Earlier this month, the Office of Federal Procurement Policy (OFPP) released a proposed Office of Management and Budget (OMB) Circular, Implementing Category Management for Common Goods and Services, which “institutionalizes” category management as the government-wide model for the acquisition of common goods and services.  Contractors should be aware of this trend, as it could impact both the number of opportunities to secure government contract awards, and the relative size of those opportunities.

If this new initiative sounds familiar, that’s because it is.  In the past, the government has attempted to take advantage of its buying power through centralizing purchasing.  Examples of this include the Brooks Act, which required most agency IT acquisitions to be conducted by GSA, and the mandatory use of the GSA Schedules.  It remains to be seen if OFPP’s new effort will meet with greater success than these past ones.  And it also remains unclear how this new effort will impact the existing GSA Schedules program which, although it is not mandatory, has been the Government’s principal centralized method of procuring commercial items.

The proposed circular applies to all Executive Branch agencies, assigning additional responsibilities to Chief Financial Officer (CFO) Act agencies and those agencies with representation on the Category Management Leadership Council (CMLC).[1]  Key aspects of the circular (and by implication, the government’s current approach to category management) are summarized below.

  • The proposal specifies that all Executive Branch agencies “must use the [Category Management] principles and practices articulated in this Circular to reduce duplication, better leverage the government’s buying power, and promote the use of effective, best in class solutions.”  Consistent with this mandatory language, all agencies are required to implement a category management program which comports with the principles outlined in the circular.
  • The circular impacts an estimated $270 billion dollars worth of government-wide common spend, segmented into ten main categories, which are subject to change at the direction of the CMLC.  The primary categories are: (1) Information Technology, (2) Professional Services, (3) Security and Protection, (4) Facilities and Construction, (5) Industrial Products and Services, (6) Office Management, (7) Transportation and Logistics Services, (8) Travel and Lodging, (9) Human Capital, and (10) Medical.  OFPP explicitly specifies that unique, mission-specific acquisitions fall outside of the scope of the circular, and remain subject to the discretion of agency leadership.
  • Each of the categories outlined above will be headed by a specific government-wide Category Manager (CMX), who is responsible for promoting efficiencies in his or her respective area.  Additionally, each agency must designate an agency-level CMX for its key areas of spend.  All strategies to promote efficiency must be approved by the CMLC, and potentially include demand management and strategic sourcing efforts, among others.
  • In line with these responsibilities, CMXs may designate “Best in Class” contract sourcing solutions as either “mandatory” or “preferred” for agency use. (Presumably, the CMX must make a recommendation to the CMLC before issuing a designation, in light of the CMLC approval requirement mentioned above, and, in any event, OMB must ultimately approve all mandatory solutions.)  OFPP contemplates that mandatory solutions will generally have some prior demonstrated record of success before being utilized, and will have an exception mechanism for instances where agencies are unable to use the vehicle.  Although agencies are merely encouraged to use preferred sourcing solutions, in some instances an agency may have to provide a justification as to why they are not using the solution, such as pricing concerns, issues with terms and conditions, or concerns over vendor performance.  CMXs may also act to consolidate agency contracts by “standardiz[ing] requirements, specifications, or configurations” of common goods and services.  Chief Acquisition Officers and Senior Procurement Executives are responsible for ensuring that the policies are effectively implemented within their respective agencies, and may designate a “Category Management Accountable Official” to assist with compliance.
  • To promote the use of the Best in Class contract sourcing solutions, GSA will post the solutions on the “Acquisition Gateway” website.  All members of the contracting workforce, including program managers, must conduct a review of data posted on the Gateway, which may including pricing information, terms and conditions, and past performance information, on a regular basis as part of their routine acquisition processes.  Consistent with this requirement, agencies are prohibited from entering into any contractual arrangement that limits internal federal sharing of data on costs and prices, terms and conditions, or any other information necessary for market research.
  • Finally, OMB will track progress of the category management principles through a publicly reported Cross-Agency Priority (CAP) goal.  A central focus of the CAP goal will be increasing “Spend Under Management,” which is measured against a tiered maturity model that evaluates CFO Act agencies based on their progress relative to attributes on leadership, strategy, data, tools, and metrics.  OMB will also track small business participation and total estimated savings under the category management program.  Agencies will generally provide reports against these metrics to OMB on a quarterly basis.

Publication of the circular provides contractors with a limited opportunity to submit formal, holistic comments on the federal government’s category management model.  OFPP will accept public comments through November 7.

[1] There are 24 CFO Act agencies, collectively representing the largest agencies in the federal government.  The CMLC is comprised of many of the same agencies.  It is chaired by the Office of Federal Procurement Policy, and includes the Department of Defense, the Department of Energy, the Department of Health and Human Services, the Department of Homeland Security, the Department of Veterans Affairs, the General Services Administration, the National Aeronautics and Space Administration, and the Small Business Administration.