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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Increased Emphasis on
Strategic Sourcing
Can Result in Substantial
Cost Savings for EPA
Report No. 14-P-0338
August 26, 2014
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code to learn more
about the EPA OIG.

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Report Contributors:
Janet Kasper
Michael Petscavage
Richard Valliere
David Penman
Abbreviations
BPA
Blanket Purchase Agreement
EPA
U.S. Environmental Protection Agency
FSSI
Federal Strategic Sourcing Initiative
FY
Fiscal Year
GSA
General Services Administration
OAM
Office of Acquisition Management
OARM
Office of Acquisition and Resources Management
OIG
Office of Inspector General
OMB
Office of Management and Budget
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More information at www.epa.gov/oiq/hotline.html.
EPA Office of Inspector General
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Washington, DC 20460
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At a Glance
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August 26, 2014
Why We Did This Review
The federal government
spends approximately
$500 billion on goods and
services each year to support
its mission. Given the
increasing fiscal pressures
facing the United States, there
has been a renewed focus on
maximizing efficiencies in the
procurement process to
achieve cost savings. One such
initiative is the use of strategic
sourcing as outlined in the
Federal Strategic Sourcing
Initiative (FSSI).
The purpose of this review was
to determine whether the
U.S. Environmental Protection
Agency's (EPA's) strategic
sourcing program is gaining
efficiencies from existing
federal initiatives under the
FSSI mandate and the EPA
was identifying and taking
advantage of strategic sourcing
opportunities outside of FSSI.
This report addresses the
following EPA goal or
cross-agency strategy:
• Embracing EPA as a high-
performing organization.
For further information,
contact our public affairs office
at (202) 566-2391.
The full report is at:
www.epa.aov/oia/reports/2014/
20140826-14-P-0338.pdf
Increased Emphasis on Strategic Sourcing Can
Resuit in Substantial Cost Savings for EPA
The EPA could save
$30 to $60 million
annually by fully
implementing its
strategic sourcing
program.
What We Found
Although the Office of Management and Budget issued
a policy memorandum on strategic sourcing in 2005
expressing the need for agencies to leverage strategic
sourcing to the maximum extent possible, the EPA has
been slow in implementing such efforts. Crucial
aspects, such as conducting spend analyses and
developing controls to ensure maximum agency
participation, were either not developed or conducted timely. The Office of
Management and Budget also encouraged agencies to participate in
governmentwide solutions, known as FSSI, and advised agencies to consider
those being offered for commonly procured commodities first when contemplating
acquisitions. Of the four solutions offered (print management, wireless services,
office supplies and domestic delivery), the EPA only participated in the office
supplies and domestic delivery solutions. The agency has been slow in
implementing strategic sourcing due to a lack of commitment in the initial stages
of the initiative and by proceeding cautiously as experience was gained. As a
result, the EPA has been missing out in cost saving opportunities and improved
efficiencies in its procurement processes.
Recommendations and Planned Corrective Actions
We recommend that the EPA develop a plan of action to strategically source
wireless services and print management. If the EPA's plan is to source these
commodities internally because it is not practicable under the FSSI initiative, we
recommend that a price comparison analysis be performed to ensure the best
possible pricing is negotiated. We also recommend that the EPA develop and
implement policies and procedures to ensure that controls are in place so that all
strategically sourced vehicles are utilized unless a valid exception is approved.
The EPA agreed with our recommendations and provided a corrective action plan
with dates for each recommendation.
Noteworthy Achievements
The EPA conducted a study of the agency's acquisition function to realize cost
savings and increase the efficiency and effectiveness of the acquisition function
within the EPA. The study, known as the Centers of Expertise in Contracting,
details the challenges facing the EPA. The report identifies the value of strategic
sourcing and estimates that, with a fully staffed strategic sourcing office, it can
achieve potential cost savings of $30 to $60 million on an annual basis. The
report provides recommendations on how to achieve a more efficient and effective
acquisition process, and the EPA is currently evaluating these recommendations.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
August 26, 2014
MEMORANDUM
SUBJECT: Increased Emphasis on Strategic Sourcing Can Result in
Substantial Cost Savings for EPA
Report No. 14-P-0338
FROM: Arthur A. Elkins Jr.
TO:
Craig Hooks, Assistant Administrator
Office of Administration and Resources Management
This is our report on the subject audit conducted by the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA). This report contains findings that describe the problems
the OIG has identified and corrective actions the OIG recommends. This report represents the opinion of
the OIG and does not necessarily represent the final EPA position. Final determinations on matters in
this report will be made by EPA managers in accordance with established audit resolution procedures.
The office responsible for implementing the recommendations is the Office of Acquisition Management,
within the Office of Administration and Resources Management.
