Information Technology Information Technology Management OfficeManagement Office

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ProcurementsProcurements

Solutions-Based Solutions-Based ProcurementProcurement

A Business Approach to Procuring A Business Approach to Procuring Information TechnologyInformation Technology

Another Innovative Procurement Technique by ITMOAnother Innovative Procurement Technique by ITMO

HistoryHistory

2002 - Gartner & Forrester2002 - Gartner & Forrester70% - 75% of all IT Projects Fail70% - 75% of all IT Projects Fail

Success Criteria:Success Criteria:– On TimeOn Time– Within BudgetWithin Budget– All originally specified functionalityAll originally specified functionality

What causes these high failure rates?What causes these high failure rates?

HistoryHistory

Consolidated Procurement Code 1981Consolidated Procurement Code 1981– Low BidLow Bid– RFP After thoughtRFP After thought

19941994– Request for QualificationRequest for Qualification– Cost Not a FactorCost Not a Factor– NegotiationNegotiation

Matters affecting the scope so long as you don’t Matters affecting the scope so long as you don’t change the overall nature and intent of the change the overall nature and intent of the solicitation.solicitation.

What Factors Contribute to these What Factors Contribute to these Failure Rates?Failure Rates?

– Detailed SpecificationsDetailed Specifications– Firm Fixed Price ContractsFirm Fixed Price Contracts– Poor Contract Management Poor Contract Management – Poor Project ManagementPoor Project Management– Scope Creep Scope Creep – Poor Change ManagementPoor Change Management

How Does the procurement process contribute?How Does the procurement process contribute?

Traditional RFP ApproachTraditional RFP Approach Identify “Problem”Identify “Problem”Research as many solutions as possible in the time allowedResearch as many solutions as possible in the time allowed– Hope you don’t miss the really good oneHope you don’t miss the really good one– Usually takes 4 - 6 monthsUsually takes 4 - 6 months

Write SpecificationsWrite Specifications– Define Existing Automated or Manual System Define Existing Automated or Manual System – Specify a particular productSpecify a particular product– Specify something that does not existSpecify something that does not exist– Can anyone say Can anyone say PROTESTPROTEST??– Establish minimum acceptable requirementsEstablish minimum acceptable requirements

Boss wants to know what is taking so longBoss wants to know what is taking so long Send to Procurement as a RUSHSend to Procurement as a RUSH

Is There A Better Way?Is There A Better Way?

Solutions-Based ApproachSolutions-Based Approach(Overview)(Overview)

PreparationPreparation– Define ProblemDefine Problem– Define Current EnvironmentDefine Current Environment– Perform an Agency Risk AnalysisPerform an Agency Risk Analysis

The SolicitationThe Solicitation– Vendor contact prohibitedVendor contact prohibited– Service Level Agreement (SLA)Service Level Agreement (SLA)– Request for Qualifications Request for Qualifications (if applicable)(if applicable)– The Request for ProposalsThe Request for Proposals

Schedule and Contract TermsSchedule and Contract TermsBidder QualificationsBidder QualificationsBusiness ProposalBusiness ProposalEvaluation CriteriaEvaluation CriteriaOfferorOfferor Guidelines for Responding to Solicitation Guidelines for Responding to Solicitation

– Pre Proposal ConferencePre Proposal Conference– AmendmentsAmendments

Prospective vendors have 15 days to protest contents of amendmentsProspective vendors have 15 days to protest contents of amendments

Proposals and the Evaluation Process Proposals and the Evaluation Process (4 – 6 months)(4 – 6 months)– Oral Presentations of ProposalsOral Presentations of Proposals– DemonstrationsDemonstrations– ScoringScoring– DemonstrationDemonstration– NegotiationsNegotiations

Award and Post Award ProcessesAward and Post Award Processes

Define the ProblemDefine the ProblemDefine the Problem, Not the SolutionDefine the Problem, Not the Solution

– Many protests are based on restrictive specifications, Potential vendors have 15 days from Many protests are based on restrictive specifications, Potential vendors have 15 days from the release of the solicitation to protest specifications.the release of the solicitation to protest specifications.

