Federal Strategic Sourcing Initiative Second Generation Domestic Delivery Services (DDS2)

GSA Expo Presentation 4 May, 2010 Federal Strategic Sourcing InitiativeSecond Generation Domestic Delivery Services (DDS2)

"Leveraging spending via governmentwide strategic sourcing for Domestic Delivery Services" Agenda • DDS Background & General Information – John Blanchard, GSA FAS • Shipping Smarter • Maureen Baer, UPS Strategic Account Director • Tom Dames, UPS Strategic Account Director • DDS Rate Details & Best Practices • John Blanchard, GSA FAS • Conclusion & Questions

GSA Mission Statement “GSA’s mission is to use expertise to provide innovative solutions for our customers in support of their missions and by so doing foster an effective, sustainable, and transparent government for the American people.” Martha Johnson Administrator, GSA

FSSI Governance FSSI is governed by OFPP and the SSWG under the CAOC. The FSSI PMO supports the SSWG and leads the federal government’s Strategic Sourcing Community of Practice which is comprised of the strategic sourcing leads for the individual Federal agencies 3

The team followed the Strategic Sourcing process to ensure the DDS2 solution lowered government Total Cost of Ownership STRATEGIC SOURCING PROCESS – HIGH LEVEL OVERVIEW 1 2 3 4 5 Conduct Market Analysis Select Sources of Supply Develop Commodity Strategy Implement & Manage Performance Profile Commodity Profile Commodity Conduct market analysis to identify industry trends, supply & demand levers, potential new suppliers, negotiation levers, and available contract vehicles Identify and select sources of supply available internally or externally Develop strategy to meet government needs, lower TCO, and ensure high contractor performance Implement contract, process and policy changes; continually measure, track and manage performance Develop detailed profile of commodity including spend profile & specifications

The DDS2 program is the result of a year-long collaboration among dozens of government experts TECHNICAL EVALUATION TEAM CONTRACTING OFFICER • Jason Holloway, GSA • Diane Kanauka, IRS • Bill Bardwell, VA • Ernie Stevens, GSA REQUIREMENTS DEFINITION & ACQUISITION STRATEGY TEAM • Kesa Russell, DHHS • Steve Schneider, DHHS-NIH • Valerie Hood, DHHS-NIH • Kathryn Calderone, DHS • Acia (John) Parker, DHS-USCG • Gerri Tzul, DOC • Al Majors, DOE • Anthony Nellums, DOE • Tim Jackson, DOE • Sondra White, DOI • Romerio Moreno, DOL • Ames Owens, DOT • Steve Hopkins, DOT-FAA • James Burns, DOT-FMCSA • Brian Dennis, NTSB • Jack Kelly, OMB • Rosalind Wright, OPM • Brenda Jackson, Treasury-IRS • Diane Kanuka, Treasury-IRS • Christin Lawlor, USDA • Todd Repass, USDA • Victor Jefferson, USDA • Bill Bardwell, VA • Nelson Gonzalez, VA • Becky Koses, GSA • Blaine Jacobs, GSA • Ed Kelliher, GSA • Ernie Stevens, GSA • John Blanchard, GSA • Kristina Nelson, GSA • Lynn Ju, GSA • Marquita Washington, GSA • Mary Anne Sykes, GSA • Mary Davie, GSA • Michel Kareis, GSA • Tauna Delmonico, GSA • Valerie Bagby, GSA • Tim Burke, GSA Page 5

Awarded to FedEx in 2006 as a pilot, and will expire May 23, 2010 $50M of spend in FY07; $100M in FY08; $130M in FY09 Estimated to have saved agencies a total of $113M off of MAS rates since the program’s inception Business intelligence reports provided to agencies on a quarterly basis Although the government has achieved significant savings through DDS1, surcharge costs remained an issue The Domestic Delivery Services program has been a true success story for the government, saving over $100M since it was introduced in 2006

