The GSA Category Management initiative seems to be slipping under the radar.  And there is no time to lose, because the comment period ends after Nov. 7.  This program will hurt most industry providers.  Yet many people have not yet heard about it.  GSA is now at the “draft” stage and plans to roll out the category management paradigm over the next three to four years starting right away.  In the material below, I will try to show you reasons as to why you need to complain about this program to GSA, your trade groups and congressman.

If your company is among the 95%, this article is written to you.  If you are a Government administrator wanting to be served by healthy contractor firms, then this includes you.

What is Category Management?

Category Management is an industrial procurement and sales paradigm in which there is a manager responsible for each major item that is bought / sold.  It developed in department store management and has been applied to government in the UK.

For example, one of the categories at Target stores is laptop computers.  A central authority manages the buying and selling of laptop computers across all of the about 1,800 Target stores in the US.  This manager is responsible for researching, evaluating, selecting, buying, pricing, selling, studying, and maintaining the laptop computer line.  The theory is that central management of a product (or service) category fosters efficiency and savings or profitability.

Category Management in the Federal Government

A GSA leader got the idea of applying Category Management to federal procurement, and an administrator at OFPP named Ann Rung took responsibility for implementing the program in 2014.  She claimed that the program soon started saving money for the Government.  In 2016 the GSA formed a council to govern the Category Management program composed of representatives from the largest agencies / services.  On Sept. 30, 2016 Ann Rung left the Government, but as a parting “gift,” she also left a circular proposing to make Category Management permanent and implement it widely.

Category Management applies to more than half of what the federal government buys.

Why is Category Management Bad?

(1) Reduced number of contracts:

A central tenet of Category Management in the federal space is to reduce the number of contracts.  For example, let’s say Government customers are currently purchasing a certain product or service through 20 contracts.  And the category managers determine that these products can be more efficiently acquired through twelve contracts.  When the shift is made to the twelve contracts, what happens to vendors providing their products and service through the other eight contracts?

As you can imagine, the changes envisioned by Category Management would be especially hard on small business.  The potential for disruption of relationships between small business and their customers is huge.  The GSA has plans to keep the same percentages of business earmarked for small business.  However, if the vehicles left in place are in a different state and are run by people they don’t know, how long will it take small businesses to adapt to the changes?  How many small businesses will be badly hurt, and how many will be forced to go out of business?  How many large businesses will be disrupted?

(2) Reduced cost to buy the same product and service:

A second central tenet of Category Management is for the Government to be able to obtain multi-billion-dollar savings.  In various reports, Ann Rung commented on the large savings generated by getting better prices.  And she projected further multi-billion-dollars savings from the program into the future.

What the GSA has not addressed is, what is the net net effect of these large cost reductions on industry, especially on small business?  Just consider the experience of industry during the past several years:  Flat or decreased total spending; a large increase in LPTA buying; and the many best value programs that are really LPTA projects in disguise.  Now heaped on top of these other tribulations is category management.  Does the Government want to squeeze the last drop of profit out of industry?  Or is this Darwinism, where only the fittest will survive?

What can Contractors Do?

Here are some ideas about what you can do to help save us from category management:

  1. Complain to GSA and to your congressman
  2. Get your trade association involved
  3. Educate your friends as to why they also need to complain
  4. Go to the web site listed below and make a comment. What you do is to paste your comment in to the web site.

Comments could be:

  1. Why the program should be cancelled
  2. Why it should be seriously scaled back
  3. Why the program should be delayed for a year for a serious economic study as to how bad it would hurt small business
  4. At minimum, they need to take 6 months just making industry aware of the program. NOW VERY FEW PEOPLE HAVE EVEN HEARD OF CATEGORY MANAGEMENT.  We should not try to slip this potentially damaging program under the radar.  The people who have not heard about category management include seasoned directors, VPs and GMs who have long been players in the industry.

Note:  The draft circular can be seen at: https://www.federalregister.gov/documents/2016/10/07/2016-24054/category-management

The deadline for comments is Nov. 7, 2016, and you can submit your comments right there on the website above.