JanSan_Requisition_Channel_Bundling_Consolidation_Analysis_08062015_v4.pdf

BUNDLING/CONSOLIDATION ANALYSIS

STRATEGIC SOURCING PROGRAM

JANITORIAL AND SANITATION SUPPLIES

REQUISITION CHANNEL

FOR

STRATEGIC SOURCING PROGRAM

JANITORIAL AND SANITATION (JANSAN) SUPPLIES

Prepared: August 6, 2015 (rev. 08212015 v3)

Rev. 4 09/03/2015

Prepared by:

Greater Southwest Region (Region 7)

Southwest Supply & Acquisition Center

JANITORIAL AND SANITATION SUPPLIES

Table of Contents

1. Executive Summary

2. Background

Strategic Sourcing

GSA Global Supply Mission

Supply Transformation Initiative

JanSan Requisition Channel

3. FAR Bundling Guidance

Regulatory Requirements

4. Analysis

Methodology

Estimation Methods Used

Janitorial and Sanitation Supplies Acquisition History

Market Research

5. Anticipated Benefits

Pricing Discounts

Proven FSSI Savings

Improved Delivery Times

Personnel Cost Savings

Administrative Savings

6. Disadvantages of Bundling

7. Specific Impediments to Small Business Participation

Suitability for Small Business

Acquisition Strategy to Maximize Small Business Participation

8. Acquisition Alternatives to Bundling

9. Contracting Alternatives

10. Determination to Bundle

11. Final Recommendations

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1. EXECUTIVE SUMMARY

General Services Administration (GSA) is embarking on a Federal Strategic Sourcing Initiative (FSSI) for Janitorial and Sanitation Supplies, hereinafter, JanSan. GSA Global Supply currently maintains contract coverage for janitorial and sanitation supplies for its customers through various contract vehicles ranging from one-time buys, Indefinite Delivery Indefinite Quantity contracts (IDIQ), Blanket Purchase Agreements (BPAs) against Federal Supply Schedules (FSS), to open market standing price quotes not to exceed $150,000. These contract vehicles ensure that a responsible and responsive contractor is available to provide a National Stock Number (NSN) when GSA receives a requisition via Fedstrip or Milstrip from its customer agencies. As part of the FSSI and Supply Transformation (ST), GSA is moving towards a direct delivery model, where the items will be shipped directly from the vendor to the end user.

With the distribution centers closed, NSNs have been removed from the stock program and moved to the direct delivery program. The NSNs that have been categorized under JanSan are currently covered by approximately 459 contracts and supplied by approximately 215 vendors.

The Government anticipates this acquisition will consolidate these contracts into fourteen (14) BPAs, but reserves the right to establish more or fewer awards depending on the quotation evaluation results and a determination of how many BPAs will serve the best interest of the Government.

Extensive market research was conducted and numerous changes were made to the acquisition strategy to minimize the potential negative impact on small business. Active steps were taken to include small business in the JanSan acquisition strategy, with the majority of awards being reserved for small business. GSA examined benefits which included cost, quality, acquisition cycle, terms and conditions, and other benefits. Substantial benefits were found to justify the decision to bundle/consolidate in areas of savings, better terms and conditions, reduced cycle time, and enablement of smart shopping. Moreover, JanSan considered historical data obtained in the first year alone by the Office Supplies (OS) FSSI had proven savings of over 10%. In the first nine months of the JanSan Purchasing Channel, savings are averaging over 25%.

15 USC § 657q - Consolidation of contract requirements requires a consolidation analysis when two or more requirements for federal goods or services that have been provided under 2 or more separate contracts will be consolidated under a single or multiple award contract.

These BPAs also constitute substantial bundling under the definition of the Federal Acquisition

Regulations (FAR) due to the projected dollar value of the Request for Quotes (RFQs). In accordance with 13 CFR 125.2(d)(1)(iv), when an acquisition involves both consolidation and bundling, the contracting officer must follow the provisions regarding bundling set forth in paragraphs (d)(2) through (7).

Therefore, the contracting team conducted a bundling analysis, using the substantial bundling threshold (5% savings on contracts estimated at more than $94 million). The team identified the following benefits:

Reduced Cost: Greater discounts than those generally offered under Multiple Award

Schedule (MAS) contracts due to the larger estimated volumes and the longevity of the contracts.

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Administrative Savings: Several types including distribution center savings, technology savings, etc.

Personnel Cost Savings: Savings due to the reduction in acquisition and depot staff.

Improved Delivery Times: Reduction in the average time of 30 day delivery to 7 days.

The acquisition team determined that these benefits justify bundling. In addition, GSA has taken numerous additional steps to ensure small businesses are given fair opportunity to participate in the JanSan Requisition Channel to include:

Engaging industry through GSA Interact web blog site, ensuring the Small Business voice could be heard regardless of geography.

Hosting a partnering session between AbilityOne and Small Business, to ensure small businesses understood how to qualify to be authorized resellers.

A virtual conference was held February 19, 2014. The meeting was a combined event for OS3, MRO and JanSan with approximately 200 vendors. The purpose was to share the developed RFQ JanSan strategies with Industry and capture feedback.

Questions were collected and where appropriate the final RFQ will be revised to provide clarity. All Q&As from this Industry Day are available at:

https://interact.gsa.gov/blog/mro-and-jansan-requisition-channel-industry-day-qa-now-available-0

Posting draft RFQs and Market Baskets to allow Industry an opportunity to view and comment.

Constructing the Jan San product categories to ensure representation of the best opportunity for small business schedule contract holders to compete effectively within and across those categories.

Reserving a majority of awards for small business. Ten (10) of the fourteen (14) awards will go to small business.

Pursuing a Waiver of the Non-Manufacturing rule from the Small Business

Administration.