DDS2 provides the government both exceptional value and strategic benefits • GOVERNMENT-WIDE BENEFITS OF THE DDS2 PROGRAM • AGENCY BENEFITS OFTHE DDS2 PROGRAM • Strengthens the government’s bargaining position for future contracts • Improves the government’s ability to understand its overall shipping patterns • Demonstrates that the government is willing to make the changes necessary to lower long-term costs • Exemplifies the benefits of government-wide strategic sourcing

Agencies representing $126M in estimated annual spend are taking advantage of DDS2’s deep discounts DDS2 VS. DDS1 COMMENTARY 7% • DDS2 is projected to save the government approximately 7%,or $9M annually compared to DDS1 rates DDS2 VS. MAS COMMENTARY • DDS2 is projected to save the government approximately 25%, or $42M annually compared to MAS rates • DDS2 waives fuel surcharges for small partial shipments while MAS fuel surcharges can be up to 23.25% 25% Source: Agency spend estimates; DDS1 & UPS MAS rates; Censeo Analysis

DDS2’s aggressive shipping rates, coupled with reduced surcharges, leads to significant savings for agencies, the government and taxpayers SAMPLE SHIPMENT 1LB MID-MORNING DELIVERY TO NON-METRO AREA DDS2 PRICING APPROACH • Delivery rates deeply discounted off MAS across service types, zones, and weights • Aggressively negotiated surcharge and accessorial costs • Waiver of fuel surcharges for small packages (compared to MAS costs of up to 23.25%) DDS2 offers 23% savings for this package * Current MAS fuel surcharge costs = 8.5% of shipment costs

"Leveraging spending via governmentwide strategic sourcing for Domestic Delivery Services" Agenda DDS Background & General Information – John Blanchard, GSA FAS Shipping Smarter – Maureen Baer, Tom Dames, UPS DDS Rate Details & Best Practices – John Blanchard, GSA FAS Conclusion & Questions

GSA and UPS……..Turn our advantage into yours.

Discover the unique ways UPS delivers our customers a competitive advantage. We DeliverMore. UPS offers more service choices so you can balance cost and customer service. And we back you with the world’s premier network. We Make Doing Business Easier. UPS technology tools and support make it easier for you to serve your customers and can accelerate your own business processes. The Ground Alternative Savings. See how UPS is providing our customers significant savings with our fast, reliable, guaranteed Ground Service. Brown® Can Make You Greener. UPS is a leader in sustainability, which can help us both work more responsibly and efficiently.

DDS2 - UPS guaranteed domestic package service options* Multiple options to meet your many demands *Visit ups.com® or call 1-800-Pick-UPS® for guarantee details, service availability, delivery-time commitments or to request a pickup. Excludes UPS Express Critical.

International express package delivery options with a difference UPS provides international services utilizing the same network. Delivery worldwide is typically in one to three days, depending on destination. Same UPS Driver at pick-up and delivery as for your ground and domestic air shipments UPS provides WWX pricing to all Federal Agencies. For both Export and Import Services Rates Automatically Attached to all FSSI/DDS2 Users. UPS International shipments can be processed on the same systems as domestic shipments Paperless Invoice provided UPS delivers more guaranteed packages on time around the world than any other carrier.

A single driver for ground, air and Int’l means more personalized service One UPSdriver picks up your ground, air and international packages. Customers trust UPS drivers to know and understand their business, and that’s a real advantage when managing complex shipping operations UPS delivers more ground packages than any other carrier. More than 10 million ground packages delivered on time every day Customers recognize UPS drivers as the industry’s best in customer service surveys. Our drivers are the face of reliability, making sure your pickups and deliveries are consistently right on time. Our integrated package network creates better efficiency and flow in your dock operations.

We Make Doing BusinessEasier.