Action Required
In accordance with EPA Manual 2750, your office provided acceptable and complete planned corrective
actions in response to OIG recommendations. All recommendations are resolved and no final response to this
report is required.
We will post this report to our website at http://www.epa.gov/oig.

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Increased Emphasis on Strategic Sourcing
Can Result in Substantial Cost Savings for EPA
14-P-0338
Table of C
Chapters
1	Introduction		1
Purpose		1
Background		1
Noteworthy Achievements		3
Scope and Methodology		4
2	EPA Not Participating in FSSI to the Greatest Extent Possible		6
Policy Highlights the Importance of Leveraged Buying		6
EPA Participation in FSSI Initiative Limited		6
Fiscal Year 2011 FSSI Spend on Commodities Not a
Total Representation of Actual Spend		7
EPA Missing Out on FSSI Savings		8
Recommendations		8
Agency Response and OIG Evaluation		9
3	EPA Slow to Implement Strategic Sourcing		10
Policy Issued on Implementing Strategic Sourcing		10
EPA Slow in Implementing Strategic Sourcing		10
Lack of Early Commitment to Strategic Sourcing Delayed Progress		11
EPA Not Realizing Full Benefits of Strategic Sourcing		12
Recommendations		12
Agency Response and OIG Evaluation		13
Status of Recommendations and Potential Monetary Benefits		14
Appendices
A Agency Response to Draft Report	 15
B Distribution	 19

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Chapter 1
Introduction
Purpose
Given the increasing fiscal pressures facing the United States government, there
has been a renewed focus on maximizing efficiencies in the procurement process
to achieve cost savings. One such initiative is the use of strategic sourcing as
outlined in the Federal Strategic Sourcing Initiative (FSSI).
The U.S. Environmental Protection Agency's (EPA's) Office of Inspector
General (OIG) conducted this audit to determine whether the EPA is gaining
efficiencies from federal strategic sourcing initiatives and if the EPA is
identifying and taking advantage of opportunities to increase strategic sourcing in
areas not covered by federal initiatives.
Background
Strategic sourcing is defined in the FSSI as "the collaborative and structured
process of critically analyzing an organization's spending and using this
information to make business decisions about acquiring commodities and services
more effectively and efficiently." Because the federal government spends billions
of dollars on goods and services, the Office of Management and Budget (OMB)
issued a memorandum in May 2005 on implementing strategic sourcing. The
memorandum explained the need to leverage spending to the maximum extent
possible through strategic sourcing. OMB noted that strategic sourcing helps
agencies optimize performance, minimize price, increase achievement of socio-
economic acquisition goals, evaluate total life cycle management costs, improve
vendor access to business opportunities, and otherwise increase the value of each
dollar spent.
OMB required agencies to develop a spend analysis and to identify no fewer than
three commodities (goods and services) that could be purchased more effectively
and efficiently through the application of strategic sourcing. Each agency was
required to develop a strategic sourcing plan. The memorandum also noted that,
beginning in January 2006, the Chief Acquisition Officer shall report annually to
OMB regarding, at a minimum: reductions in the prices of goods and services;
reductions in the cost of doing business; improvements in performance; and
changes in achievement of socio-economic acquisition goals at the prime contract
and, if possible, subcontract level.
In response to OMB's memorandum, the General Services Administration (GSA)
issued multiple governmentwide procurement vehicles for commonly purchased
commodities (GSA refers to these as solutions) so that agencies could place
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orders against them. This initiative was referred to as FSSI. The common
commodities were:
•	Express and ground domestic delivery services.
•	Office supplies.
•	Telecommunications expense management services.1
•	Print management.
In 2007, OMB issued a follow-on memorandum encouraging agencies to focus on
governmentwide solutions first. The memorandum advised agencies that when
contemplating acquisitions for express and ground domestic delivery services,
office supplies, telecommunications expense management, or printers and copiers,
the GSA FSSI solutions should be used first.
EPA's Strategic Sourcing Program and Organizational Structure
The Assistant Administrator for the Office of Administration and Resources
Management (OARM) formally initiated the EPA's strategic sourcing program on
May 28, 2013. OARM provides national leadership, policy and management of
many essential support functions for the agency, including acquisition activities.
OARM's Office of Acquisition Management (OAM) is charged with overseeing
EPA acquisitions.