The primary impetus for ST is the realization that status quo is not an acceptable option for GSA and the ST effort is an attempt to concurrently carry out the GSA Administrator’s mandate to maximize use of FSSI while building a new, more sustainable business model. The new model, which is designed to leverage industry supply chain capabilities to the maximum extent, should increase internal efficiencies and our effectiveness in supporting customer requirements, while lowering our costs and thus increasing savings to customer agencies and the taxpayer.

https://interact.gsa.gov/blog/mro-and-jansan-requisition-channel-industry-day-qa-now-available-0

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2. BACKGROUND

STRATEGIC SOURCING

FSSI, chartered under the purview of the Federal Government’s Chief Acquisition Officers

Council (CAOC), is governed by the Category Management Leadership Council (CMLC). The

Office of Federal Procurement Policy (OFPP) oversees the CMLC. Many agencies actively participate in FSSI through the Community of Practice (COP) and through Commodity Councils that provide user input to various FSSI procurement activities. At its core, the FSSI program strives to implement a commodity management approach to federal procurement. JanSan supplies are one of several commodity groups for which FSSI is seeking a more effective government-wide acquisition approach.

A strategic sourcing effort typically involves the following activities:

Analyze spend data;

Analyze the market;

Develop a strategy;

Seek and negotiate with suppliers;

Select and award to successful suppliers;

Implement strategy; and

Monitor performance

Memo M-09-25, from the Office of Management and Budget (OMB), dated 07-29-09, mandated that all Federal agencies cut their procurement expenditures by 3.5 percent for both Fiscal Years

2010 and 2011 for a total reduction of 7 percent. The memo mandated the agencies to achieve savings through more effective acquisition practices.

The government-wide strategic sourcing of

JanSan supplies under FSSI is anticipated to assist the Administration in achieving its goal of cutting $40 billion a year from procurement spending.

GSA GLOBAL SUPPLY MISSION

GSA Global Supply (GGS) manages global supply acquisition. It is a vital component of the

National Supply System and supports military, civilian, and some state/local supply requirements throughout the world. Up through FY14, large-scale support was provided through two large distribution centers, acquisition centers, call centers, and more than 30 retail stores plus forward supply points located within the Continental United States (CONUS) and abroad, including multiple sites in Europe and Asia.

Since inception, GSA Global Supply operated a national distribution system. Commodities were purchased and warehoused in large depots with extensive inventory requirements. Orders were placed through requisitions; shipments were then made directly from the depots to requisitioning offices. Due to the increased cost of maintaining a distribution system, GSA progressively reduced the size of the inventory maintained in its depot system and increasingly relied on direct vendor delivery. Through programs such as the Special Order Program, Expanded Direct

Delivery (EDD), Direct Vendor Delivery (DVD), and now Strategic Partner Delivery (SPD), the

1 U.S. Department of Defense, Office of Small Business Programs. Benefits Analysis Guidebook. 2007.

2 http://www.whitehouse.gov/sites/default/files/omb/assets/memorandafy2009/m-09-25.pdf, OMB Memo M-09-25, Improving Government Acquisition, July 29, 2009.

http://www.whitehouse.gov/sites/default/files/omb/assets/memorandafy2009/m-09-25.pdf, JANITORIAL AND SANITATION SUPPLIES

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4 | P a g e size, scale, and e-commerce interfaces have become increasingly complex, and the percentage of business outside the stock program increased. With the wind-down of the wars in Iraq and

Afghanistan, decreased volume made the traditional depot system cost prohibitive. Through

Supply Transformation, GSA decided to eliminate its depot footprint and reduce operating costs by closing the Western Distribution Center on September 30, 2014, and Eastern Distribution

Center on December 31, 2014.

SUPPLY TRANSFORMATION INITIATIVE

In 2011, the Office of General Supplies and Services (GSS) began planning and implementing a

Supply Transformation (ST) initiative designed to modernize the business line's wholesale and retail programs. ST focuses the wholesale program on the concept of greater reliance on SPD for commercially readily available items. ST was based on recommendations presented in a study by

Deloitte Consulting, LLP titled “New Business Models and Business Case Analysis” (November

9, 2006).

The primary objective of Supply Transformation is to modernize the Office of General Supplies and Services (GSS) Office of Supply Operations’ (SO) wholesale and retail programs. This initiative aligns with the Supply Operations Modernization Decision Memorandum that was approved by the FAS Commissioner on April 9, 2007. The bundled BPAs will meet one key objective: move commercially available products toward a direct vendor delivery model. By doing this, GSS will be able to provide its worldwide customer base with faster product delivery, more competitive pricing and, stellar service under this enhanced business model. The ST effort is an attempt to concurrently carry out the OMB mandate to maximize use of FSSI while building a new, more sustainable business model.

JANSAN REQUISITION CHANNEL

A RFQ will be issued for the requisition-based ordering channel for NSNs and part numbers ordered through GSA Global Supply (GS) via FedStrip and MilStrip.

It will establish several single-award BPAs with GSA Multiple Award Schedule (MAS) 51V, 73 and 75 contract holders. The FSSI JanSan Requisition Channel will support the goals of ST by: capturing the benefits of economies of scale; fostering markets for sustainable technologies and environmentally sustainable products; and, simplifying data collection.

The JanSan solution was developed to ensure small businesses’ ability to participate. Market research revealed that small janitorial and sanitation supply providers often specialize within a sub-segment as opposed to offering the full range of JanSan supplies. With this in mind, the

JanSan Requisition Channel has been divided into seven (7) categories: Cleaning Compounds and Related Dispensers; Non-Motorized Cleaning Equipment and Trash Receptacles; Brooms, Brushes, Mops and Sponges; Trash Bags; Paper Products and Related Dispensers; Motorized

Floor Cleaning Equipment and Accessories; and Personal Hygiene and Related Dispensers. The categories were developed with the dual objectives of (1) being broad enough to allow for adequate sales volume to drive pricing discounts, and (2) being narrow enough to ensure small businesses are not excluded.

A separate RFQ has been issued for the Purchasing Channel, which applies to orders placed by the customer via the following methods:

purchase cards, e-Buy, GSA Advantage, DoD E-mall, etc.

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A Global Supply Market Basket has been identified in each of the seven JanSan categories. Two single BPAs will be awarded in each Category, one for the east coast and one for the west coast.

In five of the categories, the BPAs will be reserved for small businesses.

Two categories will be unrestricted. The initial market basket is comprised of 546 of the most purchased, high-spend items and is spread amongst the JanSan product categories. Contractors submitting quotes must have all of the items in the applicable BPA approved for sale on their respective GSA Schedule contract prior to submission of their quotes.

