Presentation Transcript

1. Best Practices in IT Services Procurement

   Jean Clark, Arizona Don Greene, New York Bill Burns, Idaho
2. ProcureAZ E-Procurement Change Management Principles
3. Desire for Success – Belief in Change Single opportunity to transform procurement Phased project approach
4. Communication of Clear Vision Procurement roadmap Project communication
5. Right People on the Team IT Project Manager Contractor

6. NASPO Best Practices in IT ProcurementHourly Based IT Services (HBITS)

   A procurement success story. September 12, 2012
7. Background Objectives and Key Questions NYS attempted to address multiple objectives and answers key questions about IT Services marketplace. Objectives Understand how NYS is procuring IT Services Present observations about the current state of IT Services including spend profile, contract summary and business requirements Complete an industry analysis to identify market trends and external factors which affect potential future models for NYS IT Services procurement Provide a fact base that depicts how the OGS ITS contract is used for hourly-based services versus deliverable-based Key Questions What are the cost drivers that can be leveraged for potential savings opportunities? What opportunities exist to reduce the cost of hourly-based IT Services? How do NYS Executive Agencies use the OGS ITS Back-Drop contract? What is the nature of the current supply base?
8. Background NYS Data Gathering Process – External and Internal Detailed spend information was requested from New York State’s top IT Services vendors and top Agencies by spend. External and Internal Data Template Key fields requested: Procurement Mechanism (contract type), State Agency/Entity, Location, Job Title, Skill Category, Regular Time Pay Rate, Regular Time Bill Rate and Hours Billed The external data request differed from the internal in that vendors were asked to provide data on deliverable based IT Services in addition to hourly-based External Data Collection Results Sent data request template to 91 vendors The list of data request recipients was derived from the 788 IT Services suppliers identified in the Spend Assessment which included deliverable and hourly spend from Executive Agencies during the 12/09 to 11/10 time period Vendors on this list who had over $500K in spend and NYS certified M/WBEs who had $100K or more received the data request template; this accounted for approximately 64% of the total IT Services Assessment spend (approximately $260M) Received detailed usage data from 66 suppliers totaling approximately $684.1M over two years Seven suppliers returned over 16,000 detailed line items Internal Data Collection Results Sent data request template to eight high spend agencies Received data from six agencies
9. Background Through completing an internal and external profile, NYS identified several key findings regarding the IT Services marketplace in NYS. Key Findings Hourly-based IT Services represented 87% of total spend on past OGS IT Services contract Executive Agency hourly-based IT Services spend is $134.9M The majority of deliverable-based IT Services across NYS were not procured off of the OGS ITS contract Deliverable-based spend is concentrated in New York City, rather than in the Executive Agencies Hourly rates from one supplier vary greatly across Agencies for the same job titles The NYS procurement process discourages Executive Agencies from engaging and promoting competition among hourly-based IT Services suppliers Many agencies have created their own backdrop contracts. The OGS Centralized contract itself contained 600+ vendors (at one point almost 800). A discussion guide was developed and interviews were conducted to collect state-wide requirements and processes from the top spend agencies. All agency discussions emphasized the procurement process as a significant pain point. Depending on the type of contract, agencies are required to obtain approvals at different stages in the process to place an IT contractor Agencies shared documents that were considered as representative of their agencies procurement practices. Documents included RFPs, vendor evaluation instruments, assignment notifications, candidate evaluation instruments (for MASA contracts), invoices, and hourly rates as specified in various contracts Historically, NYS had minimal enterprise-wide insight into the breakdown between hourly-based and deliverable-based IT Services spend across the State.
