Lately I have come across a myriad of blog posts, articles, conferences and stories detailing a mysterious and ominous Category Management initiative. I decided to do more research on the subject. I noticed two things immediately:
- This has the potential to be a really big deal and it comes attached with budding consequences and gigantic changes…so why does this seem to be flying under the radar?
- Why can’t I find a single clear article (industry or Government written) that explains what is going on?
After scouring the internet for hours, my follow-on questions piled up:
- What is Category Management?
- What are the potentials upswings and pitfalls of Category Management?
- What does Category Management have to do with me, the BD professional?
- What impact is Category Management going to have on businesses (small, mid and large) and their strategy to successfully market and grow their business?
These questions have been pulling at me for weeks. After researching and reading – and not being satisfied with what I found - I decided to do a deep dive into these four questions.
Part 1 – What is Category Management?
Fun Fact: The United Kingdom (U.K.) has been attempting to implement Category Management for the past 11 years. So at least we aren’t alone, right?
Every year, the Federal Government spends almost $450 billion to buy basic goods and services. Now no one can say with complete authority exactly how many US federal agencies and departments exist – but spending is essentially managed by over 500 different departments. These 500 departments translate into about 3,300 procurement units that generally don’t speak to one another; and are collectively and unknowingly spending half a trillion annually on the same goods and services – at all different prices.
If you have been working in the Government Contracting (GovCon) world for more than one month – you already know that the U.S. Government procurement process can be equated to a popular Alice in Wonderland quote :
“Who in the world am I? Ah, that’s the great puzzle.”
A puzzle indeed – and it is clear that there is a need for something different. Currently the Administration’s answer to this puzzle is “Category Management”.
In 2014, the Administration launched the Category Management initiative to “further streamline and manage the Federal Government’s vast goods and services more like a single enterprise – leading to big savings, better efficiency and improved performance.” The main goals of category management are the usual suspects: increase savings; reduce the number of contracts; and increase the amount of spending under this initiative. Specific goals the Administration has named include:
- Establishing a team of dedicated senior government executives to lead Category Management efforts
- Eliminating more than 700 duplicate professional services contracts
- Improving GSA's Acquisition Gateway for over 5, 500 members of the GovCon acquisition workforce
Category Management is not new. In fact, there is nothing new in these memos that isn’t already required in the FAR.
In my opinion, Category Management is an exercise to get procurement personnel to pay more attention to the historical data behind what and how they are purchasing. Now, it is not easy nor practical to ask a person that is doing the job of five different people to research, gather and analyze historical data behind the procurement of one good or service (let alone 10 goods or services at the same time). It is even harder to ask that person then to communicate, share, and fact check their research with the other 500 departments – just to make sure that they are going about it effectively. So instead of asking each different agency, each individual person working in acquisitions and procurement, to do this – the Government is going to collect this information for them and put it all into one central location (aka the Acquisition Gateway). Or at least give it the good college try.
Category Management is aiming to be the holistic approach to acquisitions and procurements. In order to do this, the OMB and the Category Management Leadership Council (CMLC) has divided the federal marketplace into ten super categories of commonly purchased goods and services:
- Information Technology
- Professional Services
- Security and Protection
- Facilities and Construction
- Industrial Products and Services
- Office Management
- Transportation and Logistics Services
- Travel and Lodging
- Human Capital
- Medical Products and Services
*It is important to note that there are sub-categories under each category called “sub-hallways”– which we will get into later.
Each Category is to be treated like a business and is led by an appointed Category Manager (imagine a CEO type). So far OMB has announced and appointed eleven Category Managers (as of June 2016, one has already resigned and has been replaced) that are procurement specialist from OMB, GSA, DoD, DHS, VA and OPM. These eleven acquisition officials will each lead a “Category Management Center of Excellence” for each Category. Yes, there are ten categories with eleven Category Managers - Medical Products and Services has two Category Managers.
In parallel with the business-line approach, the other main cog in this “wheel” of Category Management is the all mighty Acquisition Gateway. The Acquisition Gateway is an online portal that will provide contracting officials with an informational resource to help make contracting easier. This portal provides various resources, tools and reading material on pricing, best practices covering acquisitions for each category and models on how to implement those practices. The Acquisition Gateway will allow federal workers to connect with other acquisition officers to not only find research, but also to get advice on different contract vehicles. This tool should allow federal workers to draft better requirements and federal officers to negotiate best value contracts consistently.
To wrap up I want to discuss the DNA of the Super Category and why this is important.
Because the DNA (the collection of historical data throughout the Government) is being used to identify and communicate the “Best in Class (BIC) Criteria” and the “Best in Class Contracts” for each category and sub-hallway. This BIC includes important elements such as what vehicles the Government will prefer to use, fair and responsible prices and even possibly set-asides and goals.
OMB and GSA are leading the efforts to build a Government spending taxonomy using Product Services Codes (PSCs) – however, these codes don’t align directly with each Super Category. So in order to create the historical data of each Super Category – the Government is now defining allocation rules to effectively divide spending between Categories and sub-hallway Categories. This new Government spending taxonomy would allow for a modified Federal Procurement Data System (THANK YOU!) that will align with Category hierarchy based on market dynamics thus making it easier for users to more effectively analyze procurement trends in Categories and sub-hallway Categories. In addition, for each Category, OMB and GSA are talking to the ten biggest agencies that utilize each category to gather data and drill down on their goods and services spending. This collection of information creates the DNA of a Super Category and is the main driver of Category Management.
In my next post, I will be discussing what I believe are the prospective upswings of Category Management – as well as the potential pitfalls. Will Category Management disappear like the Cheshire Cat with the new Administration? Or will this initiative be our potential White Rabbit that will guide Alice through this Wonderland? Stay tuned!