Advantage UPS : One technology platform works for many transportation modes UPS is the only major carrier with a single automated system that supports both package and freight shipments. That makes it easier for you to ship, track, train your personnel, and integrate our information into your systems. Advanced technology tools that support package and freight services (domestic and international air, domestic heavyweight) include: UPS WorldShip® 2009 version 11.0 UPS Billing Data and Billing Analysis Tool UPS CampusShip Quantum View® Manage

Shipping Solutions UPS CampusShip Web-based shipping solution Setup forms will need to be filled out by the agency Must identify agency CampusShip Administrator who will manage the program Setup time, once the setup forms are filled out with all the necessary information, is five days UPS WorldShip WorldShip 12 is a Windows based solution and can be used on XP, Vista and 7 Software is downloadable from www.ups.com or can be installed from a CD Installation can be instantaneous if the agency is going to use their own computer (software needs admin rights to run on the workstation) UPS-provided hardware has a lead time of two weeks UPS Sales Team will submit the necessary paperwork for the appropriation of the equipment and installation

UPS CampusShip is a Browser-Based Solution

Domestic Shipping Label • Follow the instructions on the label to complete the shipment • Take your package to the UPS drop-off within your company • Or, to find a drop-off location near you, go to UPS.com • Select the Shipping tab • Then select the Find Drop-off Locations link

Quantum View is browser based and provides information which helps our customers “see” their inbound and outbound shipments This information is available twenty-four hours a day, seven days a week. Outbound View Inbound View Vendor Vendor Hqtrs. Field location Component Site Hdqtrs. Region, Hdqtrs. Region

UPS Billing Options UPS Paper Bill Paper invoice delivered in a hard copy to shipper or billing site Setup is done automatically when account is created UPS P-Card Procurement card payment using departments P-Card. Setup is completed after the first week of shipping The UPS Project Manager will manage the process for setting up agencies on P-Card billing UPS Billing Data File Electronic flat or XML file used for auditing the weekly invoice. Delivered via an email link or downloaded from the person’s myups.com ID on the web. Customer can self-register or UPS can set it up on the backend Setup time is less than two days depending on how the agency enrolls UPS Billing Center Billing portal on UPS.com for customers who need to view their invoices online Setup time is less than five business days

The Ground Alternative Savings.

Sample of a Ground Conversion Strategy All field sites within 300 mile radius of the St Louis, Missouri DC are evaluating shifting from air to ground services Substantial savings are available, typically exceeding $25 per box shipped Full inbound Quantum View Visibility is now available for these former Air shipments UPS Ground Shipments have a Time in Transit money-back guarantee, with 98%+ reliability on time

Business days in transit to: St Louis, MO

Brown® Can Make YouGreener.

UPS - Taking a leadership position on FLEEEP President Obama issued an Executive Order on October 5, 2009: Federal Leadership in Environmental, Energy, and Economic Performance (FLEEEP) “It is therefore the policy of the United States that Federal agencies shall increase energy efficiency; measure, report and reduce their greenhouse gas emissions from direct and indirect activities…” The Order defines scope 3 as “greenhouse gas emissions from sources not owned or directly controlled by a Federal agency but related to agency activities such as vendor supply chains, delivery services…” 95% of new contract actions, including delivery services, must comply with new performance requirements • Important Milestones • April 3, 2010: Recommendations due regarding tracking and reducing scope 3 emissions from vendors • July 31, 2010: Carbon reduction goal due for agency-wide scope 3 emissions • January 5, 2011: Carbon footprint due for scope 1, 2 and specified scope 3 emissions

UPS — Uniquely qualified to help UPS is in a unique position to help agencies get up to speed quickly when implementing carbon reduction initiatives with respect to shipping, transportation and logistics: Network Efficiency. We’ve done many things to address our own carbon footprint, because our emissions impact your scope 3 emissions. Measurement. We can calculate the carbon footprint associated with your UPS shipments with precision. Mitigation. We can help you offset the climate impact of your shipping. Transparency. We include our company scope 3 emissions in your carbon footprint calculation for a complete calculation. Credibility. We have verified our calculation and offsetting methods with third parties (including SGS, the world’s leading verification and certification company). Accountability. UPS participates in many U.S. Environmental Protection Agency programs, such as Climate Leaders and SmartWay.