10. NYS Current Business Requirements NYS’ buyers found that if a need is not explicitly defined in the contract, the vendor will not always be willing to meet this need; the following were expressed as items that should be contractually required of vendors if a new contract was to be put in place. Buyers’ Business Requirements Reporting Requirements Subcontracting Reporting M/WBE Reporting M/WBE Recruitment and Participation Margin and/or markup information Incentive to provide “better” candidates Consider longer placement durations Mandatory knowledge transfer to State staff Standardization for reimbursement of travel expenses Removal of non-compete clauses Ease and/or flexibility of termination Ability to provide in-demand skill sets Confirmation by vendor of consultant work/visa Status Specialized agency needs Background checks/fingerprinting HIPAA compliance
11. Opportunity Assessment Several considerations as a strategy was developed for hourly-based IT Services in New York State Key Considerations Managing large current vendor base Transition from multitude of existing hourly-based IT Services agreements across the agencies to a central agreement Risk of losing institutional knowledge if existing IT Services personnel within agencies are replaced in the future Agencies may have resistance to potential transition of long-term IT Services personnel Timeline influences by control agency approvals (OSC, DOB, OFT) Contracting effort could be extensive .
12. Strategy for NYS IT Services Procurement There were 3 main Hourly-Based IT Services models that were identified during the requirements gathering phase. Primary Decision
13. Strategy for NYS IT Services Procurement The Category Strategy includes options and recommendations for Hourly-Based IT Services based on vendor input and agency needs. Inputs into Strategy Model - What model best fits the Hourly-Based IT Services category requirements of NYS? Result: NYS chose the Managed Services Provider Option to centralize and streamline procurement of IT Services. Regionalization - Should NYS adjust the hourly rate for IT services consultants based on geographical regions? Result: NYS identified three (3) distinct geographical regions that mirrored established Civil Service regions. (NYC Metro, Mid-Hudson, Upstate) Rate Card Structure - How should the job titles and accompanying rate card be structured in the RFP? Result: NYS identified two (2) service groups of job titles; one for industry standard titles and another to introduce competition to historical large scale contracts with limited service providers. Vendor Pool - How many vendors should the State contract with for Hourly-Based IT Services? Result: NYS determined to use 25 vendors to satisfy Statewide demand.
14. Strategy for NYS IT Services Procurement The Category Strategy includes options and recommendations for Hourly-Based IT Services based on vendor input and agency needs. Inputs into Strategy, cont’d Managed Service Provider - Should the Managed Services be provided by the State or by a 3rd party? Result: The Managed Services would be provided by the State (in-house). Approval Process - What can be done to help streamline the procurement and approval process for hourly-based IT staff? Result: NYS identified and made recommendations regarding internal approval processes that presented barriers to efficient procurement of Hourly-Based IT Services. Contract Term - How long should the term of the new contract and the placements under this contract be? Result: NYS issued RFP for a five (5) year contract with an individual placement duration of no longer than two (2) years. Interim Savings - What other strategic options can be implemented to help agencies obtain better rates for hourly-based IT Services in the interim period before a new statewide contract is implemented? Result: NYS performed additional data analysis to identify specific savings opportunities by vendor and identified areas that assisted in the engagement of rate negotiations under existing contracts. NYS selected a new model not only to deliver cost savings but also to increase efficiency by creating a defined, consistent process for all agencies for selecting Hourly Based IT Services consultants.