OAM is responsible for planning, awarding and administering contracts for the
agency, including issuing and interpreting acquisition regulations; administering
training for contracting and program acquisition personnel; providing advice and
oversight to regional procurement offices; and providing information technology
improvements for acquisition. Under OAM, the Business Analysis and Strategic
Sourcing service center was formed in 2011 and administers the strategic sourcing
program. The purpose of the EPA's strategic sourcing program is to ensure
improved efficiencies and economies in the agency's acquisition programs, and to
ensure that acquisition programs deliver the best value for American taxpayers
and the EPA. The long-term objective of the strategic sourcing program is to
transform the EPA's acquisition process from a tactical and reactive function to a
strategically driven function that ensures maximum value for every acquisition
dollar spent. The plan has five objectives but has not yet been formally finalized.
Those five objectives are:
•	Reduce the total cost of ownership for acquired goods and services.
•	Optimally leverage small and disadvantaged business participation.
•	Standardize and streamline acquisition business processes.
•	Improve visibility about acquired goods and services.
•	Establish collaborative participation and support for strategic sourcing
within the EPA.
1 The telecommunications expense management services solution expired in July 2013.
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Process Involved for Strategically Sourcing Commodities
Strategic sourcing can use differing strategies to acquire commodities more
effectively and efficiently. Strategies include leveraged buying, demand analysis
for altering buying behavior, and achieving efficiencies through standardized
acquisition processes. The first step, however, begins with an opportunity
assessment.
An opportunity assessment is an analysis of spending (spend analysis) and the
identification of products and services for which strategic sourcing should be
implemented. The process involves collecting, classifying and analyzing
expenditure data to reduce procurement costs and improve efficiency. Typically,
a spend analysis is conducted on a continual basis, and based on the results
commodities are prioritized for future sourcing efforts. The prioritization factors
in the amounts spent on commodities, potential savings that can be realized by
strategically sourcing the commodity, and the degree of difficulty in sourcing the
commodity. Once a commodity is identified and targeted for strategic sourcing,
additional steps are taken during the process and extend past contract award. The
figure below depicts the process of strategic sourcing at the EPA.
COMMODITY STRATEGIC SOURCING PROCESS
Assess and
Conduct market
Developand issue

prioritize
analysis to identify
RFx based on

opportunities
supply & demand
sourcing strategy,

based on a
levers, new
conduct

thorough
suppliers, buyer
negotiations,

orga n i za ti on-wi de
leverage
evaluate

spend analysis

proposals, and
award contracts)

Develop detailed
profile of commodity
including spend
profile &
specifications
Develop sourcing
strategy based
on Commodity
Profile & Supply
Market Analysis
Implement contract,
process and policy
changes; continually
measure, track and
manage performance
Source: The EPA's Draft Strategic Sourcing Plan, September 2013.
Noteworthy Achievements
OAM was tasked to conduct a study of the EPA's acquisition function with the
objectives of realizing cost savings and increasing the efficiency and effectiveness
of the acquisition function for all of EPA. The study, known as the Centers of
Expertise in Contracting, details the challenges facing the EPA. The report
identifies the value of strategic sourcing and estimates that, with a fully staffed
strategic sourcing office of six to 10 staff, the EPA can achieve potential cost
savings of $30 to $60 million each year. The report acknowledges the importance
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of a collaborative approach and provides recommendations on how to achieve a
more efficient and effective acquisition process. Currently, OAM is in the process
of evaluating these recommendations for a path forward. Additionally, based on
its fiscal year (FY) 2013 spend analysis, the EPA has identified seven
commodities to potentially strategically source and is actively assessing each
commodity for future strategic sourcing. Of those commodities, the EPA plans to
continue using GSA's FSSI solution for office supplies. The seven commodities
identified are:
•	Remedial Actions.
•	Student Services.
•	Lab Supplies.
•	Facilities Operations.
•	Wireless Services.
•	Conference Support Services.
•	Office Supplies.
Scope and Methodology
We conducted this performance audit from December 2013 through June 2014
in accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on our audit
objectives.
To gain an understanding of the federal initiative for strategic sourcing, we
reviewed OMB strategic sourcing memorandums dating from 2005 to the most
recent one issued on December 5, 2012. We then reviewed the EPA's strategic
sourcing plan, internal guidance, and applicable subparts of the Federal
Acquisition Regulation. Other documents that we reviewed were:
•	Annual progress submissions to OMB detailing strategic sourcing
activities.
•	Reported savings based on usage of GSA's FSSI vehicles.
•	Reported savings for the EPA strategically sourced vehicles, including the
methods used in calculating the internal savings.
•	EPA's FY 2011 spend analysis.
•	All strategically sourced EPA Blanket Purchase Agreements (BPAs).
We interviewed pertinent headquarters contracting staff in OAM to determine
how the EPA's strategic sourcing program is being implemented and overseen.
