President's Management Advisory Board Part 1

Speaker: All right. Everybody have the notebook.
Speaker: Yes.
Speaker: Let's start out on tab one.
Speaker: I am going to quickly go overview our agenda.
And then Ken and Scott for a few minutes just sort of talk about
what the roles are for the day.
We are going to have an open session starting now.
Talking with the -- then we are going to do a session and it
will run until about 11:30.
I am sorry until 11, on strategic resources and go
over to the purposing powers and really work there.
As soon as time is right here, Scott.
Speaker: That is correct.
Speaker: It is 11 then we have this morning. Or 1130.
Speaker: Ten seconds.
This is the again the time, the time shifting a little bit.
It as 11:30 that Dennis is joining us.
Speaker: So 11:30 to 12 will be Dennis and -- security
adviser, no specific agenda.
We in the past have had some talks about domestic policy,
economy, and things we have to some on the policy.
Speaker: You want to be scheduled.
Speaker: Then we will have, probably do a working lunch as
we pivot to 12:15 to 1:30.
We are going to spend that time on two topics.
One is improper payments which there has been a lot of
work going on there too.
And then while we taken on two new topics,
two new sources in proper payments,
I think we all agree we want to continue to drive the limitation
on the 2011 initiatives IT and the ITS.
So we are going to get updates on the two of those to make sure
we are continuing to make progress there.
Quickly talk about next steps and then we are going to walk
over to the Roosevelt Room for some time with the President.
With that, let me hand Scott the microphone.
(inaudible)
Speaker: Fantastic.
Thank you, Jeff.
My name is Scott
(inaudible)
I am the Executive Director for the President's Management
Advisory Board and the Designated Federal --
(inaudible)
Very quickly, as Jeff mentioned we are going to spend our time
today talking about both improper payments and
strategic sourcing.
And thank you very much to our, all of our PMAB members both for
their time as well as their patience across the last couple
of days as the calendar has shifted a little bit.
We heard a couple of days ago that the President was actually
going to have some time this afternoon to meet
with the PMAB members.
And as such, his calendar is a little less forgiving
than the rest of ours.
So we have had to move things about over this.
So thank you both for patience and your understanding.
Across our time today, we really hope to have a discussion with
all of you here and part of the reason for this board actually
being in existence is to take advantage of the expertise and
the experience that you all can bring to bear on the management
issues and challenges that are faced inside
the federal government.
So we would like for this to be a conversation.
Not a presentation.
So please feel free to stop us as we move along.
I know most of you are not shy.
We have had the opportunities to spend some time with all of you.
And we do thank you both for your individual contributions
and conversations as well as the experts inside of your companies
that you give us access to.
As Jeff mentioned we are going to run up until 1:30 at which
point we will move on over to the West Wing to meet
with President Obama.
I just wanted to remind folks that this is in
fact an open meeting.
It is being web cast at the moment.
We will close the session at one point across the day and
reopen it after, after lunch.
With that, let me turn the podium back over to
Jeff and to Joe Jordan.
Speaker: Okay.
You want to be the first person.
Speaker: Yes.
Thank you. Thanks, Jeff.
So as we go through the strategic sourcing session
this morning, I just had a few things.
First, I wanted to quickly recap the scope of the issue and also
the problem we are trying to solve.
I wanted to outline some of the really helpful input we have
already gotten from our sub committee members around the
table so that the rest of the PMAB members and the deputy
secretary that is joining us can hear.
And then we really wanted to spend the bulk of the time
getting some additional thoughts from you on how we can take the
private sector best practices and make them real as we drive
hard against this over the next couple of months
within the government.
And to that end, I am going to ask some prompting questions
framing certain issues that you guys have raised and things that
you have said are critical to strategic sourcing effort to
help refine those and how we can go forward and execute.
And then my colleague acting administrator --
(inaudible)
-- from GSA whose team has been partnered with us on the calls
and the site visits and all of those types of things,
will also outline some of GSA's specific strategic sourcing
and challenges and opportunities against --
(inaudible)
So with that, if you go to slide one which has the charts.
On the left-hand side you saw this,
we just refined a numbers a little bit.
There is a tremendous opportunity when we talk about
buying smarter within the federal government contracting.
We spend about $535 billion each year.
And even when we take a real look at that pie and pull out
things like major weapons systems and other things that
probably aren't addressable by strategic sourcing,
you are still left with a pot of approximately $150 billion
in annual prime contracts.
And we think we could improve upon how we procure
those goods and services.
What is the major issue that we are running up against and that
we are trying to solve with strategic sourcing?
On the right-hand side it shows the,
the decentralized and fragment to spend view.
Merely of agencies engaging with the same vendors and because of
differences in sophistications and quantities that they are
purchasing, et cetera, it results in,
in widening barrier prices for the same items.
So fully loaded phone and data plan in an exact same
metropolitan area, you see approximately three X variants
between three agencies.
Now, one other thing that we have really learned and that we
want to highlight is that this is happening within
the same agencies as well.
You know, for far too long we have purchased not as the
largest buyer of goods and services and the world fully
leveraging that buying power.
But rather as 130 mid size companies,
dealing with various vendors.
And so we have got to fix that.
So how, you know, what have you guys told us?
And what have we learned in terms of the path forward?
The next slide I have outlines a few of these things.
So what did we hear from the PMAB sub committee members
that we spoke to?
And thank you again.
We had calls with everyone.
Many of you sent in some documentation for this volunteer
tactical leaders.
We have done some site visits and we plan to do more.
So it was incredibly helpful.
We learned a few lessons.
And we are going to have some of the PMAB members
yourself go through a few of them in a moment.
But I wanted to outline the things on the
left-hand side here.
That senior leadership, that top level commitment is key to the
success of these efforts.
You need to have cross functional coordination if you
are going to have these things deployed.
It can't just be your procurement folks saying,
we need to go do this.
You got to get the program people,
the people in the factory floors who say,
but I can find the lot type cheaper if I just
do it on my own.
I don't want to engage in your over all contract.
Getting them bought in from beginnings.
And I know, Tim, I think you are going to talk about some of this
with the Cummings wave teams and those sorts of things.
You need to collect and analyze transaction level data.
Getting down deep into the data you use.
Gail, I know you talked about the journey that Red Cross has
gone through and we are going to have a chance to have
you outline some of that.
I heard over and over on the phone.
Data is key.
Data is key.
We have got to drive it, the data.
Then setting the aggressive goals.
And I am going to talk a little bit about some of the states,
you know, flags we are going to put pretty far out there.
Jeff has been very clear about his desire to do something
aggressive here.
We want to make sure that sort of thing
resonates with all of you.
And then lastly, this is not a fire and forget exercise.
It is continuous improvement.
Many of you have talked about you know this has been
ten years in the making.
I heard things like when we started this in '95, dot, dot,
dot, you know, and we understand that.
But given the size of work spent,
we know we can capture some quick ways.
A few things so I want to apply.
I didn't want to make this a Power Point heavy conversation.
So I will engage on this slide for a moment.
As we look at the right-hand side,
this is where I want to start to really make this a
dialogue and stop talking.
The, under the senior leadership,
the two things that we are thinking,
is we take what you have done and apply it to us,
is making sure we have gotten an accountable official at EJC,
strategic sourcing advocate is what,
the term of art that I thought of based on what a lot of you
have said.
And also making sure that you use that top level commitment
to issue some agency wide, or company wide guidance,
used policy.
Say, hey, you have to do this.
You know, three of our five calls had a comment,
why can't you just make them do this?
And the more we thought about it,
let's not talk about the problems.
Let's talk about the solutions.
In a lot of ways we can.