All Problems are Business Problems or Business Process ProblemsAll Problems are Business Problems or Business Process ProblemsFinancial Problems, Business Processes Problems (BPR), New Business ProductsFinancial Problems, Business Processes Problems (BPR), New Business ProductsBusiness Output and Analysis Problems (Data & Reports)Business Output and Analysis Problems (Data & Reports)What are the Business problems?What are the Business problems?What are the consequences of failing to resolve the problem?What are the consequences of failing to resolve the problem?Any mandatory specifications should be business requirementsAny mandatory specifications should be business requirements

Define the Problem not Symptoms, Solutions, or Current ProcessesDefine the Problem not Symptoms, Solutions, or Current Processes– SymptomsSymptoms

Symptoms indicate a problem, they are not Symptoms indicate a problem, they are not THETHE problem problem It is easy to misidentify a symptom as the problemIt is easy to misidentify a symptom as the problemA problem may have more than one symptomA problem may have more than one symptomA symptom may be the result of more than one problemA symptom may be the result of more than one problemFixing one symptom may magnify other symptomsFixing one symptom may magnify other symptomsFixing a symptom may be appropriate if supported by a business caseFixing a symptom may be appropriate if supported by a business case

– SolutionSolutionMay not be the best solutionMay not be the best solutionSolution may not solve problemSolution may not solve problemSolution may not take advantage of latest technologySolution may not take advantage of latest technologyVendors define problems in terms of their solutionVendors define problems in terms of their solution

– I didn’t know I had a problem until that salesman showed me.I didn’t know I had a problem until that salesman showed me.

– Current ProcessesCurrent ProcessesCurrent Process may be the problemCurrent Process may be the problemMay limit some significant efficiencies and advantages of technology May limit some significant efficiencies and advantages of technology

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Define the Current EnvironmentDefine the Current EnvironmentDefine the Current BusinessDefine the Current Business

– Define current business requirementsDefine current business requirementsLegal mandatesLegal mandatesReporting RequirementsReporting RequirementsProject Budget ParametersProject Budget Parameters

– Define current business processesDefine current business processesDefine program inputs and outputsDefine program inputs and outputs

Define Current Technical EnvironmentDefine Current Technical Environment– Applicable Hardware InventoryApplicable Hardware Inventory

Identify current usage and availabilityIdentify current usage and availabilityIdentify any planned changes or upgradesIdentify any planned changes or upgrades

– Applicable Software InventoryApplicable Software InventoryOperating system(s)Operating system(s)Applicable database and applications softwareApplicable database and applications software

– License type and usageLicense type and usage– Include manufacturer and versions levelsInclude manufacturer and versions levels

– Applicable Communications InventoryApplicable Communications InventoryTelecom and data connectivity and capacityTelecom and data connectivity and capacity

– Include any current hardware and software performance data that a vendor may require to Include any current hardware and software performance data that a vendor may require to develop a solutiondevelop a solution

OutputsOutputsUsageUsagePeak UsagePeak UsageData File SizesData File SizesData Field Layouts, etc.Data Field Layouts, etc.

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Perform an Agency Risk AnalysisPerform an Agency Risk Analysis

Identify any internal or external threats that may affect the Identify any internal or external threats that may affect the successful completion of the project successful completion of the project (on time, within budget)(on time, within budget)

BusinessBusinessLegalLegalPoliticalPoliticalTechnicalTechnical

Create a mitigation plan for each identified riskCreate a mitigation plan for each identified riskIgnore riskIgnore riskEliminate riskEliminate riskChange Laws or RegulationsChange Laws or RegulationsManage expectationsManage expectationsInclude Performance IncentivesInclude Performance IncentivesShift riskShift risk

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Service Level AgreementService Level AgreementAn Agreement between ITMO and the AgencyAn Agreement between ITMO and the Agency

