Air Force adds attitude to governmentwide category management

By Tim Cooke and Anne Laurent

 

This article is the first of two examining the Air Force’s super-charged category management program.

In the dog-eat-dog world of raising and training canines for government patrol and detection duties, federal agencies increasingly are competing not only among themselves, but also with foreign governments for a dwindling supply in a global market.

The Air Force is the executive agent for Defense Department working dogs — buying, training and breeding them at Lackland Air Force Base in San Antonio, where the Transportation Security Administration also trains its dogs.

Late last year, Jaclyn Rubino, the director of the strategic sourcing program office at the Homeland Security Department and manager of the governmentwide security and protection category, appointed the Air Force to lead creation of the governmentwide working dog category intelligence report (CIR). In so doing, Rubio signaled support for the robust, analytics-based, requirements-focused and market-facing category management approach the Air Force follows.

Not only is the Air Force leading the pack in the working dog category, it also has been charged by the Defense Department to help its fellow services learn from the Air Force approach to category management.

Category management is a mission-oriented business approach.

The Air Force and the Office of Management and Budget category management programs began in the same year, 2014, and both focus on goods and services purchased commonly across their enterprises — valued at $325 billion governmentwide in fiscal 2018 and $28 billion for the Air Force.

In the Air Force, category management is a business approach focused on an organization’s mission. The bottom line is to deliver more mission capability per dollar spent. Air Force category management considers, analyzes and deploys four primary strategies often in combination:

  •  Demand management
  •  Policy changes
  •  Strategic acquisition
  •  Process improvements

The Air Force concentrates on managing demand because the best way to save money is not to buy what you don’t need. In the governmentwide category management program, led by OMB, money has been considered saved if spending goes through a specified set of contracts, such as those OMB designated as best-in-class (BIC) contracts.

In its March 20 category management guidance, OMB expanded its treatment of demand management as one of five key recommended actions. For OMB, demand management has a more diffuse focus than preventing unneeded purchasing. The guidance defines it as reducing total cost of ownership by standardizing requirements, coordinating agencywide buying, sharing strategies and negotiating volume-based (tiered) pricing.

For the Air Force, category management is part of a broad effort to shift programs and procurement offices from focusing on budget execution to performing strategic cost management.

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As a result, the Air Force conducts rigorous, wide-ranging market intelligence to make data-driven decisions to cut costs and improve capability and compliance. The products of Air Force category management are informative, detailed, painstakingly assembled category intelligence reports; concise recommended courses of action; and practical execution plans.

Air Force category managers are functional domain experts, not contracting officers, who have procurement personnel, data analysts and others on their teams. Air Force category managers have been appointed for 6 of 10 common goods and services categories. Those six comprise 94% of the $28 billion in Air Force spending across the 10 categories.

The Air Force Installations Contracting Center (AFICC, formerly the Air Force Installations Contracting Agency), where the service’s category management effort was born, has built a host of tools, an experienced team, and a Business Intelligence Competency Cell (BICC). The center helps cross-Air Force and operational installation category management teams apply the approach, account for resulting savings, and reap the rewards in the form of funds to reinvest in critical readiness programs.

AFICC adopted category management to answer calls from then-Air Force chief of staff Mark Welsh and other senior leaders for help in cutting the cost of Air Force operations by $20 billion to put more dollars into mission programs. In 2015, AFICC set a five-year category management savings goal of $1 billion, but doubled it to $2 billion by 2020 after hitting the $1 billion target in just three years. In December, the Air Force cost-cutting tally stood at $1.5 billion. That amount is equal to 16% of the $9.8 billion in cost avoidance generated by the entire OMB governmentwide program in fiscal 2018.

Today, the Air Force is guiding and supporting the Army, Defense Health Agency and Veterans Affairs Department in adopting category management. The AF formula begins with revved up spend analysis using a homegrown Air Force business intelligence tool, which ingests data from the Federal Procurement Data System-Next Generation, the System for Award Management, and Air Force, Army and Navy contracting systems. AFBIT cleans the data and allows users to visualize, explore and manipulate the numbers showing how much is being spent by whom using what contracts to buy what from whom for how much.

Another AFICC analytical tool plumbs spending data to target the best candidates for management within each category’s portfolio. It finds the spending that is most important to the Air Force in markets where the service has the most buying power so it can leverage its spending to get better outcomes. That tool taught the Air Force an important lesson: Dollar value alone is not a good guide to the highest return on investment for category management. The competency cell provides targeting reports so category managers can focus on managing high-ROI spending, no matter its size.

The competency cell also teaches organizations Air Force-wide how to compile category intelligence reports using spend analyses to surface questions about why and how the service buys in each category. Category teams then interview companies that are and are not selling to the Air Force, study the markets they buy from, benchmark against the practices of similar purchasers, and use that wealth of data to recommend new approaches.

Part 2 of this series explores real-life cases of mission improvement, realigned resources, and savings the Air Force has delivered using its version of category management.

Tim Cooke, the president and CEO of ASI Government LLC, is an award-winning thought leader in federal acquisition policy and practice.

Anne Laurent is the founder of The Acquisition Innovators Hub, LLC, where she publishes the Acquisition Innovators Weekly newsletter.

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