So let's, you know, as long as we have got our agency partners
bought in and everybody is on the same page,
let's issue some guidance that says, you have to do this.
With those, did we capture the right elements there?
Is that right?
You know, you all talked about the top level commitment
and those of you who aren't on our team,
but certainly know this issue quite well.
Have we, what do you think is the right way to address that
high level accountability?
How did you do it?
Speaker: I would have used different language than they did.
Speaker: Okay.
Okay.
Speaker: I think you need to be direct.
Right.
This is, this is real dollars that could be put to better use.
Advocate means we think it is a good idea.
We like to advocate.
You start with that tonality, you are going to continue to
get it opted in and opted out.
It is just --
Speaker: Yes.
Speaker: I think at least in Cummings cases,
we were in the '90s in crisis mode.
If you look at our balance sheet material,
and indirect materials, it was the biggest item.
So we couldn't get to our profitability without dealing
with that in a systemic way.
And the second is that, the current chairman and CEO,
we put him in that area at the time.
Speaker: What was his position at that time?
Speaker: He had, he had been in strategy work.
He was a high potential.
We made him head of purchasing.
Actually, you know, I think we called it purchasing that is now
supply chain manager.
Speaker: He reported to you.
Speaker: No.
He reported to the President of the company.
I was a chairman CEO.
But this is when we engaged McKinsey and did the wave thing.
So what happened is that you have got people from various
functions and various businesses and altogether bundling types
of buys and doing a lot of analysis on where do we buy?
Why do we buy it there?
What are we paying?
What is the range of paying?
What should we be paying?
And then what would come out of that would be a plan
for that particular wave.
And so that is how you got cross functional buy in.
And now he is currently chairman and CEO in the head of supply
chain management, works directly for him.
So there is absolute compliance, at least we think there
is absolute compliance.
I am not sure that we know completely,
but that is where people understand when we talked
about strategy management with the analysts.
We give the analysts the goals.
So the analysts and our shareholders hold us accountable
in that area.
So you get a lot of that out there, and, you know,
you get the focus.
And people see this is politically correct and
important to the company and then they buy into it.
Speaker: Where is this looking down the central table?
Where does this reside right now in the --
(inaudible)
Is there someone you bill that you hold accountable for this?
Speaker: Well, all of our departments are multi-faceted.
We you know in our opposite of secretary,
we have got a chief acquisition officer, Nancy
(inaudible)
is actually here.
And we set policies, but we have got ten operating divisions.
NIH is one of them --
Indian Health services is another.
And in each of those places we have got budget officials,
we have got procurement officials, contract officers,
program people.
So you know one of the, one of the things I love to hear you
all talk about is when you have got disparate divisions
that have different missions, you know,
how does one sort of provide some consistent direction?
And the other big issue for us, Jeff,
since you gave me the blowup on it.
Is we have got competing priorities.
We have made a major push to cross the department for small
business procurement.
And, you know, there is a major focus on sustainability.
And so when you have got sort of multiple at the -- as a
government agency, we have got multiple goals.
And, you know, communicating that clearly to employees,
giving them a sense of their priorities and holding
people accountable you know is, is complex.
And so as we, as we try to up the ante in strategic sourcing
and really get people to focus on and use it more.
And, Dan, you can help us with this.
Sort of, we are going to have to balance these
competing priorities.
Or figure out how to make clearer to employees our
procurement officials, you know, how to balance them.
Speaker: I know I have another part on this issue.
I can't help but jump in.
Speaker: Dan just do two sentences on GSA's roles.
Speaker: GSA is and I will talk a little bit about it,
to some extent we are supposed to provide vehicles
that agencies can use.
We are taking a leadership role, working with Joe and OMB to try
to provide strategic sourcing vehicles.
But we are here an option, we are an option that agencies
can choose to use or not.
I was going to talk about my role,
my former role as the chief acquisition officer
among other things at the Treasury Department.
Where we had this leadership role,
where we are trying to organize the,
the acquisition of the department,
the billions of dollars we spent there, about 7.
But as Bill said, that leadership role was not a
direct hierarchical one.
We didn't, you know, we didn't have clear reporting
line of sight reporting of those acquisition
officials through that CAO.
So we had ten acquisition shops.
Ten leaders of those acquisition shops,
we thought their priority was their particular bureau,
not necessarily the agency.
And as you point out, not necessarily these higher
goals established by the administration for small
business --
(inaudible)
And so we have many layers of kind of lack of direct oversight
and obviously it has not been acquired.
Speaker: Can I ask a structural question.
Because oftentimes, you guys have talked a lot about the
challenges just inherent in the government and --
(inaudible)
and getting together.
And so I guess one question I have for you and it is
something that has worked in the past for us,
what if the incentives or the responsibility on vendor
to bundle together?
Because that is not a core competency of yours.
You are never going to be able to do it to the extent
that other people can.
So many organizations have taken,
have put the responsibility on the vendor to say,
you bundle us, okay.
Because that is a core competency of you as
a private enterprise.
You bundle us and come back with a, a rate to us.
Because I just think you need to be honest about your ability to
herd cats with some of the structure that is here.
Put the onus on them, I am not going to mention any companies,
but there is a very successful retail company that has gotten
very large by putting the responsibility for,
for that type of thing on their, on their vendors.
Speaker: What they are able to do is trade the skill of that
organization and say if you bundle us, you get us.
Speaker: Correct.
Speaker: And we have a tendency,
we will do it ten times in the Treasury Department,
never mind turning it over to an organization to bundle the
Treasury Department.
That is the whole strategic sourcing around office supplies
is our first attempt to say, show us what an entire bundle
will look like from the federal government and we'll,
we'll price that against the way we are doing it now.
I will tell you a little bit about our
relative success in that area.
Speaker: Just a thought.
Speaker: Yes.
Speaker: And just a question on that a little bit.
We have in the third section about the data.
One of the things we are thinking about doing taking out
of some of the comments that we heard with our sub committee is
mandating a contract that the vendors at least give us
certain levels of price and transaction data.
Because right now we just don't have that visibility.
So that was our kind of interim step to try to get that.
Do you think that is on the right path?
Speaker: Sure.
Speaker: Okay.
Speaker: And I can assure you they have that data.
Speaker: They are looking at your slide on the previous page.
Speaker: And they are smiling.
Speaker: They are smiling.
They are going, you know, keep selling more of that 120 guy.
Speaker: That's right.
Speaker: So they have the data and they can come back and
tell you how big of a purchaser you are if you can't.
Speaker: It is reasonable for us to ask that.
Okay.
Speaker: They will realize they won't want to
give it to you.
Speaker: Of course.
Speaker: Make you work hard at getting it.
Speaker: But that goes to the whole crux issue where we
are the largest buyer.
Speaker: But you are not finding a new territory by
insisting on --
Speaker: (inaudible)
Speaker: They know it.
They know it.
Speaker: One question.
Real quickly.
To what extent do you use a planning process,
an integrating planning process if the organization isn't
actually forcing it in.
In other words, if you think about your different
departments, and you said you had an annual planning process
that, that is integrated, each area builds a plan
that reflects the purchasing, savings, et cetera.
So it is their goal, it is their plan.
But there is an integrated view around how that is going to be
achieved and held accountable in the overall context
of the business plan.
Would you say a word about that?
Is that at the present; is that a capability that you have or
use or think about using?
Speaker: I can definitely say a word and the experts
would like to chime in.
I would just say that we are definitely doing certain things
in that direction, I know Steve,
(inaudible)
I believe will join us later and I are going around to
different agencies to do the portfolio status meetings,
talking about just that.
Really pushing investment Review Boards that combine these
various management functions into one decision making body.
