Presented by:Bert Hovermale

Lead Contracting Executive (LCE) BUMED / Director Acquisition Management, NAVMEDLOGCOM

&Jeremy Toton (CTR)

ReefPoint GroupSenior Acquisition and Logistics Analyst

NAVMEDLOGCOM

Navy Medicine FY11 Enterprise Spend Analysis &

Strategic Sourcing

Navy Medicine FY11 Enterprise Spend Analysis

FOR OFFICIAL USE ONLY 3

Bottom-Line Up-Front (BLUF)• NMLC has been conducting an annual spend analysis for four

(4) consecutive years.• This compilation of data is pulled from two (2) disparate

systems:• Federal Procurement Data System (FPDS)

o Data feed from Standard Procurement System (SPS)• Defense Medical Logistics Standard Support (DMLSS)

• Overall we want to see a continued movement of doing more inside DMLSS thru E-Commerce and less inside SPS (which we call direct contracting).• E-commerce = Prime Vendor Pharmacy + Prime Vendor Med Surg + ECAT

• We want more of an emphasis placed on better commodity management and less fragmentation…meaning limiting multiple contracting offices purchasing the same

BSO-18 Total Funding for Equipment/Supplies/Services Spending Trend FY09-11

Comment:E-Commerce and Sourcing Optimization are critical to Navy Medicine Success!Success = E-Commerce – 40-45% / Direct Contracting – 50-55 % / P-Card – 5%As the overall spend grew by a net of $42M from FY10 to FY11…• $119M (25% growth) came in the form of E-Commerce…Great!!!• Direct Contracting saw a 5.3% decrease

Total FY09 Spend = $2.27B

Total FY11 Spend = $2.33B

Total FY10 Spend = $2.29B

Navy Medicine Region Spend Trend FY10 -FY11FY10 FY11

NCA

NME

NMW

Total by $86M

Total by $70M

* Decrease linked to shift from Navy UIC to JTF UIC

BSO-18 Total Funded vs Contracted

* APF data source – SMART** Inclusive of DMLSS Spend

With continued focus on sourcing optimization and E-commerce this gap will close…allowing Navy Medicine to manage more of their own workload

The pace of growth for the APF is outpacing that of our investment in material and services…indicating a growth in things such as CIVPERS (in-sourcing), Travel, Training, Support Agreements, etc.

Navy Medicine Commodity Direct Contracting SpendSignificant decrease in Healthcare providers in NMW

Support Services (Medical and Non-Medical) continue to rise each year

Breakdown of Direct Contracting Support FOR Navy Medicine – All Commodities

• Continues to be a strong reliance on FLC and Army for contracting support• Want to continue to see FLC support decrease and NAVMEDLOGCOM / MEDCEN/MTF/CLINICs % of support continue to increase

Breakdown of Direct Contracting Support FOR Navy Medicine – Med vs Non-Med

NAVMEDLOGCOM on left axis…MEDCEN/MTF/Clinics, Army, FLCs on right axis

NAVFAC on left axis…All Others on right axis

Non-Medical CommoditiesNon-Medical Commodities

Medical CommoditiesMedical Commodities

Medical Commodities Direct Contracting Support FY11

Goal is to shift more of this to NAVMEDLOGCOM

All of FLC support for Med Maintenance should shift to Navy Medicine

Too Fragmented“lack of consistency = lack of control”

Non-Medical Commodities Direct Contracting Support FY11

Great examples of commodity management

Too Fragmented“lack of consistency = lack of control”

Air Force supported a $5M ADP requirement for Bethesda in FY11

Breakdown of Navy Medicine Total DMLSS Spend FY09 – FY11

Prime Vendor - Pharmacy on left axis…All Others on right axis

• E-Commerce and Sourcing Optimization initiatives are working!!!• GPC increased by $8M…most notably in NME

Total Navy Medicine De-Obligations

FY08 FY09 FY10 FY11

$De-Obs $56,079,153 $83,834,797 $107,236,310 $126,133,099

Total Direct Spend $1,208,720,780 $1,600,220,493 $1,674,994,196 $1,584,839,612% De-Obs 4.6% 5.2% 6.4% 8.0%

ActionsDe-Obs 1,720 2,927 3,672 4,494

Total Direct Actions 20,302 23,184 24,451 23,914% De-Obs 8.5% 12.6% 15.0% 18.8%

De-Obligations have increased exponentially over the last four (4) years…they represent an indicator for improved contract administration!!!

