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

DoD-Wide Strategic Sourcing (DWSS) Program Program Objectives  Reduction in Total Cost of Ownership  Department-wide cross- functional acquisition strategies  Improvements in meeting socio-economic goals  Standardization of acquisition business process  Improved skills of DoD acquisition community 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 Vision Achieving DWSS objectives will require collaboration among the various DoD organizational components and senior level “buy in”

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

The Acquisition Strategy creates a collaborative method of interacting with small business suppliers while maintaining competition RFP for Initial Multiple Award Task Order Contracts Place Competitive Orders Exercise Options with Final Group of Suppliers OVERALL OBJECTIVE(S) Conduct competitive RFx to down select to initial supply group comprised of incumbent and new small businesses Work collaboratively with suppliers to drive down costs of working together Further consolidate spend to “ preferred suppliers ” and implement policy enforcements Conduct Supplier Development Workshops 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 DoD Creates a collaborative approach to working with supply community – enhances capabilities of small businesses RFI to understand cost drivers