Purchasing Directors’ Meeting December 15, 2011

1. Purchasing Directors’ Meeting December 15, 2011

2. Agenda • State Purchasing Leadership and Organization – Kelly Loll, DMS • DFS Statewide Contract Reporting System Update – Elwood McElhaney, DFS • PPIP Update & Survey – Hal Houston, DMS • Hot Topics • W-9 Update – Eric Swanson, DMS  • Review of Proposed Bills – Dick Chatel, DMS • eQuote Update – MFMP team members • MFMP December release – MFMP team members

3. Agenda • Spikes-Cavell pilot – Cliff Chroust, DMS • Database clean-up – Kelly Loll, DMS • State Purchasing Marketing and Communications – Linda McDonald, DMS • Other Submitted Topics – PDs and DMS • Purchasing Directors’ Meeting Frequency and Format – Kelly Loll, DMS

4. Division Leadership & Organization • Kelly Loll, State Purchasing Director Effective December 7 • Reorganization within Division of State Purchasing • Group Category Managers (Bureau Chiefs) • Category Managers • Associate Category Managers • Contract Managers

5. Division Leadership & Organization Category Tree Key Class Group Family Category SubCategory

6. Division Leadership & Organization • Welcome Cliff Chroust and Dick Chatel • Also part of State Purchasing: • Office of Supplier Diversity • Private Prison Monitoring Bureau • Fleet Management Bureau and Federal Property Assistance

7. Statewide Contract Reporting System • Elwood McElhaney, DFSDivision of Accounting and Auditing • 2011 Florida Legislature enacted Senate Bill 2090 to amend section 215.985, Florida Statutes • Creates “Transparency Florida” Web portal • Provides visibility to state contracts procured by both executive and cabinet agencies • Gives Floridians increased visibility in how state government is doing business • DFS and DMS discussing ways to maximize the MFMP system • Support this important transparency project • Leverage efficiencies already in place in MFMP

8. Stage One – Need IdentificationFlorida Best Practice Gap Analysis Procurement Process Improvement Plan

9. Stage One – Gap Analysis Overview • The aim of this document is to provide an overview of the gaps between the current process used by State Agencies to identify a sourcing need and industry best practices. • This Stage One Assessment includes: • A review of State Agency’s current competitive sourcing processes • A summary of best practice in exploring a competitive procurement opportunity • The identification of gaps and opportunities to better align current processes with best practices • A recommendation of standard templates to apply to the current stage

10. Florida Strategic Sourcing Methodology Kick - - Off Screen Screen Shape & Shape & Stage Two: Pre-Solicitation Stage Three: Solicitation Preparation Stage Five: Evaluation Process Stage Six: Award Process Stage Seven: Contract Process Stage One: Need Identification Profile Profile Stage Four: Solicitation Conduct Conduct Develop Develop & Vendors & Vendors & Negotiate Negotiate Implement Internally & Internally & Auctions & Auctions & Strategy Strategy Selection Selection Assess Value Value Agreements Externally Externally Opportunities Factors Factors Propositions Identify internally/externally the need for purchase or establishment of a new contract. Level High - Identify Need S1.1 Identify procurement exceptions as per Florida Statute. Determine Applicable Sourcing Exceptions S1.2 Analyze existing contract sources by applying the Decision Tree. S1.3 Determine whether a sourcing event is required. S1.4 Establish Approach Review special approvals or restrictions applying to certain purchases. S1.5 Need Documented in Sourcing Tool Outcomes

