1. Copyright 2014

2.  Purchasing Mega-Trends  Federal Strategic Sourcing Initiative (FSSI)  FSSI Impact on 8(a) Program  Supplier Assessment Process  How to Confront FSSI Changes OVERVIEW 2

3. OVERVIEW Tactical (“Best Price”) PurchasingStrategic (Integrated) Purchasing Focus in on:  Leverage volume  Company agreements  Goals for price, quality, and delivery  Supplier reduction programs  Supplier meetings  Intelligence gathering  Supplier cost estimating  Technical planning for negotiations  Conducting negotiations  Functional skill development SOURCE: Alan R. Raedels, The Supply Management Process, NAPM, 2000 Focus in on:  Total life cycle cost  Strategic suppliers  Optimizing supply base  Supplier development  Aligning with business strategies  Developing organizational strategies to meet future needs  Developing commodity and supplier strategies  Participating in long-range business planning  Supply performance and relationship management 3

4. KEY DEFINITIONS Strategic Sourcing Re-Engineering. Changing purchasing from a transaction-orientated process, (i.e., three bids and a buy) to an integrated supply chain management process.) Integrated Procurement. Includes planning, sourcing, and management. Cross Functional Sourcing Teams. Used to select suppliers. Total Cost of Ownership (TCO). New focus. Supplier Diversity. Part of the strategic sourcing process. 4

5. KEY DEFINITIONS Strategic Supplier 1.A supplier that provides key supplies and/or services in a particular commodity area. 2.Strategic suppliers add a high degree of value to the supply chain management process by reducing costs, aggregating demand, etc. NOTE: Typically top 5% of supply chain. 5

6. Federal Strategic Sourcing Initiative FSSI Started in 2005 Being Implemented Gradually Starting with GSA Schedules Uses similar private sector practices “Buy Smarter and Save Act” Implements FSSI on a Broad Scale Proposed Legislation 6

7. REASONS for FSSI 7 1.Strategically source across Federal agencies 2.Establish mechanisms to increase total cost savings, value, and socioeconomic participation 3.Collaborate with industry to develop optimal solutions 4.Share best practices 5.Create a strategic sourcing community of practice

8. FSSI Implementation 8 FSSI Being implemented gradually Program to “modernize” Federal procurement Starting with GSA Schedules Part of GSA FY2014-2018 strategic plan Proposed New Law “Buy Smarter and Save Act” Implements FSSI on a broad scale Pending

9. FSSI Implementation 9 GSA Schedules (Done / In Work) 1.Express and Ground Domestic Delivery Services 2.Maintenance, Repair & Operations (MRO) Supplies 3.Office Supplies (GSA Schedule 75) 4.Print Management 5.Telecommunications Expense Management Services 6.Wireless Proposed New FSSI Areas Building Maintenance Operations (BMO) Consolidated Furniture Management

10. Supplier Assessment 10 Replaceability Strategic Value Hard Easy HighLow Strategic Supplier Capacity Technology Long-Term Contracts Brand Power I IIII IV 10

11. 11 Supplier Assessment 11 Replaceability Strategic Value Hard Easy HighLow Strategic Supplier I IIII IV 11 Vendor “Commodity Hell” II

12. 12 Supplier Assessment 12 Replaceability Strategic Value Hard Easy HighLow Strategic Supplier I IIII IV 12 Vendor “Commodity Hell” Brand / Niche Capacity Mentor-Protégé Growth Plan Contract Vehicles Proactive

13. FSSI Impact to 8(a) Companies 13 IMPACT AREADESCRIPTION Contract BundlingSmaller contracts being combined Reduces 8(a) set-aside opportunities GSA Schedule Contracts Schedule Holders being targeted For FSSI contracts CapacityNeed more capacity to handle larger scale contracts Increased need for Federal partners Period of Performance FSSI contracts can be long-term (More than 5 years)

14. FSSI Impact to 8(a) Companies 14 IMPACT AREADESCRIPTION MentorIncreased need for 8(a) mentors to build capacity 8(a) MarketingNeed to target niche areas of the FSSI supply chain Standard Specifications Can potentially limit the ability of 8(a) firms to offer innovative solutions ComplexityFSSI contracts can be more complex making them harder to price and proposals more expensive to prepare

15. How to Confront FSSI Changes 15 1.Pain. Look for new and/or underserved niche market areas in your industry. Target the ones where you are strong. Avoid challenging a strategic supplier directly. 2.Niche. Develop your “brand” as a leader in your niche. 3.Partners. Find partners who can provide you with additional capacity to meet FSSI-type contracts. 4.Change. Review your business model annually to ensure it is still effective. 5.Contracts. Find the right contract vehicles to work in FSSI environment, e.g., GSA Schedules, ID-IQ contracts, 8(a) / WOSB / HUBZone set-asides, subcontracts, etc. 6.Communicate. Provide inputs to the Feds on how to implement FSSI in your area without harming small firms.

16. IMPORTANCE of BRANDING 16 Makes it easier to get set-aside contracts 8(a) Sole Source WOSB – SBA 8(m) Program HUBZone SDVOSB Helps Identify FSSI Niche Area(s) Reduces marketing / sales time Encourages repeat business (loyalty) Generates referrals Lower marketing expenses Able to charge higher prices

17. Summary 17 FSSI is a major change to Federal procurement Consolidation (bundling) of supply chain will make it harder to find 8(a), WOSB, HUBZone, etc. set-aside contracts unless specifically targeted by FSSI Large businesses tend to win FSSI contracts Small businesses can be successful with FSSI in niche areas Recommend Federal partners and/or mentor to help small business be successful with FSSI FSSI evolving so expect more changes

18. 18 Former U.S. Air Force Contracting Officer (PCO) Certified Professional Contracts Manager (CPCM) Co-Author of book: “8(a) Survival Guide ” 312-404-2224 (Phone) www.E-MBE.net e-mbe@msn.com Richard J. Hernandez, CPCM