Navy Medicine Spend through Non-DOD Contracting Offices

FY08 FY09 FY10 FY11

BSO-18 Totals: $3,920,064 $3,998,170 $6,970,189 $13,351,910

Product / Service Type FY08 FY09 FY10 FY11

BIOMEDICAL RESEARCH STUDIES & TRIALS $38,930 $0 $0 $9,769,996

FACILITY OPERATIONS & MANAGEMENT SUPPORT $3,666,526 $3,618,913 $5,042,006 $2,939,177

MANAGEMENT & TECHNICAL SUPPORT SERVICES $49,195 $229,821 $630,159 $642,736

TELECOMM SERVICES AND COMPONENTS $165,414 $149,436 $1,298,024 $0

• This data represents real risk to Navy Medicine!

• There are very specific approvals and processes that must be documented in order to utilize Non-DOD contracting Offices

• Contact Navy Medicine’s POC at FLC Norfolk Det. Philadelphia (Ms Leanne Hanger (leanne.hanger@navy.mil) to develop a transition plan for these type requirements

We are trending in the wrong direction!

Take Aways• Strategic Sourcing, E-Commerce, and Sourcing Optimization initiatives are

working…as they continue to develop, we should see a consistent decrease in the # of unique Contracting Offices used within each commodity.

– i.e., less fragmentation and more process control

• Commands must continue to focus on shifting their GCPC and open market procurements into the E-Commerce mechanisms within DMLSS (Prime Vendor Pharm / Prime Vendor Med Surg / ECAT)

– In effort to reinforce supply chain efficiencies, OSD has decremented each of the Services Medical Commands budget by over $250M spread across the next five (5) years (Navy Medicine’s portion of that decrement is $25M).

• De-Obligations are a measure of successful contract administration…better planning and contract administration will allow for Navy Medicine to make better use of de-obligated funds still available for use in the future!

• Sending our Non-Medical requirements to our Non-Navy Medicine partners is a good thing…but sending our requirements outside of DoD is against regulations (example: Department of Interior’s GovWorks)…unless those requirements have been properly vetted and documented by the appropriate authorities.

– Violating these regulations puts Navy Medicine at risk of losing procurement authority. In addition, these actions illustrate Navy Medicine’s lack of control over regulated processes…again, placing us at risk of failing our clean audit assessment in 2013!

Navy Medicine Strategic Sourcing Initiatives

SOURCING SEMANTICS

• Sourcing Optimization– Obtaining maximum value from DLA eCommerce solutions

like Prime Vendor and ECAT by decreasing inappropriate utilization of the Government Purchase Card and eliminating unnecessary direct contracting

• Strategic Sourcing– Replacing fragmented buying with centralized commodity

management through demand aggregation and vendor consolidation in order to achieve savings, purchasing efficiencies, and standardization

MEDICAL EQUIPMENT MAINTENANCECommodity Statistics:• The most highly fragmented commodity in Navy Medicine

contracting• >95% of the spend for medical equipment maintenance occurs at

the local MTF level…despite the fact that the most maintenance intensive medical equipment in our MTFs are procured by NMLC

• Initial high-level analysis indicates Navy Medicine could save >$8M annually and streamline over 1,600 individual purchase orders.

Where we are going:Limited commodity management success so far

– Some OEM-specific requirements being processed through DLA Troop Support

• Need to balance interests– Support to the BMET community– Current contracting realities

ORTHOPEDIC IMPLANTS – A HYBRID STORY

• Strategic sourcing initiative led by M81 with a strategic optimization execution plan

• Multiple awards with primary and secondary vendors in each of five major categories: Hips/Knees, Spine, Ortho Trauma, Instruments, Sports Medicine

• Surgeons identified for each major category with Specialty Leader involvement

• Plan of action:– Issue single solicitation but award by major category – Turn negotiated contracts over to DLA-Troop Support to

become ECAT-enabled– Leverage these contracts to get additional vendors and

additional discounts in ECAT

STRATEGIC SOURCING OF SERVICES

• Medical support services buying is highly fragmented– Appointment clerks, records clerks in particular

• FLC Norfolk/Philadelphia office will test SEAPORT-O Global Business Solutions (GBS) contracts as a possible vehicle to consolidate vendors

• Effort is in need of a sponsor to facilitate requirements definition/development and demand management

BACK-UP

NME Activity Funding Trend FY08-11

• $51M of the $87M increase was linked to increases in Healthcare Providers•E-Commerce grew by near $20M…(Great Job)•Remaining growth came from Non-Medical Commodities (Facilities / IT Equip & Maintenance / Logistics Support)

• NH CL saw a decrease in Healthcare Providers by $12M…but also an increase in E-Commerce by $6M• NH Jax’s growth is linked to significant increases in IT support and Facilities…overall decrease of ECAT by 16%

•Each activity’s minimal increases in spend are attributed to:1.Minor decreases in Healthcare Providers2.Increases in Facilities3.Minimal (if any in some cases) increases in E-Commerce• NH Beaufort did double their ECAT spend…but also increased their P-Card spend from $670K to $3M

Pretty Stable and Predictable…makes for easier Acq Planning!