11. Stage One – Current State Summary Observations Steps: • Approach varies greatly amongst State Agencies • Sourcing process can be seen by requisitioners as a roadblock or ‘necessary evil’ to make a purchase Need Identification S1 • When approaching the end of a current agreement, the rebid/renewal process more often follows a similar approach • When a new need is identified, the customer often handles this step with little to no involvement from Procurement Identify internally/externally the need for purchase or establishment of a new contract. Level High - S1.1 • While many procurement decisions / restrictions are outlined in statute or rule, the application of these decisions vary by State Agency. Identify procurement exceptions as per Florida Statute. S1.2 Analyze existing contract sources by applying the Decision Tree. • Decision trees are not often formally documented and vary by State Agency. S1.3 • In pursuing a sourcing event, team size and engagement can be limited based on the size and bandwidth of the procurement office • Some customers develop their own internal teams, excluding Purchasing Determine whether a sourcing event is required. S1.4 • Special approvals and restrictions vary by State Agency and can be dependent on the commodity or service being sourced, the origin of funding (e.g., grants often have specific purchasing restrictions), and the amount of the purchase. Review special approvals or restrictions applying to certain purchases. S1.5 Need Documented in Sourcing Tool Outcomes

12. Stage One – Best Practice Purpose Steps: • Conduct a preliminary assessment of the opportunity and confirm appropriate sourcing/procurement approach Need Identification S1 • Identify and document the procurement need • Internal need identified through means such as spend assessment or contract expiration • External need identified through customer request Identify internally/externally the need for purchase or establishment of a new contract. Level High - S1.1 • Clearly documented procurement exceptions enables the procurement professional quickly identify the best course of action based on the procurement need Identify procurement exceptions as per Florida Statute. S1.2 Analyze existing contract sources by applying the Decision Tree. • A Decision Tree provides an illustrative breakdown of the procurement options based on the established hierarchy S1.3 • Based on the Decision Tree recommendation and other information collected during this stage, the procurement professional can determine whether a solicitation is required to meet this procurement need Determine whether a sourcing event is required. S1.4 Review special approvals or restrictions applying to certain purchases. • When entering a solicitation process, it is important to identify and plan for any special approvals or restrictions which may apply S1.5 Need Documented in Sourcing Tool Outcomes

13. Stage One – Gap Analysis Opportunities for Improvement Steps: • Standardize the process for sourcing competitive procurement opportunities • Encourage customers to engage Procurement team early in the process, especially when a new need is identified • Promote the sharing of spend data and reports amongst agencies Need Identification S1 • Develop Spend Assessment Job Aid to enable State Agencies to observe trends in Purchasing • Encourage customers to engage Procurement earlier in the needs identification process to enable proactive versus reactive collaboration (communication to include benefits to customer) Identify internally/externally the need for purchase or establishment of a new contract. Level High - S1.1 Identify procurement exceptions as per Florida Statute. • Develop a Procurement Exceptions Table documenting all procurement exceptions by Agency, as per Florida Statute S1.2 • Develop a decision tree for determining how an opportunity should be pursued based on key indicators (e.g., price, funding, existing agreements) Analyze existing contract sources by applying the Decision Tree. S1.3 • Provide guidance through the Decision Tree as to when sourcing events are required Determine whether a sourcing event is required. S1.4 • Develop a list of Special Approvals or Restrictions which apply to certain purchases Review special approvals or restrictions applying to certain purchases. S1.5 • Leverage Sourcing Tool project timeline to assign owners and due dates to key project activities Need Documented in Sourcing Tool Outcomes

14. Complete Fact Finding Agenda with support Complete initial project details (title, lead, commodity codes, etc) Log into MFMP Sourcing and create a new Sourcing Project Stage One – Proposed Process Flow This diagram illustrates the proposed collaboration between State Agencies and their Customers in identifying a competitive strategic sourcing opportunity. Support Completion of Fact Finding Agenda *Identify a need not currently met by an existing Agreement Notify relevant Purchasing Manager of procurement need Internal Customer *Anticipate the end of a current contract period Sourcing Lead A Purchasing Manager Assign appropriate Purchasing Lead Support Completion of Fact Finding Agenda *Conduct an annual Spend Assessment Purchasing Data Analyst Identify a need not currently met by an existing Agreement Notify relevant Purchasing Manager of potential opportunity Support Completion of Fact Finding Agenda *Conduct an annual Customer Survey *Note: Any one of these actions can trigger the beginning of this process.