Category One: Cleaning Compounds and Related Dispensers

Category One includes cleaning compounds used to sanitize and disinfect bathrooms, kitchens, office surfaces and hospitals. The category includes but is not limited to disinfectants, degreasers, glass cleaner, laundry detergents, dish detergents, bleach, aerosol fresheners, surface protection supplies and the related dispensers for these items. The Government intends to reserve this category for small business.

Category Two: Non-Motorized Cleaning Equipment and Trash Receptacles

Category Two includes non-motorized items used to perform the physical cleaning of spaces as well as trash receptacles. Examples of products represented in the Non-Motorized Cleaning

Equipment and Trash Receptacles category include, but are not limited to: dustpans, mats, laundry nets and pins, irons, ironing boards, carts, indoor and outdoor trash receptacles. The

Government intends to reserve this category for small business.

Category Three: Brooms, Brushes, Mops and Sponges

Category Three includes non-motorized items used to perform physical cleaning of spaces such as brooms, brushes, dusting cloths, mops, mop buckets, scouring pads, sponges and wipes. This category will be unrestricted.

Category Four: Trash Bags

Category Four includes paper and plastic trash bags and liners. The Government intends to

Category Five: Paper Products and Related Dispensers

Category Five includes disposable paper items used for personal sanitation and cleaning up minor messes. This category includes but is not limited to toilet paper, paper towels, facial tissue and related dispensers. This category will be unrestricted.

Category Six: Motorized Floor Cleaning Equipment and Accessories

Category Six includes motorized equipment used to clean floor surfaces, both carpeted and non-carpeted and includes but is not limited to upright vacuum cleaners, wet/dry vacuum cleaners, carpet cleaners, floor buffers, floor polishers and floor burnishers. The Government intends to

The Team reserves the right to establish more or fewer awards depending on the quotation evaluation results and a determination of the number of BPAs in the best interest of the Government.

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Category Seven: Personal Hygiene and Related Dispensers

Category Seven includes, but is not limited to, soaps, toothpaste and toothbrushes, shaving cream and razors, hand sanitizer, and related dispensers. The Government intends to reserve this category for small business.

3. FAR BUNDLING GUIDANCE

“Bundling,” as defined in the FAR, is the term used to describe the act of combining two or more existing requirements into a single solicitation when one of the requirements was or could have been performed by a small business; the solicitation will be unsuitable for award to a small business; and, the work will be performed in the United States.

To meet the definition of a bundled acquisition, at least one of the requirements being consolidated must have been previously performed by a small business or could have been performed by a small business.

When bundling will result in a contract or order with an estimated value of $6.0 million or more, it is defined as substantial bundling.

The aggregate estimated dollar value for this acquisition is

$360 million for five years, including one (1) base year and four (4) option years. The acquisition strategy team is contemplating issuing a solicitation that would meet the definition of substantial bundling. Therefore, the steps below were followed to determine if the acquisition strategy team could execute its strategy of a bundled requirement.

1. Acquisition Planning

2. Market Research

3. Benefit Analysis Determination

This bundling analysis is only applicable to the Requisition Channel of JanSan. The purchasing channel of JanSan was also a consolidated acquisition, but was not bundled. As such, a separate consolidation analysis was prepared.

REGULATORY REQUIREMENTS

In preparing the bundling analysis the contracting officers used the guidelines outlined in the

FAR. The following are the applicable regulations: FAR 7.104, 7.107, 10.001, and, 19.202-1(e).

The procedural requirements for bundling are set forth in FAR Part 7. For contracts valued over

$6 million dollars, dollar threshold for GSA, NASA and, DOE, the acquisition plan/strategy must be prepared in conjunction with a small business specialist. In fact, for substantial bundling, the small business specialist shall assist in creating alternative strategies to reduce the impact of bundling.

Additional requirements are set forth in FAR 7.107. The agency must perform market research to determine if the Government achieves substantial benefits by bundling. These benefits may include: cost savings or price reductions, improved efficiency, reduction in acquisition cycle times, etc. The benefits must be quantified and demonstrate savings of at least 5% for contracts

FAR 2.101

FAR 7.107(e)

FAR 7.104 (d)(1)-(2)

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7 | P a g e valued over $94 million. While administrative or personnel cost savings are permissible, they must constitute at least 10% in savings to be the sole reason for bundling.

In addition, once the contracting team decides to bundle, it must notify the incumbent small businesses that may be affected by bundling the procurement. This notification is required thirty

(30) days before issuing the solicitation. The notification must include information on how the small business may contact their respective Small Business Administration representative.

The proposed RFQ must also be submitted to the local SBA procurement center representative and the Office of Small and Disadvantaged Business Utilization thirty (30) days before it is issued.

The package submitted to both offices shall include a copy of the bundling analysis, the acquisition plan/strategy, and, the documentation required for substantial bundling (see below).

GSA Global Supply’s prior janitorial and sanitation contracts (One-time buys, IDIQs, BPAs, and

Standing Quotes):

Have a total value in excess of $72 million annually

Include contracts performed by small businesses

Include contracts performed by large businesses

Include contracts performed by AbilityOne vendors

The total expected value of the current requirement is $360 million over the next five years.

Based on this value, the contracting officer must prove a substantial benefit of at least 5% of the total value of the contract. Since this procurement meets the definition of substantial bundling, the contracting officer must also: (1) outline the specific benefits; (2) assess the specific impediments to small business participation; (3) outline an acquisition strategy to maximize small business participation either as prime vendors or subcontractors; (4) demonstrate that the benefits justify the use of bundling; and (5) identify alternatives to bundling and the rationale for not using the alternatives.

4. ANALYSIS

METHODOLOGY

The contracting officers conducted this analysis using various methods which are generally accepted and mandatory under the Federal Acquisition Regulations. The methods used included:

Developed a list of NSNs within the JanSan universe. The list includes NSNs in the following FSC classes: 3510, 4510, 6508, 6810, 6840, 6850, 7220, 7240, 7290, 7910, 7920, 7930, 8105, 8305, 8510, 8520, 8530, and 8540. Fire items, Central Asian Sourcing items, and restrictive source items were removed from the list by the Technical Services

Branch.

