By Michelle Litteken
You may have heard the term “category management” over the last two years. It has been discussed within agencies, in Congress, in the press, and at industry events. But do you know what it means? Because category management may have a significant impact on the way the government buys goods and services, it is a concept every contractor should know about.
Category management is a strategic approach to procurement. Specifically, the purchaser focuses on specific areas of spending. The goal is to streamline the acquisition process by building teams with expertise in each specific area and avoiding contract duplication. The government launched this effort after determining that because of fragmentation and lack of coordination in procurement across the government, different agencies pay different prices for the same item–sometimes as much as a 300 percent difference.
In December 2014, the Office of Management and Budget (“OMB”) announced a government-wide initiative to implement category management. As part of this effort, the Category Management Leadership Council (“CMLC”) identified ten categories of commonly purchased items with a FY 2014 spend of $428 billion. The ten categories are: 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, and Medical. OMB and CMLC are using this structure to analyze federal spending and develop strategies with the intent to make federal procurements more efficient and cost effective..
The December 2014 announcement was followed by the issuance of the Government-Wide Category Management Guidance Document in May 2015. The Guidance Document stated: “Under category management, the Federal Government will ‘buy as one’ by creating common categories of products and services across agencies and manage each category as a mini-business with its own set of strategies, led by a Category Manager and supporting senior team with expertise in their assigned category.” Each category team is expected to gather and compile data, analyze and assess the data, and identify opportunities to use category management strategies.
Since then, most activity has taken place in the Information Technology category. OMB has issued three policy memoranda for acquisition of items within the Information Technology category. These memos addressed laptops and desktops; mobile devices; and software. These memos could dramatically affect how the government procures these items.
For example, the memo on laptops and desktops directed all civilian agencies to procure desktops and laptops using General Services Administration (“GSA”) IT Schedule 70, NASA Solutions for Enterprise-Wide Procurement (“SEWP”), or Department of Health and Human Services Chief Information Officer-Commodities and Solutions (“CIO-CS”). The memo also prohibited agencies from issuing new awards or solicitations for laptops and desktops. The other memos contained similar directives. Indeed, the memo on software called on GSA, OMB, and the Department of Defense to develop government-wide software license agreements for mandatory use. OMB is expected to issue policy memos for other types of goods and services. The implication for contractors is clear: it is more important than ever to hold government-wide contracts like SEWP and CIO-CS.
Because category management is relatively new, one cannot yet say what its impact will be. Furthermore, the next administration may choose to follow a different approach. However, if the initiative continues on its current path, the emphasis on government-wide contracts could be problematic for small businesses; the procurements are highly competitive and because the contracts have long terms, there are infrequent opportunities to compete. At the same time, OMB has said that maximizing small business utilization is a key principal of category management. If the implementation of category management continues, policymakers must ensure that small businesses can compete and thrive. We will continue to watch this space and identify opportunities to shape procurement policy.
About the author: Michelle Litteken is an associate with PilieroMazza in the Government Contracting and .Litigation law groups. She may be reached at [email protected].