FSSI

Federal Strategic Sourcing Initiative (FSSI)

JanSan FSSI Inform Initiative Launched with Informational Website June 5, 2013

ISSA applauds Bornstein & Song Research for launching their website at  www.bornsteinsongFSSI.com.
This new website is an extension of Prof. Samuel Bornstein’s valiant efforts in informing the janitorial and maintenance supply industry about the Federal Strategic Sourcing Initiative (FSSI) and the substantial adverse economic impact it is expected to have on the JanSan private sector.

Background

In August, 2013, the GSA will implement the FSSI for JanSan and MRO industries, reducing the number of Blanket Purchasing Awards (BPAs) to just 15 nationwide for each industry category respectively. There will be just three contracts awarded for cleaning compounds, three for paper products, three for non-motorized cleaning equipment, and three awarded for motorized equipment. Three BPAs would also be established for motorized laundry cleaning equipment

“It is our determination that most of the JanSan industry is not aware of the pending FSSI implementation and the tremendous impact it will have on hundreds of independent distributors,” explains Samuel Bornstein, professor of accounting and taxation and partner with Bornstein & Song in Oakhurst NJ. “Our FSSI Inform Initiative is an effort to raise the awareness of the risk for businesses to lose a substantial amount of their government business as the GSA implements the FSSI for JanSan and MRO product categories.”

Bornstein & Song informed ISSA of the FSSI and its expected economic impact in April 2013. Since that time ISSA has been collaborating with Prof. Bornstein and his team in combating this federal initiative.

JanSan FSSI Inform Initiative

The information contained at www.bornsteinsongFSSI.com includes the listing of all government entities that will be mandated to purchase from the FSSI, the SINs associated with the FSSI, and steps interested parties can take to enlighten influencers about the impact FSSI will have on their business.

In addition, on June 4, 2013, Bornstein & Song issued a Bornstein & Song JanSan & MRO National Survey to the affected vendors in the upcoming FSSI for JanSan & MRO. The Survey is an informational survey to vendors of record to gather statistics to share with the U.S. House Committee on Small Business and other interested entities involved with the implementation of FSSI.

Visit www.bornsteinsongFSSI.com for complete information about the FSSI for the janitorial and maintenance supply industry.

About Bornstein & Song

Bornstein & Song, an economic consulting firm, has thoroughly researched the Federal Strategic Sourcing Initiative (FSSI) and has concluded that the program will likely have a significant negative economic impact on private businesses and the US and State economies. The Bornstein & Song Research intends to refute the contention that the GSA FSSI is a cost saver, when in fact it is an economic destroyer. Bornstein &Song, since 2000, has been driven by their faith-based belief that they have been given this unique opportunity to be a "vehicle for good" to help save the business community who are or will be hurt by the GSA FSSI program. Their studies intend to provide irrefutable data and evidence that FSSI must be reevaluated in its present form.

Samuel D. Bornstein is a 35 year Professor of Accounting & Taxation at Kean University School of Business. Jung I. Song, CPA is managing partner of Bornstein & Song CPAs & Consultants in Oakhurst, NJ.

Sam Bornstein, a professor of accounting and taxation at Kean University in Union, N.J., and a partner with the firm Bornstein and Song CPAs and Consultants, has been studying the impact of strategic sourcing on small businesses.

In October, Bornstein issued findings that showed the more than 550 Schedule 75 vendors who didn't win a spot on OS2 "suffered nearly an average 60 percent loss of GSA sales, while the 15 FSSI BPAs 'winners' reaped an average increase in GSA sales of almost 145 percent."


BSCAI Newsletter: How the Federal Strategic Sourcing Initiative (FSSI) May Affect Your Business - May 14, 2013

The U.S. General Services Administration (GSA) is working with the Office of Management and Budget (OMB) and partner agencies to implement 10 new government-wide strategic initiatives in the 2013-2014 fiscal year for a range of commonly purchased products and services, with janitorial and sanitation (JanSan) and maintenance, repair and operations (MRO) products being one of the first.

The FSSI for JanSan and MRO, along with the FSSI for building maintenance and operations (BMO), expected in the 2014 fiscal year, will impact building service contractors, according to Professor Samuel D. Bornstein, Kean University School of Business, and Jung I. Song, CPA, both of Bornstein & Song in Oakhurst, N.J.

