Purchasing Directors’ Meeting July 10, 2003 3:30 P.M.

State Purchasing Purchasing Directors’ Meeting July 10, 2003 3:30 P.M.

Purchasing Directors’ Meeting July 8, 2003 Agenda • Welcome / Meeting Overview • Excellence in Contracting Audit Report • DMS/State Purchasing Mission • MyFloridaMarketPlace Overview • State Purchasing Reorganization • Strategic Sourcing • Operational Issues • Open Floor / New Issues • Next Meeting Location / Time

Purchasing Directors’ Meeting July 8, 2003 Agenda • Welcome / Overview of Today’s Session • Excellence in Contracting Audit Report • DMS/State Purchasing Mission • MyFloridaMarketPlace Overview • State Purchasing Reorganization • Strategic Sourcing • Operational Issues • Open Floor / New Issues • Next Meeting Location / Time

Purchasing Directors’ Meeting Excellence In Contracting Audit Report • Propose legislative and administrative changes to address inadequacies and inconsistencies. • DMS should accept and implement the leadership role required by Florida Statute • develop formal procedures for needs assessments, standard formats for contracts • foster user groups to share best practices and common problems. • Undertake a statewide training initiative, and include incentives to encourage professionalism and certification. • Create a uniform vendor rating system to include links to websites, closeout evaluations, and a method for other agencies to access performance evaluations. • Propose legislation to enact a law similar to the federal Truth in Negotiating Act. This will help level the playing field between state negotiators and private contractors.

DMS/State Purchasing Mission DMS Mission To become a customer focused agency providing effective and efficient services in order to better enable state agencies and employees to deliver the Governor’s priorities to the people of Florida. State Purchasing Mission To gladly deliver useful and innovative purchasing services in order to become a customer focused agency providing effective and efficient customer services.

State Purchasing Mission Goals (Measures) • Purchasing statutes and rules improved before May 2004 • Recruit at least four employees highly esteemed by their peers before October 2003, and reduce annual turnover by 50% • Increase customer satisfaction by at least 15% before January 2004 • Successful delivery of innovative purchasing solution that reduces costs and saves time – MyFloridaMarketPlace adopted by all initial users before July 2004

State Purchasing Mission Tasks • Amend purchasing statutes • Amend purchasing rules • Improve contract management • Reorganize division • Deliver state term contracts that provide the right commodities and services at lower cost • Consolidate purchasing into MFMP • Training for division • DMS customer satisfaction survey • Support Facilities’ ITNs

The Really Big ContextWhat Has DMS Been Doing? • I appoint you over nations and kingdoms to uproot and tear down, to destroy and overthrow, to build and to plant. • There is a time for everything … a time to tear down and a time to build.

Context of MyFloridaMarketPlaceModernization of State Management Stand-alone legacy management information systems • LAS/PBS (Budgeting) • FLAIR (Accounting) • COPES (Personnel and Payroll) • SPURS (Purchasing) • CMS (Cash Management)

Context of MyFloridaMarketPlacePre-Modernization Challenges • Lack of standards among subsystems • Lack of complete and efficient integration • Duplication of data input and maintenance • Insufficient management information to support decision making • Incomplete reporting capabilities • Lack of single chart of accounts • Complex external interfaces • High maintenance and modification costs • Inconsistent data

Context of MyFloridaMarketPlaceOverview of Re-Engineering Initiatives Florida has embarked on three major Enterprise Resource Planning efforts • Human Resources • People First— Modernizing with the personnel system, leave and attendance and benefits management • Purchasing • MyFloridaMarketPlace — Integrating purchasing activities for all State buyers and for vendors doing business with the State • Financial Management • FLAIR Replacement — Will replace the legacy accounting and financial system with an integrated enterprise resource planning system

Context of MyFloridaMarketPlace Current Purchasing Systems Manual Vendor Bid Agency Process for System contract Matching system (Bidding) Agency contract SPURS system View SPURS Web-based (Reporting) Registration (Purchasing) Agency contract system Agency Manual contract Process for system FLAIR Invoicing Agency contract system

Registration Purchasing Bidding Contracts Invoicing Matching Reporting Overview of MyFloridaMarketPlace System Goals FLAIR / FLAIR Replacement

Overview of MyFloridaMarketPlaceGoals and Objectives MyFloridaMarketPlace… Connecting Buyers and Vendors… Expanding Opportunities… • Goals and Objectives: • Implement a single, statewide eProcurement solution enabling electronic buying and selling • Aggregate all Government spending into an efficient buying channel • Leverage new technology and capitalize on best practices • Enable and facilitate the One Florida Program • Generate savings through Strategic Sourcing and process efficiencies

