NIGP 8/8/06NIGP 8/8/06 11

Solutions-Based Procurement Solutions-Based Procurement for Information Technology for Information Technology

AcquisitionsAcquisitions

Michael B. SpicerMichael B. SpicerSouth Carolina Chief Procurement South Carolina Chief Procurement Officer for Information TechnologyOfficer for Information Technology

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Gartner and ForresterGartner and Forrester

–70% - 75% of all IT projects fail70% - 75% of all IT projects fail

–Success Criteria:Success Criteria:

On timeOn time

Within BudgetWithin Budget

Originally Defined FunctionalityOriginally Defined Functionality

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Background South CarolinaBackground South Carolina

Consolidated Procurement Code Consolidated Procurement Code enacted in 1981enacted in 1981

– Based on the ABA Model Code drafted Based on the ABA Model Code drafted in 1970sin 1970s

– Preferred source selection method is Preferred source selection method is Invitation To BidInvitation To Bid

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Background South CarolinaBackground South Carolina

1981 Code - Request For Proposals1981 Code - Request For Proposals

– Seven Paragraphs Seven Paragraphs

– ““The request for proposals shall state the The request for proposals shall state the relative importance of price and of each other relative importance of price and of each other evaluation factor …”evaluation factor …”

– Negotiations limited to price.Negotiations limited to price.

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Background South CarolinaBackground South Carolina

1993 1993 – Expanded negotiations to include scopeExpanded negotiations to include scope– Price need not be an evaluation factorPrice need not be an evaluation factor

19971997– Two-Part RFPTwo-Part RFP

Request For Qualifications Request For Qualifications

RFPRFP– Best Value Bidding Best Value Bidding

Cost at least 60%, other factors 40%Cost at least 60%, other factors 40%

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Gartner and ForresterGartner and Forrester

70% - 75% of all IT projects fail70% - 75% of all IT projects fail

Success Criteria:Success Criteria:–On timeOn time

–Within BudgetWithin Budget

–Originally Defined FunctionalityOriginally Defined Functionality

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A Prescription for FailureA Prescription for Failure

The Boss or end user calls IT The Boss or end user calls IT department and says:department and says: – I need this reportI need this report

– I need to process this formI need to process this form

– I need to automate this processI need to automate this process

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A Prescription for FailureA Prescription for Failure1970s 1970s – Data Processing was in the “glass” roomData Processing was in the “glass” room– All IT acquisitions were data processing All IT acquisitions were data processing

department responsibilitydepartment responsibility– IT Director assigns someone to manage IT Director assigns someone to manage

projectprojectThe best programmer in the departmentThe best programmer in the department

The programmer not busy at the timeThe programmer not busy at the time

Maybe even a programmer analystMaybe even a programmer analyst

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““Problem” DefinitionProblem” Definition

Project Manager meets with end user to Project Manager meets with end user to identify the problemidentify the problem

– End users identify problems in terms of End users identify problems in terms of symptomssymptoms

– Technologists identify problems in terms Technologists identify problems in terms of solutionsof solutions

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End Users Define Problems in Terms of End Users Define Problems in Terms of SymptomsSymptoms

Symptoms may emanate from more than one Symptoms may emanate from more than one problemproblem

One problem may generate more than one One problem may generate more than one symptomsymptom

There may be multiple symptoms emanating There may be multiple symptoms emanating from multiple problemsfrom multiple problems

Fixing symptoms may not solve the problemFixing symptoms may not solve the problem

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Technologists Define Problems in Technologists Define Problems in Terms of SolutionsTerms of Solutions

Search the marketplace looking at possible Search the marketplace looking at possible solutions to the “Problem”solutions to the “Problem”

The Solutions are identified in terms of The Solutions are identified in terms of

– Software and/or hardware that solves the Software and/or hardware that solves the end user’s “Problem”end user’s “Problem”

