November 8, 2011 By Justine Brown
Perhaps no one knows this challenge better than Dugan Petty, who worked in state procurement in Alaska and Oregon before becoming Oregon’s CIO. “The alignment of technology and procurement has always had a lot of tension to it,” he said. “Years ago in Alaska, we were attempting to buy technology solutions using a standard set of terms and conditions that didn’t contemplate the kind of dynamics going on in the IT world. The driver was always to make sure we met the procurement laws first and perhaps secondary was whether or not we actually achieved the outcomes we were looking for.”
Petty took on a mission to negotiate new terms and conditions that apply more appropriately to IT procurements in Alaska and later in Oregon. “When I got [to Oregon] we were dealing with the same issue.”
Oregon’s IT contract terms and conditions weren’t in line with industry practices or consistent with market expectations. So IT suppliers weren’t submitting responses and procurements weren’t delivering cost-competitive solutions.
In January 2009, Oregon’s Department of Administrative Services State Procurement Office, led by Petty, and the state’s CIO Management Council created a task force made up of agency stakeholders and TechAmerica. The task force explored terms and conditions commonly used for IT agreements, and discussed alternative strategies to solicit, negotiate and administer IT contracts. Members also explored stakeholder concerns, developed templates for frequently used IT contract terms and conditions, and developed guidance around the use of those templates.
The members eventually agreed on more than 100 proposed revisions to Oregon’s IT contract terms and conditions. The resulting templates now provide a starting point for developing contracts that support different types of IT projects, such as those that require consulting and solution development, software licenses and hardware. And they reflect collaboration among task force participants on such issues as risk allocation, liability, ownership and warranties.
Complex contract terms and long procurements can even discourage the formation of new companies. Even though government IT is a large and stable market, the number of startups formed to address it has been comparatively small.
“I’ve advised a number of venture capitalists and institutional investors who want to create new products for the public sector,” said Miri. “They see the opportunity, and many of them want to give back to their communities. But they are always frustrated by the same problem ... the procurements and contracts are just too complex.”
No. 4: Procurement rules result in poor communication.
How much a contractor knows coming into a procurement, and how well that company understands the requirements, can make the difference between an agency getting the right or wrong solution. Yet current procurement rules often prevent or restrict the types of communications that take place.
“Overall, more communication with the bidders decreases the chances of an unpleasant surprise or people walking away if they find their expectations are off,” Kerr said.
Massachusetts is one example of an entity that’s recognized this issue and is making changes to improve the situation. “The commonwealth has made some strides in pre-bid discussions with the vendor community, more meetings and incorporating vendor thinking into their RFQs [requests for quotation],” said Kerr. “Other states have a two-tiered approach, first doing an RFI and then later with the RFQ. It drags out the process further but it seems to improve the communications and understanding either side has of the others’ requirements and needs.”
There must be some way to begin making incremental decisions about the selection process, which creates a better fit for what an agency is trying to do, Petty said. “It comes down to better communication. When you look at the projects that are not successful, I believe some of the seeds of failure are in the procurement process. We build some of that in and then people blame it on lack of project oversight. But no amount of contract compliance or oversight solves the fact that the project is flawed from the beginning.”
Petty said better communication and engagement of vendors incrementally is a step in the right direction. He recently saw a private company in Oregon experiment with this approach with a great degree of success. Over the course of a week, the company invited three suppliers to its office and sat down in a conference room day after day to talk about what it was trying to accomplish, including what architecture it wanted and what its business interest ultimately was.
“They opened themselves up completely,” Petty said. “Then they created a dialog among the three about potential solutions. They talked it all out rather than creating a document that might not explain it well. Then they sent the three companies out to come up with proposals and eventually they picked one. That’s what we should be doing.”
No. 5: Governments need better procurement expertise.
Government procurements create huge demands on agencies and their lawyers. Yet the number of skilled and experienced people assigned to work on procurements is often limited. There’s a need to hire and train government staff about new types of technologies and service delivery so they can better understand what they are procuring.
“If I’m going to put a new driveway in at my house, I might not know how to do it,” said Petty. “If I don’t know how, why not have a conversation with driveway companies so I at least understand the basics of what I’m trying to procure? Sometimes we create processes that inhibit those conversations, and it gets harder in IT because we are ultimately trying to enable a business process, yet sometimes we don’t understand that business ourselves. How do you succeed in that environment?”
When the White House issued Kundra’s report on federal IT reform, some of the sharpest directives and choicest words were reserved for this problem. The task of designing and developing “a cadre of specialized IT acquisition professionals” was placed front and center. To improve the situation, Kundra proposed a three-pronged strategy that included classroom training, on-the-job experience and mentorship. Also core to the improvement was the gathering and disseminating of best practices from government and the private sector. Moreover, the training was actually embedded into the job requirements of program and project managers.
While it’s good news that agencies are seeking ways to legally work through some of the procurement obstacles they face, there’s still a long road ahead. Perhaps the track record for good, solid government procurements will continue to improve, and memories of huge failures will fade, allowing for just enough relaxation of the rules to permit more innovative and interesting solutions to rise to the top. After all, according to Petty, it’s more about perception than reality.
“I don’t think government projects fail more than those in the private sector; they are just more visible,” he said. “We have an important obligation to try to figure out how to deliver these projects in a way that increases our odds of having the project come out as expected.”
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