We interviewed contracting staff at the regional levels to obtain a regional
perspective of the EPA's strategic sourcing program. We interviewed the national
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purchase card program manager, and several other staff involved with
government purchase cards to evaluate the controls and policies in place for
ordering strategically sourced items using a government purchase card.
Additionally, we interviewed GSA officials to determine how the EPA is utilizing
GSA's governmentwide FSSI vehicles, how savings are calculated when an order
is placed, and any future initiatives that may impact the EPA.
There were no prior audits impacting the objectives of this assignment. Therefore,
follow-up on past recommendations was not conducted.
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Chapter 2
EPA Not Participating in FSSI to the
Greatest Extent Possible
The EPA has only participated in two of the four FSSI solutions offered. Of the
four solutions available—domestic delivery, office supplies, print management
and wireless services solutions—the agency only participated in the office
supplies and domestic delivery solutions. While the EPA's FY 2012 report to
OMB indicates substantial use of two FSSI solutions, the data did not include
purchase card transactions from non-FSSI vendors. In 2007, OMB issued a policy
memorandum stating that strategic business solutions that leverage the vast
buying power of the federal government is a top priority of the acquisition
community and to focus on governmentwide solutions first. It advised agencies
that when contemplating acquisitions they should first consider those being
offered under the FSSI initiative. The EPA stated it has not participated in all
solutions because they either were not practicable or the agency already had
existing contracts in place for those services. By not fully participating in the
initiative, the EPA is not receiving the benefits of savings through volume
discounts afforded under strategically sourced vehicles. The lack of participation
also diminishes the total collective volume for a given solution that otherwise
would benefit all agencies.
Policy Highlights the Importance of Leveraged Buying
OMB issued its initial strategic sourcing memorandum in May 2005. The
memorandum explained the need to leverage spending to the maximum extent
possible through strategic sourcing. It also stated that federal agencies are
responsible for maximizing the value of each dollar and emphasized the need to
purchase more effectively and efficiently through the application of strategic
sourcing. In May 2007, OMB issued a follow-on memorandum stating that
strategic business solutions that leverage the vast buying power of the federal
government is a top priority for the acquisition community. The memorandum
encouraged agencies to focus on governmentwide solutions and, when
contemplating acquisitions, those offered under the FSSI initiative should be
considered first.
EPA Participation in FSSI Initiative Limited
At the time our audit was conducted, we determined that the EPA had been
participating in the office supplies and domestic delivery solutions since the 2007
memorandum, and was not participating in the print management and wireless
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services solutions available governmentwide through the FSSI initiative.2
Table 1 summarizes FY 2011 expenditures associated with the two solutions with
which the EPA participated.
Table 1: EPA's participation in FSSI solutions
Commodity description
FY 2011 total
spending on
commodity
FY 2011
amount spent
through FSSI
FY 2011 % of
total spending on
commodity going
through FSSI
FSSI Domestic Delivery 2
$762,874
$762,874
100%
FSSI Office Supplies
$2,413,627
$2,413,627
100%
Source: The EPA's FY 2012 Acquisition Status Review Report.
The EPA did not participate in the FSSI solution for print management because it
had end user service agreements in place for equipment that it already owned, and
until recently the FSSI solution for print management did not have services for
existing equipment. As a result, the EPA has been using internally placed
contracts for these services. Additionally, the EPA stated that it has been
negotiating lower pricing under its existing contract for print management and
expects to finalize the modification to incorporate the new pricing in the near
future.3
For wireless services, the EPA did not participate in this solution because it was
not offered under the FSSI initiative until May 2013. Based on the Centers of
Expertise in Contracting report—a study conducted from April 2012 to March
2013—the EPA had 48 contracts in place for wireless services. In reviewing its
wireless service plans, the EPA stated it identified approximately 700 lines with
zero usage and either disconnected or suspended those lines, for what it considers
to be a potential cost savings of between $400,000 and $600,000 annually. The
EPA is also developing plans to strategically place its own wireless contracts,
once the existing ones expire, at what it says is better pricing than what the newly
awarded FSSI solution is offering.
Fiscal Year 2011 FSSI Spend on Commodities Not a
Total Representation of Actual Spend
While the information submitted to OMB for FY 2011 makes it appear that the
EPA is fully utilizing the FSSI solutions for office supplies and domestic delivery,
that is not actually the case. The EPA reported the amounts calculated and
provided by GSA. However, that information only includes transactions ordered
under the FSSI initiative—it does not include transactions the EPA made outside
of the FSSI initiative, such as transactions made using the government purchase
2	At the time of our audit there were four active FSSI solutions. The telecommunications management solution
ended in 2013, while the wireless services solution began in 2013.
3	Since the modification has not been finalized, we were not able to conduct a price comparison analysis between the
newly negotiated EPA rates or the rates contained in the newly awarded FSSI BPA.
