As demand for computing power increases, government agencies face an unending procurement dilemma – how to acquire the right technology at the lowest prices, particularly in the face of shrinking budgets and tighter purse strings.
Purchasing groups exist to negotiate competitive rates and help public-sector organizations buy everything from auto parts to notepads. But when it comes to procuring IT products, Oklahoma and Texas may have found a winning formula.
The Oklahoma Office of Management and Enterprise Services, Information Services Division (OMES-ISD) and the Texas Department of Information Resources (DIR) have partnered in a multi-state procurement cooperative for technology equipment and services. The one-year pilot specifies that Texas will be Oklahoma’s “preferred source” for buying tech items. The contract was signed in June and can be extended in perpetuity if both parties agree.
One state buying an item off another state’s purchasing contract isn’t new – the practice of cooperative purchasing is fairly common, according to Mary Cheryl Dorwart, director of DIR’s Technology Sourcing Office. But she felt the Oklahoma-Texas partnership was “pretty novel,” due to Oklahoma’s classification of Texas as its preferred source for tech purchases.
Bo Reese, interim Oklahoma CIO, said going to Texas for his state's technology needs provides access to extensive IT portfolios and allows for greater economies of scale in purchasing. Alex Pettit, former CIO of Oklahoma and now CIO of Oregon, agreed, and noted that the deal should be able to secure better prices for state and local governments.
In a fictitious example, Pettit explained that if 32,000 copies of Microsoft Office are needed for all the endpoints (users) in Oklahoma, Texas can take that exact number, combine it with its own statistics and establish an “order-in-hand.” By having set numbers, Texas theoretically will be in a better position to get a more competitive contract price from vendors.
Discussions about a possible Oklahoma-Texas partnership first took place in August 2013, with the idea that both states could benefit from the alliance. The gain for Oklahoma is obvious – better pricing on IT purchases for the state and local government agencies, which are also permitted to take advantage of the deal. For Texas, however, the union could also be lucrative.
Dorwart noted that by having Oklahoma included in its stable of buyers, it increases Texas’ sales volume and therefore, the negotiating power the state has with vendors. In addition, she said the DIR tags an administrative fee onto all the purchases that are made from its contracts. So by increasing the volume on the contracts, it could eventually lead to a lower fee because of increased revenue.
Though the deal benefits both states, joining forces wasn’t easy for them. Pettit said there was a lot of “back and forth” between both sides. Pettit, along with Texas CIO Karen Robinson and Preston Doerflinger, Oklahoma’s secretary of Finance, Administration and Information Technology, were some of the key individuals spearheading the effort.
“We started off with a very broad scope of things we wanted to do and ended up having to narrow that and get through what we could get through,” Pettit said. “You would think the agencies could very quickly come to an agreement, but not so much. There was a lot of stuff we had to work out.”
Most of that centered on identifying statutory constraints, authority and alignments between the states, according to the OMES' Reese, who added that state-specific questions were addressed individually, while a collaborative approach was used for alignment questions between the states.
Dorwart felt that setting the relationship up as a pilot program was a smart move, because it enabled the states to partner without trying to envision and solve all possible conflicts at once. The states have the ability to adjust their agreement as they proceed through the process. But the partnership was codified using a version of Texas’ standard interlocal agreement forms that was modified to account for Oklahoma identifying Texas as its preferred source for technology purchases.
“We knew what we were committing to – we’re running a cooperative contracts program,” Dorwart said. “We’re doing the same thing for Oklahoma that we’re doing for all of our customers in terms of running the program. But the more difficult thing was really defining what it is that Oklahoma is committing to from the purchasing perspective.”
The partnership wasn’t consummated until after Pettit left Oklahoma to become Oregon’s CIO in January. Oklahoma made a $40,000 IT purchase from Texas’s state contracts in June, according to Dorwart. Matt Singleton, chief operations and accountability officer for OMES-ISD, told Government Technology in an email that one of the state's agencies purchased "networking and optical equipment" from the DIR's contract with Alcatel-Lucent.
Assuming future transactions go smoothly, all parties agreed that the arrangement might serve as a good purchasing model for other states. Pettit, however, had some guidance for those considering it.
Pettit noted that if fellow state CIOs are leading the charge for a purchasing partnership, it’s helpful if the CIOs have IT purchasing authority. He and Robinson had it, and agreed very quickly to do something together, even if the development took a while. Had that authority belonged to others, adding more people to the decision-making process could have further slowed progress.
Also, Pettit felt that states should focus on partnering with other states that share the same philosophies. For example, it might not work smoothly if one state was fully consolidated while the other wasn’t. It would make coming up with solid numbers more difficult.
Dorwart added that Texas would consider being a “preferred source” of technology for another state if the situation presented itself and was beneficial to both parties. She said that Texas’ procurement expertise is in technology, but another benefit of working with DIR is that its customers also have the opportunity to further negotiate pricing and other requirements with tech vendors based on volume and quantity.
Reese was in favor of continued collaboration across government entities and encouraged other states to take a look at the Texas and Oklahoma technology purchasing partnership.
“If other states can reap the benefits of increased economies of scale as a result of the work we’ve started – that’s a great thing,” Reese said. “This is the type of innovation we think government can use more often to improve service quality while stretching the taxpayer dollar as far as it can go.”
Editor's Note: This story has been edited to clarify various procurement details.