Federal Acquisition Service U.S. General Services Administration 2011 Government Transportation Forum April 20-21, 2011 Federal Strategic Sourcing Initiative Second Generation Domestic Delivery Services (DDS2)

Agenda: "Leveraging spending via governmentwide strategic sourcing for Domestic Delivery Services" Page 1 FSSI DDS1&2 Background – Blaine Jacobs, GSA DDS2 Update and Insights – Stevie Graham, GSA Managing Domestic Delivery Services – Bill Bardwell, VA Sustainability – Tom Dames, UPS Agenda

Page 2 What is Strategic Sourcing? “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” Clay Johnson Former Deputy Director for Management, OMB Definition of Strategic Sourcing

Page 3 Background

Strategic Sourcing is a structured, analytical, and collaborative process Here’s a look at the high-level process the interagency commodity team used for DDS2 Page 4

Page 5 The DDS2 program is the result of a year-long collaboration between dozens of government experts TECHNICAL EVALUATION TEAM Diane Kanauka, IRS Bill Bardwell, VA Ernie Stevens, GSA REQUIREMENTS DEFINITION & ACQUISITION STRATEGY TEAM CONTRACTING OFFICER Jason Holloway, GSA Kesa Russell, DHHS Steve Schneider, DHHS-NIH Valerie Hood, DHHS-NIH Kathryn Calderone, DHS Acia (John) Parker, DHS-USCG Gerri Tzul, DOC Al Majors, DOE Anthony Nellums, DOE Tim Jackson, DOE Sondra White, DOI Romerio Moreno, DOL Becky Koses, GSA Blaine Jacobs, GSA Ed Kelliher, GSA Ernie Stevens, GSA John Blanchard, GSA Kristina Nelson, GSA Lynn Ju, GSA Marquita Washington, GSA Mary Anne Sykes, GSA Mary Davie, GSA Michel Kareis, GSA Tauna Delmonico, GSA Valerie Bagby, GSA Tim Burke, GSA Ames Owens, DOT Steve Hopkins, DOT- FAA James Burns, DOT- FMCSA Brian Dennis, NTSB Jack Kelly, OMB Rosalind Wright, OPM Brenda Jackson, Treasury-IRS Diane Kanuka, Treasury-IRS Christin Lawlor, USDA Todd Repass, USDA Victor Jefferson, USDA Bill Bardwell, VA Nelson Gonzalez, VA

Agenda "Leveraging spending via governmentwide strategic sourcing for Domestic Delivery Services" Page 6 FSSI DDS1&2 Background – Blaine Jacobs, GSA DDS2 Update and Insights – Stevie Graham, GSA Managing Domestic Delivery Services – Bill Bardwell, VA Sustainability – Tom Dames, UPS Agenda

Page 7 DDS2  UPS Oct 2009 – Sep four options  Over $1B savings forecasted  Lower discounted common accessorials  Continue with no FSCs for parcels  Monthly enhanced shipping reports  Over 80 participating agencies  36% ground shipmentsDDS2  UPS Oct 2009 – Sep four options  Over $1B savings forecasted  Lower discounted common accessorials  Continue with no FSCs for parcels  Monthly enhanced shipping reports  Over 80 participating agencies  36% ground shipments DDS1  FedEx Oct 2006 – Sep 2010  Over $676M savings  Discounted accessorials  No fuel surcharges (FSCs)  Quarterly shipping reports  61 participating agencies  9% ground shipmentsDDS1  FedEx Oct 2006 – Sep 2010  Over $676M savings  Discounted accessorials  No fuel surcharges (FSCs)  Quarterly shipping reports  61 participating agencies  9% ground shipments Comparison of DDS1 to DDS2

"Leveraging spending via governmentwide strategic sourcing for Domestic Delivery Services"  Regular town hall meetings to share best practices  UPS reviews to help agencies achieve their DDS2 goals  First year statistics  Over 17,000 new UPS accounts created  $88.3M spend and $216.4M savings  12.9M packages shipped  7.6 LBS average package weight  $6.84 average cost per package  98.8% on-time performance  64% air express and 36% ground Page 8

 Using USPS First Class Mail for letters is still the best deal in town!  Do you really need to send letters via express service?  Service Upgrades and Pricing Anomalies  Next Day Air is less expensive than Next Day Air Saver  Second Day Air is less expensive than 3-Day Select  Avoiding or minimizing pickup fees  Consolidate packages to a central pickup point, use a Drop Box, take packages to an authorized UPS facility, hand them to a UPS courier  Realize optimal savings without degradation of service  Use UPS Ground vs. Air services to the extent possible Why You Should Use

Agencies can further reduce costs by helping users select the optimal service for their domestic packages 10 47% Savings 60% Savings SAMPLE 10 LB ZONE 1 PACKAGE APPROXIMATE TRANSIT TIME FOR GROUND SHIPMENTS FROM THE DC AREA Source: UPS.com … at significantly lower costs than Next Day Mid-A.M. and even Two Day Express Service! UPS Ground service typically delivers packages traveling less than miles in 1 day… Source: UPS DDS rate chart; GSAAdvantage shipment box prices