15. Stage One – Proposed Process Flow This diagram illustrates the proposed collaboration between State Agencies and their Customers in identifying a competitive strategic sourcing opportunity. Internal Customer Review procurement exceptions, as per Florida Statute Use Decision Tree to analyze existing contract sources Determine whether a sourcing event is required. Review special approvals or restrictions. Assign Team Members based on approval requirements Move to Stage 2: Pre-Solicitation Sourcing Lead A Purchasing Manager Approve sourcing event decision Purchasing Data Analyst

16. Stage One – Recommended Templates • Annual Customer Survey to identify opportunities at the ‘grass-roots’ level • Annual Spend Analysis a Job Aid to enable State Agencies to run analysis in MFMP, ‘sample reports’ from State Purchasing • Stakeholder Notification Process / Communication to engage Procurement team early in the process • Procurement Exceptions Table a comprehensive documentation of all procurement exceptions by Agency, as per Florida Statute • Decision Tree to determine determining how an opportunity should be pursued based on these key indicators with reference to forms • Special Approvals or Restrictions a list of known and recommended approvals and restrictions which apply to certain purchases (agency specific) • Fact Finding Agenda for meeting with internal customers who initiated the sourcing requirements to understand the need, who needs it, why it is needed, and who needs to be involved in the sourcing process

17. Best Practices ‘Dictionary’ • Internal Customer is the person / team initiating the future spend • Sourcing Lead manages the procurement event (may also be the Purchasing Manager) • Purchasing Manager is the Agency Purchasing Lead • Purchasing Data Analyst provides analysis and reporting support including analyzing spend reports and other information to inform the sourcing team

18. Stage Two – Pre-solicitationFlorida Best Practice Gap Analysis Procurement Process Improvement Plan

19. Stage Two – Gap Analysis Overview • The aim of this document is to provide an overview of the gaps between the current process used by State Agencies to research and develop a preliminary business case for a competitive sourcing event and industry best practices. • This Stage Two Assessment includes: • A review of State Agency’s current competitive sourcing processes (including process flow diagrams) • A summary of best practice in research a competitive procurement opportunity and developing a preliminary business case • The identification of gaps and opportunities to better align current processes with best practices • A recommendation of standard templates to apply to the current step

20. Florida Strategic Sourcing Methodology Kick - - Off Screen Screen Shape & Shape & Stage Two: Pre-Solicitation Stage Three: Solicitation Preparation Stage Five: Evaluation Process Stage Six: Award Process Stage Seven: Contract Process Stage One: Need Identification Stage Four: Solicitation Conduct Conduct Develop Develop & Vendors & Vendors & Negotiate Negotiate Implement Auctions & Auctions & Strategy Strategy Selection Selection Assess Value Value Agreements Opportunities Factors Factors Propositions Identifying scope, stakeholders and critical business requirements. S2.1 Conducting market analysis to identify available goods, services and suppliers. S2.2 Estimating expected contract award value or purchases for the fiscal year. S2.3 Addressing market and budget constraints. S2.4 Identifying the best solicitation method. S2.5 Addressing delegated purchasing authority. S2.6 S2.7 Planning the solicitation.

21. Stage Two – Current State Summary Observations • Approach varies greatly amongst State Agencies • This step is often done, although much less formally than spelled out here • Consider how this process varies for a legislative directive or spend thresholds Stage Two: Pre-Solicitation Key Worksteps • Internal spend profiles based on various data sources (FLAIR, SPURS, NIGP) • When investigating existing agreements, the DFS Statewide Contract Reporting System (SCRS) will provide insight in the future (not yet built) • RFI’s are often conducted by State Agencies, but no standardization exists for the layout or announcement of these events at the moment • RFI’s can also be used to indicate and support a Single Source approach Identifying scope, stakeholders and critical business requirements. S2.1 Conducting market analysis to identify available goods, services and suppliers. S2.2 • External commodity / vendor profiles are sometimes conducted using various data sources, including Consumer Reports • For some agencies, market research of possible revenue generation is an integral part of the analysis Estimating expected contract award value or purchases for the fiscal year. S2.3 Addressing market and budget constraints. S2.4 • Ask probing to questions to help prepare a risk assessment and even review business processes if risks are too high Identifying the best solicitation method. S2.5 • Sample business cases are available from SP and DOR • Most State Agencies have some a Business Case review meeting/approval process • At State Agencies, Business Cases are very focused on funding (and may have specific requirements based on funding type) Addressing delegated purchasing authority. S2.6 S2.7 Planning the solicitation.

