Practitioners: Strategic sourcing doesn’t have to hurt small firms

Strategic sourcing and small business contracting may not be inherently at odds, federal procurement officials said at a Wednesday forum on the consolidation strategy.

Officials from across government and from Pennsylvania and Illinois -- two states deep in implementation of strategic sourcing programs -- debated how procurement goals that prioritize socioeconomic diversity and participation by small and minority-owned businesses balance against those for minimizing cost. Participants did not identify themselves during the discussion, allowing them to speak freely.

Some argued that strategic sourcing, in which agencies and even departments consolidate commodity purchases into a smaller number of buys to get price and performance leverage, does not have to hurt small business.

"When we say that strategic sourcing is bad for small businesses, we're assuming that strategic sourcing leads to a certain answer," said Raj Sharma, president of the Censeo Consulting Group, which hosted the event. "Strategic sourcing is a process, not an answer."

One participant said there is a built-in conflict between small business participation in contracting and strategic sourcing, especially when an agency goes from a decentralized to a centralized model, because procurements become too big for a small firm to handle. Adding a geographic component can push a contract further from small businesses, he said, if an agency is looking for a single entity that can provide services nationwide.

Another person disagreed, highlighting an example of a recent Defense Department strategic sourcing procurement that was split into two contracts -- one each for the East and West coasts -- to facilitate small business participation. Small businesses did not win either one, the official said, but several put in bids, providing evidence that the strategy worked.

Splitting the procurement in two also helped the department meet its goals for small business "opportunities," a measure that tracks how many contracts are open to small businesses, rather than the more familiar metric of how many contracts are awarded to them.

Discussion participants agreed that small business participation is important, but were divided on the importance of having a large number of small firms obtain contracts. One person said his agency had been successful in carving out a role for small business in a major strategic sourcing initiative, but the result had been a significant boost in revenue for one supplier, rather than multiple contracts spread throughout the community.

Some practitioners suggested that this did not fully meet federal goals and one said that, regardless of the letter of the law, consolidation could lead to complaints to members of Congress from business leaders who had been squeezed out.

Another participant said that aggregation, even in the small business sector, could benefit an agency by allowing it to place more demands on suppliers.

Regardless of specific strategy, an official who focuses on small business said the key to preventing a head-on collision between small firms and strategic sourcing goals is to address the question early on. "You have to factor small business in early in the process, and not frame it as a barrier" to strategic sourcing, she said.