming existing federal procurement procedures, and his well intentioned use of strategic sourcing to leverage the gross buying power of the federal government is not something that I would call a failure in theory.  However, I strongly feel that Mr. Gordon did not put the necessary time and research into determining the potential social costs associated with streamlining federal procurement in this manner.  I further believe that, as a result of this oversight, key decision makers within the current administration were misinformed with regards to the potential savings represented by the use of strategic sourcing as cost saving measure for federal commodity and service procurements.

A little history… OMB and GSA began the implementation of a failed strategic sourcing initiative at federal level back in 2005, picking on the little guy, the office supplies contractors on multiple award schedule 75.  The initiative was designed to leverage the massive consolidated buying power of the combined agencies, in an attempt to achieve greater savings than those being realized through the standing GSA multiple award contracts.  The stated intentions of this program were to: increase small business utilization, while simultaneously increasing the level of transparency through the use of enhanced level three reporting requirements.  All of which sound great on paper…

Unfortunately, regardless of the failure of the first round of strategic sourcing contracts (nobody really used used them), the current administration decided to implement a second round of contracts in 2011, this time with mandated usage requirements.  The aggregated savings, verified in an independent study available through http://www.stopfssi.org, appear to rest somewhere around 1.5% across the top 2000 selling if this available on GSA Advantage, the general service administration’s primary tool for procurement falling below the microprocessor threshold of $3000.00.  While this appears to be a savings, it gets far more convoluted than one would anticipate.  The award of this most recent round of contracts effectively limited the prior usage of a pool of over 600 contractors, down to a pool of 15.  This radical move has funneled more than 70 million dollars away from over 500 small businesses, and into the hands of 15 contractors, and the number is growing rapidly.  The problem here, is that the program causes significant job loss amongst the 500+ affected small business that previously competed for this spend, while simultaneously limiting competition, which has proven in the past to cause increases in pricing over time. 

Factoring the minimal up front savings of 1.5%, one must conclude that the social and economic costs to the American tax payer will result in increased overall spending, and that any potential saving acheived beyond that available on the general standard schedules is simply going to be further diminished the longer that the program runs.

So… my hat is off to you Mr. Gordon for giving it you best shot, and for putting a valid idea to the test.  GSA did a horrible job of implementation, and the damages done to many small businesses thus far will be irreversible for the foreseeable future.  The experiment must end soon, or the unintended consequences of this program will drive more business under, and more people onto unemployment.  Should GSA succeed in implementation of the NITCP, FSSI, and OASIS contracts, the job loss could easily exceed 50000 American workers.

Please… somebody on the hill wake up and open your eyes.  GSA needs oversight, and the American public deserves better than to be pickpocketed by those responsible for reducing federal spend.

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