Overview of MyFloridaMarketPlaceSupporting the Governor’s Priorities • More effective and efficient government that harnesses the use of technology • Running government like a business when it makes sense to do so • Enterprise-wide initiative • Private sector best practice • Diversifying Florida’s economy / One Florida • Performance-based measurement and accountability • Public / private partnerships

- Overview of MyFloridaMarketPlaceProject Timeline The project will be completed over four phases: Mobilization, Development, Deployment and Operations, all of which include specific milestones. Contract 2002 2003 2004 2005 2006 2007 Phase/Activity Month Oct* - Dec Jan - Mar Apr - Jun Jul - Sep Oct - Dec Jan - Mar Apr - Jun Jul - Sep Oct - Dec Jan - Mar Apr - Jun Jul - Sep Oct - Dec Jan - Dec Jan - Oct Mobilization Phase 1 - Program Establishment - Staffing Development Phase 4 -10 - Conference Room Pilot - Confirm Requirements Deployment Phase 6-22 6 - Launch Vendor Reg. Portal 8 Online Contract / Catalog Loading - - Pilot Implementation (DMS&DOT) 10 - Initial Users Live 18 - Bring on Additional Users 22 - Transition from SPURS 22 Operations Phase 23 61

Overview of MyFloridaMarketPlaceKey Dates in Near Past and Future • March 31, 2003: Vendors began registering in the system via the Vendor Registration module • April 28, 2003: Pilot Agencies (DOT, DMS, STO) began loading contracts • June 2, 2003: Pilot Agencies (DOT, DMS, STO) began entering Blanket Purchase Orders • July 1, 2003: New rules effective (60A-1.030, -1.031, -1.032) • July 1, 2003: Go Live with Transaction Processing for Pilot Agencies (DOT, DMS, STO) • September 1, 2003: Begin rollout to remaining agencies

Overview of MyFloridaMarketPlaceUpdate on Go-Live As of 7/8/2003… • 13,304 vendors are registered • DOT, DMS, and STO have created 295 requisitions • 13 POs have been transmitted to vendors • DMS has issued ITN (7/9/03)

Overview of MyFloridaMarketPlace System Functions Initial Users - Pilots Eligible Users - Other State Agency State Term Contract Vendors Minority Businesses MyFloridaMarketPlace Users Initial Users - Exec Agencies Eligible Users – Univ, City, County Agency/ Dept. Contract Vendors Small Businesses General Public Buyers Vendors Buyer Tools Vendor Tools • Vendor search • State term contract items • Requisitions/Purchase orders • Online workflow approvals • Informal solicitation (quotes < $25,000) • Sealed bids (ITN, ITB, RFx > $25,000, auctions, reverse auctions) • Receipt of Goods • P-Card • Contract development and administration • Reports • Self registration • E-mail notification of formal and informal solicitations • Online quoting on informal solicitations (< $25,000) • Online submission of sealed bids (> $25,000) • Electronic purchase order receipt • Electronic submission of invoices • Catalog creation and updates for State term contracts • Reports “I want to buy” “I want to sell” Business Support and Operations • Buyer Help Desk • Vendor Help Desk • Strategic Sourcing • Procurement Assistance • Catalog Enablement • Training and Education

Overview of MyFloridaMarketPlaceSystem Functions Vendor Registration – Allows vendors to register and maintain their vendor information in the system. The vendor may also register for CMBE certification within the Vendor Registration System Requisitioning – Online creation of requisition from an online catalog or contract. Supports submitting electronic quotes to vendors and allowing vendors to respond to the quote online. Bidding – Online submission of solicitations to vendors. Vendors will respond to their bids online and the agency may evaluate the responses online as well. Contract tracking – Online tracking of contracts including available balance, contract term, contract pricing, etc. Invoice reconciliation – Online matching of invoice, purchase order, receipt, and/or contract. The discrepancies will be identified and routed to the agency for review Reporting – Customized reporting capabilities providing the agencies with spend visibility, contract compliance, etc.