Which is, you know a very common private sector in a sense.
But to frequently unlike Tim's example, where the
chairmans CEO
came from procurement or for --
(inaudible)
procurement which is one of the biggest things that we took out
of that site visit.
Other than the deconstructed engine and lobbying I
had to be pulled away.
Is that in government it is an ancillary
function too frequently
-- and we need to make -- we are talking about something that
drives decisions or fund our $35 billion annual spending,
it needs to be brought into that.
So we are making progress.
But I think it is still -- we are not in.
John, you are nodding.
Speaker: Yeah.
Ten seems to be the number of the day here.
We, we have ten operating administrations,
fairly independent in transportation.
We brought them together under strategic sourcing executive
steering committee and I chair it.
And to Dan's point about no clear lines of responsibility,
we actually established it here.
And built by consensus, a plan, the low
hanging fruit we go over.
We establish targets on it.
And I think one of the important attributes is that we said
explicitly early on, that the savings accrue back to the,
to the operating crew.
Because you keep us fed.
So you can reinvest it in your priorities.
That made buy-in, exit a whole lot easier.
So we are, we are through the first couple of them.
We estimated what the savings would be from strategic sourcing
in the first one we did.
Speaker: What was it?
Speaker: It is peripheral devices and servers.
And we are about 7.7 millions in savings.
We anticipate we'll be over eight.
And that is right in the mid range of what we
thought we would be.
You can actually measure it.
Speaker: Right.
Speaker: What I was going to say that is a very important
point and what I made when we had our conversation is that if
the savings have to be reapplied to something that matters.
To people that are finding the savings.
In my business, we always say we want the money to
be on the screen.
We are in TV business, so if we can save money by saving money
on cell phones or all of the other ancillary things,
it really makes a difference to the company because we
are putting the money where we should.
And what matters to our audience.
So I don't know what the, the analogy is --
Speaker: It is very analogous.
You talked about your different shows, getting them bought in.
Speaker: Right.
Speaker: You know with the centralized efforts.
It is the same thing with a lot of the ten
different departments.
Speaker: Joe, just playing keep keeper.
Should we have Tim just --
Speaker: Just one other thing.
I am happy to do that.
But just, just to talk about the goals,
what we found when we did the wave and we are
saving 30 to 40 percent.
I mean, they are huge if you do the analysis.
And Joe, you know the process.
Because I think you were working for McKinsey at the time or
something like that.
Speaker: I was.
Speaker: I just, you know, couple of things.
This is an -- this isn't in the book.
But this is Cummings started in the '90s,
so it is a long process to have what they call a Cummings
production system and one function of the production
system is purchasing.
So we have what we call functional excellence.
So we defined and break down the purchasing flow of searching,
sourcing contract development and negotiations how to pay
supplier management, risk management, change management,
supplier quality improvement.
And then we have what that means, what falls in that area.
And I ideally and I realize this is impossible.
If you could get all of the agencies into a centralized
purchasing function, and have one common system, it would,
it would save you literally hundreds of billions of dollars.
And so I mean the stakes are that high.
It does require though software development.
And so you are caught in this bind of that I have got to spend
money to save money.
But my argument is that the return on that software if
it is done well is just you know enormous.
The, I guess you know rather than Cummings was,
we have four businesses.
We probably have plants in 70 different locations and 30
different countries, so we are not the federal government.
But you know it is a fairly complex organization.
So it can be done.
When talking to the people that hosted you during the
visit, they got four observations/recommendations.
And rather than go through all of this,
I thought I would just touch on those four.
First, you have already identified it.
I guess you have 35 different purchasing systems.
And if you can consolidate that into 17 or whatever it is,
and maybe you can't do total, but you can consolidate around
certain commodities, and that is where the software development.
So too many systems.
Trying to reduce the number of systems that you have.
The second one is, I don't know what you do about it.
But I guess there is 36,000 acquisition officers or buyers.
But two thirds of them are in the Department of Defense.
So the Department of Defense is setting policies and processes
that the other third inherit.
They are not going to necessarily be aligned with
your what objectives are.
So somehow I think you have got to get the Department of Defense
into this process if at all possible.
And, and work closely together.
I handled defense sales a long long time ago in the 80's.
And essentially we got out of that business because we
couldn't afford to do business with the government.
And I mean just the procurement policies,
the costs associated with that, the abuses that were in there.
The rotation that every three years that procurement officers
moved, made it very, very difficult.
So there is a lot of opportunity here if in
fact you can get cooperation.
The second one or the third one, again,
I don't know what you can do about it.
But your annual budget process makes it incredibly difficult --
Speaker: You got the right guy at the table.
Speaker: -- because you don't have a budget.
So late appropriation leads to spend it or lose it.
You have to do it quickly so you may not get all of the analysis
and the data that you need.
So you are subject to mistakes.
So again going back to some kind of a system like this and
dividing the scope of what buyers can do or what they
should do, and at least gaining some direction.
I know you are not going to change the budgeting process.
But if you can figure out how to optimize that for you.
And then the fourth observation is that as,
as on the GSA side is that because of the recent lack of
compliance there is somewhat of a crisis as I
understand it and to quote Ron
(inaudible)
"never waste a crisis."
So you might be able to take some of the problems that you
have had there in other areas and really make them visible,
in the sense that we really need to fix this and we need to do it
in a hurry and it is the right things to do for the country.
But use that crisis to be able to move it.
And that is again at Cummings I mean we were really,
really in trouble.
And so if we hadn't had three or four initiatives,
this being one of them, so we made it very visible.
Speaker: It is interesting.
Because I think you are, you are right on about the GSA situation
as the crisis is an opportunity, you have the
right leaders to do that.
When you initially said crisis, I was finding I was just
thinking about the budget pressure we are under.
You know, a few years ago, whether it was in this area or
improper payments or else where in a growing budget environment,
it is a little harder to get people's attention.
And Annie and I talked about this a lot.
And --
(inaudible)
-- it is pretty easy to get people's attention now.
Because their budgets aren't growing.
And they want to invest in mission and policy.
So there is real opportunity, for the macro of quote prices in
the budget and I think there is an interesting link to GSA and
new leadership in GSA.
Speaker: Tim is right, that is what happens in
almost every organization.
Right.
Speaker: Why is GSA, I commented about GSA is an option.
Can you help me, help me, expands on that a little bit?
Speaker: Yeah.
I would say and that was really, if you don't mind,
that is kind of the introductory part of what I was going
to talk about, who is GSA.
And kind of, I am the, I don't mean to jump ahead.
Speaker: No, that is perfect.
Let's do that and let's go back to the other members.
Speaker: Okay.
Speaker: Can you tell us what you think,
not what is on your slides.
Speaker: Yeah, I mean it is not really on there or anything.
In 1949 a predecessor of the PMAB,
called the Hoover commission appointed by Truman,
was dealing with these same issues.
Question is how do we leverage this scale and the scope of the
federal government?
And how do we organize things like our real estate holdings
and how do we, you know, how do we stop buying dumb?
We buy once, we buy smart.
We buy well.
The problem is that then we created a monopoly that lasted
for about 40 years.
And what happened is it, there was a sense of the service
provision that we provided was declining in quality.
So in the early 90's, something under the called the Cleaner
Cohen Act passed and essentially rendered GSA an
option with an idea to try to leverage you know some of the
best practices of private sector and the former competition.
And so what we did was in essence push out that
acquisition activity into the agency.
So smart guys like John could you know,
get the acquisition work force focused on these goals.
The problem is then whether the competition is real or not.
You know, can people really switch between they
have built these, these organizations better,
maybe focused on some priorities but not all of
the common priorities.
