Category Management & Small Business Goals Harmonizing Category Management & Small Business Goals October 2018 For Official Use Only

Define category management Agenda Define category management Describe the framework for category management laid out in the President’s Management Agenda Discuss strategies for helping agencies meet the dual goals of category management and small business contracting For Official Use Only

Key Points Category management is about informed buying: Category management focuses on collaboration and sharing of business analysis by market experts to enable more informed buying for common goods and services using a combination of government-wide, agency and local contracts – not one-size-fits-all contracting. Agencies are expected to pursue category management & small business contracting together: The President’s Management Agenda expects agencies to (i) improve their acquisitions of common goods and services using category management principles & (ii) continue to meet their small business goals. This will entail a balanced approach using a combination of government-wide, agency, and local contracts. Harmonization is working: Early results show small business participation increases when category management principles are used effectively. Efforts are ongoing: OFPP, SBA, and OSDBUs are working together to build on current success and expand strategies to help agencies meet their dual goals. These efforts will include outreach and in-reach. For Official Use Only

What is Category Management? Category management (CM) is a business practice focused on information sharing and collaboration between agencies where: Cross-agency teams of experts in the acquisition of particular types of common goods and services study the federal market for those goods or services and share market intelligence with agencies through the Acquisition Gateway, such as: Terms and conditions that have produced good results; Standardized requirements that can meet most agency needs and avoid costly and unnecessary customization; Competitive pricing strategies informed by past prices paid; and Existing contracts that are (i) well-managed, (ii) reflect the characteristics above, (iii) have small business participation that meets or exceeds the government-wide average, and (iv) have the capacity to support use by other agencies. Agency buying activities and OSDBU offices use this market intelligence to review their current spend for opportunities to achieve better contract results while continuing to meet small business goals. For Official Use Only

Category Management Government-wide Categories FY17 common spend - $303B Transportation & Logistics ≈$28.5B Led by DoD Facilities & Construction≈$81.2B Led by GSA Professional Services ≈$71.1B Led by GSA IT≈$56.7B Led by GSA Medical ≈$43.5B Co-Led by DoD and VA Construction Related Materials Construction Related Services Facilities Purchase & Lease Facility Related Materials Facility Related Services Business Admin Services Financial Services Legal Services Management & Advisory Services Marketing & Public Relations Research & Development Social Services Technical & Engineering Services IT Software IT Hardware IT Consulting IT Security IT Outsourcing Telecomms Drugs & Pharmaceutical Products Healthcare Services Medical Equipment, Accessories, & Supplies Fuels Logistics Support Services Motor Vehicles (non-combat) Package Delivery & Packaging Transportation Equipment Transportation of Things Industrial Products & Services ≈$11.1B Led by GSA Travel ≈$7.5B Security & Protection ≈$5.4B Led by DHS Human Capital ≈$4.5B Led by OPM Office Management ≈$2.3B Led by GSA Basic Materials Fire/Rescue/Safety/ Environmental Protection Equipment Hardware & Tools Industrial Products Install/ Maintenance/Repair Machinery & Components Oils, Lubricants, & Waxes Test & Measurement Supplies Employee Relocation Lodging Passenger Travel Travel Agent & Misc. Services Ammunition Protective Apparel & Equipment Security Animals & Related Services Security Services Security Systems Weapons Compensation & Benefits Employee Relations Human Capital Evaluation Strategy, Policies, & Ops Planning Talent Acquisition Talent Development Furniture Office Management Products Office Management Services For Official Use Only

(1) Improve results from contracts for common goods and services The Framework for Category Management The PMA requires CFO Act agencies to pursue two objectives simultaneously: (1) Improve results from contracts for common goods and services (2) Continue to achieve their small business contracting goals For Official Use Only

Objective #1: Improve Results from Contracts for Common Goods and Services For FY 18, the President’s Management Council established goals for agencies to -- (i) bring spend under management by decreasing spend that is not aligned with sound category management principles by 20% and (ii) increase the use of BICs to 35% of spend that could suitably be made through those vehicles. Agencies may receive credit for local contracts if their use is part of a comprehensive balanced strategy developed by the OSDBU to maintain a robust supplier base & to take advantage of government-wide and agency-level vehicles where they can produce better value consistent with having a strong small business contracting base. Dollar-wise, the SUM goal is 6X larger than the BIC goal. For Official Use Only

The SUM Goal is 6X Larger Than the BIC Goal Category Management Spend Status $350 $305 $300 $250 $200 $ Billions $175 $150 $132 $100 $50 $22 $0 Total Category Management Spend Spend Under Management (includes BIC) BIC Unaligned Spend For Official Use Only

What is a “Best-in-Class” Contract? BICs are a subset of government-wide solutions that: result from rigorous requirements definitions & planning processes; reflect competitive pricing strategies; demonstrate use of category and performance management strategies; follow data-driven strategies to change buying & consumption behavior (demand management); and have undergone validation by third parties. By the numbers in FY 2017: 26 the number of BICs 35 the percent of BIC spending that went to small businesses 75 the percent of BIC contractors who are small businesses 22.7B the amount spent through BICs in FY 2017 (exceeds the 35% goal) For Official Use Only

Why Have a Goal for BICs? Having a goal on BICs reflects the benefits of using model contract solutions: more than $7 billion in savings and cost avoidance in FY 17, increased use of common specifications, and greater reliance on government and industry best practices For Official Use Only

How Should the BIC Goal Be Viewed? BICs are just one element of an effective category management strategy. BICs are not intended as one-size-fits all vehicles, nor are agencies expected to make “all or nothing” decisions when deciding whether to migrate work to a BIC. In some cases, a BIC may be suitable to meet requirements for some agency components and not others. This balanced approach should help ensure agencies meet their SB goal, attract new entrants, build their supplier base, and still get better value for the taxpayer. For Official Use Only