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card with non-FSSI vendors. For example, using the EPA's FY 2011 spend
analysis, we identified approximately 38,000 transactions totaling more than
$5 million that were potentially related to office supplies. Conversely, the EPA
reported $2.4 million in its submission to OMB with all expenditures ordered
directly against a strategically placed vehicle.
The EPA did not report all purchases for office supplies and domestic delivery
services because it does not have the capability to link government purchase card
transactions to specific BPAs in its systems. Currently, the only way to cross-
reference purchase card transactions to specific BPAs is through logs maintained
by each individual purchase card holder (for FY 2012, there were 1,370 active
purchase card holders). These logs are held independently of each other and are
not linked to a database. Given the large number of card holders, cross-
referencing each transaction in this manner to ensure that an acquired commodity
received the correct pricing is a daunting task.
EPA Missing Out on FSSI Savings
By not fully participating in FSSI, the EPA is not receiving the benefits of savings
through volume discounts afforded under strategically sourced vehicles. While the
EPA is only one agency, the lack of participation across the federal sector can
diminish GSA's negotiating ability for future follow-on agreements. With
increased participation, all agencies can realize greater cost savings when
commodities do not lend themselves to internal sourcing.
Additionally, the EPA does not have reasonable assurance that it is receiving the
negotiated pricing established in the FSSI vehicles when government purchase
cards are the method of payment. Until a system or method is developed to link
these transactions, the EPA will not be able to perform in-depth analyses on
spending, which could diminish its negotiating stance for future awards.
Recommendations
We recommend that the Assistant Administrator for Administration and
Resources Management:
1.	Develop a plan of action to strategically source wireless services and print
management. If the plan is to source these commodities internally because
it is not practicable under the FSSI initiative, perform a price comparison
with established pricing under the FSSI solution(s) to ensure the best
possible pricing is negotiated.
2.	Develop a system or method to link purchase card transactions to BPAs.
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Agency Response and OIG Evaluation
OARM agreed to take corrective action in response to recommendations 1 and 2
and provided completion dates of November 2014 and October 2014,
respectively. We believe that the proposed corrective actions, along with the
planned completion dates, meet the intent of the recommendations. These
recommendations will remain open pending completion of the proposed
corrective actions. The complete agency response to the draft audit report is in
appendix A.
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Chapter 3
EPA Slow to Implement Strategic Sourcing
Although OMB issued a policy memorandum on strategic sourcing in 2005
expressing the need for agencies to leverage strategic sourcing to the maximum
extent possible, the EPA has been slow in implementing strategic sourcing.
Crucial aspects, such as conducting spend analyses and developing controls to
ensure maximum agency participation, were either not developed or not
conducted timely. Additionally, to date the EPA has only strategically sourced
one commodity. In OMB's 2005 memorandum, it explained the need to leverage
spending to the maximum extent possible through strategic sourcing. The
memorandum noted that strategic sourcing helps agencies optimize performance,
minimize price, and otherwise increase the value of each dollar spent. Due to a
lack of commitment in the initial stages of the initiative and by electing to proceed
cautiously, the EPA has been missing out in cost saving opportunities and
improved efficiencies in its procurement processes. According to the EPA, it
could save $30 to $60 million annually by fully implementing its strategic
sourcing program.
Policy Issued on Implementing Strategic Sourcing
OMB issued its initial strategic sourcing policy memorandum in May 2005. The
memorandum explained the need to leverage spending to the maximum extent
possible through strategic sourcing. OMB also noted that strategic sourcing helps
agencies optimize performance, minimize price, increase achievement of socio-
economic acquisition goals, evaluate total life cycle management costs, improve
vendor access to business opportunities, and otherwise increase the value of each
dollar spent. The memorandum required agencies to develop a spend analysis and
to identify no fewer than three commodities that could be purchased more
effectively and efficiently through the application of strategic sourcing. It also
required that each agency develop a strategic sourcing plan with the following
elements: (1) strategic sourcing governance, (2) goals and objectives,
(3) performance measures, (4) communication strategy, and (5) training strategy.
EPA Slow in Implementing Strategic Sourcing
Although OMB issued a memorandum on strategic sourcing in 2005 requiring
federal agencies to enhance strategic sourcing efforts, the EPA has been slow in
implementing a program. The approach taken in implementing its efforts was
cautious—to act as experience was gained. This tactic was communicated in the
EPA's 2006 Annual Strategic Sourcing Progress Report, which stated:
The EPA's vision is to proceed cautiously and learn from these
initial endeavors. As experience is gained and successes are
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achieved, the agency will expand the program to include additional
commodities. The EPA's strategic sourcing team will continue to
conduct opportunity analyses for the next phase of strategically
sourcing commodities. Additionally, the agency will closely follow
the FSSI efforts related to copiers, cell phone service, domestic
delivery services and IT hardware.