TOTAL COST TO SHIP BY PACKAGE WEIGHT (ZONE 1 SHIPMENT RATES) TOTAL COST TO SHIP BY PACKAGE WEIGHT (ZONE 1 SHIPMENT RATES) The savings potential by substituting for Ground Service varies by weight Page 11 NOTESNOTES Source: UPS DDS rate chart; GSAAdvantage shipment box prices $2.05 Savings $6.22 Savings $14.57 Savings $27.69 Savings $41.07 Savings UPS does not provide shipping boxes for Ground shipments Total Cost to Ship includes DDS2 shipping rates plus estimated packaging costs for Ground shipments The dollar differential between Ground and Next Day Mid-Morning is relatively low for packages under 5 lbs but widens as package weight increases Shipping a 50 lb. package via Ground Service saves 82% over Next Day Mid- Morning

"Leveraging spending via governmentwide strategic sourcing for Domestic Delivery Services" Page 12 FSSI DDS1&2 Background – Blaine Jacobs, GSA DDS2 Update and Insights – Stevie Graham, GSA Managing Domestic Delivery Services – Bill Bardwell, VA Sustainability – Tom Dames, UPS Agenda

 Opportunities with FOB Origin shipments – What is agency policy?  Product contract terms may restrict competition  Small companies cannot access lowest package rates  Eliminate vendor “Handling” charges – Separate shipping charges  Managing government accounts for inbound shipments – Not without reports!  Separate or shared government accounts for vendors?  Have a plan to manage the account(s) - abuse, claims  Working together vs. independently to maximize effectiveness  Within your agency and between agency and vendor  Avoid costly communications and training shortfalls  Establish subject matter expert groups  Distribute “How To” messages regularly – weekly, monthly  Establish regular training & refresher training events – award certificates Managing Domestic Delivery Services

"Leveraging spending via governmentwide strategic sourcing for Domestic Delivery Services" Page 14 FSSI DDS1&2 Background – Blaine Jacobs, GSA DDS2 Update and Insights – Stevie Graham, GSA Managing Domestic Delivery Services – Bill Bardwell, VA Sustainability – Tom Dames, UPS Agenda

Federal Government Taking leadership with FLEEEP President Obama issued an Executive Order (Order) on October 5, 2009: Federal Leadership in Environmental, Energy, and Economic Performance (FLEEEP)  Federal agencies are now required to report, inventory and reduce their own greenhouse gas (GHG) emissions, as well as that of their contractors (Scope 3 emissions)  The Order defines Scope 3 as “greenhouse gas emissions from sources not owned or directly controlled by a Federal agency but related to agency activities such as vendor supply chains, delivery services…”  95% of new contract actions, including delivery services, must comply with new performance requirements  “The head of each agency shall designate from among the agency’s senior management officials a Senior Sustainability Officer who shall be accountable for agency performance with the requirements of the order.”

Six Greenhouse Gases - Convert to CO 2 Equivalents 16 Environmental Footprint

What Impacts the Carbon Intensity of the Transport Sector  What mode of transport is used  Scale and density of the network  Efficiencies of the network  Efficiencies of most energy intensive mode (air fleet)  Efficiencies of the ground fleet  Carbon Avoidance – strategies and results  Low carbon fuels  Advanced Technology Vehicles  Capturing all carbon from origin to destination (Scope 1, 2, 3) Relative Carbon Impact

Network Efficiency

CO2 / Available Ton Mile Gallons / ATM Emissions / Payload Capacity % of Fleet Meeting Stage IV Early acquisition of efficient aircraft Average age of fleet is 12.3 years In flight aircraft visibility Surface Management Systems Innovative routing technology Continuous Descent Approach Single engine taxi / Optimize fuel on-board Aircraft Network Fuel Efficiency

Alternate Fuels and Technology Hybrid Electric:  P70H (US) = 25  P100H (US) = 225 Electric:  P100E (US) = 2  P50E (International) = 26 Liquid Petroleum Gas:  LPG Vehicles (Korea) = 6 Compressed Natural Gas:  1,076 CNG Vehicles (US)  71 CNG Vehicles (International) Liquid Natural Gas:  11 LNG Tractors (US) Propane:  464 Propane Vehicles (International Package Cars & Shifters)  8 Propane Shifters (US) Total Alternative Fuel Vehicles (US & International) = 1,914 Updated: 01/03/2011 UPS Clearing the Air with New LNG Tractors Atlanta, February 22, 2011 Purchase Is Step Toward U.S. Energy Security UPS Clearing the Air with New LNG Tractors Atlanta, February 22, 2011 Purchase Is Step Toward U.S. Energy Security

UPS calculates carbon emissions for all these shipments, then purchases and retires offsets equaling that amount  A nominal fee covers the offset cost plus carbon calculation  Cost is $.05 for Ground and $0.20 for Air  UPS purchases only certified offsets that fund projects with positive environmental impact An Easy Way to Offset Carbon Emissions UPS : EPA Presentation: October, 4, 2010

Details of Request Data Detail / Output General Methodology Third Party Verification Stamp Carbon Footprint Analysis Report

For more information Page 23 Stevie Graham (703) or