Importance of the Sourcing Strategy through the Prism of FAR

In our earlier posts, we used to praise strategic sourcing. The concept is familiar, with its routes in the Buygrid framework (1967), but many companies are still working on embracing it. 

A sourcing strategy is at the core of strategic sourcing. I recall some of my former colleagues disliking it and perceiving it as an element of bureaucratic process.

This post will look at a sourcing strategy from an uncommon perspective, trying to prove its vital importance for the procurement profession. 

The sourcing strategy definition and overview 

A sourcing strategy is a structured and comprehensive plan that outlines how an organization will acquire the goods, services, or resources it needs to operate effectively and achieve its business objectives. 

It involves making deliberate decisions about where to source these items, how to engage with suppliers, and how to manage the procurement process to achieve optimal results.

Sourcing strategy benefits

You can find dozens of arguments supporting the importance of a sourcing strategy.

We suggest just three, which are rare.

Sourcing project retrospective

A sourcing strategy is a product of proactive planning. It's a script of your sourcing project, which you prepare before entering the market and engaging with suppliers. 

Upon completion of a sourcing project, it allows you to exercise an essential element of Agile methodology - a retrospective. It is when your team reflects on past work and identifies ways to improve.

You may analyze your analytical assumptions and patterns, negotiation planning, and supply market study from the post-mortem perspective and rectify false practices for the future.

Furthermore, you may assess and report on the actual value delivery vs. initial forecasts. 

Similarly, your management may evaluate the proficiency of underlying analysis and assumptions by comparing it with outcomes.

Audit trail  

An audit trail is a step-by-step record by which purchase orders, contracts, and payments can be traced to their source.

A sourcing strategy is a vital element of this audit trail. Anyone can follow your assumptions, ideas, and estimates from the project's origins. You won't need to explain your decisions and specific process steps as long as their logic is duly described in a sourcing strategy and approved.

You or your successors can review past projects and understand how they've been planned and accomplished.  

Personal initiative and sound business judgment

U.S. Federal Acquisition Regulation (FAR) is one of the most comprehensive descriptions of public procurement working practices, roles, and responsibilities of its actors. 

It's the detailed and stringent code of procurement governance. Still, FAR declared personal initiative and sound business judgment among the guiding principles of procurement. 

"The role of each member of the Acquisition Team is to exercise personal initiative and sound business judgment in providing the best value product or service to meet the customer’s needs. In exercising initiative, Government members of the Acquisition Team may assume if a specific strategy, practice, policy, or procedure is in the best interests of the Government and is not addressed in the FAR nor prohibited by law (statute or case law), Executive order or other regulation, that the strategy, practice, policy or procedure is a permissible exercise of authority."

A sourcing strategy enables procurement initiative and innovation.   

Indeed, anyone in procurement wants to exercise innovative approaches and diverse business practices. Unfortunately, many will blame rigid governance as a restricting factor.

The well-documented and duly approved sourcing strategy may resolve that problem. 

It will reflect your logic throughout the entire sourcing project and make it hard to accuse you of disobeying the governance as long as the reasons are reflected there.

Let's look at a sourcing strategy not as a compulsory element of the strategic sourcing process but as an enabler of procurement initiative and innovation.

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More information on this and other exciting topics can be found in "The Technology Procurement Handbook." It represents 23 years of experience, billions of dollars worth of successful sourcing projects, and 1000s hours spent on research, analysis, and content creation for the most demanding professional readers.
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