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April 4, 2023
Small Business Contracting Under Category Management
Summary
a kind of spending known as “spend under management” or
Category management is an initiative led by the Office of
SUM; and (2) the amount of contract dollars awarded
Management and Budget (OMB) to help federal agencies
through contracts labeled as Best-in-Class (BIC).
collectively save money on the goods and services they
purchase. A key feature of the policy is the grouping of
Generally defined, SUM covers spending on contracts that
commonly purchased goods and services into 10 categories
are actively managed using CM—a designation that applies
used across the government (plus nine unique defense-
to three out of four “tiers” of possible types of contracts.
spending categories for use by the Department of Defense).
See Table 1 for the CM contract tiers. The three SUM tiers
For example, there is a government-wide purchasing
include certain agency-wide contracts (“tier 1”), certain
category for professional services and another for
multi-agency contracts (“tier 2”), and government-wide
transportation and logistics. The initiative encourages
contracts that have been deemed BIC (“tier 3”). The Federal
agencies to make more of their purchases using
Supply Schedule, for example, is a multi-agency contract
government-wide contracts, to benefit from administrative
that is considered a tier 2 contracting vehicle. The non-
cost savings, volume discounts, and contract vetting.
SUM tier (“tier 0”) includes contracts that are administered
in a decentralized way and do not align with the CM
As a policy, category management is intended to improve
framework.
efficiency for agencies when contracting with private
businesses and has done so by certain measures. There are
BIC contracts are OMB-recommended contracting vehicles
questions, however, about its impact on small businesses
that are thought to maximize the government’s leverage as
and on the diversity of the federal supplier base. Some
a customer due to various characteristics, such as
Members of Congress, executive agencies, and industry
performance, data collection, reporting, or other contract
representatives have pointed to a potential trade-off
terms. They have met specific OMB criteria required for the
between improving prices for federal buyers and ensuring a
BIC label. In some cases, BIC contracts are not only
diverse federal supplier base that includes a sufficient share
recommended, but “mandatory,” for buyers.
of small businesses.
Table 1. Category Management (CM) Contract Tiers
History of Category Management
by Spend-Under-Management (SUM) Designation
Although category management (CM) was initiated in 2014
and has been implemented across federal agencies since
SUM
2016, a preceding policy known as the Federal Strategic
Tier
Designation
Contract Type Description
Sourcing Initiative (FSSI) dates back to a procurement
policy reform effort established in 2005. Led by the General
0
Not SUM
Decentralized, non-CM-aligned
Services Administration (GSA) and the Department of the
1
SUM
Agency-wide
Treasury, FSSI pursued better prices for agencies by
encouraging spending through fewer, but larger, contracts.
2
SUM
Multi-agency
CM is broader than FSSI, but encompasses some of its
3
SUM
Best-in-Class (BIC)
practices and tools.
Source: Developed by CRS with information from GSA’s Acquisition
When CM was officially launched in 2014, it expanded on
Gateway, an online tool and information source for federal buyers.
FSSI concepts, emphasizing procurement efficiency and
Notes: This organization of contract features by SUM designation is
transparency. OMB’s Office of Federal Procurement Policy
known as the “Tiered Maturity Model.”
led this effort and published guidance for Chief Acquisition
Officers and senior procurement executives in a December
OMB has sought growth in SUM amounts and the dollars
2014 memorandum, “Transforming the Marketplace:
obligated through BIC contracts by tracking these
Simplifying Federal Procurement to Improve Performance,
measures. It has also directed agencies to reduce tier 0
Drive Innovation, and Increase Savings.” Since then, OMB
contract awards. Measuring and appraising agencies’ SUM
has updated directives related to CM but largely maintained
achievements and BIC contract usage appears to have
its features (see “Policy Outcomes and Revisions”).
increased both of these KPIs.
Policy Implementation
Critics of CM have argued that small business pathways in
To track implementation and effectiveness, OMB examines
the federal contracting market were reduced because of the
CM performance metrics or Key Performance Indicators
CM focus on BIC contracts, which tend to exclude small
(KPIs). The following two KPIs have drawn particular
businesses based on their size and complexity. Some also
attention: (1) the amount of contract dollars that fall within
claim that reducing tier 0 contract opportunities in favor of
more SUM necessarily limits small business prospects. On
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Small Business Contracting Under Category Management
the other hand, others argue that the share of award dollars
The guidance allows agencies to receive SUM recognition
contracted to small business remains substantial enough for
for contracts awarded to “certified and self-certified
the government to reach its statutorily required small
socioeconomic small businesses” (i.e., 8(a) program
business contracting goals, and that data on BIC contracts
participants and other small disadvantaged businesses,
show commendable levels of small business participation.
women-owned small businesses, service-disabled veteran-
owned small businesses, and small businesses working in
Policy Outcomes and Revisions
HUBZones). In addition, the guidance requires agencies to
Evaluations of the overall effectiveness of CM have
prioritize “socioeconomic and small business goals ... over
focused on (1) whether the government as a whole has
the achievement of BIC contract goals if achievement of
eliminated redundancies, and (2) how much it has likely
both goals is not possible.” This could lead to a reversal of
saved when purchasing the “commonly purchased” goods
contracting priorities for some agencies under CM.
and services covered by CM categories. There are some
Furthermore, OMB’s decision to “no longer measure
indications that the government has purchased more
reductions in unmanaged (Tier 0) spend” could reduce the
efficiently since implementing CM and saved money as a
pressure on agencies to work to eliminate some of their
result. In 2020, a Government Accountability Office (GAO)
most small business-accessible contracts.
study concluded that CM “saved the federal government
billions of dollars, and in some instances, enhanced
OMB’s December 2021 memorandum also creates a new
agencies’ mission capabilities.”
metric to track: the number of “entrants to the federal
marketplace.” This policy update responds to evidence that
Some contend that CM’s cost savings have come partially
although agencies generally continue to reach small
at the expense of small businesses, despite the amount of
business contracting goals in terms of the amounts they
contract award dollars flowing to small businesses. In
award to small businesses, the number of small business
particular, they assert that the increase in SUM and BIC
contractors, and specifically new firms, has declined since
contracts has harmed small businesses and eroded the
2005.
number of small businesses in the federal supplier pool.
Testimony before congressional committees and
Acting on the above issued guidance, some federal agencies
investigations by GAO have highlighted SUM and BIC
have issued memos of their own to their procurement
contracting as potentially unfavorable for small business
executives and developed strategies to comply with CM
contractors. Both small business advocates and those
while supporting contracting opportunities for small
interested in the federal supplier market have expressed
businesses. For example, the Department of Commerce and
concerns as a result.
Department of Defense memos describe plans to achieve
SUM and utilize BIC contracts without compromising
Reacting to findings that small business participation in
small businesses’ participation as contractors.
federal contracting, by some measures, has declined with
the advent of CM, OMB released revised guidance in a
R. Corinne Blackford, Analyst in Small Business and
December 2021 memorandum, “Advancing Equity in
Economic Development Policy
Federal Procurement.”
IF12374
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Small Business Contracting Under Category Management
Disclaimer
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