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Headquarters U.S. Air Force

Mr. Ronald PoussardDirector, Small Business ProgramsSAF/SBFebruary 26,2009

STRATEGIC SOURCING

Teresa Rendon Small Business ProgramsSAF/SB

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Federal Mandate from OMBMay 2005

May 05 Memorandum from the Office of Management and Budget (OMB):

Each agency’s Chief Acquisition Officer (CAO), Chief Financial Officer (CFO) and Chief Information Officer (CIO) are responsible for the overall development and implementation of the agency strategic sourcing effort.

Beginning in January 2006, the CAO shall report annually to the Office of Federal Procurement Policy (OFPP) regarding, at a minimum, reductions in the prices of goods and services, reductions in the cost of doing business, improvements in performance and changes in achievement of socio-economic acquisition goals.

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Strategic Sourcing Definition

Strategic Sourcing is the collaborative and structured process of critically analyzing

an organization’s spending and using this information to make business decisions

about acquiring commodities and services more effectively and efficiently.

OMB MemorandumRe: Implementing Strategic Sourcing

20 May 2005

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Strategic Sourcing IS NOT Just… Strategic Sourcing IS…• 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, socio-economic considerations, organizational goals/objectives

& other environmental factors• Based on MARKET INTELLIGENCE and takes

into account small business capabilities• A COLLABORATIVE, CROSS-FUNCTIONAL

approach• About SUPPORTING AN ORGANIZATION’S

MISSION through procured goods and services

• Leveraged buying

• Contract consolidation/bundling

• About saving money

•

• The resulting contract

• Contracting and procurement

What is Strategic Sourcing?The “IS” & “IS NOTS”

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Benefits of Strategic Sourcing: Beyond Consolidation and Leverage

Primary Benefits of Strategic Sourcing

Reduction in Cost Per Unit

Pricing Improvements• Lower unit price• Volume rebates

• Payment term discounts

Supply Chain Savings• Cost of capital

• Warehousing costs• Shipping costs

Reduced Lifecycle Costs• Maintenance costs

• Operating costs• Disposition costs

Improved Operating Efficiency

Reduced Procurement-Related Operating Expense

• PO Processing• Accounts Payable

• Receipt/Warehousing• Standardized procurement

process

• Reduced Non-Procurement Related Operating Expense• Other operating efficiencies

Performance Monitoring• Structured metrics and

periodic review of contractor performance

Change in Consumption/

Volume

Demand Management• Eliminate demand

• Reduce consumption• Encourage substitution

• Change product mix

Specification Review• Eliminate “gold-plating”

• Simplify specifications• Alternative products

Improved Focus on Socio-

economic Goals

Socio-economic Goals • Structured analysis of

small/disadvantaged business opportunities

Source: Censeo Consulting Group

Censeo Consulting Group, Inc. - Confidential; All rights reserved, 2005

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How it all started

71 contracting offices and numerous Field Operating Agencies (FOAs) are doing great work:

• But, as organized, are only able to provide tactical support to their customers

This alignment results in:• Redundant procurement of similar goods and services

Sometimes from the same vendors• Inability to effectively strategically source requirements• Inefficient use of contracting expertise

Business As Usual Can Not Continue…

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How will it apply?

Only applies to base-level (installation) contracting within the continental United States Approximately $15 Billion per year

Does not apply to: Major Weapon Systems Logistics Support to Weapon Systems Laboratory Support Research, Development, Test and Evaluation

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• Buying largely by 5 geographic-based Air Force Materiel Command (AFMC) Regional Centers

• Workload based on region-- not Major Command (MAJCOM) spend

AFMC Centralized Strategic SourcingResponsibility and

Execution

Regional ApproachOriginal

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Risk Mitigation StrategyRevised Approach

MAJCOM Strategic Sourcing“AETC Example”

AFMC-aligned, AF-wide SS Organization

Joint AFMC & MAJCOM Strategic

SourcingResponsibility and

Execution

• Stand up AFMC-aligned Organization-- Execute AF-wide Strategic Sourcing• Manage enterprise Field Operating Agencies (FOAs) & Commodity Councils

• No geographic regions-- retain MAJCOM alignment • MAJCOMs establish strategic sourcing capability• Retain Headquarter Specialized & local buying missions

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The goals and objectives of the Air Education and Training Command Contracting (AETC CONS) Strategic Sourcing flight continue to evolve as the command leads the way in transforming USAF acquisition towards a culture of strategic sourcing. The standing mission statement of the AETC CONS Strategic Sourcing Flight is provided below:

Leading USAF acquisition transformation by teaming with functional partners and leveraging Strategic Sourcing principles to develop optimized sourcing strategies, reduce Total Cost of Ownership, and utilize Small Businesses to the maximum extent practicable

AETC Strategic Sourcing Vision

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Strategic Sourcing Way AheadAn Example

Market Research

Review Current Strategy

Requirement Definition

Sourcing Strategy

Execute Strategy

Performance Management

Strategic Sourcing

Team

Review Strategy• Paper is currently purchased “tactically” from unit-to-unit• Cannot achieve volume discount with tactical purchases• Prices vary• Most purchases to Large Businesses

Market Research• What types of paper are available? (recycled, etc)• What are the cost drivers?• Do we have leveraging capability?• Can we purchase through a Small Business?• What are trends in this industry?

Requirement Definition• Demand is high due to employee pilferage of paper reams• Small Business can meet requirement• Determine the type of paper needed

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2

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Printer Paper Acquisition Printer Paper Acquisition ExampleExample

Sourcing Strategy• Purchase paper in boxes (not reams) – reduces demand• Purchase environmentally compliant product• Purchase in bulk – can negotiate considerable discount• Purchase from Small Business

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Entire process can be executed quickly

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Why Strategic Sourcing?Brings Greater Opportunities for Small Business

• We know small business capabilities are often not fully understood

• We know strategic sourcing analyses will help “grow the pie” in terms of opportunities currently available for small businesses:

Via better capture of “spend” for various goods and services

Inclusion of Small Business Specialists on Strategic Sourcing Teams early in the process

Through enhanced market analysis to determine capability, risk and past performance

By deploying comprehensive data analysis to enable data-driven strategic sourcing decisions

We aim to maintain and strengthen Small Business through Strategic Sourcing…

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Actions You Can Take Remain Competitive for Strategically Sourced Contracts

Keep your local AF Small Business Specialist apprised of your capabilities, interests and areas of possible competitive advantage

Keep your Central Contract Register data current• Market research tool for contracting officers• Provides information about business size and socio economic status

Subscribe to FEDBIZOPS and stay current on posted opportunities• Respond to Sources Sought Synopses and Request for Information• Participate in Industry Days and small business outreach events

Consider leveraging your capabilities by “teaming” with other small businesses to pursue larger procurement opportunities

There are many resources available to help you!-- Local Air Force Small Business Specialist (SBS) -- www.AFSmallBiz.org (Locator Link for SBS info)

-- Small Business Administration; www.SBA.gov -- Small Bus Development Centers; www.sbdc.org

-- Minority Business Development Agency (MBDA) -- Procurement Tech Asst Centers; www.PTAC.org

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QUESTIONS?