In his book Free, author and Wired magazine editor Chris Anderson insisted that "the trend lines that determine the cost of doing business online all point the same way: to zero."
On behalf of federal agencies, the U.S. General Services Administration found a way to pay for things that could have been used for free. It took most of a year to negotiate contracts with Facebook, MySpace, Flickr, YouTube, Vimeo, Blist, SlideShare, AddThis and blip.tv that met federal standards. We're told there are more to come. The model makes more sense for social platforms -- such as OpenSocial, Socialcast and KickApps -- that let purchasers support private-label Web social networking and microblogging.
Such changes in the way that software moves from being a purchased product to a consumed service should draw attention to the not-so-subtle difference between procuring a commodity product versus a dynamic set of services that cater to the public's evolving needs for -- and expectations of -- online services. Public procurement processes were forged around the former, some of which have proven unhelpful with the latter. That said, a number of states have begun to adapt their procurement practices to reconcile past practices with today's practices and tomorrow's prospects.
For example, as the Center for Digital Government documented in a recent white paper, Texas recently rebid its TexasOnline portal contract to NIC. Procurement officials worked closely with the lead agency, the Department of Information Resources (DIR), to run a competitive procurement that protected and promoted the state's interests, while adapting to the realities of contemporary technology business models, which included:
- Pricing: On the question of "free," or how procurement evaluates a no-cost service, Texas evaluated the bidders' investment in portal services over the life of the contract, and how the vendor planned to deliver upon the state's desired business model.
- Contract length: Many states limit contract length, but a transaction-based enterprise portal may require several years for the state or private-sector provider to recoup the initial investment. Texas chose to provide an initial seven-year term, with renewals if the vendor is performing at satisfactory levels. This gives ample time to make necessary investments in services during the life of the contract.
- Terms and conditions: Texas understood the difference between model and mandatory contract terms, recognizing that potential bidders may stay on the sidelines because of rigid language. Texas included a base contract in the request for offer and asked bidders to provide exceptions and additional terms in their responses. This set a baseline for negotiations, but didn't eliminate potential bidders that couldn't meet all of Texas' terms.
- Contract structure: Form follows function. Texas wanted to maximize the number of agencies that would participate in the portal over the life of a multiyear contract. Texas used a simple contract structure that featured a single master contract, with baseline terms for the overall services. Agencies that elect to participate will execute a customer agreement, which defines the specific services to be provided, as well as any changed or additional terms and conditions. This contract structure allows the flexibility to adapt for services that are unforeseen when the master contract is signed.
The goal of the procurement was to maximize competition by providing enough flexibility to attract the best available portal service providers to the competitive rebid, while delivering a contract that could adapt to the immediate and future goals of the DIR and TexasOnline.
That may put a glossy sheen on what was a protracted, difficult process. As one former official familiar with the process told me, "I don't consider that contract to be terribly innovative for a portal, but it is definitely light years ahead of most procurements."
One small step for a portal. One giant step for public procurement.