Reviewed the current BPA holders of janitorial and sanitation NSNs. The bundling will not only impact current BPA holders but could potentially affect other MAS contract

FAR 7.107

FAR 10.001 (c)

FAR 19.202-1(e)(1)-(4)

FAR 7.107(e)

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8 | P a g e holders. MAS contract holders not awarded a JanSan BPA could experience a decrease in sales.

Developed various acquisition strategies which included bundling.

Identified potential benefits of bundling and projected estimates of the benefits of a bundled acquisition.

Used key data which was derived from a variety of sources, including, databases on current contracts, the Deloitte and Mercator Group studies, and results of other FSSI projects.

Issued a Request for Information (RFI) targeting small business schedule contract holders in the applicable FSC classes to determine the number of businesses who manufacture janitorial and sanitation products and supplies and are capable of meeting the demands of proposed BPAs.

ESTIMATION METHODS USED

The team used analogous estimating by comparing current discounts between MAS prices and

BPA prices with the potential discounts under the bundled contracts. The data used for the project was gathered by the Technical Services Branch in Region 7 and Business Operations

Support of GSA in Central Office.

Business Operations Support of GSA conducted a search in the following databases: FSS19, derived from URHF, CRHF and POPI and CSC which is derived from DAYTRAN, HISTDAYTRAN, and ASIADAYTRAN. The Technical Services Branch in Region 7 reviewed the data supplied by Business Operations Support and scrubbed it for fire items which have been transferred to DLA, Central Asia Sourcing products, and restrictive source products.

JANITORIAL AND SANITATION SUPPLIES ACQUISITION HISTORY

Currently, there are an estimated 1,813 active janitorial and sanitation items supported by

GSA’s Stock Number [NSN] Program in Stock Classes 3510, 4510, 6508, 6810, 6840, 6850, 7220, 7240, 7290, 7910, 7920, 7930, 8105, 8305, 8510, 8520, 8530, and 8540. Examples of

JanSan supplies are laundry detergents, dish detergents, bleach, hand soap, brooms, mops, dustpans, mop buckets, toilet paper, paper towels, vacuum cleaners, wet/dry vacuum cleaners, carpet cleaners, floor buffers, floor polishers and floor burnishers. Each janitorial and sanitation supply item is classified with a unique National Stock Number (NSN) that is managed by GSA.

Acquisition Divisions within the Northeast Supply Operations Center and Southwest Supply

Operations Center maintain contact coverage of the janitorial and sanitation supply NSNs.

Contract vehicles range from one-time buys, Indefinite Delivery Indefinite Quantity contracts

(IDIQ), Blanket Purchase Agreements (BPA) against Federal Supply Schedules (FSS), to open market standing price quotes not to exceed $150,000.

In Fiscal Year 2014, there were 459 Supply Operations janitorial and sanitation supply contracts with sales posted against them; seventy-six percent (76%) of them were with small business firms. These 459 contracts were with 215 vendors; 352 of the contracts were with small business vendors.

Restrictive source items are products requiring First Article Testing or other restrictive specifications..

Of the 1813 NSNs for Janitorial and Sanitation products, AbilityOne provides 768 for the government. These NSNs will continue to be managed by AbilityOne.

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FY13 total FY14 total

Total Number of Vendors with Sales

289 21514

Total Number of Large vendors with Sales 45 37 Total Number of Small vendors with Sales 244 185 FY13 total FY14 total Total Number of Contracts with Sales 601 459 Total Number of Large Business Contracts with Sales 114 107 Total Number of Small Business Contracts with Sales 487 352

With respect to annual sales, in 2013, Global Supply received requisitions for over $78M in janitorial and sanitation supplies. In 2014, total sales declined to $72M. These figures represent a total of both contract cost price and small purchase cost price. The chart below shows breakdown of sales for contract cost price only.

Year AbilityOne

Small Large

FY 2013 Sales $52,548,644 $18,764,737 $58,987,864

FY 2014 Sales $48,399,634 $16,977,903 $53,901,453

Further spend analysis exhibited the following characteristics:

The Government issued 84% of its requisitions to large businesses

Small business accounted for 23% of government spend through requisitions

Spend is consolidated: 50% of government spend is through the top 5 vendors

Currently, vendors are engaged in intense price competition

Janitorial and sanitation supplies are often purchased under established service contracts

An analysis of spend patterns shows a significant savings opportunity based on characteristics described above

MARKET RESEARCH

Market research was conducted to determine the number of small business schedule contract holders who manufacture janitorial and sanitation products and are capable of meeting the requirements of the direct delivery model. A Request for Information/Sources Sought (RFI) was issued on e-Buy against the following Special Item Numbers (SINs): 75-85, 105-001, 105-002, 375-100, 375-103, 375-107, 375-117, 375-125, 375-129, 375-135, 375-139, 375-200, 375-321, 375-323, 375-341, 375-351, 375-352, 375-353, 375-355, 375-356, 375-361, 375-362, 375-363, 375-364, 375-368, 375-371, 375-372, 375-99, 384-2, 384-4, 384-9, 384-99, 476-12, 476-13, 507-

2, 507-4, 507-8, 507-99, 658-1, 681-1, 852-1, 852-2, and 852-99. The RFI was posted on GSA

Advantage and FedBizOpps on October 24, 2013 and left open until December 20, 2013.

14 Total number large and total number small may not add up to total number of contracts due to duplication of vendors showing in both groups.

15 AbilityOne sales are also embedded in the figures for small and large, therefore, sum of all three columns will not add up to total sales for the fiscal year.

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The RFI requested the Contractor complete a spreadsheet containing the potential list of NSNs.

There were sections in the spreadsheet enabling the Contractor to indicate whether they were manufacturers or dealers of each NSN. In addition, there were sections asking them to state the business size and socioeconomic status of the manufacturer of the product.