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““Problem” DefinitionProblem” DefinitionThe Problem is not a set of symptomsThe Problem is not a set of symptomsThe problem is not a technological The problem is not a technological problemproblemThe Problem is a business problemThe Problem is a business problem– I need to perform a business operation more I need to perform a business operation more

efficientlyefficiently– I need to perform a newly assigned business I need to perform a newly assigned business

operationoperation

Define the Problem, not a solutionDefine the Problem, not a solutionTechnology is not the Problem, IT is a Technology is not the Problem, IT is a solutionsolution

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Detailed SpecificationsDetailed Specifications

After reviewing as many solutions as time After reviewing as many solutions as time allows (6 mos.), the end user and project allows (6 mos.), the end user and project manager create detailed specificationsmanager create detailed specifications– Define an existing manual or automated Define an existing manual or automated

systemsystem– Define specific vendor’s solutionDefine specific vendor’s solution– Define a solution that does not existDefine a solution that does not exist

Can anyone say PROTEST?Can anyone say PROTEST?

– Define a minimum acceptable level of Define a minimum acceptable level of performanceperformance

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Firm-Fixed PriceFirm-Fixed Price

We ask vendor to propose a firm-fixed We ask vendor to propose a firm-fixed price for a poorly defined “Problem” price for a poorly defined “Problem”

Question:Question:

If you define the solution and it does not If you define the solution and it does not work, who is responsible?work, who is responsible?

If the vendor defines the solution and it If the vendor defines the solution and it does not work who is responsible?does not work who is responsible?

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Contract ManagementContract Management

State’s Project ManagerState’s Project Manager – Technologist – Technologist– ““Problem” not properly & completely definedProblem” not properly & completely defined

ContractorContractor– Contract signers and promisers never seen Contract signers and promisers never seen

againagain– Contractor’s PM – ProfessionalContractor’s PM – Professional

Efficient, profitable project – success optionalEfficient, profitable project – success optional– Contract Compliance ManagerContract Compliance Manager

Make sure contractor complies with contractMake sure contractor complies with contractGenerate change orders whenever possibleGenerate change orders whenever possible

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Failure to Define the ProblemFailure to Define the Problem

Failure to properly and completely identify Failure to properly and completely identify the Business Problem results in:the Business Problem results in:

– Scope CreepScope Creep

– DelaysDelays

– Cost OverrunsCost Overruns

– Contract Modifications and Change Orders Contract Modifications and Change Orders (maybe)(maybe)

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A Solutions-Based ProcurementA Solutions-Based Procurement

Request for QualificationsRequest for Qualifications

Request for ProposalsRequest for Proposals

Pre Proposal ConferencePre Proposal Conference

Receipt of ProposalsReceipt of Proposals

EvaluationEvaluation

AwardAward

Looks like an RFP, doesn’t it?Looks like an RFP, doesn’t it?

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Request For QualificationsRequest For Qualifications

A description of the scope of the work to A description of the scope of the work to be solicited by the RFPbe solicited by the RFPRequire information only on their Require information only on their qualifications, experience, and ability to qualifications, experience, and ability to perform the requirements of the contract. perform the requirements of the contract. Responses ranked from most qualified to Responses ranked from most qualified to least qualified.least qualified.Proposals solicited from at least the top Proposals solicited from at least the top two qualified offerorstwo qualified offerorsFailure to be selected to receive RFP is Failure to be selected to receive RFP is not subject to protestnot subject to protest

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The Solutions-Based RFPThe Solutions-Based RFP

Organizational BackgroundOrganizational BackgroundDefine the Current Business EnvironmentDefine the Current Business EnvironmentDefine the Current Technical EnvironmentDefine the Current Technical EnvironmentDefine the Business PROBLEMDefine the Business PROBLEMDemonstrationsDemonstrationsBusiness Proposal or CostBusiness Proposal or CostOptions Options Minimum Offeror QualificationsMinimum Offeror QualificationsEvaluation CriteriaEvaluation CriteriaDesired Proposal FormatDesired Proposal Format

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Organizational BackgroundOrganizational Background

Organizational HistoryOrganizational History

MissionMission

Agency BudgetAgency Budget

Organizational StructureOrganizational Structure

Number of Employees Number of Employees

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Define the Current Business Define the Current Business EnvironmentEnvironment

