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The U.S. Department of Defense (DoD) annually obligates billions of dollars for the procurement of supplies and services in support of the national military strategy. In fiscal year (FY) 2016, the DoD obligated approximately $239 billion on contracts for defense-related supplies and services. Specific to the U.S. Air Force (USAF), over $50 billion were obligated on contracts for supplies and services in FY2016 (USA Spending, 2016). Services typically account for over half of the DoD procurement budget, compared to the acquisition of supplies. In the current environment of budget and manpower cuts, the DoD is transforming its acquisition process to ensure that critical supplies and services are sourced cost-effectively. The DoD has been undergoing a transformation of its procurement function from a transaction-oriented perspective to a strategic-oriented enterprise. The procurement function is no longer seen as a tactical, clerical, or administrative function, but more of a strategic function. This transformation can be attributed to the fact that the DoD has begun to understand and realize the importance of procurement in achieving the strategic objectives as well as the impact of procurement on reducing costs. One aspect of this transformation in the DoD is the use of a strategic sourcing approach, specifically category management, for the procurement of services at military installations. Category management is a federal government initiative that emphasizes a focus on ﾓincreased efficiency and effectiveness, lessening costs, and reducing redundanciesﾔ (Sharkey, 2015). Category management emphasizes leveraging buying power, improving efficiencies, and managing consumption. The Air Force is leading the DoD in its category management initiative through category planning, category execution, and category performance management. Specific to category execution, the use of performance levers such as total cost management and the identification of specific cost drivers in service acquisitions can result in increased efficiency and effectiveness and a reduction in costs. Purpose of Research The purpose of this research is to analyze the price drivers for one of the DoDﾒs most commonly procured installation-level services, integrated solid waste management (ISWM). Specifically, we focus on the procurement of ISWM services within the Air Force to identify the relationship between service-related price drivers, contract-related price drivers, price, and contractor performance. Our focus is to study the effect that price drivers (both service and contract) have on contract price and contractor performance. We test seven hypotheses to determine the effect that service and contracting variables have on price and contractor performance. Based on our research findings, we provide recommendations to the Air Force for strategically sourcing ISWM services that will result in increased efficiency, effectiveness, and a reduction in costs. Naval Postgraduate School Acquisition Research Program |