The RFI requested a capabilities statement, demonstrating the Contractor’s ability to meet eleven

(11) business requirements:

1. Full commercial item catalog service;

2. Wide distribution/shipping capability;

3. Utilization of Small Businesses in a meaningful way, to be verified via subcontracting requirements;

4. Continental United States (CONUS) customer orders

a. Ability to pack, package, mark, and label for CONUS deliveries using FED-STD-

123;

b. Delivery required to end customer within four (4) calendar days

5. Ultimately bound for delivery Outside the Continental United States (OCONUS), customer orders with delivery to a stateside consolidation point

a. Ability to pick, pack, and mark for DTS Container Consolidation Point (CCP) deliveries following MIL-STD-129;

b. Deliver to the CCP within seven (7) calendar days after receipt of purchase order

6. Compliance with the Trade Agreement;

7. Compliance with AbilityOne Program;

8. Approved AbilityOne reseller;

9. Capability of meeting the delivery, security and points-of-service requirements;

10. Ability to comply with Electronic Data Interchange (EDI); and

11. Have a zero dollar minimum order threshold.

Twenty-one contractors responded to the RFI. Of the responses, ten contractors were deemed responsive; MAS contractors whose submissions included a complete capabilities statement and spreadsheet.

All of the responsive contractors were small business distributors of the NSNs listed in the spreadsheet. One of the contractors who submitted only a spreadsheet was a small business manufacturer, who indicated they could manufacture a small percentage of the items listed on the spreadsheet. Based on the RFI responses, it is clear that there are no small business manufacturers capable of meeting the requirements of the direct vendor delivery model.

As a result of this market research, an Individual Waiver to the Non-Manufacturer Rule was submitted to SBA and granted on September 2, 2015

. This waiver will allow small business distributors an opportunity to participate on small business set-asides under the JanSan

Requisition Channel. If the waiver was not obtained, per the Non Manufacturer Rule, small businesses who do not manufacture janitorial and sanitation items would have been precluded from participating on set-aside portions under this acquisition.

One contractor was not a MAS contract holder. One contractor listed NIB as a manufacturer for all of the items in the market baskets. Ten contractors failed to submit the capabilities statements and/or spreadsheet

Initial request for the Requisition Channel was approved 06/05/2014; with the change in categories and acquisition approach a new waiver was requested.

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A second RFI was issued on September 25, 2014 and closed on October 8, 2014. This RFI was issued to determine whether an expanded market basket would inhibit small business participation. Based on the responses received to the RFI, the JanSan team is confident that small business distributors are capable of meeting the requirements of the expanded market basket categories; however, there are reservations on the breadth and depth of the non-market basket offering.

5. ANTICIPATED BENEFITS

PRICING DISCOUNTS:

By using FSSI and leveraging greater buying power, the prices of JanSan products will be reduced by using economies of scale. Additionally, contractors will be motivated to offer more competitive pricing, i.e. lower unit costs, because of the larger volume and a five (5) year BPA period of performance. Whether FSSI solutions are awarded as BPAs against Federal Supply

Schedules or as stand-alone Indefinite Delivery, Indefinite Quantity (IDIQ) contracts, these bundled solutions will push prices even lower, because it will aggregate customer requirements in large volumes, therefore, driving deeper discounts.

According to a DAU training module, “Strategic Sourcing Overview,” cost per unit savings may come in the form of pricing improvements through:

Lower unit price

Volume rebates

Payment term discounts

FSSI-JanSan Requisition Channel will be mutually beneficial to the janitorial and sanitation item manufacturer and supplier community. “Strategic sourcing benefits both buyers and suppliers. It benefits buyers because they can negotiate lower unit prices for high-volume purchases, thus reducing cost of goods sold and maintaining the ability to price their products competitively. It benefits suppliers because they are able to sell a significant portion of their output, which makes planning easier and gives management long-term cash flow visibility.”

“[M]anufacturers can benefit from strategic sourcing. One benefit is that by having a stable relationship with key suppliers, the business can ensure that they have a steady supply of both bottleneck items and other necessary goods. Additionally, by negotiating with the supplier and finalizing a purchasing arrangement, the company can secure a lower price on those items because the vendor is assured of a buyer for their products.”

Historically vendors have offered lower prices for larger purchases. Many of the vendors on schedule in the JanSan arena will post their volume discounts on GSA Advantage. If the information is not available on GSA Advantage, the customer must contact the vendor to ascertain if additional discounts are available.

Importance of Strategic Sourcing Skills by Chirantan Basu, Demand Media posted on http://smallbusiness.chron.com

STRATEGIC SOURCING, http://www.epiqtech.com http://smallbusiness.chron.com/ http://www.epiqtech.com/

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To gain insight into the additional discounts BPAs offer from MAS contracts, the team examined contracts in the Southwest Supply Acquisition Center (a majority of the janitorial and sanitation

NSNs are managed in this office); specifically the average cost savings from awarding a Blanket

Purchase Agreement to a MAS contract holder. The review consisted of 77 NSNs previously covered by BPAs in the office. These specific NSNs were selected due to the high volume of annual spend. The discounts offered from the MAS contracts range from 0% to as much 59.5% off their MAS pricing. Based on this limited sample, there was an average discount of 21% from their MAS contract.