Current Processes and Procedures Directly or Current Processes and Procedures Directly or Indirectly Related to This ProjectIndirectly Related to This Project

Current Legal or Business MandatesCurrent Legal or Business Mandates

Any Procedural or Process Documentation Any Procedural or Process Documentation Directly or Indirectly Related to This ProjectDirectly or Indirectly Related to This Project

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Define the Current Technical Define the Current Technical EnvironmentEnvironment

All Hardware and Software Currently Used All Hardware and Software Currently Used to Address the Requirements of This to Address the Requirements of This ProjectProject

Any Currently Owned or Operated Any Currently Owned or Operated Hardware or Software That Could or Hardware or Software That Could or Should be Utilized to Solve The ProblemShould be Utilized to Solve The Problem

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Define the ProblemDefine the Problem

Define the Problem, Not The SolutionDefine the Problem, Not The Solution

The Problem is ALWAYS a Business The Problem is ALWAYS a Business ProblemProblem

Business Problems Can Include Legal Business Problems Can Include Legal MandatesMandates

Technology is a Solution, Not the ProblemTechnology is a Solution, Not the Problem

Define the Budget Range for this ProjectDefine the Budget Range for this Project

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Evaluating Demonstrations?Evaluating Demonstrations?

DemonstrationsDemonstrations

– ValidationValidation

Highest Ranked Offeror, Not ScoredHighest Ranked Offeror, Not Scored

– Demonstration EvaluationsDemonstration Evaluations

All OfferorsAll Offerors

Short ListShort List

–All Offerors within a percentage of All Offerors within a percentage of the highest ranked offerorthe highest ranked offeror

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Perform Agency Risk AnalysisPerform Agency Risk Analysis

Perform agency risk analysisPerform agency risk analysis

– Identify any internal or external political, Identify any internal or external political, business, or technological factors or business, or technological factors or issues that may affect the successful issues that may affect the successful completion of this project.completion of this project.

– There may be opportunities to shift There may be opportunities to shift agency risk to contractor in the agency risk to contractor in the solicitationsolicitation

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Business Proposal or Cost?Business Proposal or Cost?

If cost is not an evaluation criteria, you If cost is not an evaluation criteria, you may consider a business proposal may consider a business proposal including cost and submitted with technical including cost and submitted with technical proposal, orproposal, or

A Business Proposal with Cost submitted A Business Proposal with Cost submitted separatelyseparately– Require a Bill of Materials without cost be Require a Bill of Materials without cost be

included in technical proposalincluded in technical proposal

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Business Proposal?Business Proposal?

Total Cost of OwnershipTotal Cost of OwnershipRisk Analysis of proposed solutionRisk Analysis of proposed solutionRisk Mitigation PlanRisk Mitigation PlanOpportunities for Risk SharingOpportunities for Risk SharingPerformance Incentives (maybe allowed)Performance Incentives (maybe allowed)Financing OptionsFinancing OptionsImplementation ScheduleImplementation Schedule– Staff Deployment ScheduleStaff Deployment Schedule– Milestones and DeliverablesMilestones and Deliverables– Payments tied to DeliverablesPayments tied to Deliverables

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Cost?Cost?

Offeror to include project risk analysis, risk Offeror to include project risk analysis, risk mitigation plan, implementation plan, mitigation plan, implementation plan, options, staffing plan, and bill of materials options, staffing plan, and bill of materials (without pricing) in the technical proposal(without pricing) in the technical proposal

TCO, financing options, performance TCO, financing options, performance incentives submitted under separate incentives submitted under separate cover to include Bill of Materials with cover to include Bill of Materials with itemized cost.itemized cost.

