Strategic Sourcing Thomas W Essig Director Program Analysis

Strategic Sourcing Thomas W. Essig Director, Program Analysis and Business Transformation DASN Acquisition Management April 25, 2006

What is Strategic Sourcing? DEFINED BY STRATEGIC SOURCING DEFINITIONS Office of Management and Budget (OMB) 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. This process helps agencies optimize performance, minimize price, increase achievement of socio-economic acquisition goals, evaluate total life cycle management costs, improve vendor access to business opportunities, and otherwise increase the value of each dollar spent. Public Sector Strategic Sourcing Roundtable Strategic sourcing is NOT…. an answer…it is NOT leveraged buying, it is NOT bundling. 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” HOLISTIC process that addresses customer needs, market conditions, organizational goals and objectives, and other environmental factors Based on MARKET INTELLIGENCE and takes into account small business capabilities Inclusive of CUSTOMER REQUIREMENTS A CROSS-FUNCTIONAL APPROACH About SUPPORTING AN ORGANIZATION’S MISSION through procured goods and services About DEVELOPING ORGANIZATION WIDE STRATEGIES

Do. D-Wide Strategic Sourcing (DWSS) Program Vision To provide customers throughout the Department [of Defense with services acquired] in the most efficient and advantageous manner. Memorandum from Paul Wolfowitz, Deputy Secretary of Defense, “Acquisition of Services Review” 2/6/2003 Program Objectives Ø Reduction in Total Cost of Ownership Ø Department-wide crossfunctional acquisition strategies Ø Improvements in meeting socio-economic goals Ø Standardization of acquisition business process Ø Improved skills of Do. D acquisition community Achieving DWSS objectives will require collaboration among the various Do. D organizational components and senior level “buy in”

Temporary Service Cost Drivers KELLY AND MANPOWER, AMONG THE LARGEST PLAYERS IN THE US MARKET, … … EXHIBIT A BREAK-EVEN MARK-UP OF APPROXIMATELY 20%, SUBSTANTIALLY LOWER THAN THE INDUSTRY AVERAGE CONTRACT LABOR SERVICES US REVENUE SHARE (MAY 2004) COMPARISON OF BREAK-EVEN MARK-UPS INDUSTRY AVERAGE VS LARGEST US PLAYERS (2004) LARGE PLAYERS EXHIBIT A SUBSTANTIALLY MORE EFFICIENT COST STRUCTURE COMPARED TO INDUSTRY AVERAGE TOTAL # SERVICE PROVIDERS = > 20, 000 Source: IBIS, Temporary Help Services in the US, May 2004 Source: CSFB, Global Services, March 2004; CIBC, Manpower Equity Research, April 2004, Censeo analysis Do our incumbents have favorable cost structure to meet our requirements with high levels of service at comparably lower prices/ mark-ups?

The Acquisition Strategy creates a collaborative method of interacting with small business suppliers while maintaining competition RFI to understand cost drivers RFP for Initial Multiple Award Task Order Contracts • Conduct competitive RFx to down select to initial supply OVERALL OBJECTIVE(S) group comprised of incumbent and new small businesses Place Competitive Orders Conduct Supplier Development Workshops • Work collaboratively with suppliers to drive down costs of working together Exercise Options with Final Group of Suppliers • Further consolidate spend to “preferred suppliers” and implement policy enforcements • Achieves/exceeds socio-economic goals • Includes a combination of set-asides for 8(a), Hub-Zone, and Service Disabled Veteran Owned • Enables fair market prices for Do. D • Creates a collaborative approach to working with supply community – enhances capabilities of small businesses