NSN Contract # Supplier Discount to

MAS

7240-00-151-6630 GS-07F-BPADL ALLE DESIGNS 55%

7240-00-151-6629 GS-07F-BPADL ALLE DESIGNS 55%

7240-00-139-7521 GS-07F-BPADL ALLE DESIGNS 55%

7290-01-369-7966 GS-07F-BFLBM BBMC, INC. 28%

7930-00-633-9849 GS-07F-CAP10 CAPITAL SOAP PRODUCTS, LLC 59.50%

7930-00-269-1272 GS-07F-CABPA CAPITAL SOAP PRODUCTS, LLC 0%

7930-00-929-1220 GS-07F-BCAPT CAPITAL SOAP PRODUCTS, LLC 0%

7930-00-721-8592 GS-07F-BCAPT CAPITAL SOAP PRODUCTS, LLC 0%

7930-01-294-1115 GS-07F-BCAPT CAPITAL SOAP PRODUCTS, LLC 0%

7930-01-312-6389 GS-07F-BCAPT CAPITAL SOAP PRODUCTS, LLC 0%

7930-01-294-1116 GS-07F-BCAPT CAPITAL SOAP PRODUCTS, LLC 0%

8520-01-422-2216 GS-07F-BCCPI CCP INDUSTRIES, INC. 12%

7930-01-356-9206 GS-07F-BCPSI COMPLETE PACKAGING & SHIPPING

SU

3%

7930-01-490-7282 GS-07F-AA236 COMPLETE PACKAGING & SHIPPING

SU

37.60%

7930-01-380-8495 GS-07F-AA236 COMPLETE PACKAGING & SHIPPING

SU

16.80%

7930-01-364-7375 GS-07F-ELSC1 ELSCO INTERNATIONAL INC 0%

7930-01-363-2819 GS-07F-ELSC1 ELSCO INTERNATIONAL INC 0%

7930-01-363-2818 GS-07F-ELSC1 ELSCO INTERNATIONAL INC 0%

7930-01-364-7376 GS-07F-ELSC1 ELSCO INTERNATIONAL INC 0%

7930-01-381-3398 GS-07F-ELSC1 ELSCO INTERNATIONAL INC 0%

7930-01-346-5280 GS-07F-AA142 G.R.L. (GLOBAL RESOURCE LINK), L 0%

7930-01-471-2724 GS-07F-AA142 G.R.L. (GLOBAL RESOURCE LINK), L 0%

7930-01-418-1513 GS-07F-AA142 G.R.L. (GLOBAL RESOURCE LINK), L 0%

7920-00-893-5903 GS-07F-BGEER GEERPRES, INC 0%

7920-00-682-6861 GS-07F-BGEER GEERPRES, INC 0%

7920-00-781-5247 GS-07F-BGEER GEERPRES, INC 0%

7920-00-682-6861 GS-07F-BGEER GEERPRES, INC 0%

7920-00-781-5247 GS-07F-BGEER GEERPRES, INC 0%

7920-00-550-9911 GS-07F-BGEER GEERPRES, INC 0%

7920-00-682-6862 GS-07F-BGEER GEERPRES, INC 0%

7920-00-634-5054 GS-07F-BGEER GEERPRES, INC 0%

7930-01-183-8585 GS-07F-BPAHI HILLYARD INDUSTRIES, INC. 0%

7930-00-141-5888 GS-07F-BPAHI HILLYARD INDUSTRIES, INC. 0%

JANITORIAL AND SANITATION SUPPLIES

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7930-00-205-2870 GS-07F-BPAHI HILLYARD INDUSTRIES, INC. 0%

NSN Contract # Supplier Discount to

MAS

7930-00-045-6912 GS-07F-BPAHI HILLYARD INDUSTRIES, INC. 0%

7930-00-045-6923 GS-07F-BPAHI HILLYARD INDUSTRIES, INC. 0%

7930-01-184-3905 GS-07F-BPAHI HILLYARD INDUSTRIES, INC. 0%

7910-00-550-9111 GS-07F-BIAJW ISRAEL ANDLER & SONS, INC. 9%

8520-00-225-8563 GS-07F-BMKRP MAKOOR PRODUCTS MFG COMPANY,

INC

11.10%

8520-00-082-2146 GS-07F-BMKRP MAKOOR PRODUCTS MFG COMPANY,

INC

11.10%

8520-00-965-2109 GS-07F-BMKRP MAKOOR PRODUCTS MFG COMPANY,

INC

11.10%

8520-00-782-3509 GS-07F-BMKRP MAKOOR PRODUCTS MFG COMPANY,

INC

11.10%

8520-00-782-2183 GS-07F-BMKRP MAKOOR PRODUCTS MFG COMPANY,

INC

1.13%

7910-00-680-8297 GS-07F-BMFJW MERCURY FLOOR MACHINES, INC. 29.60%

7910-00-680-8296 GS-07F-BMFJW MERCURY FLOOR MACHINES, INC. 25.30%

7910-01-364-2170 GS-07F-BMFJW MERCURY FLOOR MACHINES, INC. 29.40%

7910-00-628-9585 GS-07F-BMFJW MERCURY FLOOR MACHINES, INC. 36.70%

7920-00-205-1711 GS-07F-BRAGS MILL WIPING RAGS, INC. 6.60%

7920-00-205-3570 GS-07F-BPMWR MILL WIPING RAGS, INC. 0%

7920-00-148-9666 GS-07F-BPMWR MILL WIPING RAGS, INC. 0%

7910-01-423-9525 GS-07F-AA085 MMG TECHNOLOGY GROUP, INC. 1%

6810-00-598-7316 GS-07F-BMOIN MORNING STAR INDUSTRIES INC. 12.50%

7910-00-985-6797 GS-07F-BPHJW PULLMAN-HOLT CORPORATION 0%

7910-01-084-8854 GS-07F-BPHJW PULLMAN-HOLT CORPORATION 19.90%

6840-00-242-4770 GS-07F-BRTKM RITE-KEM, INC. 10%

6840-00-255-0472 GS-07F-BRTKM RITE-KEM, INC. 0%

6840-00-246-6438 GS-07F-BRTKK RITE-KEM, INC. 29.44%

7930-01-045-3517 GS-07F-BRK01 RITE-KEM, INC. 37%

7930-00-459-2247 GS-07F-BPKEM RITE-KEM, INC. 0%

6850-00-926-2275 GS-07F-BPARI RITE-KEM, INC. 20%

6850-00-281-1985 GS-07F-BPARI RITE-KEM, INC. 0%

8520-01-303-4039 GS-07F-BPRIV RIVERSIDE MANUFACTURING, LLC 0%

8520-01-303-4038 GS-07F-BPRIV RIVERSIDE MANUFACTURING, LLC 0%

8520-01-371-0048 GS-07F-BPRIV RIVERSIDE MANUFACTURING, LLC 0%

8520-00-334-0023 GS-07F-BPRIV RIVERSIDE MANUFACTURING, LLC 0%

7240-00-160-0440 GS-07F-BSKP1 S & K PRODUCTS COMPANY 5%

7240-00-161-1143 GS-07F-BSKP1 S & K PRODUCTS COMPANY 8%

7240-00-161-1147 GS-07F-BSKP1 S & K PRODUCTS COMPANY 8%

7910-00-720-5536 GS-07F-BSAYC S&Y TRADING CORP. OF NEW JERSEY 19.30%

7910-00-550-9123 GS-07F-BSAYC S&Y TRADING CORP. OF NEW JERSEY 38.10%

7910-00-550-9125 GS-07F-BSAYC S&Y TRADING CORP. OF NEW JERSEY 1.40%

8520-01-370-4284 GS-07F-BPASM SUNSHINE MAKERS, INC. 0%

8520-01-370-2162 GS-07F-BPASM SUNSHINE MAKERS, INC. 0%

7920-00-291-8305 GS-07F-AA104 VERNAS VENTURES LLC 0%

7920-00-292-4375 GS-07F-AA104 VERNAS VENTURES LLC 0%

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NSN Contract # Supplier Discount to

