The U.S Government Accountability Office, an agency that provides auditing, evaluation, and investigation services for the US Congress, released report GAO 21-40 "FEDERAL BUYING POWER: OMB Can Further Advance Category Management Initiative by Focusing on Requirements, Data, and Training" on November 30th, 2020. It outlined and documented category management’s emergence from strategic sourcing, and assessed the activities and efforts surrounding this its implementation to date. One of the most striking features of this report was the input and characterization of the US Air Force’s approach. This is a perfect example of the appropriate application of category management.
In earlier posts I cover some of the possible fallacies associated with government-wide IT management initiatives, and the report by GAO does is subject to them on occasion, as when they reference to government buying “more like a single enterprise” (pg. 40).
The Merriam-Webster dictionary defines enterprise “a unit of economic organization or activity. especially: a business organization.” Due to the federated nature of our national governing structure the US Government cannot be considered a single enterprise. You could look at it that way, but you would be wrong. Rather government is more accurately an enterprise of enterprises, more akin to an investment structure like Berkshire Hathaway than it is a holistic organization executing sourcing strategies like Citibank, Caterpillar, or Walmart. This increases complexity of some sourcing initiatives, but the example set by the USAF shows what can be done as these approaches move down the stack, at the actual enterprise, where I argue they are more appropriately applied.
The "Thunderbirds" perform at the Arctic Thunder Open House in Anchorage, Alaska. (U.S. Air Force photo by Senior Airman Cory W. Bush)
In the section on “Leading Commercial Practices and Agency Practitioners’’ Requirements-Driven Approaches” the GAO gives an overview of the US Air Force implementation of category management. The Air Force early on concluded that “strategic sourcing efforts were not widely adopted because contracting personnel did not control requirements or the related budgets.” Air Force as an enterprise has the command, structure, and internal oversight and controls by which to engage in the kind of data discovery and analysis to take a complete cost view of their activities and engage in category management. In other words the US Air Force is an enterprise, contained within the enterprise of the Department of Defense, which is contained within the enterprise of the executive branch of the US Federal Government, and receiving their budget from the US Congress – yet another enterprise within the US Federal Government. Category management was adopted further down the enterprise stack, where the requirements reside and the data is self-contained (though disparate) for more thorough adoption.
Total Cost of Ownership
Aside from their requirements-focused approach, their approach to a complete, or total, cost approach should be highlighted. Product price in this instance, and literally within this image, is only the tip of the iceberg within their assessment and analysis. The other costs that are associated with the operations, maintenance, installation, and training are all factors that need to be considered. These other costs reflect the needs of their operations, these needs are translated into requirements, and the requirements are indications of what an agency needs to consider as they account for competed pricing. In other words the price is a reflection of the requirements and the market, and so long they were competed price is price. Under which vehicle is indifferent other than facilitating the ability for the USAF to account for the detailed data required to strategically manage the “commodity” or category of assets and possibly as a cost savings measure pertaining to any fees.
This describes a common approach towards IT management that underpins not only category management but similar (duplicative?) initiatives that try to accomplish the same: such as Technology Business Management or just simply IT Asset, Security, and Inventory Management. All of these strategic exercises are a means to engaging in activity-based costing by which CIOs can track, categorize, analyze total costs while considering resource consumption and stewardship of public dollars. All attempt to capture and categorize very similar data - from various acquisition, financial, IT management, and even personnel/HR systems - to assess and manage an IT operations strategically.
Each flavor of category management (manufacturing vs. retail vs. enterprise) applies sourcing strategies for different reasons, purposes, and conditions. The USAF appears to be applying these sourcing principles as a requirement-driven approach that befits their condition as an enterprise, and they serve as a fine example for the better application of this within government. GAO does assumes some faulty premises (Enterprise Government, Commodity IT, and False Equivalency) within their report: sometimes expressed through the citation of GSA/OFPP documentation; sometimes implicitly with their recommendations or characterizations; and sometimes stated outright. That said, our colleagues at the USAF understand this better than most and should serve as the model for category management application and enterprise execution…at the enterprise and through their requirements. Well done Air Force!