Overview of MyFloridaMarketPlaceSystem Benefits • “E-procurement can deliver more than just lower prices. Indeed, the net impact of its other characteristic deliverables – better productivity, faster processing, greater visibility, the elimination of maverick, or unplanned, ad hoc buying – can have a much higher ROI than what can be achieved by shaving a few pennies off price.” • “Better productivity in the buying department [allows] buyers to do what they ought to do – buy better, not shuffle paper. …[Purchasing agents’] jobs used to be transaction-based. Now they are performing a higher value role.” CIO Magazine, 6/15/03

State Purchasing Reorganization Work Completed Through Feb. 2003 – • Validated As-Is structure and headcount • Reviewed As-Is job titles and pay grades • Reviewed As-Is job descriptions • Confirmed State vs. Outsourcing To-Be roles & responsibilities • Determined evaluation criteria & weights* • Completed spend and STC analysis and factored to organization structure • Based on spend & vendors, benchmarked for appropriate organization sizing • Conducted 23 Agency interviews • Developed, profiled, and scored multiple To-Be organization structure options* • Discussed and refined leading option* • Developed To-Be job descriptions • Prepared implementation plan – Key Findings – • Organization lacks vision, strategy, leadership and direction; is reactive • Over the last 2-4 years have gotten way off the best practices path and instilled practices that detract value (e.g., STCs without best pricing; 1-year only contracts) • On average, personnel are not capable past tactical activities; are unresponsive • Significantly overstaffed vs. benchmarks * Work completed via Workshops with State & DMS Departmental Purchasing involvement.

State Purchasing Reorganization DMS obtained input from the CRP and multiple agency interviews. A number of opportunity themes for State Purchasing emerged. – Subset of Interview Questions– – Other Themes of Opportunities – • What services does State Purchasing provide to you? How well do they provide these services (i.e., what is and isn’t working)? • What other services would you like to see State Purchasing provide? • Involvement / input from Agencies • Interaction with Agencies • Communication with Agencies • Assistance / support • Services rec’d are less value than 1% fees • Unavailable • Unresponsive • Inconsistent (answers, guidelines, procedures, processes, interpretations) • VBS cumbersome and inefficient • Slow on single-source exception reviews • Legal unresponsive and “liberal” • Purchasing expertise • Training • Leadership – STC Themes of Opportunities – • Inconsistent competitive value • Unresponsive to new STC opportunities • Slow renewals • Overuse of contract extensions • New RFQ requirement on STCs makes them redundant (provides bid list only) • Inconsistent and poorly written contracts N = CRP + 23 Interviews

State Purchasing Reorganization The workshop process led to evaluation criteria and weights, which State Purchasing used to develop and evaluate the organization design alternatives. N = 9 * CMBE – Certified Minority Business Enterprise

State Purchasing ReorganizationINTERIM To-Be Organization Structure

Leverage State-Wide Volume Obtain Best Prices & Value Obtain State-Wide Savings Reduce State-Wide Supply Base Identify New STC Opportunities Increase Demand / Volume on STCs Manage Compliance Strategic Sourcing Objectives Strategic sourcing is a proactive process to leverage demand and select vendors that offer the best value.

– Agency – – State – – Vendors – Strategic Sourcing Benefits • Leveraged savings • Reduced supply base • STC compliance management • Increased spend visibility • Data capture for future leveraging • Reduced transactional workload • Increased vendor compliance with transaction fee collection • Best price STCs to leverage • No additional purchasing effort required – vendors, contracts, pricing, and service levels “ready to go” on most contracts • Users “release” – reduced transactional workload • Increased time to spend on Agency- unique needs • Increased volume • Reduced rework (e.g., no more STC events followed by Agency events for same goods / services) • Lowered cost of doing business with the State • Increased visibility into demand over time • Longer-term contracts • More ROI in State business

Develop Selection Factors & Screen Vendors Profile Internally & Externally Prepare Value Proposition & Award Kick - - Off Screen Screen Shape & Shape & Conduct Competitive Event Kick-Off & Assess Opportunities Profile Profile Conduct Conduct Develop Strategy Implement Agreements Develop Develop & Suppliers & Suppliers & Negotiate Negotiate Implement Internally & Internally & Auctions & Auctions & Strategy Strategy Selection Selection Assess Value Value Agreements Externally Externally Opportunities Factors Factors Propositions Propositions Strategic Sourcing Methodology Develop Value Proposition Around Options Prepare Fact Prepare Fact - - Level High High - - Fast Track to Value Fast Track to Value Fast Track to Value Measure Measure Measure Based Based Data Data Complete Complete Complete Results Results Results Negotiation Negotiation Collection & Collection & ITB/ITN/ RFQ/RFP & Trends & Trends & Trends Build Build Build “Packages” “Packages” Analysis Analysis Build Total Build Total Build Total Validate & Validate & Validate & Supplier Supplier Vendor Key Worksteps - and / or - Cost of Cost of Cost of Profile Profile Profile Selection Selection Selection Ownership Ownership Ownership Segment Segment Make Award Decision Category Category Category Decision Decision Decision Negotiate Negotiate Model Model Model Purchases Purchases Develop Develop Vendors Develop Matrix Matrix Matrix Value Value Conduct Conduct Conduct Propositions Propositions Form Form Auctions Auctions Auctions Conduct Conduct Conduct Develop Develop Develop Conduct Conduct Conduct Cross- Cross - Industry Industry Industry Category Category Category Supplier Supplier Vendor Functional Functional Analysis Analysis Analysis Strategy Strategy Strategy Analysis Analysis Analysis Sourcing Sourcing Teams Teams Value Propositions Benefits Category Profile TCO Model In-Scope Categories Selection Decision Matrix ITB/ITN/RFQ/RFP Typical Deliverables Realization Industry Profile Category Continual Vendor Improvement Strategy Auctions Award Decision (ITA) CFSTs (Cross-Functional Sourcing Teams) Ariba Analysis Ariba Contracts Ariba Analysis Ariba Sourcing Ariba Sourcing Ariba Contracts Ariba Analysis Tools Source: Accenture Best Practices