Identify evaluators and any technical or business resources Identify evaluators and any technical or business resources that will be requiredthat will be requiredSchedule Request for QualificationsSchedule Request for QualificationsSchedule two meetings with RFQ evaluatorsSchedule two meetings with RFQ evaluatorsSchedule RFP issue date and pre proposal dateSchedule RFP issue date and pre proposal dateSchedule resources necessary to respond to pre proposal Schedule resources necessary to respond to pre proposal questionsquestionsSchedule Amendment issue dateSchedule Amendment issue dateSchedule date for Offerors to return proposalsSchedule date for Offerors to return proposalsSchedule three meetings with evaluators, technical resources, Schedule three meetings with evaluators, technical resources, and business resourcesand business resourcesSchedule Award Posting DateSchedule Award Posting Date

– Failure to adhere to schedule will result in procurement being Failure to adhere to schedule will result in procurement being removed from priority processing statusremoved from priority processing status

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Request for QualificationRequest for QualificationWhen do you use a RFQ?When do you use a RFQ?

Complexity of Problem to be SolvedComplexity of Problem to be SolvedNumber of potential vendorsNumber of potential vendors

The RFQ solicitation must:The RFQ solicitation must:contain at a minimum a description of the goods or services to be solicited contain at a minimum a description of the goods or services to be solicited by the request for proposals by the request for proposals the general scope of the work the general scope of the work the deadline for submission of information and how prospective offerors may the deadline for submission of information and how prospective offerors may apply for consideration apply for consideration

– The solicitation may only require information about their qualifications, The solicitation may only require information about their qualifications, experience, and ability to perform the requirements of the contract experience, and ability to perform the requirements of the contract

Perspective offerors shall be ranked from most qualified to least Perspective offerors shall be ranked from most qualified to least qualified on the basis of the information providedqualified on the basis of the information provided

Proposals shall then be solicited from at least the top two Proposals shall then be solicited from at least the top two prospective offerors by means of a request for proposals prospective offerors by means of a request for proposals

Failure of a prospective offeror to be selected to receive the request Failure of a prospective offeror to be selected to receive the request for proposals shall not be grounds for protest for proposals shall not be grounds for protest Recommended for Solutions-Based RFPsRecommended for Solutions-Based RFPs

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Schedule & Contract TermsSchedule & Contract Terms

The previously agreed to schedule will be The previously agreed to schedule will be imbedded in the solicitationimbedded in the solicitationThe posting date will appear on cover of the The posting date will appear on cover of the solicitationsolicitationStandard contract terms and conditions will be Standard contract terms and conditions will be added to the solicitationadded to the solicitation– Limitation of Liability, Indemnification, and Limitation of Liability, Indemnification, and

Warranty are negotiable Warranty are negotiable – Any special terms or conditions will be added to the Any special terms or conditions will be added to the

solicitationsolicitationFederal Requirements, Penalties, Liquidated Damages, etc.Federal Requirements, Penalties, Liquidated Damages, etc.

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Offeror’s QualificationsOfferor’s QualificationsInclude the following information for the offeror and any Include the following information for the offeror and any subcontractor that will contribute more than 10% of the subcontractor that will contribute more than 10% of the performance requirements of the contract:performance requirements of the contract:

– Include a brief history of the offeror’s experience in providing Include a brief history of the offeror’s experience in providing solutions of similar size and scopesolutions of similar size and scope

– FinancialsFinancialsAuditedAuditedPublic Corporations, Private Corporations, Private Companies, and Public Corporations, Private Corporations, Private Companies, and LLCsLLCs

– Corporate ReferencesCorporate References– Customer Lists – A complete customer list is requestedCustomer Lists – A complete customer list is requested– Failed Projects, Suspensions, Debarments, Litigation (past and Failed Projects, Suspensions, Debarments, Litigation (past and

present)present)(back)(back)

Business ProposalBusiness ProposalBusiness ProposalsBusiness Proposals

– Total Cost of OwnershipTotal Cost of Ownership – What is the anticipated cost of purchasing, owning, – What is the anticipated cost of purchasing, owning, operating, maintaining, and supporting the proposed solution for the total operating, maintaining, and supporting the proposed solution for the total potential term of the contract? Provide a detailed accountingpotential term of the contract? Provide a detailed accounting

– Risk AnalysisRisk Analysis – What internal, external, business, legal, political, or technical – What internal, external, business, legal, political, or technical factors could significantly impact the probability of completing this project on time factors could significantly impact the probability of completing this project on time and within budget?and within budget?