NME Region Commodity SpendNoteworthy Comments:• The net $20M increase in Healthcare Providers doesn’t tell the story:

▫ NMC Portsmouth increased from $96M to $147M▫ Nurses went up by $20M / Radiologists rose $7M / Dentists up $11M

▫ NH Camp Lejeune decreased from $58M to $45M ▫ All other NME MTF Healthcare Provider requirements shrunk $4-6M

• The $16M decrease in Medical Equip & Supplies was tied mostly to NME Region HQ spend shrinking from $12M to $1.5M• There were significant funding increases from FY10 to FY11 in Facility Construction & Maintenance at every NME MTF…most notable:

• Portsmouth went up by $8M / Beaufort rose $5M / Jax up $4M• The non-med support services spike is linked to IT/ADP/Telcom services• The $10M decrease in Non-Medical Equip & Supplies was tied mostly to NME Region spend shrinking from $8M to $980K• Despite increases at every MTF for facilities…there were decreases in Logistics Support Services at almost every MTF…mostly minor (>$1M) • Medical Equipment Maintenance declined significantly at Portsmouth, Jax, Pensacola and Camp Lejeune

NME DMLSS Spend Comparison FY09-FY11FY09 FY10 FY11 % Change

NMC PORTSMOUTH $22,102,039 $17,355,729 $18,580,158 7.1%USNH JACKSONVILLE $5,027,669 $4,960,852 $5,348,025 7.8%USNH PENSACOLA $5,569,379 $4,080,964 $4,216,102 3.3%USNH CAMP LEJEUNE $10,139,494 $8,113,658 $8,539,114 5.2%NHC NEW ENGLAND $1,324,353 $2,665,003 $2,855,727 7.2%USNH BEAUFORT $2,077,833 $671,184 $2,883,453 329.6%USNH CHERRY POINT $1,194,757 $1,157,126 $1,054,775 -8.8%USNH CORPUS CHRISTI $557,766 $581,171 $547,074 -5.9%USNH CHARLESTON $794,511 $701,321 $681,862 -2.8%USNH NAPLES $3,724,446 $1,755,977 $2,903,367 65.3%USNH SIGONELLA $1,809,632 $1,535,522 $1,732,718 12.8%USNH GUANTANAMO BAY $2,400,070 $1,340,197 $1,926,846 43.8%

USNH ROTA $858,788 $609,818 $787,634 29.2%

NME Total GCPC Spend: $57,580,738 $45,528,522 $52,056,855 14.3%

FY09 FY10 FY11 % Change

NMC PORTSMOUTH $13,567,111 $12,603,853 $17,112,959 36%USNH JACKSONVILLE $3,586,014 $3,609,530 $4,397,326 22%USNH PENSACOLA $3,576,596 $3,115,271 $3,518,954 13%USNH CAMP LEJEUNE $4,103,770 $4,217,231 $5,292,190 25%NHC NEW ENGLAND $289,220 $315,085 $406,827 29%USNH BEAUFORT $2,363,497 $1,594,886 $1,671,912 5%USNH CHERRY POINT $455,020 $559,952 $732,297 31%USNH CORPUS CHRISTI $943,620 $338,136 $250,806 -26%USNH CHARLESTON $181,747 $206,379 $171,303 -17%USNH NAPLES $60,680 $106,526 $116,779 10%USNH SIGONELLA $14,595 $22,741 $16,482 -28%USNH GUANTANAMO BAY $592,209 $343,044 $381,553 11%

USNH ROTA No Recorded PVM sales in DMLSS

NME Total GCPC Spend: $29,734,079 $27,032,634 $34,069,390 26%

FY09 FY10 FY11 % Change

NMC PORTSMOUTH $2,501,589 $2,486,863 $3,245,689 31%USNH JACKSONVILLE $449,307 $451,472 $380,900 -16%USNH PENSACOLA $954,826 $732,866 $742,404 1%USNH CAMP LEJEUNE $1,595,038 $1,346,901 $1,598,530 19%NHC NEW ENGLAND $304,527 $393,045 $582,054 48%USNH BEAUFORT $836,458 $696,398 $1,142,039 64%USNH CHERRY POINT $57,775 $50,611 $41,175 -19%USNH CORPUS CHRISTI $153,794 $113,849 $138,174 21%USNH CHARLESTON $127,261 $120,723 $123,589 2%USNH NAPLES $95,998 $66,070 $86,928 32%USNH SIGONELLA $40,331 $10,435 $17,156 64%USNH GUANTANAMO BAY $28,497 $3,890 $56,376 1349%

