With government agencies scrambling to trim down their finances in response to looming sequestration-related budget cuts, when it comes to saving money, no stone is being left unturned. Amongst hiring freezes and staff reductions, federal agencies are turning to a tried and true method of penny-pinching: buying in bulk.
The US General Services Administration (GSA) is turning to a new strategy for making purchases in order to help the federal government get the best deals. The approach, called “strategic sourcing” combines multiple federal agencies on a single contract to buy goods and services from government contractors. The hope is that by sharing contracts between agencies, the larger order sizes will allow the government to cut a better deal by encouraging bulk discounts.
The approach makes sense – the fewer government contracts, the more competitive they are for private contractors and thus the lower profit-margins those companies are willing to accept. The GSA hopes to do $9 billion worth of strategic sourcing deals in 2013 and Joseph Jordan, an administrator at the Office of Management and Budget has said that he expects the procurement approach to make up about $150 billion in federal agency purchasing.
The strategic sourcing approach is not without critics. Andy Medici of the Federal Times reports that professional services contractors that sell federal agencies everything from office supplies to vehicles are worried that strategic sourcing will force the government to prioritize price over quality.
Much of that worry can be written off as government contractors concerned that strategic sourcing will actually success and their bottom lines will suffer. But there is a ring of truth to their concerns. Quality is a hard characteristic to convey in large contracts, and likely even less so when the purchasers are from multiple federal agencies. The move towards strategic sources also hints at a larger problem, where federal managers are pushed so hard to keep costs down that price becomes the only part of a contractor’s bid that matters. If this becomes the case, there is a very real risk that quality will indeed suffer.