– Risk MitigationRisk Mitigation – What actions can be taken to mitigate the identified risks? – What actions can be taken to mitigate the identified risks?

– Risk SharingRisk Sharing – Are there opportunities for mutually beneficial risk sharing? – Are there opportunities for mutually beneficial risk sharing?

– Performance IncentivesPerformance Incentives – Are there opportunities for performance-based – Are there opportunities for performance-based incentives?incentives?

– Financial OptionsFinancial Options - Are there alternative financing options available to the - Are there alternative financing options available to the State?State?

– Implementation ScheduleImplementation ScheduleMilestones and DeliverablesMilestones and DeliverablesStaffing Deployment ScheduleStaffing Deployment SchedulePayments tied to DeliverablesPayments tied to Deliverables

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Evaluation CriteriaEvaluation CriteriaEvaluation CriteriaEvaluation Criteria – There are a few standard criteria: – There are a few standard criteria:– Functional Capabilities:Functional Capabilities: How well does the proposed solution meet How well does the proposed solution meet

the needs of the State as identified herein.the needs of the State as identified herein.– Technical and Performance Capabilities:Technical and Performance Capabilities: How well do the technical How well do the technical

and performance capabilities of the proposed solution meet the needs of and performance capabilities of the proposed solution meet the needs of the State.the State.

– Business Plan:Business Plan: - The impact of the proposed systems on the business - The impact of the proposed systems on the business and financial operations of the Agency.and financial operations of the Agency.

– Installation and Support: Installation and Support: The degree to which the proposed The degree to which the proposed installation and support capabilities meet the needs of the State.installation and support capabilities meet the needs of the State.

– Implementation Plan: Implementation Plan: Is the plan complete, reasonable, and does it Is the plan complete, reasonable, and does it meet the objectives outlined in the offeror’s proposal?meet the objectives outlined in the offeror’s proposal?

– Qualifications:Qualifications: References (corporate and/or personal), resumes, References (corporate and/or personal), resumes, financial statements, and evidence of ability to conduct business in the financial statements, and evidence of ability to conduct business in the State. State.

– Risk:Risk: What is the level of acceptable risk associated with the proposed What is the level of acceptable risk associated with the proposed solution.solution.

– Demonstrations: Demonstrations: (next page)(next page)

Evaluation CriteriaEvaluation Criteria (cont)(cont)

DemonstrationsDemonstrations::– Completeness, robustness, and ease of use of the proposed system.Completeness, robustness, and ease of use of the proposed system.

There are three methods of including demonstrations in the evaluation There are three methods of including demonstrations in the evaluation process:process:The apparent successful vendor is asked to demonstrate its product so that The apparent successful vendor is asked to demonstrate its product so that the State may verify the claims made in the vendor's proposal. This is a the State may verify the claims made in the vendor's proposal. This is a pass/fail evaluation.pass/fail evaluation.All vendors submitting proposals are asked to demonstrate their products, All vendors submitting proposals are asked to demonstrate their products, and each evaluator scores each demonstration.and each evaluator scores each demonstration.A short list of vendors are asked to demonstrate their products. This is A short list of vendors are asked to demonstrate their products. This is accomplished through a two-part evaluation process. Two sets of accomplished through a two-part evaluation process. Two sets of evaluation criteria are included in the RFP. Each proposal received is evaluation criteria are included in the RFP. Each proposal received is evaluated against the first set of criteria which does evaluated against the first set of criteria which does notnot include the include the demonstration. The vendors receiving the top three scores are asked to demonstration. The vendors receiving the top three scores are asked to demonstrate their products. If there are less than three vendors offering demonstrate their products. If there are less than three vendors offering proposals, then all vendors will be asked to demonstrate their products. proposals, then all vendors will be asked to demonstrate their products. Each of these vendors is evaluated against the second set of evaluation Each of these vendors is evaluated against the second set of evaluation criteria. The second set of criteria should include all the first-part criteria. The second set of criteria should include all the first-part evaluation criteria plus the demonstration.evaluation criteria plus the demonstration.

