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An Analysis of Category Management of Service Contracts

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Technical Report

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Naval Postgraduate School Monterey United States

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In an increasingly budget-constrained environment, the Department of Defense DOD must maximize the value of fiscal resources obligated to service contracts. According to the Government Accountability Office report Strategic Sourcing published in 2013, over half of procurement spending between 2008 and 2013 was obligated to service contracts. Therefore, this research focused on identifying rate, process, and demand savings for common recurring DOD service requirements. We developed a methodology to standardize analysis of service requirements to identify relevant cost drivers. Furthermore, a clustering continuum was created to organize services based on proximity between the customer-supplier base. Utilizing commercial business mapping software, we analyzed the cost driver data, produced visualizations, and illustrated strategic opportunities for Category Management initiatives. Requirements for Integrated Solid Waste Management ISWM within the Los Angeles area were evaluated using the software and methodology to demonstrate a model for practical application. This research resulted in two findings rate and demand savings were inconclusive but suggested opportunities do exist, and significant opportunities for process savings exist across the DOD. Further research is needed to quantify rate and demand savings and identify other opportunities to achieve efficiencies through Category Management of service requirements. We also recommend that future research focus on proximity-independent services.

Subject Categories:

  • Logistics, Military Facilities and Supplies
  • Economics and Cost Analysis

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