UPS helps you move ahead UPS delivers and picks-up from every address in the U.S. UPS maintains the largest service portfolio and network in the world, with one combined network for all small package shipments. UPS provides solutions that enhance overall value. UPS solutions focus on process improvement. UPS’ innovative technology creates - or enhances current - efficiencies to bring additional value. Partnering with UPS aligns GSA with the industry leader. Our goal is to produce increased efficiencies, improved reliability, and long-term cost savings. Transitioning to UPS is easy. Turn our advantage into yours.

Shipping Smarter through UPS ….A Consultative Approach The Cornerstone is Business Process Improvement Through: Shipment Preparation Technology UPS WorldShip, UPS CampusShip, UPS InternetShip Visibility Technology UPS Quantum View Manage Suite of Tools Cost Allocation Mode Optimization Ground versus Air Hundredweight versus LTL Reporting GSA Portal Billing Data Tool Getting Greener 30

Some Best Practices Convert from Waybills to electronic shipment processing Utilize Visibility Tools Better Cost Allocation through mandatory reference field Electronic Billing Reduction of account numbers Move Air to ground where possible

Thank you …..Q & A

Aggressive UPS pricing for commonly used services creates an opportunity for the government to receive faster delivery at lower prices • …BUT THE GOVERNMENT CAN USE THESE DIFFERENCES TO ITS ADVANTAGE • Shippers can use the “upgraded” services to maximize the value of their shipping spend • Account Managers can use UPS’ shipping tools to “turn off” Afternoon, Second Day A.M.* and 3-Day service to minimize confusion and eliminate unnecessary costs • Account Managers and Shipment Experts can use pricing differences as an opportunity to educate shippers on the value of utilizing more cost effective services (such as using Ground service when shipping within a metro area) • SIGNIFICANT DISCOUNTING HAS CREATED UNIQUE PRICING STRUCTURES… • Next Day Mid-Morning and Two-Day shipping are now less expensive than Next Day Afternoon and Three-Day services Mid-morning shipments are 4% less expensive than afternoon delivery 2 Day shipments are between 1% and 9% less expensive than 3 Day, depending on package weight and shipment zone * Second Day A.M. service is offered for convenience, yet carries non-DDS, commercial rates

Agencies can further reduce costs by helping users select the optimal service for their small packages UPS Ground service typically delivers packages traveling less than 200-300 miles in 1 day… … at costs less than half of Next Day Mid-Morning service SAMPLE 1 LB ZONE 1 PACKAGE APPROXIMATE TRANSIT TIME FOR GROUND SHIPMENTS FROM THE DC AREA 54% Savings 39% Savings Shipping Rate Source: UPS.com Source: UPS DDS rate chart

All are welcome to attend the monthly DDS “Town-Hall” meetings DDS “TOWN-HALL” MEETINGS Who? - Representatives from over 60 participating agencies - GSA Program Managers - UPS transition & account representatives What? - DDS Program Updates - Shipping Best Practices - Q&A with UPS Representatives When? - 1st Thursday of every month at 9AM EDT Where? - Dial: (714) 551-0020; Access Code: 199-273-224 For more information, please visit the DDS website at www.gsa.gov/dds

Let GSA help you decide if DDS is the right solution for you! To learn more about DDS or to join the program: 1 2 3 Visit the DDS website at www.gsa.gov/dds Request a Business Case Join the Program • Facts • Press Releases • FAQ’s • Contact Information • Presentations • BPA Information • UPS Tutorials • DDS Signup Letter • Ordering & Funding Procedures • “Town-Hall” Meeting Schedule • Upon request, GSA will create a business case based on your agency’s specific shipping profile • Analysis will show the expected savings from the DDS2 program compared to your benchmark rates • To request a business case, please contact Blaine Jacobs at (703) 605-2892 or blaine.jacobs@gsa.gov • If DDS is right for you, submit a letter indicating your intention to join the program • The signup letter is available for download at www.gsa.gov/dds • UPS will work with your agency to set-up shipping accounts and train employees

Questions?

Federal Strategic Sourcing Initiative Second Generation Domestic Delivery Services (DDS2)