“There is a sense of urgency as GSA is moving on a fast track to implement the FSSI for JanSan and MRO in August 2013,” Bornstein said. “GSA is holding an FSSI JanSan and MRO Pre-Solicitation Industry Conference on May 15, which will precede the Request for Quotations expected in June with implementation in August.”

Strategic Sourcing in the Public Sector

Strategic sourcing is a procurement process that continuously re-evaluates the purchasing activities of a company in order to make business decisions about acquiring supplies and services more efficiently.

Bornstein said that strategic sourcing has mostly been used in the private sector to derive savings when purchasing goods and services from vendors. In this program, the private sector leveraged buying by seeking the lowest price through volume discounts and other procedures that saved them money, at the risk of shrinking their base of vendors with whom they previously conducted business.

Bornstein, who, along with Song, has been researching small business issues since 2000, said: “Strategic sourcing made a few ‘winners,’ but created substantially more ‘losers.’ The winners got the business, and the losers lost the business and suffered the consequences of lost revenues that they previously relied on to pay their bills and employee salaries.

“The problem with strategic sourcing when applied to the public sector is that the government cannot share the same indifference to the plight of the people who lost business because a business that suffers financial distress and forces the loss of employee jobs will impact income tax revenues, unemployment, social safety-net costs and other costs. Most important, however, is the economic cost to the U.S. economy, especially as the economy is struggling to recover from staggering unemployment and the recession, from which many believe we have not yet recovered.”

In 2005, the federal government decided to implement the Federal Strategic Sourcing Initiative (FSSI) for government procurement, thereby trying to duplicate this policy that was saving billions in the private sector.

“Unfortunately, strategic sourcing applied to the public sector is not the same as the private sector,” Bornstein said. “The private sector does not have the same socio-economic responsibilities to small business and U.S. economic growth as the public sector.”

FSSI in Office Supplies

The FSSI vehicle was initially applied in 2010 to GSA MAS Schedule 75 Office Supplies (OS2). Bornstein and Song conducted research on this FSSI in order to determine the impact on these government contractors and vendors.

Bornstein said: “We noticed that FSSI had caused the displacement of a significant number of small businesses and the resulting loss of employee jobs. We found that the FSSI for office supplies was a self-inflicted wound that caused a significant economic cost to the U.S. economy.

“GSA was only interested in the savings derived from getting the lowest price on office supply purchases. The FSSI for Schedule 75 Office Supplies shrunk the base of small business federal contractors and vendors from 569 to only 15 who were awarded Blanket Purchase Agreements (BPA). The claimed savings were touted by GSA, but there was no attempt to consider the other side of this issue, which was the impact on small businesses and the cost-benefit analysis. Lacking these analyses, GSA and OMB had no idea of the downside to the economy — and the picture was not pretty.”

Potential Effect on BSCs

In 2011, GSA had recorded $1.6 billion in government sales related to JanSan and MRO in the GSA Schedules 51V, 56, 73, 75, and 81IB. Bornstein said that the OMB and GSA expect to reap approximately 15-20 percent in savings by leveraging lowest prices from contractors and vendors. “It can be expected initially that there will be at least $220 million in lost federal government sales for JanSan and MRO contractors and vendors,” he said.

In order to provide a better perspective on the level of involvement of BSCs in the total federal contracting environment, Bornstein stated that total annual GSA sales was only 7 percent of the annual $500-plus billion in federal government spending.

“The JanSan and MRO community, which sells through the GSA schedules, is only a fraction of the overall JanSan and MRO community selling to the federal government,” he said. “This means that a significant number of BSCs may be selling directly to federal government agencies through other contract vehicles such as 8a, HubZone, SDVOSBs, IDIQs, BPAs, etc. As the OMB intends to make FSSI mandatory for the big seven government agencies that collectively spend more than 90 percent of the annual $500-plus billion in overall federal government spending, it behooves all those who sell to the federal government to take notice of FSSI.”

Bornstein and Song will continue to conduct research to help make the FSSI counter argument, but Bornstein suggests that building service contractors be educated in federal strategic sourcing and learn how it may affect them.  Visit www.bornsteinsongFSSI.com for complete information about the FSSI for the JanSan and MRO supply industry.

For more information, please contact Professor Samuel Bornstein at bornsteinsong@aol.com.