And so this source of opportunity that we provide
people called the GSA schedules which is essentially a
precleared set of vendors with a list price that is,
that is obvious and transparent and frankly a jumping off point
for, for negotiations.
Now, has about 11 percent of the marketplace.
Speaker: You have got a terrible chicken egg problem.
Because of it being voluntary in that it can't promise to deliver
a certain amount of products.
Right.
And ever since then, why would I opt into that?
I might be better on my own.
If everybody tells me -- I should do it together,
I can deliver a much better --
Speaker: So it is essentially the same problem.
Basically, GSA is the same problem we are trying to solve
inside ten groups of an organization,
they are trying to be siloed.
You say inside an agency, you have got fragmentation.
At the federal government level you have got much larger
fragmentation.
So it is really the same problem.
Speaker: Yeah, but I assume when you come in and make it
work, you are doing it much more tops down.
Sure.
You are push back advocate.
In essence, Dan's whole organization is, is advocacy.
Speaker: I just wonder though if this is relevant to you.
My experience across many different companies,
but most recently even at Pfizer.
There is, there is a real difference between sourcing and
procurement regarding things that people really regard as
strategic to their mission and they really ought to have
control over versus paper clips.
And one of the things we found was that and we,
we spent you know in violation of the 80/20 rule,
we spent a lot of time fighting for example,
with R and D whether over whether lab equipment was
something they should have control over or whether that
should be done separately.
And at the end of the day, that was not a good use of our time.
If you can, it is hard for me to believe that people
really care who makes decisions about office supplies.
And if you can start with as I saw your document says,
I think you are really all over that,
and that is the way to do it.
Don't let the perfect be the enemy of the good.
It strikes me that you say there are certain things that are
mandatory, that there is no strategic issue here,
there is no agency specific issue.
This is not something that you need to have control over.
Let's agree on that.
Let's, let's nail that one.
That is mandatory, to talk about Liz's point.
That is not about advocacy, that is non negotiable.
We are going to buy the paper clips.
Now, let's not, you know, let's fight another day over the
things that you think you have control over.
One of the things we found for example,
we were spending a huge amount of money on consultants and
obviously McKinsey for example, knew a lot more about how many
different people they were charging different
rates than we did.
But everybody felt they needed to have control over their
decision making about consultants.
So we said we'll fight that battle later.
Let's get the paper clips done.
Speaker: The initial cut is 530, 541.50.
I think your point, Jeff, you want 150.
Speaker: Take the low hanging fruit that nobody can
legitimately argue is a decision they should be making.
So it strikes me, Dan, when you talk about history of this,
we have sort of gone from all to nothing.
You know, first it was all centralized,
then it was all competitive.
The fact is there is different kinds of sourcing.
There is some that should be centralized and there is some
that maybe artfully shouldn't.
Let's get the centralized ones done that
everybody can agree on.
Speaker: We visited Hewlett Packard,
they have an internal GSA like organization and they control
or provide 90 percent of the
(inaudible)
Built around planning and the planning is about how much am I
going to save you next year?
How much are we going to spend in the coming year?
And I think that that is you know,
maybe there is some relative percentage, 90/10, 80/20, 65/35,
but it is merely a balance of what are those things that
you gain value from my centrally buying once,
and buying well using your scale?
And what are those things that are deeply mission critical to
human services and health and human services.
Speaker: The problem is everybody is going to agree on
the data, but the issue is when you try to move that line up
to what is included in strategic sourcing,
you get all of the reasons why it can't be done.
So I actually think you have to go a different approach.
Which the goal is there there is an accountability to
spend under management.
Meaning everybody has to say we have a target of how much is
going to be managed centrally, and you have to get that bought
off on and you have to get to that goal.
Speaker: Where is that?
(inaudible)
Speaker: So spending management under from BMO such
procurement, you have got like 75 percent of that.
So, and I actually think the question is like,
I always get the argument that Jeff just made that there is
expertise inside of function that will do a better job.
I don't necessarily buy it.
Speaker: I agree with you.
I agree with you.
Speaker: I know this is going to take an act of
Congress literally.
But I think you have to edict and not advocate, edict,
it all comes through central location and instead of saying,
oh, and guess what, you get to spend the overage.
I would say, here is your new budget and it presupposes that
of the savings that you have in here, not all of it,
but some of the 150 billion is cut out.
Because really when you do that forcing mechanism,
people will want to do this.
They would rather cut other people's money
than their own budget.
So I, I think that I understand what you are saying exactly,
Jeff, but they can opt out, as opposed to opting
in on the paper clips.
Say all of it, it goes through central procurement,
and be strange and exotic, maybe we'll give you a hall pass.
Speaker: I guess I am just sequencing this because I don't
disagree with anything you said.
I am just saying, let's not let the perfect be the
enemy of the good.
If we start to fight, if we start to fight over things that
are going to want to control, we are going to miss the
opportunity on the ones that we can agree on.
Speaker: The question I was asking why does somebody
perceive they are not getting enough value from whatever the
central process is?
Speaker: That is good.
So Maurice, why do you not GSA more than you do?
Presupposing that you don't.
What is the issue?
Speaker: I think the issue is at least the perception, that,
well, first the issue is the desire to want to be in control.
Right.
That is the first issue.
But the second is the perception that we can get as good a price
if not better than GSA.
The third is the sense that GSA, this is not personal,
the doubt that GSA will be a zealous advocate for us.
So it is that trust issue.
Speaker: Do you distinguish between different
kinds of expenses?
We are using paper clips as kind of a stream.
But there are certainly things like the smart
phones that are used here.
Would you distinguish, or would your people distinguish between
the things that they argue they could get a price on better
versus things that really are mission core that really
need to be done by you?
Speaker: I would say my folks have a rebuttable presumption.
The rebuttable presumption is that we can do it better.
And then let's chat and see if GSA can beat us.
As opposed to the other way around.
Speaker: That is the chicken and egg issue.
Speaker: But Maurice said the issues exactly right.
Control, price, trust.
And trust.
I mean that is exactly right.
Speaker: I would just say in the price thing a lot of that is
the chicken and egg thing.
Speaker: Yes.
Speaker: And in terms of one and three.
It ends up not enough people participating.
Speaker: And I would just complicate it a little
bit even more.
So those same factors are actually at work
within the department.
So there are people within the department who will say,
you know what?
Rather than using our procurement shop,
maybe we should go to GSA because they can do it better
than our procurement, so same issues.
And so it is.
Speaker: Be mind managers, outside managers.
Speaker: Yes.
Yes.
Right, so we don't even need them within our enterprise
right now to get a scale.
Speaker: What has to happen, is, right,
you need to have a level of expertise inside of GSA where
when they sit across the table from any other agency,
the person feels like this guy knows more about
telecommunications or down loads about telecommunications then
anybody inside of my function.
Moving up from paper clips.
And I kind of feel like what we have to do is think about how do
we get that level of expertise inside of GSA in a couple of
functions where the other agencies feel, yes,
there really is a benefit.
This person is a true expert.
And it really comes down to value provided by the person
sitting across the table.
Speaker: You could kill that bird with the same stone as
the trust issue by seeding the positions with people that come
from the agencies.
Speaker: And we've talked about just that.
Speaker: That's exactly right.
I mean, you want to try to centralize,
then you've got to move from your, you know,
franchise teams in effect --
Speaker: Detail
(inaudible)
Speaker: -- because -- exactly.
The other thing is, why is it an either/or?
Why isn't it a joint thing so that you have on a project a
leader of GSA and a business leader from the Department of
Housing and Urban Development.
So that's what we do on the things that Greg is
talking about where you, you know, functional
expertise is critical.
This is not a no-brainer type of thing.