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Considering OptionsConsidering Options

Offerors may have multiple solutions to the Offerors may have multiple solutions to the same functional requirement, each of same functional requirement, each of which will work fine with their solution.which will work fine with their solution.Offerors may propose options that shift Offerors may propose options that shift riskriskOfferor must fully explain each available Offeror must fully explain each available option, the cost delta for each option and option, the cost delta for each option and the exact parts of the original proposal for the exact parts of the original proposal for which the option may be substituted.which the option may be substituted.Each option will be considered prior to Each option will be considered prior to commencing full proposal evaluationcommencing full proposal evaluation

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Offeror’s Original ProposalOfferor’s Original Proposal

Offeror’sTechnical Proposal

Offeror’sBusiness Proposal

-$$

-$$$

+$

Fully compliant with all the specifications, terms, and conditions

B o MBill of Materials

Total Cost of

Technical Proposal

Risks or Options

$$$$$$$$$$$$$$$

Offeror’sNew

Technical Proposal

Why should the State accept the proposed Risk or Option?

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Determine Evaluation Determine Evaluation MethodologyMethodology

Traditional RFP Evaluation CommitteeTraditional RFP Evaluation Committee

RFP Evaluation Committee RFP Evaluation Committee – Subject Matter Consultants AvailableSubject Matter Consultants Available

Subject Matter EvaluationsSubject Matter Evaluations

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Subject Matter EvaluationSubject Matter Evaluation

Program personnel only evaluate program Program personnel only evaluate program portions of proposalportions of proposalTechnologists only evaluate technology Technologists only evaluate technology portions of proposalportions of proposalBusiness personnel only evaluate Business personnel only evaluate business portions of the proposalbusiness portions of the proposalThese areas may be further subdividedThese areas may be further subdividedEvaluation criteria for each subject area or Evaluation criteria for each subject area or SME scores roll up into a superset SME scores roll up into a superset evaluation criteria.evaluation criteria.

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Determine Evaluation CriteriaDetermine Evaluation Criteria

Functional Capabilities:Functional Capabilities: How well does the How well does the proposed solution meet the needs of the State as proposed solution meet the needs of the State as identified herein.identified herein.

Technical and Performance Capabilities:Technical and Performance Capabilities: How How well do the technical and performance capabilities of well do the technical and performance capabilities of the proposed solution meet the needs of the State.the proposed solution meet the needs of the State.

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

CostCost

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Determine Evaluation CriteriaDetermine Evaluation CriteriaInstallation and Support: Installation and Support: The degree to which the The degree to which the proposed installation and support capabilities meet proposed installation and support capabilities meet the needs of the State.the needs of the State.

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

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

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Set Desired Proposal FormatSet Desired Proposal Format

Submittal LetterSubmittal Letter

Executive OverviewExecutive Overview

Technical OverviewTechnical Overview

Detailed Technical Explanation of Detailed Technical Explanation of Proposed Solution with specificationsProposed Solution with specifications

Any Available OptionsAny Available Options

Business ProposalBusiness Proposal

Offeror’s QualificationsOfferor’s Qualifications

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Evaluation and AwardEvaluation and Award

Evaluation of OptionsEvaluation of Options

Oral Presentations and DiscussionsOral Presentations and Discussions

Initial EvaluationInitial Evaluation

DemonstrationsDemonstrations

Final ScoringFinal Scoring

Demonstration of Highest RankedDemonstration of Highest Ranked

NegotiationsNegotiations

AwardAward

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Final and ConclusiveFinal and Conclusive

The determinations required by the Code The determinations required by the Code are final and conclusive, unless clearly are final and conclusive, unless clearly erroneous, arbitrary, capricious, or erroneous, arbitrary, capricious, or contrary to law: contrary to law:

No SpecificationsNo Specifications – No Protest – No Protest

Request for QualificationsRequest for Qualifications – No Protest – No Protest

AwardAward – No Protest – No Protest

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ConclusionConclusion

Define the Problem, not the solutionDefine the Problem, not the solution

Technology not the problem, IT is a solutionTechnology not the problem, IT is a solution

Reduce the probability of a successful protestReduce the probability of a successful protest

A successful IT project must include people:A successful IT project must include people:– Program PeopleProgram People– TechnologistsTechnologists– Project ManagersProject Managers– ProcurementProcurement– Financial Financial – LegalLegal

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Questions?Questions?