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Cutting costs, one printer at a time

Jun. 28, 2010 - 06:00AM   |  
By TOM SPOTH   |   Comments
Dan Gordon, head of OMB's Office of Federal Procurement Policy, says he views strategic sourcing as "an area ripe for future savings."
Dan Gordon, head of OMB's Office of Federal Procurement Policy, says he views strategic sourcing as "an area ripe for future savings." (Tom Brown / Staff file photo)

Your printer is wasting more than $300 million a year in taxpayer dollars. Well, yours and a bunch of other ones.

The General Services Administration thinks it can recoup that money and more by changing the way the government buys and uses printers, copiers and fax machines.

Scheduled to begin in fiscal 2011, this governmentwide "strategic sourcing" initiative is one of several that GSA and the Office of Management and Budget are coordinating.

The goal is to consolidate agencies' buying power and adopt the best acquisition practices of government and industry, in order to squeeze industry for better deals.

OMB says the government is already saving about $857 million in fiscal 2010 through other strategic sourcing initiatives both government-wide and agency-specific in scope and that number could increase in future years.

"There is enormous opportunity out there," said Dan Gordon, head of OMB's Office of Federal Procurement Policy. "I view this as an area ripe for future savings."

Printers are just one area of opportunity:

GSA in September awarded a contract for domestic shipping services to UPS. The deal is expected to save $1 billion over five years, with costs 6 percent lower than a previous shipping contract also negotiated using strategic sourcing.

Agencies will save an estimated $192 million over four years through 12 office supplies contracts finalized earlier this month. Vendors agreed to deeper discounts on 400 products under a new version of a strategic sourcing deal signed in 2007.

GSA is also trying to use strategic sourcing to change the way agencies buy cell phones, smart phones and other wireless services. Objectives for that contract include negotiating better rates, standardizing plan types and giving agencies better information on how to optimize their use of wireless devices. GSA is bringing federal acquisition and information-technology workers together to develop the wireless initiative.

Michel Kareis, head of GSA's Federal Strategic Sourcing Initiative, said other strategic sourcing projects are in the works, but she declined to provide details. GSA's website identifies medical supplies and office furniture as possible strategic-sourcing efforts.

Gordon said OMB and GSA are working to identify other products and services that could be bought using strategic sourcing. Generally, the concept works only for items that are commonly used by all agencies like printers.

Too many feds still have their own personal printers on their desks instead of being connected to a network printer, Kareis said. GSA is analyzing where the government's printers are, how much they're used and how to slash waste from the more than $1 billion per year spent on printers, ink cartridges, toner, printing paper, printer maintenance and other related costs.

"Having to give up your desktop printer, a lot of people in the hallway are saying, ‘They want me to do what?'Ÿ" Kareis said. "But I think if you ask most federal employees to make some basic changes that aren't too painful, [they're] more than willing to do that."

Agencies also often underestimate a printer's cost by focusing only on the initial purchase price, Kareis said. An industry report from Lexmark International found that the sticker price of a network printer accounts for only 5 percent of the total amount spent on the device. Fifty percent goes to operation and maintenance costs and 45 percent to supplies such as ink, paper and toner.

GSA aims to reduce the number of government printers, get better prices by getting multiple agencies to collectively negotiate a single contract, and be smarter about calculating the total cost of printers. GSA's Kansas City office piloted the idea and saved 43 percent on equipment and 48 percent on maintenance, and GSA expects agencies can cut costs by 30 percent to 40 percent overall, a total savings of $300 million to $400 million in fiscal 2011 alone. GSA hasn't released information about which agencies are expected to sign on.

Those savings don't even include some key side benefits: Fewer printers means less energy used, and a single contract negotiated by GSA reduces the burden on other agencies' acquisition workers. Also, as part of the strategic sourcing initiative, GSA wants to teach employees such cost-saving tricks as printing on both sides, printing in black and white or in draft mode, and using fonts that save paper. Kareis said the government could save millions of dollars just by making those simple adjustments.

Office supplies contract

In negotiating the 12 office supplies contracts finalized earlier this month, GSA got pledges from agencies to spend a total of $250 million through the contracts about 30 percent of total federal spending on office supplies. By dangling that massive pool of cash, GSA convinced vendors to offer deep discounts.

Sunrise, Fla.-based Capitol Supply will offer prices an average of 19 percent lower than what it normally charges on the GSA schedules, which is already 40 percent below normal retail prices.

"Based on the pricing, this is a phenomenal opportunity for the government to save money," said David Ostan, Capitol Supply's director of national accounts. "Of course, we're hoping for a lot more business based on that, and that's why we were willing to lower our prices to the point that we did."

Capitol Supply expects to do $200 million of business on its contract in the next four years.

Gordon said GSA established a "price to beat" the lowest price that any federal agency was getting at the time for each of about 400 products, from binders and boxes to paper and pens. Once the bids came in, GSA notified vendors of the lowest prices offered and gave them 24 hours to go even lower. After getting the new bids, they did the same thing again.

GSA also got vendors to agree that any orders on government purchase cards will automatically receive the discounted price.

"I'm awfully proud of what they did," Gordon said of GSA's efforts.

But experience shows the initiative may be promising more than it can deliver. The previous strategic sourcing deal for office supplies was expected to accommodate about $300 million in spending, but the actual amount was about one-tenth of that, said Bill Gormley, president of the Washington Management Group and a former GSA senior executive.

Gormley said he's not convinced that the new deal will fare any better. Agencies have indicated that they will spend a certain amount, but it's not a die-hard commitment, Gormley said. The administration tried to make spending mandatory, but in the end "there's really no teeth in it," Gormley said. He added that if feds use purchase cards to buy office supplies, as they often do, they may not be aware which vendors are on the contract or have easy access to one of those companies.

"It's a great initiative, a great idea," he said, but "the government does not have a good track record in strategic sourcing."

Allan Burman, former administrator of the Office of Federal Procurement Policy, said one key difference in the new strategic sourcing efforts is that the Obama administration is trying to coordinate cross-agency strategic sourcing, rather than asking each agency to establish its own contracts. The current administration has also made strategic sourcing a higher priority, Burman said.

"We just didn't try hard enough [before]," Gordon said. "Too often in the past, it's as if we were 20 or 30 medium-sized businesses."

Gordon said he plans to make "a significant effort" to spread the word about the contracts negotiated through strategic sourcing.

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