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AcquisitionMatters
each organization or the number and size of suppliers within each spending category. FPDS isn’t organized to enable agen- cies to effectively categorize their spending and analyze it in a market-facing way so they can pursue strategies to drive value within specific industries.
Additionally, FPDS data is organized by product or service codes. Contracts are assigned codes based on the predomi- nant product or service in the order, even when it includes a wide variety of items. “For example, an order for $1,000 of lumber and $500 of pipe would be coded as 5510 Lumber and Related Wood Materials,” according to the FPDS Product and Service Codes Manual. So the data lacks enough detail to accurately categorize agencies’ contract obligations.
That dearth of detail, along with questionable data qual- ity, makes FPDS more useful for a high-level view of buying trends than for an analysis of spending. As the Congressional Research Service noted last year: “Decision-makers should be cautious when using obligation data from FPDS to develop policy or otherwise draw conclusions.”
GSA is working on the Integrated Award Environment initiative to improve the reliability and pertinence of the data in FPDS and other procurement systems. When the initiative is complete, the IAE likely will be a better source for data- based acquisition decision-making.
From data to insights
In the U.K., we faced a set of procurement data problems almost identical to those faced by U.S. agencies today, including poor quality, little granularity, reports only at the very highest level and no continuous reporting. We began with the best available data, and it was far less compre- hensive or useful than FPDS. So we set about establish- ing a governmentwide baseline to create the first view of total third-party spending and gauge the maturity of the data we had.
We engaged a company with cloud-based software to gather data on and analyze annual central government spending through 100-plus organizations. During the first round of 16 weeks, we collected accounts payable data from the majority of those organizations, covering 84 percent of central government spending.
We used live accounts-payable data, not contracts or obligations data. And our analytics partner cleaned, cor- roborated, corrected, transformed, classified and enriched that data to enable analysis, then organized it by categories. We compiled agency-specific and governmentwide spending analytics and live monthly reporting and eventually built dashboards for agencies and policymakers.
Those analytics enabled GPS and individual agencies to
create all sorts of value, such as identifying high-performing and cost-effective suppliers and helping agencies manage their demand — for example, by identifying where they were spending unnecessarily or ineffectively.
In addition, we could see when agencies were spending outside the most efficient governmentwide contracts and guide them to savings opportunities. Spending data also showed whether capable small and medium-sized compa- nies were receiving the levels of spending set by govern- ment policy.
The data gave us insights into suppliers’ behavior, which we used to improve our relationships with them. Because we were better able to predict and deliver government- wide spending, suppliers gave us better prices and terms, as well as more information about their operations. Those insights led us to ask better questions and learn more about the industries where we spent the most, making us even better buyers.
Cutting computer costs
We learned about the hundreds of suppliers and in excess of 20 large resellers and systems integrators from which we bought computers, printers and software. When spending data revealed that we were paying large price differentials agency to agency and in comparison with commercial buy- ers, we set about finding why.
Understanding the industry led us to negotiate directly with original equipment manufacturers using government volume to win better prices, which we directed our resell- ers to leverage. Examining supply chain practices revealed other levers for savings, such as having suppliers piggyback on optimal OEM distribution routes.
It is safe to say that none of this would have been pos- sible if we had not first collected, corrected and analyzed accounts-payable data. Our lessons have been hard-won, but they have saved hundreds of millions of pounds that were used to deliver better outcomes for citizens.
Spending analysis made us smarter and more effective buyers and customers — and made our suppliers sharpen their pencils to provide better performance, terms and pricing.
Analyzing true spending data can help create a smoother and more direct path to better delivery and more savings for U.S. agencies as they move to manage their spending under a category management operating model. n
David Shields, former managing director of the U.K. Government Procurement Service, is managing director for procurement transformation and category manage- ment at ASI Government.
28 May 15, 2016 FCW.COM