22. Stage Two – Best Practice Purpose • Gain deeper insight into the category, both internally through current customers, vendors, and statewide spend, as well as externally via market trends, potential new vendors, and distribution channels. • Lays the foundation for the category strategy and helps the team start to identify savings opportunities. Stage Two: Pre-Solicitation Key Worksteps • Gain insight into the category through hosting an RFI, a pre-solicitation meeting with vendors, or contracting with an expert. • Collect information from existing contracts to better understand pricing and category-specific terms and conditions • Internal Profile should include vendor spend details, current top vendors, vendors’ share of the category, levels of vendor fragmentation, a list of high spend items, and current contract terms. Identifying scope, stakeholders and critical business requirements. S2.1 Conducting market analysis to identify available goods, services and suppliers. S2.2 Estimating expected contract award value or purchases for the fiscal year. • External profile pulls together industry trends, market size, and distribution channels to show how a more complete picture of the category beyond customers and vendors in Florida. S2.3 Addressing market and budget constraints. S2.4 • A risk assessment includes a disaster recovery plan to address issues during the procurement process and contract life including ethics requirements, protests, and possibly redesign of business processes if very limited competition. Identifying the best solicitation method. S2.5 • The business case pulls together all the information that has been gathered for the category and presents an action recommendation for management review and approval (e.g., conduct ITB/ITN/RFP, establish ACS, do nothing). • Examples of these deliverables can be found in the PPIP Step Two Overview Presentation Addressing delegated purchasing authority. S2.6 S2.7 Planning the solicitation.

23. Stage Two – Gap Analysis Opportunities for Improvement • Standardize the process for sourcing competitive procurement opportunities • Encourage State Agency Procurement professionals to communicate more on new opportunities / improve awareness of existing agency agreements • Investigate the opportunity to develop an internal communication tool / discussion group linking State Agency Procurement professionals Stage Two: Pre-Solicitation Key Worksteps • Develop a set of standard RFI notification templates (one for goods, one for services) • Develop a set of standard RFI templates (one for goods, one for services) • Enhance Spend Assessment Job Aid to enable State Agencies to use as input in the Internal Profile Identifying scope, stakeholders and critical business requirements. S2.1 Conducting market analysis to identify available goods, services and suppliers. S2.2 • External Profile to include Total Cost of Ownership (TCO), specific to customer needs • Develop a job aid to guide State Agencies in developing and understanding the benefits of an External Profile Estimating expected contract award value or purchases for the fiscal year. S2.3 Addressing market and budget constraints. S2.4 • Compile advice of experienced procurement professionals on mitigating risks • Agree on a standard template for a preliminary business case • Revisit the decision tree to confirm MOP after developing business case Identifying the best solicitation method. S2.5 • Develop Sourcing Templates to capture output of the Internal and External Profiles and Preliminary Business Case • Leverage Sourcing Tool project timeline to assign owners and due dates to key project activities Addressing delegated purchasing authority. S2.6 S2.7 Planning the solicitation.