There's two people leading it.
And that seems to do away with a lot of the I'm throwing this
over the wall to GSA and please, I hope that they do it right,
why can't you do it as a team.
Speaker: I mean, actually, we did do a
(inaudible)
contract, that was one of our first
strategically sourced contracts.
On slide 12, you can see where the compliance is.
But that was created --
(inaudible)
Speaker: It's this chart.
Speaker: It's the agencies, we took the names off to protect
the innocent, except GSA, to show that I even have compliance
within GSA, I have compliance within GSA,
only one-third of my office supplies are actually bought
through the strategically
(inaudible)
Speaker: That is extraordinary, where are the other two thirds bought?
Speaker: They're bought on a schedule.
They're bought in the open market. They're bought --
Speaker: Catalogs.
Speaker: -- catalogs, you know.
What we've actually done is created --
Speaker: People go into Office Depot and --
Speaker: Yes.
Speaker: Actually, if you go to Office Depot,
you'll use the government credit card.
You will actually, whether you want to or not,
you will get the strategically sourced price.
So it made it a bit like, I don't know,
escape proof in that sense.
Speaker: But still, again --
Speaker: But people are working hard to get around it anyway.
Speaker: Exactly right, exactly right.
Speaker: I do think we, some of us spent a few minutes
with folks on your team.
And I think all things pointing to going after commodities in
this first big phase, you know.
And I do think you want to make your way up the food chain a
little further over time.
But the first issue is data.
So how do you get at the data.
And some of the folks that work for you had jobs in other
agencies as acquisition officers and commented that even within
the agency, it's really hard to get data.
So getting data from the suppliers,
you can force that on them.
And then focus on commodities and go after and obviously
deliver value versus what they were spending before,
you get the quick wins or relatively quick wins and move
on to other, perhaps more complex services,
at a point which you may even have better data.
Speaker: One of the things, not just in this area,
but the other areas that our group has worked on is that the
time frame is much longer than your time frame, okay.
And in building a system like this,
ultimately that's what's going to be required.
You can do the one-offs, if you are talking about it,
you can get savings.
But you're not going to sustain it and have it ongoing unless
you build the system, and the system won't be built within the
time frame of your staying here.
So in doing something like that, starting with commodities,
there ought to be an effort that says why we're doing this,
we're going to build a system, okay.
So that when you guys leave, there's something left behind
that somebody can inherit and that's going to be as important
as the short-term savings --
Speaker: (inaudible)
Speaker: I think there's two parts to the system.
I think there's the QSP 201 that you guys did,
which is the set of policies informed by all the learning,
that's the bedrock
(inaudible)
and then there's the actual technical system that you talked
about that eases implementation, improves the escape
proof nature and all this.
We're trying to do both those things.
And you're right.
The best we can do is start and put it on a path where we've got
some quick wins.
Sam, you talked about this in our conversation,
the importance of getting those quick wins, getting the buy-in,
so that's
(inaudible)
Speaker: Is there anything else you want to get out before
we turn
(inaudible)
Speaker: No, I actually think you had it pretty much where I
wanted to end it, that our biggest challenge
is frankly data.
And I think maybe part of it is the work of history.
When we decided to go full competitive,
it was around the time that frankly many of our best
practices private sector organizations were automating,
we were automating.
And instead of automating once with one common system with one
common platform so we had full visibility, we did it
37 times, at least.
I think that there are multiple systems actually operating or
instances of systems operating within agencies.
So really, to be able to get to where we need to be,
we have to see what we're spending,
who we're spending it with, how were we spending.
In order to do that we have to get, you know,
we have to get systems that will actually talk back to us.
Speaker: I would actually say,
I completely agree with the data comment,
they will always make you better.
But you can actually make a lot of progress before you get a lot
of data, because you can actually figure out what are
the data areas that you are spending a lot of money.
And back to your chicken and the egg program,
you've got to solve that right away.
And so what is the step to get people to say we are going to
commit to participating, because otherwise,
we won't get off the dime.
Speaker: Right, you take this slide,
and you say it has to be 100%.
Every agency, 100%.
We're taking about office supplies, right.
Speaker: Or page 11, these activities.
So it's, you know, we're talking paper clips,
it's really beyond that.
It's hard for me to see, maybe software
licenses you can debate.
But it's hard for me to see where any of these other things
that are listed on this page, any agency should be able to
argue we need to do that ourselves.
As long as you still have the chicken and egg problem,
you cool the purchasing power, you ought to be able to get
better prices on anything on this page together
than you can alone.
And so make that mandatory.
Speaker: I agree.
Speaker: And that's the quick win, that's the commodity.
Nobody can argue with that.
Speaker: You don't need a lot of data.
Speaker: You don't need a lot of data.
Speaker: This is the data.
I think there's enough data.
Speaker: And it's all these things on this page,
travel service, hotel rooms, telecom manager, software lines,
you'll get some fights about, I predict. But --
Speaker: But even there,
but even there there's going to be some things --
(inaudible)
(inaudible)
Speaker: Jane.
Speaker: but that -- I'm Homeland Security.
We're the third largest department, about
400,000 people, if you include our contractors,
and we strategically sourced 3 billion last year and
had a savings of almost $350 million.
And we are all in on this.
It is not a one size fits all.
It is a one approach fits most.
And so that's the theory that we're operating on.
Not a one size fits all.
But like McDonald's proved successfully,
one approach fits most.
And so, you know, can you adopt in that kind of environment.
What we find is -- and we're an overwhelmingly operational work.
We're in Washington, you can think of us as regulatory,
we are policy making, we are.
But we are overwhelmingly out there in field, Coast Guard,
Secret Service, TSA, all those things.
Operators need a proximity to their procurement,
as you all know, that really is more than a cultural barrier
to consolidation and quote headquarters doing it.
It's reality.
I mean, at my previous job at the United Nations, you know,
it is a very real -- it's plumbing and wiring,
it's the oxygen of any operation.
The thing that we encounter among -- that's in addition to
all the issues that everybody I think very thoughtfully and
mutually put on the table is, we encounter -- we induce market
distortion because of our volume sometimes.
I mean, we completely distorted the landmarking in Central
Africa at one point when I was at the UN and there are other
areas where we actually can induce market distortion because
of the particularized needs that we have.
So we have to be mindful of that in addition to sort of this
whole business thing and the other rules of procurement
that we want to adhere to.
But what I thought I was hearing is, you know,
let's just mandate -- and we can do a lot of mandating.
We have in Homeland Security.
We've done a lot of mandating, you know,
we're a relatively new department.
So on the one hand it was hard to do mandating,
because we had 22 different agencies that trace back to
1790, sort of figured out, you know, look,
we know how to run things, yeah, but Eisenhower's out of office
so let's catch up with, you know, the reading.
So the mandating thing is right.
But driving it all to a single source solution --
Speaker: Well, can I just ask you, and truly, genuinely interested,
if you look at this list on 11, office supplies,
travel services, hotel rooms, things like that,
as a matter of principle, would you object or would your people
object to mandates on things like that?
Speaker: No, we already have them.
Speaker: I know, central mandates from GSA as opposed to
within the department.
Speaker: No, and in certain respects,
we essentially conform to --
Speaker: Right. So you could solve the chicken and egg problem
theoretically, which I do think is part of the issue here,
because as you said, you're not sure you're
getting the price but you're
not getting the price because nobody -- people can opt out.
So if you truly mandate it, these activities here are going
to be done centrally, period, full stop.
Everybody's in.
Is that something you -- your people would have
a problem with?
Speaker: So the answer, like anything,
is it sort of -- not on paper clips.