What Examples Might Guidance or Tools Highlight to Help Agencies Balance Their Use of BICs/Gov’t-wide, Agency and Local Solutions? Agency and Local Solutions BICs or Government-wide solutions might be suitable when: Goods and services are widely available from a large number of small businesses and those on government-wide vehicles offer better value than those on agency-wide or local contracts. Agency or local solutions may be preferable when: Work requires specialized skills not available through small businesses on a BIC or government-wide solution but are available from small businesses on an agency-wide solution; Migration from a local to government-wide solution could cause harm to the small business industrial bae that provides goods or services that would be migrated; and/or Use of the BIC or government-wide solution would force the agency to rely on a small business cadre of small business providers that could create significant mission risk. For Official Use Only

Objective #2: Maintain Strong Small Business Participation The PMA holds agencies responsible for meeting their small business contracting goals: Achievement of the above-mentioned CM goals is not an excuse for missing the agency’s small business goal. Every agency’s small business contracting goal and industrial base is different and, as a result, the benefits and drawbacks of adopting a given category management solution, such as a BIC or other government-wide solution, or agency-wide solution will vary from agency to agency. COLLABORATION & COORDINATION DOES NOT MEAN ONE-SIZE-FITS ALL BUT, AGENCIES ARE EXPECTED TO DO MEANINGFUL ANALYSIS TO BRING THEIR SPEND UNDER MANAGEMENT Each category manager has baselined small business spend and is expected to work with solution providers & OSDBUs to meet or exceed the baseline. For Official Use Only

Small Business Participation is Higher as a Percentage of Spend Under Vehicles Aligned with CM Principles FY17 SMALL BUSINESS ELIGIBLE SPEND ($ BILLIONS) 100% 62.1% 56.5% 74.3% 76.8% 25.7% 23.2% 37.9% CFO Baseline: Total SB Achievement Spend Under Management BIC Spending Other than Small Business Spend Small Business Spend Source: FY16-17 FPDS Data Fy

CFO Baseline: Total SB & Socioeconomic Achievement Small Business & Socioeconomic Participation is Higher on Popular BICs than on Federal Contract Vehicles Generally FY17 SOCIOECONOMIC SPEND AS PERCENT OF SMALL BUSINESS ELIGIBLE SPEND (%) 100 83 66 23.9 43 33 31 33 30 26 28 22 21 19 19 15 12 9.1 4.1 4.7 1.6 5 2 CFO Baseline: Total SB & Socioeconomic Achievement SEWP Alliant SB OASIS SB Small Business Small Disadvantaged Veteran Owned Service Disabled Women Owned HubZone Source: FY16-17 FPDS Data Fo

Building out Strategies for Meeting Building out Strategies for Meeting Category Management & Small Business Goals OFPP, GSA, SBA, and OSDBUs are working together on a variety of strategies to build on current achievements and strengthen the results under both initiatives. SBA is a member of the Category Management Leadership Council. OSDBUs have been invited to actively participate on all category management teams, supporting market research, small business baselining and impact analyses. They also serve as strategic advisors to senior agency official accountable for category management. Current strategies include: Guidance for agencies (pending) Tools to support data-driven decision-making Increase small business participation on BIC and other government- wide solutions For Official Use Only

Tools to Support Data-Driven Decision-Making Tools that are available or are under development for the workforce include: A small business dashboard compiles all details regarding SB on BICs, including spend, vendors, types, on-ramping opportunities, terms and conditions A BIC finder tool, under development, will allow research to determine what BICs are available to meet small business needs, even allowing for searching options for SB set asides and for the socio-economic categories Solution finder: includes BIC and other available solutions Training: designed to help members of the workforce understand the dual goals of the category management framework For Official Use Only

Increase Small Business Participation on BIC & other Government-Wide Solutions Emphasize the consideration of on-ramps for small businesses during the contract term On-ramp was used by GSA to add 31 new small businesses to OASIS and many more are expected to be added Identify opportunities for more government-wide set-aside vehicles Whenever a BIC is expiring or a new one is considered, consider the creation of a set-aside vehicle, either as the sole vehicle or in parallel to establishment of an unrestricted vehicle, as has been done for BICs such as Alliant and OASIS For Official Use Only

Category Management Myth vs. Fact Agencies will be forced to give up all, or most, local, bureau, and agency-wide contracts for common goods and services and rely instead on government-wide solutions whenever they exist. Agencies will use a balanced approach, relying on a healthy mix of local, bureau- wide, agency-wide, and government-wide contracts to help the agency (i) save money, (ii) reduce unnecessary contract duplication, (iii) meet small business goals, (iv) including socio-economic goals, and (v) support a robust small business industrial base. Agency buying offices and OSDBUs will consider market intelligence gathered by category management teams to meet the objectives above. For Official Use Only

Summary of Mechanisms to Ensure Strong Small Business Participation as Agencies Align their Spend with CM Principles Small business goals unchanged: Guidance and training will emphasize that agencies remain responsible for meeting their small business contracting goals. Balanced approach: Guidance and training will emphasize that agencies will use a combination of government-wide contracts, agency contracts, and local contracts shaped, in part, on small business contracting impact and the ability to maintain a robust small business industrial base. OSDBUs as strategic advisors: OSDBUs will serve as strategic advisors to help agencies in evaluating when best-in-class contracts and other government-wide solutions are beneficial and when agency and local solutions are more advantageous. Tracking of results: Category managers and owners of government-wide solutions will keep track of small business participation to evaluate results and make adjustments where necessary. Ongoing collaboration between CM and small business community: OFPP, SBA, and OSDBUs are working together to build on current success and expand strategies to help agencies meet their dual goals. These efforts will include outreach and in-reach. For Official Use Only