Veterans Affairs ahead of game on bulk purchases

Seven years ago, the Veterans Affairs Department realized that it was being overcharged by the company that sold it burial flags - the neatly folded tokens given to relatives of deceased veterans.

As the only provider, the company was selling VA the Stars and Stripes for about $41 a pop, and it was raising its price each year. "They had us over a barrel," said Charles Roberson, VA's associate deputy assistant secretary for program management and operations. Veterans Affairs gives out about 525,000 burial flags annually, he said, and costs were adding up.

Veterans Affairs addressed the problem as part of its strategic sourcing plan, before "strategic sourcing," or leveraged buying, became common parlance in agency acquisition offices. The department cultivated three commercial vendors instead of one, and negotiated the price down to $32 per flag. Multiple vendors, in addition to stimulating competition and lower prices, also reduced the risk of supply interruptions, Roberson said.

While strategic sourcing often is associated with single-vendor solutions, in reality it often means multiple vendors providing supplies or services for an entire department, instead of individual employees making many small purchases. When departments examine their needs and coordinate procurements, they often find they can get better deals from vendors who are willing to cooperate in exchange for higher volume sales.

Like other federal agencies, last fall Veterans Affairs selected three commodities it planned to strategically source. The Office of Management and Budget has required agencies to have strategic sourcing plans in place by the end of January.

Agencies can meet OMB's requirements by selecting products that they are already strategically sourcing. This leaves Veterans Affairs especially well-positioned to comply.

In addition to burial flags, the department selected pharmaceuticals, which it already purchases for itself as well as the Defense Department and other select agencies, and headstones, said Jan Frye, assistant secretary for acquisition and materiel management at the department.

Frye said the department also applies strategic sourcing to its purchase of hearing aids, a program that will cost $750 million over a five year period that began last year. The application of strategic sourcing saved $12 million out of $109 million of sales in 2005, he said.

Veterans Affairs, he noted, has always been ahead of the game on strategic sourcing. "We were country before country was cool," he said.