While the 2006 annual progress report stated that EPA would expand the
program, it was not until May 28, 2013, that the program was formally initiated.
While the EPA developed a draft strategic plan and has been following the draft
in the interim, as of May 2014 the strategic plan had not been finalized or
approved. Furthermore, the EPA did not conduct its first comprehensive spend
analysis until June 2012 and it was not until March 2014 that the EPA completed
its next spend analysis for FYs 2012 and 2013.
Since OMB's 2005 memorandum, the EPA has only strategically sourced one
commodity. On March 12, 2008, the EPA awarded two BP As for laboratory
supplies. However, those BP As were allowed to expire in March 2013 without
follow-on vehicles being issued. As a result, as of June 2014, the EPA did not
have the ability to leverage its buying power with regard to laboratory supplies.
Additionally, the strategically sourced BP As were not used for the majority of
laboratory supply purchases. In 2012, the EPA reported to OMB that a total of
$24,665,889 had been expended for laboratory supplies in FY 2011. Of that, the
EPA reported that 37 percent, or $9,126,379, was expended through strategically
sourced vehicles. In analyzing the two strategically sourced BP As, we determined
that neither BPA had an obligation history associated with it in the EPA's
financial system. After obtaining and reviewing the calculations the EPA
submitted for its reporting purposes, we could not substantiate the total
expenditures or the expenditures reported through the use of a strategically
sourced vehicle because the transactions were made via government purchase
cards. As discussed in chapter 2, government purchase card transactions cannot be
linked to a particular BPA in EPA systems. As such, the EPA does not have
reasonable assurance that it ever received the negotiated pricing contained in the
two BP As.
Lack of Early Commitment to Strategic Sourcing Delayed Progress
The EPA has been slow in implementing strategic sourcing due to a lack of
commitment in the initial stages of the initiative and by electing to proceed
cautiously as experience is gained. Prior to 2011, no specific office or service
center was tasked with implementing strategic sourcing, which contributed to the
EPA's lack of a unified, cohesive effort in implementing its program agencywide.
In addition, the EPA has provided limited direction to and communication with
regional contracting and program offices. Although the EPA's strategic sourcing
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plan has a communications strategy, the EPA's dissemination of information in
this area has been inadequate. In meeting with staff from one EPA region, we
were told that the communication on strategic sourcing is not at the levels needed
to ensure an effective program, and when communication was provided it was
usually repetitive in nature. Since virtually all aspects of strategic sourcing are
centered in headquarters and because there are no regional points of contact, the
program may be unable to fully develop and accommodate regional needs.
The EPA did not have controls, such as purchase card restrictions, in place to
monitor the usage of its strategically placed laboratory supplies BP As.
Consequently, as reported in EPA's annual progress report, those BP As accounted
for just 37 percent of all laboratory supplies that EPA purchased in FY 2011.
Another contributing factor impeding the program is a lack of resources. Despite
the fact that the EPA's Centers of Expertise in Contracting report indicated that
six to 10 staff members were needed to fully operate the program, there are
currently only two full-time staff members assigned to carry out the day-to-day
operations of strategic sourcing. Due to minimal staff, critical aspects—such as
conducting spend analyses and developing controls for vehicle usage—were not
developed or conducted in a timely manner.
EPA Not Realizing Full Benefits of Strategic Sourcing
Given the increasing fiscal pressures facing all federal agencies, there has been an
increased effort to maximize efficiencies in procurement processes to achieve cost
savings. By not fully developing its strategic sourcing program in the initial stages
of the initiative, the EPA has been missing out in cost saving opportunities and
improved efficiencies in its procurement processes. The EPA's Centers of
Expertise in Contracting Study estimated that the EPA could save $30 to
$60 million annually by fully implementing its strategic sourcing program.
However, the EPA will not realize these potential cost savings unless a greater
emphasis is placed on strategic sourcing. We believe these are funds that could be
put to better use if strategic sourcing were fully implemented.
Recommendations
We recommend that the Assistant Administrator for Administration and
Resources Management, to achieve the estimated $30 to $60 million in annual
cost savings:
3. Develop and implement policies and procedures to ensure that controls are
in place so that all strategically sourced vehicles are utilized unless a valid
exception is justified.
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4.	Develop a collaborative approach to strategic sourcing to best ensure ideas
from all contracting and program offices are considered agencywide and
strategic sourcing activities are implemented in a uniform manner.
