In the spring of 2018, OMB released a memo instructing agencies on steps they need to take to comply with the White House’s Category Management initiative. For this blog post, I collaborated with Curt Cote, a Partner at Censeo and recognized leader in Federal Category Management to share his expertise on how agencies can not only comply with this guidance but realize the immense benefits that a well-executed Category Management strategy can provide.
Pushing Category Management Forward: 4 Practical Next Steps
Based on conversations with our clients, we know that the memo has raised a significant amount of questions and uncertainty about where agencies should start. Based on our experience implementing category management programs across the government, we recommend that agencies take the following first steps:
Make Strategic Decisions About the Use of Best in Class Contracts
The use of “Best in Class” (BIC) and “Spend Under Management” (SUM) metrics have provided agencies a consistent way to measure progress and set goals for their Category Management programs. OMB is doubling down on these metrics by increasing each agency’s BIC and SUM goals. However, most of the “low hanging fruit” has been picked, since agencies have already transitioned most of their commoditized spend (i.e., Office Supplies) to managed contracts.
Therefore, agencies should conduct a forward-looking spend analysis to identify where the biggest pockets of spend will lie in the future. This data, along with supply market research, can then be used to identify which upcoming requirement areas are best suited for a managed contract. We advise our clients to be cautious in doing so, however, as attempts to reach BIC and SUM goals through wholesale shifts to managed contracts have in some cases led to less than ideal results. Although agencies receive credit on their Category Management metrics through such an approach, poor overall procurement outcomes can arise due to artificially limiting competition or engaging with a suboptimal supply base for those needs.
Use Strategic Vendor Management to Actively Engage with Suppliers
Vendor management, also called Supplier Relationship Management (SRM), is comprised of pre-award and post-award strategies aimed at effectively engaging with industry partners to both align against and drive improved performance outcomes. Most agencies use industry days, RFIs, and draft solicitations to engage with vendors pre-award. However, the true value of vendor management is unlocked after award. When agencies establish strategies to improve the value that key suppliers provide over the course of their contracts, they see a significant and immediate return on investment. Effective vendor management requires investments and focus from both the agency and the supplier.
We recommend that our clients analyze and segment their supply base to identify vendors who are performing large, mission-critical tasks, and/or who are delivering a unique and critical technical solution. For these vendors, develop specific and measurable objectives, and work with the vendor to creatively and collaboratively solve for those objectives. For example, a potential objective for a vendor delivering mission-critical supplies may be to increase on-time delivery. The agency and the vendor could then hold discussions to identify barriers and inefficiencies on both sides that prevent timely delivery and find mutually beneficial solutions to achieve that objective.
Address Inefficient Buying & Consumption Behaviors
Demand management strategies are amongst the most powerful levers in the Category Management toolkit. Our clients have saved millions of dollars and significantly enhanced mission outcomes by improving the way that they develop requirements or utilize products and services. The key to building effective demand management programs is to ensure active representation and participation from program offices, technical experts, and acquisition staff. A comprehensive team will ensure the created strategy addresses the diverse needs of all stakeholders.
As a first step, identify the products or services that are bought or used in multiple offices across the agency. These common categories are the most likely candidates for effective demand management. Bring a cross-agency team together to discuss and compare their needs within the selected categories. Be on the lookout for opportunities to standardize requirements and specifications as a means to simplify the acquisition and reduce costs. Private sector demand management practices are easily findable through some online research and may offer additional ideas for improving buying decisions.
Train the Workforce in Category Management Principles.
The full value of Category Management is only unleashed when a critical mass of acquisition and program personnel incorporate it into their day-to-day work practices. However, it’s not realistic to expect that the entire federal workforce can (or should) become Category Management experts overnight. We have found that the most successful agencies identify a select list of acquisition and program/mission staff to be Category Management practitioners. They then identify the specific competencies their agency needs based on the specific way they are implementing Category Management. For example, if an agency has a central Category Management office that performs spend analysis for the agency, it isn’t necessary for that agency to conduct a broad spend analysis training. The more that training is tailored to the agency’s operating environment, the more the agency will see its workforce begin to integrate category management principles into their day-to-day work.
Category Management is changing the way that the federal government approaches acquisition. Institutionalizing these practices will take time and effort but, as seen in the private sector, the benefits to be realized are significant. Hopefully, these steps are helpful as you think about ways to keep pushing these practices forward within your agency.
Derrick Moreira, President of Censeo Consulting Group, has more than 22 years of management consulting and industry experience leading and delivering complex supply chain and operations strategy solutions. Most recently, Derrick has played a key role in standing up and managing several large-scale supply management transformational initiatives across federal agencies. Key areas of subject-matter expertise include supply management and strategic sourcing, cost and business case analysis, workforce planning, program governance, change management, and process improvement/ reengineering. You can read his posts here.