MAS

7920-00-292-4371 GS-07F-AA104 VERNAS VENTURES LLC 0%

7930-01-504-8866 GS-07F-BPWEC WECSYS LLC 44.70%

7930-01-399-2720 GS-07F-BWSS1 WERTH SANITARY SUPPLY CO INC 0%

7930-01-412-0535 GS-07F-BWERZ WERTH SANITARY SUPPLY CO INC 2.70%

Average Discount 21%

JanSan can anticipate similar savings on MAS pricing by bundling these contracts. Because the price reductions due to volume discounts would yield an estimated savings equal to more than 5 percent of the new contract’s value, it meets the “measurably substantial benefits” test for bundling. These savings will enable agencies to successfully report on measurably substantial benefits equivalent as mandated by section 3(e)(2) of U.S. Senate Bill 1304 “To promote strategic sourcing principles within the Federal Government.”

PROVEN FSSI SAVINGS:

The first test case for the strategic sourcing model was the Office Supplies (OS2) Solution awarded in June 2010. In audit GAO-12-178, it was determined that OS2 “resulted in direct savings of $88.7 million on spending of $607.9 million through April 2013.”

In addition, the report found that non-strategic sourcing vendors lowered their prices by an average of 10% to compete with the BPAs. The report outlined some key successes which are not quantifiable but notable as possible benefits of FSSI. They include: a decrease in price variability; a reduction in contract duplication; an increase in productivity of acquisition professionals by giving them time to work on mission critical items; and, an increase in vendor accountability in meeting its performance goals. In fact, since its inception, Office Supplies FSSI increased small business participation from 67% to 76% while achieving an average saving rate of 18%. This FSSI has saved the federal government over $350 million in direct and indirect costs. The JanSan

Purchasing Channel, while still in its first year of operation, has an average savings rate over

25%.

Other current FSSI solutions in place are: Domestic Delivery Services Generation 2 (DDS2), Print Management (Print), Wireless, and Telecommunications Expense Management Services

(TEMS). The Government tracks the annual spend and the resulting savings for these solutions.

For TEMS, as of October 2012, the program had saved the Government $3.8 million, which equates to an 18% savings. For Domestic Delivery Services, as of May 2013, the Government had saved 27.9% using FSSI. As of Q3 FY 2013, the Print Management FSSI program had saved the Government 15 percent.

Based on this information, there is a consistent pattern of significant discounts from awarding

Blanket Purchase Agreements from Multiple Award Schedules. Therefore, the JanSan FSSI can expect to achieve similar discounts by bundling.

Koses, J. (June 13, 2013). Effects of Strategic Sourcing Initiatives on Small Business. Retrieved from http://www.gsa.gov/portal/content/173467. The savings was calculated by using the difference between FSSI pricing and nonstrategic sourcing pricing.

https://strategicsourcing.gov/ http://www.gsa.gov/portal/content/173467

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IMPROVED DELIVERY TIMES:

A sampling of the delivery times for the current janitorial and sanitation supply contracts in the

Southwest Supply Center demonstrated an average delivery time of 23 days. The acquisition team reviewed forty-one contracts, which cover 82 NSNs. The delivery times ranged from 5 days to 45 days. The mode was 30 days.

One of the benefits of the proposed bundling is improved delivery times. The proposed delivery time for the FSSI BPAs is 7 calendar days CONUS. Shorter delivery times will significantly increase customer satisfaction.

Contract Number Supplier Delivery Time

GS-07F-BPADL ALLE DESIGNS 20

GS-07F-BFLBM BBMC, INC. 28

GS-07F-AA132 BBMC, INC. 30

GS-07F-AA214 BEHRENS MANUFACTURING, LLC 30

GS-07F-QCAPS CAPITAL SOAP PRODUCTS, LLC 30

GS-07F-CAP10 CAPITAL SOAP PRODUCTS, LLC 10

GS-07F-CABPA CAPITAL SOAP PRODUCTS, LLC 10

GS-07F-BCAPT CAPITAL SOAP PRODUCTS, LLC 10

GS-07F-BCCPI CCP INDUSTRIES, INC. 5

GS-07F-BCPSI COMPLETE PACKAGING & SHIPPING SU 30

GS-07F-AA236 COMPLETE PACKAGING & SHIPPING SU 30

GS-07F-V9310 COTSWOLD INDUSTRIES, INC. 30

GS-07F-ELSC1 ELSCO INTERNATIONAL INC 7

GS-07F-W0005 FABREX UNLIMITED, INC. 30

GS-07F-AA142 G.R.L. (GLOBAL RESOURCE LINK), L 7

GS-07F-BGEER GEERPRES, INC 30

GS-07F-BPAHI HILLYARD INDUSTRIES, INC. 45

GS-07F-QINTK INTEK MARINE TECHNOLOGY, LLC 7

GS-07F-BIAJW ISRAEL ANDLER & SONS, INC. 30

GS-07F-AA178 KEL-SAN, INC. 21

GS-07F-V9288 LAST GROUP ENTERPRISES INC 30

GS-07F-BMKRP MAKOOR PRODUCTS MFG COMPANY, INC 10

GS-07F-BMFJW MERCURY FLOOR MACHINES, INC. 15

GS-07F-BRAGS MILL WIPING RAGS, INC. 30

GS-07F-BPMWR MILL WIPING RAGS, INC. 30

GS-07F-AA085 MMG TECHNOLOGY GROUP, INC. 30

GS-07F-BMOIN MORNING STAR INDUSTRIES INC. 10

GS-07F-BPHJW PULLMAN-HOLT CORPORATION 30

GS-07F-BRTKM RITE-KEM, INC. 30

GS-07F-BRTKK RITE-KEM, INC. 30

GS-07F-BRK01 RITE-KEM, INC. 30

GS-07F-BPKEM RITE-KEM, INC. 30

GS-07F-BPARI RITE-KEM, INC. 30

GS-07F-BPRIV RIVERSIDE MANUFACTURING, LLC 30

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Contract Number Supplier Delivery Time