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Guidelines for RespondingGuidelines for RespondingOfferor’s Guidelines for Responding to a Solutions-Based Offeror’s Guidelines for Responding to a Solutions-Based ProcurementProcurement

Submittal LetterSubmittal LetterExecutive OverviewExecutive OverviewTechnical OverviewTechnical OverviewDetailed Explanation of Proposed SolutionDetailed Explanation of Proposed Solution

– ManagementManagementImplementation Schedule, Project Management, Applications Implementation Schedule, Project Management, Applications Develop Methodologies, sub contracting, etc.Develop Methodologies, sub contracting, etc.

– Technical DetailsTechnical DetailsDesign, equipment, performance criteria, data conversion, etc.Design, equipment, performance criteria, data conversion, etc.

– BackupBackup– Intellectual PropertyIntellectual Property– StaffingStaffing– Service LevelsService Levels– Change ManagementChange Management– Training, Installation and SupportTraining, Installation and Support

Offeror’s proposal becomes basis for contractOfferor’s proposal becomes basis for contractAllow Extra Time for Offerors to Prepare ResponsesAllow Extra Time for Offerors to Prepare Responses

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Pre Proposal ConferencePre Proposal Conference

Pre Proposal ConferencePre Proposal Conference– One for RFQ and One for RFP?One for RFQ and One for RFP?– Vendors can seek clarification and additional Vendors can seek clarification and additional

informationinformation– Be careful not to answer questions in terms of a Be careful not to answer questions in terms of a

potential solutionpotential solutionVendors often ask questions to seek a competitive Vendors often ask questions to seek a competitive advantage over and eliminate competitionadvantage over and eliminate competition

– Have Personnel Available to Answer QuestionsHave Personnel Available to Answer Questions– Issue Amendments as AppropriateIssue Amendments as Appropriate

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Proposals and the Evaluation ProcessProposals and the Evaluation Process

Receive Proposals Receive Proposals Evaluation ProcessEvaluation Process (could take 4-6 months)(could take 4-6 months)

– Oral PresentationsOral PresentationsClarification and Through Understanding of ProposalClarification and Through Understanding of ProposalCan not be evaluatedCan not be evaluated

– DemonstrationsDemonstrationsShort ListShort ListCan Be EvaluatedCan Be Evaluated

– ScoringScoring– Evaluators will provide brief justification of scoringEvaluators will provide brief justification of scoring– Demonstration of Highest Scoring SolutionDemonstration of Highest Scoring Solution– NegotiationNegotiation

Negotiate with the highest ranking offeror on matters affecting the Negotiate with the highest ranking offeror on matters affecting the scope of the contract, so long as the overall nature and intent of the scope of the contract, so long as the overall nature and intent of the contract is not changed. Document Negotiations.contract is not changed. Document Negotiations.

– Determinations are be final and conclusive unless they are Determinations are be final and conclusive unless they are clearly erroneous, arbitrary, capricious, or contrary to law. clearly erroneous, arbitrary, capricious, or contrary to law.

Effective NegotiationsEffective Negotiations

The Art of NegotiationThe Art of Negotiation

SC Procurement Code & SC Procurement Code & RegulationsRegulations

– Source Selection RulesSource Selection Rules– Cancellation and Rejection Cancellation and Rejection – Protest ProcessProtest Process– Case LawCase Law

Intellectual PropertyIntellectual Property– Types of LicensesTypes of Licenses– Public DomainPublic Domain– License AgreementsLicense Agreements

Creating Creating Manufacturer’sManufacturer’sNegotiatingNegotiatingGoverning Law, Indemnification Governing Law, Indemnification

– Escrow AgreementsEscrow Agreements– § 11-35-3840. Authorizes License of IT§ 11-35-3840. Authorizes License of IT– License, Ownership, Marketing RightsLicense, Ownership, Marketing Rights– Fees, Royalties, Revenue SharingFees, Royalties, Revenue Sharing– Program-for-HireProgram-for-Hire

Common Law EmploymentCommon Law Employment

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Outsourcing vs. OffshoringOutsourcing vs. Offshoring– Service Level AgreementsService Level Agreements– DeliverablesDeliverables– Data Ownership and Security Data Ownership and Security – ProblemsProblems