5.	Evaluate OAM priorities and determine whether resources can be
allocated from lower priority work to the strategic sourcing program.
6.	Increase awareness of the strategic sourcing program by:
a.	Developing and assigning regional points of contact.
b.	Developing informational packets to be disseminated to
headquarters and regional offices to ensure that all acquisition
personnel, including purchase card holders and approvers, are
adequately informed on the strategic sourcing requirements and
initiatives.
7.	Approve and finalize a strategic sourcing plan, by the Chief Acquisition
Officer, that will be administered agencywide.
Agency Response and OIG Evaluation
OARM agreed to take corrective action in response to recommendations 3 through
7 and provided a completion date of December 2014 for recommendation 3, and a
completion date of October 2014 for recommendations 4 through 7. We believe
that the proposed corrective actions, along with the planned completion dates, meet
the intent of the recommendations. These recommendations will remain open
pending completion of the proposed corrective actions. The complete agency
response to the draft audit report is in appendix A.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec. Page
No. No.
Subject
Status1
Action Official
Develop a plan of action to strategically source
wireless services and print management. If the plan
is to source these commodities internally because
it is not practicable under the FSSI initiative,
perform a price comparison with established pricing
under the FSSI solution(s) to ensure the best
possible pricing is negotiated.
Develop a system or method to link purchase card
transactions to BPAs.
12	Develop and implement policies and procedures to
ensure that controls are in place so that all
strategically sourced vehicles are utilized unless a
valid exception is approved.
13	Develop a collaborative approach to strategic
sourcing to best ensure ideas from all contracting
and program offices are considered agencywide
and strategic sourcing activities are implemented in
a uniform manner.
Assistant Administrator for
Administration and
Resources Management
Planned
Completion
Date
Claimed
Amount
Agreed-To
Amount
11/30/14
Assistant Administrator for 10/31 /14
Administration and
Resources Management
Assistant Administrator for 12/31 /14
Administration and
Resources Management
Assistant Administrator for 10/31 /14
Administration and
Resources Management
$60,000
$60,000
13 Evaluate OAM priorities and determine whether
resources can be allocated from lower priority work
to the strategic sourcing program.
13 Increase awareness of the strategic sourcing
program by:
a.	Developing and assigning regional points of
contact.
b.	Developing informational packets to be
disseminated to headquarters and regional
personnel to ensure that all acquisition
personnel, including purchase card holders
and approvers, are adequately informed on
the strategic sourcing requirements and
initiatives.
Assistant Administrator for 10/31 /14
Administration and
Resources Management
Assistant Administrator for 10/31114
Administration and
Resources Management
13 Approve and finalize a strategic sourcing plan, by
the Chief Acquisition Officer, that will be
administered agencywide.
Assistant Administrator for
Administration and
Resources Management
10/31/14
1 O = Recommendation is open with agreed-to corrective actions pending.
C = Recommendation is closed with all agreed-to actions completed.
U = Recommendation is unresolved with resolution efforts in progress.
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Appendix A
Agency Response to Draft Report
July 24, 2014
MEMORANDUM
SUBJECT: Response to Office of Inspector General Draft Audit Report No. OA-FY14-0070
"Increased Emphasis on Strategic Sourcing Can Result in Substantial Savings to
EPA," dated June 13, 2014
FROM: Craig E. Hooks, Assistant Administrator
TO:	Janet Kasper, Director
Contract and Assistant Agreement Audits
Office of the Inspector General
Thank you for the opportunity to respond to the issues and recommendations raised in the Office of
Inspector General Draft Audit Report No. OA-FY14-0070 'Increased Emphasis on Strategic Sourcing
Can Result in Substantial Cost Savings for EPA" dated June 13,2014. The Office of Administration
and Resources Management agrees with audit findings, and for all recommendations we have provided
corrective actions and completion dates in Attachment 1 hereto.
Ifyou have any questions regarding this response, please contact John Bashista, Director, Office of
Acquisition Management at 202-564-4310 or LisaMaass, OAM's Audit Follow-up Coordinator, at 202-
564-2498.
Attachment
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ATTACHMENT I-RECOMMENDATION DISCUSSION
Recommendation #1: Develop a plan of action to strategically source wireless services and print
management. If the plan is to source these commodities internally because it is not practicable under
the Federal Strategic Sourcing Initiative (FSSI) initiative, perform a price comparison with established
pricing under the FSSO solution(s) to ensure the best possible pricing is negotiated.
OARM agrees with this recommendation. OARM began the process of strategically sourcing the
agency's wireless services in FY13. Part of that process included performing a price comparison
between the Federal Strategic Sourcing Initiative and the negotiated rates under EPA's existing
contracts for these commodities. Ill the 3rd quarter of FY14, OARM finalized renegotiation of its
agreements with AT&T and Verizon at rates better than those currently available through FSSI.