Bornstein & Song research indicates that the FSSI program must be reevaluated due to the negative impact on these businesses and the U.S. economy.

Now, the GSA and OMB is targeting JanSan and MRO vendors as the first of 10 new FSSI programs. In fact, OMB plans to make FSSI mandatory for all federal government purchases. By making this FSSI program mandatory, this means that it will be mandated for all federal agencies to purchases products and services from only those vendors who were awarded the FSSI BPAs. In fact, this new policy was made clear by Joseph Jordan, the Administrator for the Office of Federal Procurement Policy (OFPP).

“Mandatory is what we’re moving toward,” Jordan says. “There will be winners and losers, and not all who want to sell to the government can sell to the government.”

Bornstein & Song has been researching the FSSI program from its inception as a vehicle for savings. They focused on the initial FSSI for Schedule 75 Office Supplies (OS2) which was implemented in 2010. The federal government touts the savings, but does not recognize the downside, the economic cost of job loss to the U.S. economy.

Based upon the research, and the negative impact that the FSSI has caused for a significant number of businesses and their employees who lost their jobs, it behooves us to alert all jan/san and MRO vendors of this FSSI program. It is too late for the Schedule 75 Office Supplies businesses, but it is fortunate that the FSSI program for jan/san and MRO is in its formative stages.

Long term consequences of strategic sourcing?

Sam Bornstein, a professor of accounting and taxation at Kean University in Union, N.J., and a partner with the firm Bornstein and Song CPAs and Consultants, has been studying the impact of strategic sourcing on small businesses. Bornstein said his initial study of the federal initiative is showing the savings by agencies don't present the entire picture.

"In our preliminary work, we discovered among the nine contractors that we had personally interviewed, we found 171 jobs lost to FSSI. That is shocking," Bornstein said. "Based upon our preliminary research, we discovered that all we have to prove is a net job loss of 900 jobs, this will far exceed the $16 million of GSA claimed FSSI savings in [2011]."

He added the costs go beyond just job losses at the effected companies.

"GSA seems to be convinced, and adamantly convinced, that the FSSI is working well, but are not apparently aware or concerned about the off-setting factor, that these displaced small businesses — the financial distress, the failures, the mortgage defaults and foreclosures — and by the way, I should add, these will impact not only the U.S. economic recovery and part of that is the housing market because they are all interrelated," Bornstein said.

He said the administration should have had GSA do a cost-benefit analysis to better understand the impact of FSSI.

GAO didn't address the impact of strategic sourcing on small businesses, or whether the contracts affected competition across the government. Some claim strategic sourcing doesn't save money and actually does more harm than good.

Sam Bornstein, a professor of accounting and taxation at Kean University in Union, N.J., and a partner with consulting firm Bornstein & Song, criticized GAO's findings, specifically around the FSSI program for office supplies.

"[T]he damage that this program has caused for a significant number of small businesses and the resulting jobs that have been lost, it is critical to evaluate the impact of strategic sourcing on employment along with the displacement of small businesses that will result from the restriction of competition," he said in an emailed comment. "Merely seeking out a lower price is short-sighted if there are unintended consequences which will result in job loss in an 8-plus percent unemployment environment. Strategic sourcing at this time may hurt rather than help the economic recovery."

Small business could be impacted

The impact of strategic sourcing on small businesses remains a growing concern. Some experts and vendors say the Federal Strategic Sourcing contract for office supplies are negatively affecting small businesses and costing the government more money.

Sam Bornstein, who is studying strategic sourcing at Kean University in New Jersey, said fast-tracking of strategic sourcing programs using blanket purchase agreements are of concern.

He said OMB's decision to move forward picks only a few winners and too many losers.

Bornstein said the office supplies BPA, which OMB says saved the government more than $140 million last year, is an example of things to come for 15 other product and service areas.

"By limiting contractor participation to only the 15 BPA awarded contractors, these non-winners suffered financial distress and had to layoff a significant number of their employees due to the lost federal sales," Bornstein said of the office supplies BPA. "My concern is for the unintended consequences, which will equate to the cost of economic loss due to the displacement of small businesses and the loss of jobs. I am suggesting a cost benefit analysis be performed to evaluate the economic impact on the U.S. economy and especially the small businesses and their employees, before these programs move forward."