We all know federal contracting can be a bit disorganized. Between delays, duplicate contracts, and a tedious process, at times, we are all left scratching our heads, thinking, “There has to be a better way to do this!” That is where category management comes in. The Federal Government has made a push for agencies to begin categorizing their procurement efforts to do their best to prevent contracting issues.
What is category management? Category management enables a government agency to categorize buying groups. By creating these groups, the agencies can eliminate redundancies, increase efficiency, and deliver more value and savings from the government acquisition programs. The keys to the success of category management are to identify core areas of spending, collectively developing levels of expertise, leverage shared best practices to provide acquisition, supply, and demand management solutions. In short, by categorizing acquisitions to deliver more savings, value, and efficiencies to federal agencies.
It is a relatively newer process being implemented by the Department of Defense to buy goods and services. The Army began utilizing this approach in 2019. They created 19 categories, 10 of which are profession and service focused, and the other nine are related to weapons and ammunition, electronic and communication equipment, and R&D focused. By grouping buying efforts in similar categories, the Army can use the data for other procurements in its category to make better decisions when it comes to consolidating contracts negotiating price and what the state of the industrial base they are looking into. Category management is not only making the process more repeatable and efficient. It is saving valuable time and money. The Army alone saved $1.2 billion or 9% in 2019, and they are looking to save an additional 5% in 2020. Category management is being utilized across the Department of Defense. The Air Force has also saved $1.5 billion by using this approach.
What does this mean for us in the industry? It is quite simple; contracts are going to become more organized and repeatable. That means researching contracts and understanding the category they are coming out of will give us more insight into what the customer is looking for, their requirements, and budget. Not only is the category management approach giving the customer more data to understand the industry, it is also giving us in industry data to understand the customer.