15. The HBITS RFP– RFP Summary The HBITS RFP implements a new model for procuring hourly-based IT services in New York State, competitively bidding out 24 Job Titles across 3 Regions*. Definition of HBITS: Hourly-Based IT Services The HBITS RFP evaluation consisted of three parts: Administrative, Financial, and Technical. It was evaluated with a 60/40 Financial/Technical split to signal to the Bidder community the State’s emphasis on competitive pricing and to further encourage Bidders to bid actual Hourly Wage/Bill Rates, rather than Not To Exceed (NTE) rates Administrative Evaluation: Pass/fail assessment to ensure that Bidders provided complete proposals in the proper format. Only Bidders that passed the Administrative Evaluation moved forward to the Financial Evaluation Financial Evaluation: Calculated a Total Cost for each Bidder based on historical usage of all Job Titles and the Bidder’s proposed Hourly Wage Rates and Markup Percentages for these Job Titles. Only Bidders that received a Financial score and were deemed susceptible to Award moved forward to the Technical Evaluation Technical Evaluation: Qualitative review of each Bidder’s Technical Proposal by a committee of evaluators. Only Bidders that received a Technical score moved forward to receive a Total Score Administrative Evaluation (Pass/Fail) Financial Evaluation (Maximum 60 Points) Technical Evaluation (Maximum 40 Points) Total Score (Maximum 100 Points)
16. The HBITS RFP- Evaluation Summary 101 proposals were received by NYS in response to the HBITS RFP. A summary of the evaluation process is below. Scoring Overview 3 proposals were not accepted or opened because they were received after Bid Opening (January 24, 2012 – 11AM) 78 Bidders received Technical Scores and were sent for score compilation to the Financial Evaluation Committee The Financial Evaluation Committee Chair combined Technical and Financial scores to create Total Scores for the 78 Bidders The Bidders were ranked from 1 to 78 according to Total Score; the top 25 Bidders have been recommended and notified of they are a tentative awardee Administrative Evaluation (Pass/Fail) Financial Evaluation (60 Points) Technical Evaluation (40 Points) 78 Bidders 101 Bidders 94 Bidders 88 Bidders Advancement of Bidders through Evaluation -7 DQ’d Bidders -6 DQ’d Bidders -10 DQ’d Bidders
17. The HBITS RFP- Results Several positive outcomes were delivered to New York State as a result of this competitive exercise. HBITS awardees included several Minority and Women-Owned Business Enterprises (M/WBE) and Small Business Enterprises (SBE) HBITS awardees are a mixture of historically large-spend vendors and new players, thus introducing much needed competition to the marketplace. The Vendor Performance Criteria will ensure only the 20 best vendors (out of 25 total) will be on contract in any given year. A streamlined process was developed for obtaining HBITS in NYS. This included implementation and administration of the resultant HBITS contracts NYS was able to identify tens of millions in savings.
18. IT Service Procurements – Best Practices** Engage IT commodity strategy teams - integrate purchasing Engage vendors to understand technology roadmaps Create strategy - propose requirements and standards Ensure enterprise adherance to requirements and standards **Read NASCIO’s - Leveraging Enterprise Architecture for Improved IT Procurement State of Idaho
19. Idaho and the PIPS (BV) Process Performance Information Planning System CONCEPT: Hire smart people, and allow them to demonstrate their expertise Preplan projects from beginning to end while identifying potential risks and their solutions Measure performance as well as any deviation from the plan RESULTS IN: Quicker time to supplier selection Greater emphasis on project planning – project success Reduction of client management requirements Motivation towards continuous improvement Creation of accountability, through measurement State of Idaho
20. Idaho and the PIPS (BV) Process Performance Information Planning System Filter 6 Weekly Report & Post-Rating Filter 1 Past Performance Information Filter 4 Prioritize (Identify Best Value) Filter 5 Pre-Award Phase (Pre-Plan) Filter 2 Project Capability Filter 3 Interview High Old method – 300 pages per supplier p Point Method Of Award Including cost Negotiate – clear issues Detail planning with the state and the Vendor 10 pages 5 pages Panel -Risk Assessment (RA) -Value Added (VA) Schedule Cost - Supplier Quality Assurance RFP – Current Conditions/Expected Outcomes Quality of Vendors Intent to Award Award Client Quality Control Evaluation Team Blind Low Appeals Dominant Information (1, 5, 10) 20
21. Idaho and the PIPS (BV) Process Pros: Greater time spent planning project prior to award – service project success BV partner identified quicker Ease for evaluator Less bias due to blind process Control shift to the supplier expert – weekly reporting Supplier uses best processes at lower cost, increases profit, assumes risk Client lowers cost through monitoring, not controlling State of Idaho
22. Idaho and the PIPS (BV) Process Cons: Requires vendor and client training – breaking the Paradigm Suppliers have hard time taking the lead as expert and creating dominant information around risk and minimization -”you’re the customer – tell us what you want us to do” –Suppliers have a difficult time planning - reactive versus proactive not BV Evaluators have a hard time grasping dominant information for RFP scoring differentiation Problem with client control shift to the supplier expert Client says-- “we like controlling and directing the supplier – we are the experts” Purchasing’s job becomes more difficult – internal resistance State of Idaho