The higher you go up to mission criticality,
and you get there for us pretty low, 9-millimeter ammunition,
you're already there.
But we've mandated that.
We've mandated central, you know --
Speaker: Right. We're talking about hotel rooms.
Speaker: Right.
Speaker: It's deceptive, I hope.
743 billion of the $150 billion opportunity,
that's what you're doing right now?
That's not what these represent, office budget alone is a million
dollars -- Yes.
Speaker: Much bigger number.
Speaker: Much bigger.
I mean, the government spends across these, I would guess, 10,
15, $20 billion --
Speaker: More.
Speaker: More.
Speaker: So if you just mandated these and centralized
them, the opportunity is huge.
Speaker: Right, huge.
Speaker: Before you get to arguments about what's
mission critical or not, just this alone.
Speaker: But then, you know, for instance,
in order to cut the travel, you know,
fully realize the benefits of travel fully realized,
we have to have everyone adopt the same travel system.
And we never even got the travel system,
the original one we put in place fully adopted.
And, you know, there are agencies,
there are bureaus within agencies that say, yeah,
that doesn't work for us.
Speaker: See, that's the
(inaudible)
You can always find the reason why not to do something.
Speaker: Exactly.
Speaker: I don't mean to -- I don't mean that to sound like I
understand all the complexities.
But when you say somebody negotiated a rate for a hotel
room, right, you picked what the standard hotel room is going to
be across everybody.
That doesn't matter what system it's in.
You always take this -- sorry?
Speaker: That's right.
Speaker: And so I think to Jeff's question,
I was going to go to the point you made, Jane,
which there's $350 million that you've already figured
out how to save, right.
How does that fit into these categories?
And you've gotten scale by being able to do it more centrally.
I think that was really the -- because you've already
solved for 350, I mean, that's fantastic.
Speaker: Within her department.
Speaker: Within your department.
That's great.
So now, can we take how much of that was in these buckets and
can we then extend that to other agencies?
Speaker: Well, I also want to just challenge
(inaudible)
that there seems to be a bit of naivety in my mind that going
central, that every single action that I give the GSA,
I am going to get a better price on that particular action.
It doesn't work that way.
So this is the -- it's called the greater good
and it ladders up.
So we've had situations where I've had to centralize things,
and I said I know that you're getting charged more now.
But guess what?
When I put this all together, net at the top we're
saving a lot more money.
But you're right, on the margin, on that decision,
you're now paying $20 more for your hotel room.
But we're doing it for the greater.
That seems to be not part of the conversation here.
Speaker: Price versus cost.
You can take a contracting official working for another
agency, go and use our strategically sourced office
supply contract and get a better price for a stapler.
But I had to pay the bid contracting official, I had to,
you know --
Speaker: It's also on the margin.
If you continue to look at and empower people as advocates to
look at every decision on the margin, the reality is,
I'm going to make a guess.
Let's say you centralized everything.
30% of the time you are going to pay more for your, you know,
individual thing that you might have doing it on your own.
But at the end of the day once you finished
(inaudible)
you saved a boatload of money.
There seems to be not an understanding,
acceptance is that every time the decision gets made on
the margin now that it's centralized,
I might or might not on that decision be in a better
or worse position.
And so you're allowing people to opt out on
every marginal decision.
Speaker: Well, Liz --
Speaker: (inaudible) though --
Speaker: -- conversation about the greater.
Speaker: There's a lot of passion about this,
and I agree with what Liz just said that we're not maybe seeing
always the bigger picture.
But to get us going, I mean, you've already got a lot of
great work, so how do we pick something and drive it across
the, as much of the government, federal government as possible.
So what -- if you were to say pick three areas,
whatever those three are, and they're on this list.
Speaker: I agree.
Speaker: And then just say, let's go around and figure
out how we advocate for this to be consolidated
centrally in a way that --
(inaudible)
Speaker: And you might lose.
Speaker: I think, as the government,
we picked a few areas and made some early progress.
It's early progress.
So now we have to -- I guess there's a
(inaudible)
You drive those to 100 percent or do you add more
(inaudible)
Speaker: If this is a case of not letting the perfect be the
enemy of the good, you have to get people used to the idea that
certain decisions made centrally will respond to your point
earlier, which was well summarized, control,
trust and price.
That means everybody's got to get in the pool on it,
take one of these things that should not be controversial,
office supplies, travel service, hotel rooms, make it mandatory,
100%, solve for it, then you'll create a momentum
around the whole concept.
GSA will have more credibility, people will believe that it can
get things done, early wins.
I think that's the way to go.
Speaker: And by the way, I would argue,
hotel rooms could actually be easier than office supplies.
Speaker: Yes.
Speaker: Let me tell you why.
Don't get me wrong.
You should work on the office supply issue.
But you have a logistics delivery component to that.
While with hotel rooms, it's actually -- there is a price,
and there is a specific set of places you stay.
And I guarantee, you could drive that one without
a lot of challenge.
Speaker: And to Liz's point, I do think you have to find --
you have to at some point, the agencies to the extent that they
have marginal increases, for the benefit of the whole,
they have to get some benefit from what the whole gets
to be participating.
Speaker: Yes.
Speaker: Or at least have some visibility to it.
Speaker: One other comment I'd like to quickly make is that
the systems issue is going to be a constant barrier when
trying to get something done.
And I would encourage you to think about what I call
low tech system solutions.
Don't change the system, change the data in the system.
So, you know, load the hospital -- load the hotel rates into the
37 existing systems.
Load the procurement vendors into those systems as opposed to
focusing on eliminating and centralizing all of the systems.
Speaker: You have phrasing it, don't change
the systems, do it.
Change the data in the systems.
Speaker: So you have a procurement system that's set up
to purchase hotel rooms.
Don't worry about centralizing all 36 systems to use
the same hotel rooms.
Change the data in the system so that someone gets on that
system, they use that hotel and they use that
(inaudible)
Change the databases in the systems and have a
way to control that.
That's a lower tech, quicker, faster solution to get
(inaudible)
and consistency.
(inaudible)
Speaker: There was a friend of mine who runs a software
company in the northwest that you are all quite familiar with
and he basically had all of his --
Speaker: Startup.
Speaker: Sorry?
Speaker: Startup company.
Yeah, 25 years ago it was a startup.
So he basically had all his -- he had a specific initiative,
and I won't go into the details.
But he said I want adherence to this.
He had every one of his line executives come in and say,
tell me how you're going to achieve this.
And it's not about months and year,
it was about a short period of time.
And so you pick stuff and you say how do we get adherence to
our directive on we're going to get everybody consolidated
on the top three things we picked, hotel rooms,
telecommunications and office supplies, or whatever it was.
And everybody had to come forward and say,
here's what it is.
And then he said, so, tell me right now why you won't be
able to adhere to what you just told me.
And he had zero tolerance for people not complying.
And so it was a very, just everybody comes in,
presents and hold them accountable for it.
Speaker: We have 15 minutes left in this session.
Let's go to 8 and 9, and Gail, is there anything that we
haven't hit on that you want to emphasize?
Speaker: Let me start by saying that I feel your pain.
(laughter)
I feel like I've kind of inherited something that mirrors
what you're struggling with on a much, much smaller scale.
We have a four prong mission.
And two of the prongs are responsible for most
of our procurement.
Disaster services, we're responding to 70,000
disasters and we're getting meals and equipment,
cots, blankets.
And then biomedical, and I highlight that one because
there's a lot of strange and exotic stuff that we have
to buy, like testing agents, et cetera.
And yet we still centralize procurement for that, as well.
And I'll explain how we compensated for, you know,
the expertise and, you know, how did you do this with something
that isn't paper clips.
Our challenge was that everything was decentralized.