Those changes are currently in the process of being rolled out, and should be completed by
November 2014.
OARM renegotiated its print contract in March 2014 to reflect industry-wide structure (black and
white vs. color) and the rates are now lower than FSSI's offering. Since previously FSSI did not
offer rates for agency-owned equipment, FSSI pricing was not comparable since EPA owns its
equipment. As a result, EPA did not consider FSSI pricing in the past. Additionally, a
memorandum to encourage changes in behavior including reduced printing, and reduced color
printing, double-sided printing, and less desk-top printing will be distributed agency-wide. In
August 2014, OARM anticipates establishing an agency-wide Print Commodity Team to
determine the best approaches for managing both ongoing and future additional strategic sourcing
printing efforts at EPA.
Recommendation #2: Develop a system or method to link purchase card transactions to
BP As.
OARM agrees with this recommendation. OARM is in the process of implementing PaymentNet
agency-wide. This automated purchase card system bas a robust electronic purchase log feature
which includes a drop down button and comment box allowing users to note whether the
transaction was made using a Blanket Purchase Agreement. If a BPA was used, the BPA number
must be annotated. Conversely, if a BPA was not used and should have been, cardholders will be
required tojustify why in the comment section of the purchase log. This process will enable EPA
to validate data already being captured via GSA FSS and other agency-wide BPAs. Additionally,
PNET will provide cardholders with uniform platform for recodingjustification for non-use of
agency-wide strategic sourcing purchasing vehicles. The PNET system will be deployed and will
be mandatory for all purchase card users effective October 2014.
Recommendation #3: Develop and implement policies and procedures to ensure that controls are
in place so that all strategically sources vehicles are utilized unless a valid exception is approved
OARM agrees with this recommendation. OARM is currently in the process of developing a
policy to make strategically sourced vehicles mandatory, if appropriate, depending on the goods
or services required and the sourcing strategy used. This policy will include an exception process
requiring users tojustify reasons for not using a strategically sourced vehicle, although in some
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cases, the justification may be an exception for usage set forth in the contract vehicle. This policy
document will be published agency-wide by December 2014.
Recommendation #4: Develop a collaborative approach to strategic sourcing to best ensure ideas
from all contracting and program offices are considered agency-wide and strategic sourcing
activities are implemented in a uniform manner.
OARM agrees with this recommendation. OARM has developed, vetted, and finalized an
agency-wide Strategic Sourcing Plan which includes specific processes, roles, and
responsibilities to ensure a strong collaborate approach. This Strategic Sourcing Plan will
be disseminated across the agency by October 2014.
Recommendation #5: Evaluate OAMpriorities and determine whether resources can be allocated
from lower priority work to the strategic sourcing program
OARM agrees with this recommendation. O ARM/O AM is in the process of conducting a
reorganization through which it will better align its personnel and functions to support the
accomplishment of the agency's mission. As apart of this process, O ARM/O AM agrees to
evaluate whether resources can be allocated from lower priority work to the strategic sourcing
program. The reorganization is to be completed by October 2014.
Recommendation #6: Disseminate broader awareness of the program by:
a.	Developing and assigning regional points of contact.
b.	Developing informational packets to be disseminated to regional personnel to
ensure that all acquisition personnel, including purchase card holders and
approvers, are adequately informed on the strategic sourcing requirements and
initiatives.
OARM agrees with these recommendations. OARM is developing a communications and
marketing plan for the strategic sourcing program. Formal implementation will begin by October
2014. This plan will include headquarters and regional stakeholders for each commodity, as
applicable.
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Recommendation #7: Approval and finalize a strategic sourcing plan, by the Chief
Acquisition officer, that will be administered Agency-wide.
OARM agrees with this recommendation. OARM has developed, vetted, and finalized an
agency-wide Strategic Sourcing Plan which includes specific processes, roles, and
responsibilities to ensure a strong collaborate approach. The Strategic Sourcing Plan will be
disseminated across the agency by October 2014.
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Distribution
Appendix B
Office of the Administrator
Assistant Administrator for Administration and Resources Management
Agency Follow-Up Official (the CFO)
Agency Follow-Up Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Education
Principal Deputy Assistant Administrator, Office of Administration and Resources Management
Director, Office of Acquisition Management, Office of Administration and Resources
Management
Director, Office of Policy and Resource Management, Office of Administration and
Resources Management
Deputy Director, Office of Policy and Resource Management, Office of Administration and
Resources Management
Director, Office of Regional Operations
Audit Follow-Up Coordinator, Office of Administration and Resources Management
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