USNH ROTA $3,427 $17 $77 357%

NME Total GCPC Spend: $7,148,828 $6,473,141 $8,155,091 26%

FY09 FY10 FY11 % Change

NMC PORTSMOUTH $81,851,996 $77,624,243 $92,278,589 -5%USNH JACKSONVILLE $32,776,639 $30,483,578 $36,990,714 -7%USNH PENSACOLA $30,799,399 $30,750,315 $34,345,369 0%USNH CAMP LEJEUNE $20,119,753 $19,436,910 $23,717,558 -3%NHC NEW ENGLAND $14,046,913 $13,412,124 $14,760,249 -5%USNH BEAUFORT $9,367,338 $8,366,550 $11,179,137 -11%USNH CHERRY POINT $5,819,562 $6,809,693 $7,065,111 17%USNH CORPUS CHRISTI $9,043,908 $7,151,140 $12,961,060 -21%USNH CHARLESTON $9,064,616 $6,760,662 $7,453,073 -25%USNH NAPLES $100,128 $174,610 $714,578 74%USNH SIGONELLA $268,761 $429,115 $643,229 60%USNH GUANTANAMO BAY $1,185,874 $1,396,798 $1,130,721 18%

USNH ROTA $1,231,659 $1,600,672 $1,324,052 30%

NME Total GCPC Spend: $215,676,546 $204,396,410 $244,563,440 -5%

GCPC ECAT

PRIME VENDOR – MedSurg PRIME VENDOR – Pharmacy

NMW Activity Funding Trend FY08-11

Saw a decrease of $20M in Healthcare Providers

Pretty Stable and Predictable…makes for easier Acq Planning!

NMW Region Commodity Direct Contracting SpendNoteworthy Comments:• The net $11M decrease in Healthcare Providers doesn’t tell the story:

▫ Camp Pendleton decreased from $39.5M to 17.5M▫ NHC Hawaii increased from $10.8M to $15M▫ NH Bremerton increased from $9.8M to $14M▫ All other FY11 NMW Healthcare Provider requirements were the same as FY10 (within +/- 1%)

• NMW investment in Med Equip & Supplies have been consistent• Facility projects at NMC San Diego, NH Bremerton, and NH Yokosuka caused the $22M increase from FY10 to FY11• Non-Med Equip and Non-Med Support Services remain consistent• Logistics Support Services continue to shift pretty drastically year to year

▫FY10-11 $6M increase was at NMC San Diego▫ Near $15M spike in FY09 was linked to one requirement for custodial janitorial services awarded by NAVFAC Northwest for NH Bremerton

• $2.4M increase for Med Support Services was due to new investment for Naval Center For Combat and Operational Stress Control (NCCOSC)

Breakdown of Direct Contracting Support FOR NMW – All Commodities

• Continues to be a strong reliance on NAVFAC, FLC and Army for NMW contracting support• Navy Medicine (NMW MTFs and NMLC) account for over 70% (on Avg) of total contracting support for region

NMNCA Region Spend Trend FY09-11NMNCA Activity FY08 FY09 FY10 FY11

NNMC BETHESDA $298,541,038 $461,475,925 $478,522,177 $393,749,983NHC QUANTICO, VA $8,130,517 $6,021,873 $11,256,385 $8,470,902NHC PAX RIVER, MD $3,300,211 $1,826,674 $6,125,551 $7,275,656NHC ANNAPOLIS, MD $1,644,020 $3,892,059 $3,394,832 $3,700,057JTF CAPMED $1,021,335 $1,142,038 $6,625,041 $9,070,911

Bethesda on left axis…Quantico/Pax River/Annapolis/JTF CAPMED on right axis

* - NNMC Bethesda’s totals include the DMLSS spend for Quantico, Pax River, and Annapolis

NMNCA Region Commodity SpendNursing Services alone dropped from $47M to $9M

• $3M increase in Comms Installation• 2M increase in Office Machine maintenance• $1.5M increase for elevator maintenance

Investment in ADP/Telcom Services more than doubled

Investment in ADP/Telcom equipment went from $800k to $8M

Breakdown of Direct Contracting Support FOR NMNCA – Medical Commodities

Based on current guidance, the Army’s % of supporting NMNCA should continue to rise and NMLC’s should continue to shrink