Everything's optional.
We had 700 chapters that were operating as independent units.
So -- and just to illustrate how out of control all this
was, I had 33 blood services operations.
In 33 units, we had 69 vendors just for t-shirts.
So, you know, and that's about as paper clip as you can get.
So, you know, the starting point was, as I said, pretty similar.
So what we did is we stood up a shared services model.
So we took all procurement out from under these separate
places that were doing all the purchasing.
And it might have been a little bit easier for me to do this,
because the folks that are out there -- but I would suspect
it's similar in your units, as well,
they're very mission driven and they don't get their jollies
from buying paper clips.
So did they think that a centralized procurement function
would get them a better price?
I'm not too sure.
But I can tell you that they didn't really feel like
doing this anyway.
So it was probably easier to wrest some control.
So the other thing that we did that might get rid of the
challenge of the strange and exotic is instead of aligning
around functions, like contracts or payment,
we aligned around business units.
So the people that were procuring for biomedical
actually understood those kinds of vendors and what the agents
and kits and medical supplies were being used for.
So they could speak the language after a while when we
structured it this way.
So that was a big improvement.
And then if you look at the bottom of the page,
you can see the strategic sourcing process.
So what we did there is instead of being transactional,
we became very strategic.
We literally, from the planning perspective,
said how much do you want, what do you want to buy,
what are your future requirements.
And we did this with every single vendor that we were using
in the process.
And then the managed piece, which is essential,
is we keep managing that ongoing relationship with the vendor.
And by the way, we can buy a lot of our disaster supplies off of
the GSA schedule.
We do it religiously and we save a boatload of money.
So I'm going to put in a commercial for GSA.
And then I just --
Speaker: (inaudible)
Speaker: And by the way, my team is like,
why do we think they can do better than we can?
And I said, they can.
Just, you know, you've got to try it.
Come back and tell me it doesn't work, but try it.
So, you know, we're very much there.
So if you just look at the second page,
I'll make a couple of points on this.
We did deploy additional data sets because we had so many
things going on, so many different places.
So we went to Oracle for the financial stuff.
We went to Oreba for procurement.
And I did hear a lot of squawking about, you know,
I don't like this system, it's user hostile and, you know,
it became just try it, you're going to learn to love it.
And eventually that is what happened.
I mentioned that we aligned with the business units.
The notion of having competing goals,
like you need environmentally friendly suppliers, et cetera,
et cetera, we had two competing goals, too.
We wanted to improve the proportion of minority and
women-owned businesses in our supply set.
Because as you can see, where we started, it was abysmal.
And took us a while to figure out, you know,
because we didn't have data either, what percentage it was.
It was only 2%.
So, by the end of the fiscal year we were up to 10.
This year we're going to end higher than 15.
But the most important thing is we saved money,
improved quality, and improved this.
So they're not necessarily competing priorities and they
sometimes can work on a lot of stuff.
And you can see the savings that we were able to manage to get.
And that becomes the cause celebre.
I mean, as soon as people saw this,
and I translated it back into head count.
I basically said this is how many people that we would have
to lay off, and I know you can't do that,
but there's some other unit of measurement that you can use
that can galvanize people.
But this is how many jobs we saved by doing nothing
more than buying smarter.
So, you know, I think a lot of it is a major cultural shift.
A lot of it is trust me.
A lot of times I said let's just try it, we can always back off,
if it doesn't work.
And I have to say, you know, I was using words
like mandate edict.
I had no teeth in those.
I, you know, we since changed our governance so that the
chapters do ultimately report into one location.
But this was just me trying to get this
through through influence.
And, you know, if you tee it up in a way that the people that
are impacted see the benefit to them,
and you sound like you believe it, I do think you can prevail.
And, you know, if all else fails,
I have learned that just nagging consistently without stopping
will eventually exhaust people and they'll --
(inaudible)
Speaker: (inaudible)
Speaker: No, I'm done.
Speaker: Why don't you present
(inaudible)
to what we want to do across the next few months and then
in October we've got, you know, progress
(inaudible)
and if we can get feedback on that,
that will be the last five or ten minutes.
Speaker: That would be great.
So how I'm going to do that is taking some of the potential
tactical applications that I had handed out at
the beginning in the
(inaudible)
slide and then all the input that you guys were just giving,
I've already refined some of those,
based on what I heard today.
So first, laying out -- and this is a very strawman for pressure
testing type of idea -- but the goal would be to try to save $10
billion over the next two years through GSA sourcing.
A real number, and aggressive man on the moon type target but
one that we think is achievable.
With the process based on what I'm hearing now,
focusing the process to, gee, I think there's two prongs.
One is we've got to drive increased utilization of our
current federal strategic sourcing initiative vehicles.
We've got a few that stood up, you've seen the document,
that opt in is just, or the opt out is too powerful.
We've got to figure out the right ways to drive increased
utilization, adhere to a lot of mandate,
but we've got to do that in partnership with the agency.
And the second prong is increasing the number of
vehicles that we have.
So the sub-bullets are we've got to improve the agency high level
accountability, but also create a steering committee
(inaudible)
so we don't act ahead of what all of your needs are.
We get the buy in, but we do it quickly.
And then on the second front, we've got to improve the data.
So inserting a contracting clause in new contracts that
says you have to give us that price and volume data.
So we will still have our own data systems that we populate,
but we'll always be able to get that from the agencies.
So what does that look like by October so we can come back to
some real progress and things to discuss.
I see three things that I would like to be back here talking
about with you.
One, an update on where we are on the utilization of those
federal strategic sourcing initiatives.
Speaker: (inaudible)
there's office supplies --
Speaker: Six.
Speaker: Yeah, office supplies, wireless,
domestic delivery and a few others.
Speaker: (inaudible)
Speaker: Exactly.
Speaker: Is there anything in the travel space?
Speaker: We have already a very robust travel management.
We competed that.
There's some opportunities around car rental --
Speaker: But we're thinking a half dozen or so things like
those that we just mentioned.
Speaker: Yes.
Speaker: That you're going to strive toward or you
are going to --
(inaudible)
Speaker: Exactly.
So we'll give you a from/to on the utilization and say, hey,
did the things that we hear happen.
I'm sorry, back up a step.
We're going to have to issue some sort of guidance in
collaboration with the agencies.
But to the agency saying, okay, cancel those two prongs.
Here are the specific things you need to do.
Based on that, there will be a from/to on the utilization of
the vehicle so you can say, hey, do these things work or how do
we need to course correct.
And then secondly, we'll update you on some of the progress
on a new target list.
You know, to Jeff's point, I know that there was a
lot of discussion there.
But what I heard you really saying is it's a continuum.
It's not binary choice, but it's a continuum and we've got to
move up that value chain and at a certain point to James'
feedback, it may -- the cost benefit may
(inaudible)
but we're a long way away from that.
Speaker: Right.
Speaker: So we're going to continue.
We've got some things at one end of the chain.
We're going to keep moving up.
So we're going to tell you how we're doing
against the ones we have.
We're going to tell you some of the things that we're targeting
and then our progress and why those are the right things.
And then -- I'm sorry.
Speaker: Please, please.
Just one
(inaudible)
combining Liz said with something Gail said.
If you come up with this $10 billion moon shot idea,
thinking of a way to translate it obviously can't use the
metric you used, but some metric that says this is going to be,
to Liz's point, by working together,
we're going to create something that is of value to all of us.
Speaker: Yes.
Speaker: And probably relate back to the budget in some way,
because that's where the rubber meets the road.
Speaker: Yes.
Speaker: So if we collectively deal with this
chicken and egg and we get all that and we save $10 billion,
here's what it will mean to your agency in a real way by -- so
Liz's point, giving up at the margins will
get something together.