24. Stage Two – Current Process Flow This diagram illustrates the current collaboration within State Agencies to internally and externally research a competitive sourcing opportunity and develop a preliminary business case. Support RFI development , as needed Send e-mail to identified supplier community Internal Customer Optional as a courtesy to suppliers Determine whether the procurement needs an RFI Develop RFI to collect more information from supplier community Post RFI notification on VBS Review RFI Responses Complete research through other sources Develop Preliminary Business Case Present Business Case to Review Board Sourcing Lead Determine if procurement indicates single source or non-competitive Support RFI development , as needed Internal Sourcing Team

25. Stage Two – Proposed Process Flow This diagram illustrates the proposed collaboration within State Agencies to complete Step Two of the Seven Step Sourcing Methodology for competitive sourcing opportunities. Internal Customer To Be Completed Sourcing Lead Internal Sourcing Team

26. Stage Two – Recommended Templates • RFI Posting template intended to notify the public that you have issued a Request for Information (RFI) • RFI template capturing the key content recommended for inclusion in an RFI • Internal Profile to identify current top customers and vendors, understand spend behavior and distribution across current vendors, and better understand current agreement pricing and category-specific terms and conditions (if any) • External Profile includes category analysis of pricing and vendor profiles at the local, regional, and national levels • Preliminary Business Case pulls together all the information gathered for the category and presents an action recommendation for management review and approval (e.g., conduct ITB/ITN/RFP, establish ACS, do nothing); a small, medium, and large Business Case depending on the spend • Sourcing Project Workplan with a comprehensive list of key activities to complete this step of the sourcing methodology • Decision Tree to determine determining how an opportunity should be pursued based on key indicators including spend thresholds, statutory requirements, etc.

27. Best Practices ‘Dictionary’ • Internal Customer is the person / team initiating the sourcing request • Sourcing Lead manages the procurement event • Purchasing Manager is the Agency’s Purchasing Lead • Internal Sourcing Team where applicable, based on size and complexity of the event, this team is identified by the Sourcing Lead and consists of one or more procurement professionals within the State Agency who will play a key role in developing / managing the procurement event • Purchasing Data Analyst provides reporting and analysis support throughout the procurement event (e.g., developing spend reports, analyzing survey results, etc.) to help the Sourcing Lead make informed decisions

28. PPIP Survey • Stage One and Stage Two PPIP Survey • Open through 6 p.m. Eastern time, Dec. 20 • 16 responses as of Dec. 14 • Still time to give us your feedback • Any questions, contact Linda.McDonald@dms.MyFlorida.com

29. Hot Topics – W-9 Update Purchase Order (PO) data: • 85 percent of POs are associated to vendors that currently have a valid W-9 status • in October, this was 71 percent • Of the 15 percent of POs that are associated to vendors without a valid W-9: • Department of Health represents 42 percent • Department of Corrections represents 11 percent

30. Hot Topics – W-9 Update Invoices: • 90 percent of paid IRs are associated to vendors that currently have a valid W-9 status • in October, this was 79 percent • Of the 10 percent of paid IRs that are associated to vendors without a valid W-9: • Department of Health represents 33 percent • Department of Corrections represents 20 percent

31. Review of Proposed Bills Purchasing Related Bills • Tracking a total of 29 Bills, so far • Domestic Call Centers (SB 678, HB 649) • Affects section 287.058, Florida Statutes • Requires contracts exceeding Category 2 that include call centers must be staffed by persons within the United States • Applies to subcontracts as well • Minority Business Certification Taskforce (HB 4103, SB 1112) • Affects section 287.0943, Florida Statutes • Deletes requirement to convene task force to assist minority business in procurement or development of government-sponsored programs • Task force proposed uniform criteria and procedures for qualifying businesses to participate in procurements as CMBEs

32. Review of Proposed Bills Purchasing Related Bills • Wartime Veterans (SB152, SB 922, HB 221, HB977) • Affects 295.187, Florida Statutes • Renames Act to Florida Veterans Business Opportunity Act • Includes Service–Disabled Veterans Enterprise Program and Wartime Veterans • Wartime veteran who served in a campaign or expedition for which a campaign badge has been authorized or served during Spanish-American War; Mexican Border period; World War I; World War II; Korean Conflict; Vietnam Era; Persian Gulf War; Operation Enduring Freedom; Operation Iraqi Freedom. • A veteran of a period of war, as used in 38 U.S.C. sesttion1521, who served in the active military, naval, or air service: • For 90 days or more during a period of war; • During a period of war and was discharged or released from such service for a service-connected disability; • For a period of 90 consecutive days or more and such period began or ended during a period of war; or • For an aggregate of 90 days or more in two or more separate periods of service during more than one period of war.