Time Zone DifferencesTime Zone DifferencesLanguage BarriersLanguage BarriersCultural DifferencesCultural Differences

IT LeasingIT Leasing– Solicitation vs. Standard Equipment Solicitation vs. Standard Equipment

AgreementAgreement– Lessor’s Standard Lease FormLessor’s Standard Lease Form– State Treasurer's Lease Register State Treasurer's Lease Register – Lease TermsLease Terms– Property TaxesProperty Taxes– Analyzing the LeasesAnalyzing the Leases

Lease vs. PurchaseLease vs. PurchaseCapital vs. OperationalCapital vs. Operational

Financial AnalysisFinancial Analysis– Business PlansBusiness Plans

Risk Analysis, Risk Mitigation, Risk SharingRisk Analysis, Risk Mitigation, Risk SharingFinancing Options, Cost AnalysisFinancing Options, Cost Analysis

– Income Statements, Cash Flow Statements, Income Statements, Cash Flow Statements, Balance SheetsBalance Sheets

Liquidity, Leverage, Profitability, Debt RatingLiquidity, Leverage, Profitability, Debt Rating– Protecting Against BankruptcyProtecting Against Bankruptcy– Limited Liability Corporations (LLC)Limited Liability Corporations (LLC)

Award and Post Award ProcessesAward and Post Award Processes

Award a ContractAward a Contract– Since Vendor Proposed Solution, Vendor is completely responsible for Since Vendor Proposed Solution, Vendor is completely responsible for

performanceperformance

Intent to Award, FOIA, ProtestIntent to Award, FOIA, Protest– 15 Days to Protest15 Days to Protest– 16 Days to Award16 Days to Award– Release Redacted Proposals, Evaluator Notes, Justifications and DeterminationsRelease Redacted Proposals, Evaluator Notes, Justifications and Determinations

ProtestsProtests– Protests are a measure of knowledge and inefficiencyProtests are a measure of knowledge and inefficiency– Protest hearings cost the State upwards of $40,000Protest hearings cost the State upwards of $40,000– Usually, apparent winner did not meet a mandatory specificationUsually, apparent winner did not meet a mandatory specification– Procurement Review Panel will not substitute its judgment for qualified Procurement Review Panel will not substitute its judgment for qualified

evaluators unless evaluator was clearly wrong, arbitrary, capricious, or acted evaluators unless evaluator was clearly wrong, arbitrary, capricious, or acted contrary to lawcontrary to law

Post Award Contract AdministrationPost Award Contract Administration– Change Orders and Contract Amendments approved by Purchasing OfficerChange Orders and Contract Amendments approved by Purchasing Officer– Change orders may be delegated - Change Order Delegation of Authority? Change orders may be delegated - Change Order Delegation of Authority?

(attached)(attached)– Contract controversies resolved by ITMOContract controversies resolved by ITMO

Attachments and LinksAttachments and Links

Delegation of Authority for Contract AdministrationDelegation of Authority for Contract Administration

Guidelines for Preparing a Solutions-Based SolicitationGuidelines for Preparing a Solutions-Based Solicitation

Guidelines for Responding to a Solutions-Based Guidelines for Responding to a Solutions-Based SolicitationSolicitation

State Portal Specifications State Portal Specifications www.cio.state.sc.us/itmo/solution/portal.docwww.cio.state.sc.us/itmo/solution/portal.doc

ARE YOU READY?ARE YOU READY?– Training and Certification of IT Procurement OfficialsTraining and Certification of IT Procurement Officials– Starting January 2005Starting January 2005

How Can We Make It Better?How Can We Make It Better?

TeamworkTeamwork– Business SpecialistsBusiness Specialists– Financial SpecialistsFinancial Specialists– TechnologistsTechnologists– Project ManagerProject Manager– Procurement OfficerProcurement Officer– LegalLegal– Everyone involved from beginning in definition, Everyone involved from beginning in definition,

creation of contract, implementation, project creation of contract, implementation, project completion.completion.

Information Technology Information Technology Management OfficeManagement Office

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ProcurementsProcurements