INFOGRAPHIC: Can Small Businesses Survive Category Management?

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The latest acquisition trend to hit the federal government is category management. The goal of category management is for the government to ‘act as one’ to take advantage of its considerable buying power and streamline the procurement process. To that end, GSA began establishing contract vehicles for commonly purchased ‘categories’ of products and services, many of which were issued against its Schedules program.

Almost as soon as a new strategic sourcing contract was awarded, I heard horror stories from companies who weren’t selected about the sudden, and sometimes catastrophic, erosion of their federal business. Most of these were small businesses and, since increased small business utilization was one of the stated goals of category management, I decided to look at the data to see what was going on.

I focused on OS2, the strategic sourcing Blanket Purchase Agreement (BPA) for office supplies. GSA boasted that OS2 “achieved a small business utilization rate of 75 percent.” GSA doesn’t mention that only 13 small businesses were awarded OS2 contracts.

Herein lies the conundrum – can you consider OS2 a small business success story when so few companies benefited? What about the 400+ small businesses whose federal sales suffered as a result? Take a look at my infographic and let me know what you think (click to enlarge).

StrategicSourcingInfographic_Rev1

Jennifer Aubel is part of the GovLoop Featured Blogger program, where we feature blog posts by government voices from all across the country (and world!). To see more Featured Blogger posts, click here.

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5 Comments

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Profile Photo Judy Bradt

Jennifer, you’re right: this is a big challenge! Even if there are multiple vendors tied for lowest-price, few small businesses thrive in a long-term race to the bottom. If your Federal buyer is already price shopping before they meet you, the battle is usually lost. What to do? Small business can best survive — and thrive — a Federal category management culture by responding from a relationship-nurturing culture.

But I’d like to ask GovLoopers to help test my theory.

QUESTION: If you’re a Federal buyer, tell us: are you MORE, or LESS, likely to call GSA’s Category Manager for help if you’re already in touch with several vendors to discuss ideas, innovations, and approaches to your needs?

Prof. Samuel D. Bornstein

Judy, As I read the Category Management Guidelines on Spend Under Management-Tiered Maturity Model, it becomes clear that it will be “mandatory” that the Agencies abide by the decision of the Category Manager as to which vendor to purchase goods or services. This is consistent with the OMB directive as contained in OMB Memorandum M-13-02 “Improving Acquisition through Strategic Sourcing,” December 5, 2012.

Prof. Samuel D. Bornstein

Since Category Management is effectively FSSI by another name, one can view CM as a “wolf in sheep’s clothing”. Besides the recognized irreversible damage that FSSI has done to small business federal contractors and the US Economy, by way of the jobs that have been lost, there are other concerns that must be addressed. Those concerns relate to the restricted competition and the possibility of fraud and the misappropriation of funds where the Category Managers wield enormous power to select the winners and the losers. There are Internal Control Procedures which must be implemented before CM moves forward, otherwise lacking this oversight, there will be problems as CM will cover $277 Billion (two-thirds) in annual government.
The implications for small business federal contractors will be far more significant than the damage that FSSI has already caused for Schedule 75-Office Supplies.

Bill Williams

Bottom line is, Small Business are required to compete with Big Business Billion Dollars of Purchasing Power. This Govt initiative is a duplication of Corporate Americas Business Model that devastated Small Business under the disguise of (TCO) Total Cost of Ownership. I know I was a key implementation player for several Fortune 500 Corporations.