33. Review of Proposed Bills Purchasing Related Bills • Florida Business Preference • Affects 283.35, Florida Statutes, ITB for printing must include preference for vendors with a principal place of business with Florida. If out-of-state business has low (responsive/responsible) bid add 5 percent for evaluation purposes only. • Affects 287.084, Florida Statutes, ITBs for Personal Property must include preference for vendors with a principal place of business within Florida. • If out-of-state business has low (responsive/responsible) bid add 5 percent for evaluation purposes only.

34. Hot Topics – eQuote Update • MFMP Sourcing 3.0 eQuote • eQuote available for agencies to use • Informal solicitations • Quotes off State Term Contracts • Completed buyer training sessions at MatchMaker in November and two webinars in December • Will schedule additional vendor webinars for early 2012

35. MFMP Sourcing eQuote Update Agency eQuote Access • Twelve agencies to date requested accounts for eQuote • Sixty eQuote customers throughout these agencies • APD • DOE • DEP • DOH • DJJ • DMS • DOR • DOT • DVA • DOAH • FWC • State Courts

36. Hot Topics – MFMP Release 9.2.0 • MFMP technical team implements release tonight • Maintenance window from 7 p.m. to midnight • Addresses several known issues from the MFMP 3.0 upgrade: • Customers will not receive an error when submitting an invoice where the first line item has more split accounting lines than subsequent line items (SIR 1593).   • Fully approved requisitions will no longer show in the "To Do" section of your Dashboard (SIR 1610). • An "Invoice" button now displays on Contract Requests and Contracts so customers can invoice against contracts in all statuses. The status of contracts that are “Closed,” but still available for invoicing will now be "Inactive" rather than "Closed” (SIR 1619).

37. Spend Analytics Pilot – Spikes Cavell • DCF Spend Analysis Pilot • Drilling down on Spend • Comparing Agencies and Entities (Observatory: 1000+ public entities) • Looking at percentage of spend in category • Contract opportunities (identify large spend off contract) • Relative size of supplier base on a given category of spend • Enriched data on vendors • Employee count • Total revenue • Incorporation date • Basket of goods provided • Geographic spend data • Which cities get the spend • Helps highlight spend in Florida • RFI & other vendors

38. Spend Analytics Pilot – Spikes Cavell • Brief Overview: Spend Data

39. Hot Topics – Database Clean-up • Guidelines for adding and removing commodity codes • Vendor database cleanup

40. Hot Topics – Communications • Expanded Marketing and Communications role • State Purchasing and MyFloridaMarketPlace • E-mails and Newsletter • Contract Marketing Webinars • State Agency Customers • Florida Local Government Customers (OEUs) • PPIP survey feedback

41. Hot Topics – Submitted Topics • Practical use of “Present-value methodology – Dick Chatel and Dave Callaway • Others?

42. Hot Topics – Purchasing Policy Evaluation using Net Present Value (NPV) • Required by section 287.0572, Florida Statutes • Rule 60A-1.063, Florida Administrative Code, repealed in October 2011 • Requires comparative evaluation using NPV • Used to help identify relative value of offers when different payment schemes are offered by vendors(unequal payment streams or differing payment periods) • MS Excel includes NPV functionality up to 254 events. • Actual Formula available in help feature • Rate is specified by Federal Reserve • Apparent title change • DMS has requested assistance from Federal Reserve to identify new title and location

43. Hot Topics – Meeting Frequency/Format • Planning for 2012 • Collaborative Format • Increased interaction and participation • Meeting Frequency

44. Happy Holidays! Thanks for attending today! See you in 2012!