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CHIPS Articles: Department of the Navy Launches Strategic Sourcing for IT Equipment

Department of the Navy Launches Strategic Sourcing for IT Equipment
Millions Targeted for Savings on Client and Enterprise Computing
By Floyd Groce and Roger Yee - April-June 2009
In this ever-tightening budget environment, the Department of the Navy (DON) has undertaken a strategic sourcing pilot initiative to achieve cost savings and acquisition process improvements.

In 2008, the Assistant Secretary of the Navy for Research, Development and Acquisition (ASN RDA) and the DON Chief Information Officer jointly chartered the DON IT Equipment Commodity Team to achieve the following goals:

• Reduce total life-cycle costs;
• Reduce time from requirement identification to delivery;
• Maximize usage of small business capabilities;
• Improve the ability to manage IT assets;
• Increase strategic vendor and IT management;
• Structure compliance into the acquisition process; and
• Create a technical foundation for future Naval net-centric operations.

Roger Yee, the Navy's lead for strategic sourcing efforts from ASN RDA, summarized the intended benefits: "Through the DON strategic sourcing initiative, we will not only reduce costs for the department's non-Navy Marine Corps Intranet (NMCI) IT equipment, but will improve our operational efficiency and supply management."

Disciplined Process
To achieve these goals, the team adopted a disciplined and repeatable process (shown in Figure 1) to guide their efforts and align stakeholders' expectations.

"This strategic sourcing process has been proven in numerous projects in the government and commercial sectors yielding significant savings in the acquisition and management of goods and services," said Lido Ramadan from Censeo Consulting Group, a leader in the execution of strategic sourcing in the federal government. "This approach can be applied to many goods or services procured throughout the DON."

As a result of an initial opportunity assessment, non-NMCI IT equipment was identified as the most immediate opportunity to address. This included desktops, laptops, servers, and associated software and peripherals.

Through spend analyses performed in Phase 1 (Profile Commodity), it was revealed that the DON spends more than $500 million on non-NMCI equipment annually. The team learned there were thousands of contracts and a lack of consistent buying guidelines resulting in a variety of equipment configurations, imposing avoidable support and maintenance costs.

With no DON-wide established contracts, along with the disadvantages associated with decentralized and disaggregated buying and funding, the DON's potential negotiating leverage has been greatly reduced.

The Solution
Upon completion of Phase 3 (Develop Commodity Strategy) of the strategic sourcing process, the team developed three vital and integrated strategy recommendations to improve the acquisition of non-NMCI IT equipment. Figure 2 illustrates the three phases of the solution set.

Standards – At the foundation of the strategy is the establishment of DON-wide hardware configuration and buying standards. As part of the stand-up of a Center of Excellence, representatives from various DON networks are analyzing existing configurations and developing DON-wide hardware standards. Standard configurations will help create a technical platform for net-centric warfare, enable better security and information exchange, and reduce total maintenance time and cost.

Contracts – To enable centralized, consolidated purchasing, the DON CIO and ASN RDA joint policy will designate use across the Department of the Navy for the Army's Computer Hardware Enterprise Software Solution (CHESS) and the Air Force's IT Commodity Council (ITCC) contracts.

A Memorandum of Understanding is envisioned to formalize the relationship and ensure the availability of DON-specific equipment. For technical requirements that cannot be met through these vehicles, the team will establish new “supplementary” contract(s), which will be open for use across the entire DoD.

Process – To effectively manage the DON-approved buying vehicles, an organization will be designated to manage DON use of the Army CHESS and Air Force ITCC contracts and relationships with these program offices. To consolidate future purchases, a DON-specific process is being developed to aggregate DON IT equipment requirements and funding. Strategic sourcing initiatives often find significant savings from improving how purchases are managed, not only by reducing the negotiated price of a commodity.

Communications
As with any department-wide initiative, communications will be essential for adoption throughout the DON. A formal communications plan will identify DON stakeholders and the best methods of communications and delivery. The team will leverage the Enterprise Software Initiative’s (ESI) communications avenues and coordinate future communication efforts through their established channels. DON CIO’s application of Lean Six Sigma to ESI will also be leveraged to benefit from DON and DoD-wide enterprise license agreements.

“The DON CIO’s Enterprise Software Licensing Lean Six Sigma Project Team has similar findings as the DON IT Equipment Commodity Team,” said Floyd Groce, DON CIO team lead for Enterprise IM/IT Planning and co-chair of the DoD Enterprise Software Initiative Working Group. “Both of these projects will benefit as we establish our common DON enterprise processes.”

Return on Investment
Considerable savings are expected from the efforts of the DON IT Equipment Commodity Team. This cost avoidance is largely driven by the use of appropriate acquisition vehicles, consolidated purchasing leverage and improved configuration management.

Figure 1--Commodity Strategic Sourcing Process
Figure 1

Figure2.  The solution shown in three phases.
Figure2. The solution shown in three phases.
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