Mr. Pat Rhode, Chief, Procurement Transformation Division, US Air Force

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AF Strategic Sourcing Initiatives
Mr. Pat Rhode, Chief, Procurement Transformation
Division, US Air Force Date August 5, 2008
Time 1045 1145
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Outline

• DoD and Strategic Sourcing
• Strategic Sourcing Model
• AF Initiatives
• Commodity Councils
• AF Results
• Installation Acquisition Transformation
• Emerging Demands
• Questions

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DoD and Strategic Sourcing

• Strategic sourcing is mandated by the OMB and is
  identified by GAO as a best practice
• The Department of Defense (DoD) is one of the
  largest, most complex purchasing organizations in
  the world exceeding 300 billion in FY07
• Lack of coordination across Contracting
  Activities has resulted in a proliferation of
  duplicative efforts and lack of efficiency in a
  strained budget environment

Understand HOW and WHERE it is spending its
procurement dollars! IDENTIFY opportunities to
LEVERAGE its buying power and Source
Strategically!
DoD Needs to
The SSDB was chartered to focus on DoD Strategic
Sourcing results
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DoD and Strategic Sourcing
Strategic Sourcing IS NOT Just
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
• A 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
• A COLLABORATIVE, CROSS-FUNCTIONAL approach
• About SUPPORTING AN ORGANIZATIONS MISSION
  through procured goods and services

• The resulting contract
• Leveraged buying
• Contract consolidation/bundling
• Contracting and procurement
• About saving money

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DoD and Strategic Sourcing
Strategic Sourcing Benefits
Requires a collaborative effort
Reduces total cost of ownership
Improves management of consumption
Improves operating efficiency
Improves focus on socio-economic goals
Provides cost savings
Tactical Sourcing
Strategic Sourcing Provides Opportunities To
Maximize Procurement Spend Dollars -- plus a lot
more
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DoD and Strategic Sourcing

• Strategic Sourcing results AND potential
• In FY06, DoD targeted 4.3 Billion, or 1.5, of
  the DoD total spend and achieved an estimated
  cost savings of 538 Million, or 12.5!
• These savings do not even count the out-year
  savings stemming from decreased administrative
  costs, less manpower requirements, improved
  demand management, all of which will have a
  multiplier effect for years to come!

But what about the other 98.5 of the Spend ?
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AF and DoD Strategic Sourcing Model
Current Strategy Review
Opportunity Assessment Goods and Services

• Identify requirements
• Review past and present business arrangements
• Conduct TCO analysis

Market Research
Commodity

• Identify qualified suppliers
• Understand industry trends and cost structure

Buyers
Performance Management
Finance
SB

• Administer contract
• Monitor internal performance
• Integrate supplier relationship mgmt
• Conduct quality analysis

QA Reps
Strategic Sourcing Team
CE
Requirements Definition
COTRs
Maint.
Buyers

• Collect requirements
• Standardize requirements

Contracting
Proj. Mgr
Strategy Execution
Results
Lawyers
PEOs
Customer Warfighter Taxpayer

• Follow acquisition process
• Use business arrangements

Sourcing Strategy Development

• Determine level of competition
• Develop a CONOPs

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AF FY08 Commodity Councils
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AF Strategic Sourcing Results
Examples of Air Force Strategic Sourcing Successes
Information Technology
Aircraft Structures
Medical Services

• Contained an executed spend of 54M in the Boeing
  sole source strategy
• Generated a 7.7M cost avoidance in FY07in the
  Boeing sole source strategy
• Reduced ALT by 70 days as a result of reduction
  in synopsis and Justification and Approval (J and
  A)
• Focused on developing sole source strategies for
  major vendors

• Focused on developing strategies and standards
  for Clinical Support Services (CSS), Temporary
  Medical Staffing (TMS) and Medical Administrative
  Support Services (MASS)
• Expanded to OCONUS
• Addressed a baseline spend of 207M through
  strategic sourcing
• Generated a 9M cost avoidance in FY07
• Awarded 100 of CSS and MASS to small businesses

• Developed standard desktop configurations
  AF-wide also adopted by OMB
• Set up a quarterly enterprise buy to generate
  economic order quantities
• Awarded 8 of FY07 spend in one initiative to
  small business and anticipates awarding 25 in
  another initiative
• Generated over 150M in cost avoidance since FY03

Cost Result
Socio-Economic Result
Process Result
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AF Strategic Sourcing Results

• Achieved a cost savings/avoidance of 98.8
  million on a baseline spend of 2.6 billion in
  FY07
• Strategic sourcing focus on only 4 of the 69
  billion FY07 AF spend

But what about the other 96 of the Spend ?
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Installation Acquisition Transformation (IAT)

• Current CONUS Installation Contracting (15B)
• 71 Contracting offices/squadrons
• Provide tactical support to their assigned
  installation customers
• Results of Current Construct
• Redundant procurement of similar goods and
  services
• Inability to effectively strategically source AF
  requirements
• Inefficient use of contracting expertise
• Installation Acquisition Transformation is
• AF-Enterprise Initiative
• Crosses traditional organization lines

Enables Strategic Sourcing
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Key Tenets of IAT

• Maintain Customer Relationships
• Continue Socio-Economic Focus
• Retain Contracting Experts at Every Installation
• Maintain Robust Contingency Contracting
  Capability
• Ensure Force Development
• Preserve Transparency

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IAT Future State
788th IAG
790th IAG
HQ
786th IAG
IAGs
787th IAG
789th IAG
From 71 tactical units to 5 strategic units
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IAT and Strategic Sourcing
Installation Acquisition Group
Enterprise Sourcing Squadron
Program Support Squadron
Business Support Squadron
Sourcing Acquisition Squadron
Requirement Evaluation Sourcing Flight
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IAT and Strategic Sourcing

• Enterprise Sourcing Squadrons (ESS)
• Conduct lifecycle acquisition of defined
  commodities including services
• Provide multi-functional skills to develop
  acquisition strategy
• Coordinate with FOAs and existing Air Force and
  DoD commodity councils
• Execute strategic sourcing activities
• Maintain Air Force-wide focus on defined
  commodity groups

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IAT and Strategic Sourcing

• Requirement Evaluation Sourcing Flight
• Evaluate requirements, determine appropriate
  sourcing location/strategy
• Identify similar requirements from multiple
  installations
• Utilize historical spend data to identify
  strategic sourcing candidates
• Develop sourcing teams for identified candidates

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IAT and Strategic Sourcing
AF Level Sourcing Installation Acquisition
Center Enterprise Sourcing Squadrons
Strategically Sourcing the Enterprise!
Regional Level Sourcing Acquisition Sourcing
Squadrons
Installation Level Sourcing
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Emerging Demands

• Strategic Sourcing training of contracting
  workforce
• Build Strategic Sourcing Experts
• Process Re-engineering across enterprise
• Greater awareness, collaboration and utilization
  of DoD and Federal initiatives and capabilities

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• QUESTIONS?