GS-07F-BSKP1 S & K PRODUCTS COMPANY 20

GS-07F-BSAYC S&Y TRADING CORP. OF NEW JERSEY 5

GS-07F-BPASM SUNSHINE MAKERS, INC. 15

GS-07F-AA104 VERNAS VENTURES LLC 7

GS-07F-BPWEC WECSYS LLC 45

GS-07F-BWSS1 WERTH SANITARY SUPPLY CO INC 30

GS-07F-BWERZ WERTH SANITARY SUPPLY CO INC 15

AVERAGE DELIVERY TIME 23

While improved delivery times is not quantifiable and does not count towards the 5% required in order to bundle, shorter delivery times is an anticipated benefit of this bundled acquisition.

PERSONNEL COST SAVINGS:

In addition to savings from volume discounts, GSA has realized a reduction in personnel costs.

There are currently 1813 NSNs in the JanSan universe. The inventory levels at the depots were managed by inventory manager staff at the acquisition centers in Fort Worth, TX and New York, NY. The inventory managers placed orders with the vendors for the items delivered to the depots. In addition, they forecasted demand and assisted contracting staff on contracting needs for the NSNs they managed. With Supply Transformation, the vendor will be responsible for having their own internal supply chain department to manage these items. Moving to a direct delivery model has eliminated the need for Inventory Managers to manage these NSNs.

Anticipating a reduction in staff due to supply transformation, GSA offered retirement packages to staff in Supply Operations (excluding 1102 staff), and at the two distribution centers in

Burlington, NJ and French Camp, CA. Therefore, this data will include the pre-retirement staff.

Prior to the retirement of the Inventory Managers, each person managed 200 NSNs.

Prior to the first and second rounds of the retirement package offerings, there were 9 inventory managers in the Fort Worth office. For FY 2013 the inventory managers were at the following grades and steps:

No. of

Employees

Grade & Step Annual Salary

FY 2013

Fringe Benefit

Factor

Overhead

Rate

Total Cost

Per

(36.25%)

(12%)

Inventory

Manager

1 Grade 9, Step 1 $50,154 $18,181 $8,200.20 $76,535.20

2 Grade 11, Step 5 $137,542 $49,859 $22,488.12 $209,889.12

1 (retired

FY2013)

Grade 11, Step 6 $70,793 $25,662 $11,574.60 $108,029.60

1 (retired

FY2013)

Grade 11, Step 7 $72,816 $26,396 $11,905.44 $111,117.44

OMB Circular A-76, May 29, 2003, Attachment C, “Calculating Public-Private Competition Costs.” B.2.f(1). This factor represents the benefit cost factor of full time fringe benefits which include: retirement benefit cost factor (26.1%), insurance and health benefit cost factor (7%), medicare benefit cost factor (1.45%), and miscellaneous fringe benefit factor(1.3%).

Ibid B.5.

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1 (retired

FY2013)

Grade 11, Step 9 $76,861 $27,862 $12,566.76 $117,289.76

1 Grade 12, Step 4 $80,005 $29,002 $13,080.84 $122,087.84

1 Grade 12, Step 5 $82,430 $29,881 $13,371.84 $124,803.84

1(retired

FY2013)

Grade 12, Step 8 $89,702 $32,517 $14,244.48 $132,948.48

The average cost to the Government per year per inventory manager was $143,243. The average five year cost per inventory manager was $716,215. The Government saved $469,385

($2,346,925 over a 5 year period) from the four inventory managers who retired in FY 2013. In a decision paper written by Joseph Jeu, as Assistant Commissioner of General Supplies and

Services and approved on April 9, 2007 by James A. Williams, as Commissioner Federal

Acquisition Service, reduction in workforce would be done by attrition.

While bundling cannot be justified solely on the reduction in personnel cost, since it is less than 5% required for substantial bundling, is important to note that the Government will achieve these additional savings by bundling.

ADMINISTRATIVE SAVINGS:

Innovations in supply chain management have put greater reliance on vendors. GSS is presented with the opportunity to reduce supply chain costs for many products through Supply

Transformation. Federal strategic sourcing initiatives point the way to lowering these costs. In addition, new business practices are forming among GSS’ customer base, including the DoD supply chain. Through these new practices, GSS expects to: lower overhead; reduce environmental impact; continue to supply best products and services to customers and taxpayers at lowest possible cost; increase product breadth; obtain competitive pricing; and achieve best value for customers and taxpayers.

Supply Transformation will refocus the wholesale program on the concept of greater reliance on commercial vendors for readily available commercial items.

Purpose #1: Save taxpayer dollars through acquisition and operating efficiencies

Purpose #2: Increase customer responsiveness: broader product range, lower prices, and faster delivery

Supply Transformation will institute a business model that ensures Global Supply’s long term viability, solvency, and relevance in a changing market.

A Mercator Group decision paper outlined total estimated cost savings for the Strategic model at

$105,194,759 per year. They estimated that closing the depots will decrease the annual Steady-

State Operating costs from $251,881,347 to $146,686,588. A summary analysis of the savings associated with the new business model is shown in the table below.

In FY 2013, three buy-outs were offered.

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Summary Analysis of Savings Associated with New Business Model. Source: “Distribution Center Options

Analysis.” The Mercator Group. December 20, 2013, page 11.

As indicated above, the new ST operating model will result in an estimated cost savings of

$105,194,759 per year. This $105 million in annual savings is projected for the entire GSS business line upon completion of Supply Transformation. GGS estimates that the portion of the annual savings attributable to the JanSan Requisition Channel items under ST will be

$13,212,462 annually. This amount is derived from the percentage of revenue that these janitorial and sanitation commodities generate within General Supplies and Services portfolio from FY12 Supply Operations Financial Statements. Thus, the total projected savings for the bundled requirement’s base period, plus four, one-year option periods is $13,212,462 * 5 years =

$66,062,310.

To achieve the savings identified, ST is…