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NNSA Contract Reform in Action: Supply Chain Management Center

December 22, 2009

As part of NNSA's commitment to being a responsible steward of tax dollars, NNSA Administrator Thomas D'Agostino (then the head of Defense Programs) created the Supply Chain Management Center (SCMC) in 2006 and selected Honeywell, operator of the Kansas City Plant, as the lead contractor for managing the initiative. 

Since Management and Operating (M&O) contractors spend approximately 80 percent of NNSA's acquisition dollars, we realized that the greatest savings could be realized by aligning the purchasing power of these seven contractors. 

Under the Supply Chain Management Center, the M&O contractors' acquisition processes are becoming more strategically focused and integrated, gaining pricing and process efficiencies through an enterprise-wide approach which includes the following major features:

  • eSourcing: an electronic sealed-bidding and reverse auctions function.  The eSourcing tools have saved NNSA an average of 9.5% per event, with reverse auctions enjoying an average 18% in cost savings per event.  To date, there have been over 1,300 eSourcing events.  Examples have included highway restoration, pagers and associated services, roofing repairs, and high pressure fire loop construction.  Specific success stories include:

    • Nevada Test Site (NTS) had a recent requirement to construct a new fire station. The Government estimate was $24 million. Using the Sealed bid eSourcing the NTS obtained the construction for $15.7 million or a savings of $8.2 million (34 percent).
    • Sandia National Laboratories used the eSourcing Reverse Auction functionality for computer support services and saved $766 thousand or 43 percent savings over a five year period.
  • Strategic Sourcing:  where the seven NNSA M&O contractors analyze their acquisition spend to identify common commodities (i.e., commercial supplies and services).  The M&O contractors then use their combined purchasing power to achieve savings by negotiating multi-site commodity contracts with vendors.  These commodity contracts are then place in the eStore, an online catalogue from which all the M&O contractors may place orders.  Examples of commodities have included commercial software, travel services, laboratory supplies, ammunition and safety glasses.

Using these tools, the SCMC saved over $25 million in its first two years of operation, accelerating to $73 million of savings in FY 2009 directly supporting the Administration’s emphasis on acquisition reform.  The vast majority of savings have to date been achieved from eSourcing.  Additional future savings are anticipated from Strategic Sourcing as the M&O contractors exercise their combined purchasing power while reducing duplicative transaction costs.  Overall, the greatest savings are expected in the early years.  The NNSA anticipates the savings will eventually level out to about $30 million per year on average.