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Uncle Sam Saves $1.2 Billion with a Cost-Focused Procurement Approach

Jan. 7, 2020
The U.S. Army starts using category management as a way to save money that’s now being allocated to the agency’s modernization efforts.

In 2019, the U.S. Army saved about $1.2 billion by integrating category management into its procurement approach—savings that are now being redirected toward modernizing the agency, Army News Service reports.

Category management—or the segmentation of spend that groups goods and services based on their specific functions—is relatively new for the Defense Department and borrows best practices from the private sector.

“This is one of the ways we’’re funding the Army’s priorities,” Rebecca Weirick, executive director of services acquisition in the Office of the Deputy Assistant Secretary of the Army for Procurement, said at a recent panel on Army acquisition and contracting.

Data-Driven Decision Making

Using its new procurement approach, the Army divides purchases into 19 categories, said James H. Lewis, panel chair, who also works in the Army’s procurement office. Ten of the 19 categories are commonly used by all federal agencies (i.e., professional services or security and protection). The other nine are DOD-centric, including weapons and ammunition, electronic and communication equipment, and research and development.

The new approach also factors in vendor size and capability. For example, sometimes it’s smarter to buy from a small business—depending on the commodity in question—because the overheads are so much lower. Other times it’s smarter to use a large business and buy in bulk. “Category management has provided the ability to discern the best acquisition approach,” Weirick explained, “using data-driven decision making.”

Rolling it Out

The Army began implementing category management in 2018. Because the Air Force had already been using the procurement strategy for several years, the Army was able to take advantage of data the Air Force had collected.

The secretary of the Army directed implementation of category management, and assigned the under-secretary the role of senior official responsible for category management within the Army. The under-secretary named co-category managers at the three- and four-star level, both at the major commands and in the Pentagon. Those same individuals are also responsible for approving budgets.

The Army has set a goal of saving 5% year over year using category management and will reinvest those funds in higher agency priorities. Steve Benson, director of category management for the DOD Office of the Chief Management Officer, said for every dollar the department has invested in category management, it has realized a return of $160 for a ratio of 1:160.

Now, the Army is rolling out its category management approach to procurement across a wider swath of departments and employees. According to Army News Service, a course called “Contracting Efficiencies” will debut early this year at the Army Logistics University to teach category management concepts to non-acquisition personnel. The pilot course will be taught at ALU in Fort Lee, Va., and the curriculum is being developed by the Army’s Office of Business Transformation at the Pentagon.

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.