I don't know what that metric is but something like what
Gail was talking about.
Speaker: And we've got to thread a real needle between
what Debbie's talking about and has been so successful,
which is getting agency participation by saying you can
cut here and reinvest in mission critical things.
Also taking into account what Gail says,
which is we're in tough budgetary times,
let's give some of those savings back.
Speaker: It may be a
(inaudible)
of saying if we save 10 billion, here's the piece of it you're
going to get back.
Speaker: That's exactly right.
So that's -- so you're right that we need to refine the
metric and we want to address both of those.
Speaker: You know, one cautionary note on this
approach, and I don't know the right answer here,
but if you keep moving up the ladder one piece at a time,
you're in effect sort of slowly ripping this Bandaid off and at
the very end of the process, you're going to have all the
sacred cows that people don't want to touch and it's going to
really be hard to blow through that last piece of it.
So I'm going to throw out a whacky idea,
but I don't know if this makes any sense,
because I'm thinking a little bit with my mouth here.
But if you took one that was complex and hard,
instead of the paper clip, the travel, et cetera, et cetera,
and a separate group tried to tackle that.
Because you're not going to be creating enough muscle memory
on how to do this if you're just going to do the
real low hanging fruit.
And maybe you stop at the end of the low hanging fruit.
I mean, maybe that's the answer.
But I would just encourage you to don't just do the easy stuff,
because, you know, you can't declare success and say see how
easy that is, now we're going to buy missiles.
I mean, it's just -- it's not going to work that way.
Speaker: Yes.
Speaker: And I would add to that,
even the low hanging fruit can be difficult.
Speaker: Yeah.
Speaker: Someone used the word noncontroversial earlier.
I don't think there's anything that's not controversial.
I mean, even hotel rooms, as easy as that sounds, you know,
there are people that are going to say, oh,
I want to stay closer to where the conference is, or, oh,
I've been staying at that hotel --
Speaker: My frequent flyer.
Speaker: Right, I get frequent flyer.
I mean, nothing's easy.
And so, you know, there are going to be -- there's
resistance all in whether I've done this with Mckenzie or Booze
Allen or whoever has come in and said I can get you, you know,
10 million here and, you know, 20 million here.
You never get all of it.
And I think that's -- you have to be realistic about that.
And whether you get 80% of it or 85% of it,
it's a constant challenge, it's an on going process.
And, you know, I would hate for you to set sights and say I'm
going to get 3 billion and you only get 2 billion and so folks
are disappointed.
I mean, it's always a push and always, you know,
even if you have a mandate, people find ways
to get around it.
So I think you just have to keep that in mind.
Speaker: (inaudible)
who's driving this like --
Speaker: (inaudible)
Speaker: Do you feel like you're buying?
Speaker: Oh, so I thinkthere's no question there's buy
in, we've saved, you know, a billion four in our department
in seven years and the bulk of that in the
last three and a half.
I mean, we came in, secretary came in with what we called
efficiency initiatives which had 3069, what can we do with 38s,
what can we do with 60, what can we do with 90,
creating a culture and expectation.
We also had sort of the let's build the department together
kind of thing, because Homeland Security's still relatively new.
I mean, it's ten years old.
It's not one year old for the 10th time.
I mean, but there was a period of time in our life where we
were repeating, you know, the mistakes of
all our founding year.
I love the phrase let's put it -- let's put the
money on the screen.
We have a version of that, you know,
let's put it on the border.
Let's put it in the airports.
We want to
(inaudible)
the operational line.
So what I'm sort of trying to understand the message of this
conversation, because it's not should we do strategic sourcing.
The answer is of course we should.
Speaker: Right.
Speaker: The issue is under what conditions does a
government wide centralization of the functionality make sense
as opposed to the value proposition for money.
I mean, we take the government rate hotels.
We don't take the Homeland Security rate hotels.
You know, we take -- and we're making use of this and
we're going to do more.
We've got almost four dozen active initiative programs that
could be bucketized in certain respects and they range in
everything from the paper clip, you know,
nine millimeter weapon, up to, and this is a very big list I've
been working on for 18 months, which is common
air frame procurement.
I mean, the border control's got 27 different air frames.
The Coast Guard's got four.
So --
Speaker: -- hearing from (inaudible)
analogy, he started 20 years ago.
I think what you're hearing from the private sector is that
threshold of commonality is much further along than you think,
I think to Greg's point. So --
Speaker: Jeff.
Speaker: To Jeff's point.
I'm so sorry.
Speaker: It's okay.
It's a compliment.
(laughter)
(inaudible)
Speaker: But that threshold is further out than you think
and, you know, it's not about paper clips and hotel rooms,
that you can push it much further than you think
you can sitting here now.
Speaker: I think we agree with that.
Speaker: There's one message, though,
that I don't think we can overemphasize,
and that is that you will get your employees to say this is
really a great thing but it doesn't really apply to me.
Speaker: That's what I mean.
Speaker: Okay.
And it's absolutely guaranteed that you will get that.
And so you have to be able to sit there and say, yes,
it does apply to you and you must comply.
Anything less than that, you're going to miss the opportunity.
(simultaneous talking)
Speaker: -- possibility in however remote it might be that
the fact that it's costing more on the margin
will ultimately lead to
(inaudible)
Speaker: I think that's my one ask is, you know,
for our subcommittee especially, between now and October,
we're going to need to continue to meet with the experts that
you've pinpointed as well as some of yourselves to pressure
test the ideas as we move press aggressively.
So, you know, Tim, when we met with your team,
they talked about the lock tight example,
that's what Liz is saying, which is, you know,
to try to break through and say we want to own this, they'd say,
look, I can buy a lock tight for three bucks,
the strategic sourcing effort
(inaudible)
is 350, let me just do my own thing.
We've got to break through some of these and we're going
to need your experience.
Speaker: The one that I got was on the travel.
We standardized and got huge savings but the guys in India
say we've got a local one, we can get a better
deal on air fare.
And we literally had to say you'll lose your job if you
don't follow
(inaudible)
You will lose your job.
Speaker: All right.
Great session.
Joe will, working with Dan and deputies pull together a plan
and we'll get that out in the next week or so.
Feedback, because this one has such potential.
(simultaneous talking)
Speaker: You're walking over dollar bills,
just need to pick them up.
(laughter)
Speaker: And you know, it's complex.
But with Jeff's framework and others,
there's some very low hanging fruit.
Let's nail that.
That would build the muscle and we can take on that.
Speaker: One last comment.
Speaker: Yes, please.
Speaker: Is I would burn a lot of calories and cycles on
the incentives to get this done.
Because what strikes me, and we can debate and I agree,
I totally agree with both -- every set, about pick three,
just start with whatever, just don't try to boil the ocean.
Be very composite and very specific.
Second, inspect what you expect in terms of
(inaudible)
One thought would be, not to be controversial,
but we talked about notion of centralized procurement.
Might want to think about centralized results.
Because this department says I saved 50 and I saved 100.
Some of it's bullshit.
We say timeout, we're going to have a clearing house here.
We're going to identify.
So centralize.
I would have a third idea of centralized measurement so every
organization isn't just saying we are fantastically great when
OMB rolls up and says, you know, we've got a budget problem.
Everybody's saving everything but nothing is rolling.
And lastly, it's about incentives.
Because unlike the private sector,
and it's much easier for us, think about what is the
motivation, what is the incentives.
Is it a giveback
(inaudible)
I don't know.
But I think you really need to solve that and then the earlier
commentary on what and how is easier.
But incentives is tricky.
Speaker: Agreed.
Speaker: All right.
Great session.