Spend Analysis Overview FLAIR Spend was Analyzed & “Sourceable” Spend Identified & Categorized Spend was Segmented by Benefit Potential & Ease of Implementation Categories were Mapped to 9 Waves of 3 Categories Each Sourcing Business Model was Developed from Savings Goals 23 Agency Interviews Conducted Waves Reflect Agency Input & DMS Feedback – Wave 1 – – Office Supplies – MRO Supplies – Printing – Waves 2+ – – Straw Modeled – Built Into Model – Being Finalized

Agency Participation on Category Teams 3rd Tier Agency Users Benefit From STC 2nd Tier Agency Users Data & SMEs to Category Team Top Agency Users Category Team Core Members

DMS Lead – Tom Butler • Sourcing Event – Auction • Target STC Date – Oct. 2003 Office Supplies • DMS Lead – David Comer • Sourcing Event – ITB • Target STC Date – Oct. 2003 MRO Supplies • DMS Lead – Charles Day • Sourcing Event – RFP • Target STC Date – Nov. 2003 Printing Strategic Sourcing Wave 1

Purchasing Directors’ Meeting Operational Issues • IT Consulting Contracts • Single Source Applications • Commodity Codes • Microsoft Settlement

Operational IssuesIT Consulting Contracts • Potential Y2K crisis led to change in consulting procurement practices, away from time-consuming formal competitive bid process and toward prompt, non-exclusive, pre-qualification process • Led to audits, both in-house and by others, criticizing number of contracts (70), lack of competition, inadequate terms, and confusion of use. See Audit of State Term Procedures for Acquiring IT Consultant Services (DMS IG Report No. 2000-118); Selected State Agencies’ IT Consultant Procurement Practices (AG Report No. 02-050 Oct. 2001); IT Consultant Services Contract Audit (EOG IG Report Sep. 2001) • DMS Purchasing memoranda provided interim guidance. See Multiple Award State Term Contracts, Memo. No. 5 (00/01) (Oct. 5, 2000); State Term Contracts for Information Technology Consulting Services, Memo. No. 1 (00/01) (rev. Sep. 5, 2000). Interim statutory fix validated request for quotes (RFQ) process in May 2001

Operational IssuesIT Consulting Contracts • In October 2001, DMS and STO began review of best IT procurement practices. First (prototype) new solicitation was IT Hardware contract in June 2002. Detailed review done of federal experience procuring IT services (federal spend went from $8 billion in 1997 to $17 billion in 2001). • DMS worked with STO and DCF resources (purchasing and technology) to develop new formal competitive solicitation documents (RFP). Expect to release before September 1, 2003. • Effective July 1, 2003, State Purchasing has ceased the old method of awarding IT Consulting contracts. For those in queue, applicant must have done everything necessary by June 30, otherwise its application will be denied and its recourse will be to bid new contract (or contract directly with user agency). • New contract will follow federal schedule model – unassailably, a best practice. Number of contractors will decrease significantly.

Operational IssuesIT Consulting Contracts • Transition period will require adjustment • Some contracts are expiring between now and September 1 and will not be renewed • Unisys Corporation 7/17/03 • Motorola 7/22/03 • Gulf Computers, Inc. 7/23/04 • United Consulting Systems, Inc. 8/04/03 • Advanced Data Solutions, Inc. 8/14/03 • Bearing Point, Inc. 8/18/03 • Anteon International Corp. 8/26/03 • I.S. Consulting 8/27/03 • Xerox Corp 8/27/03 • Digital Fusion 8/27/03

Operational IssuesSingle Source Processing - Problems • Single source purchases over Category Four ($150,000) require review and approval by DMS following agency posting of the single source description on the Vendor Bid System (VBS) (see sections 120.57(3) and 287.057(5)(c), FS) • Agency Feedback • The process is slow • Uncertain as to content to post on VBS, both in the single source description posting and the single source notice of intended decision following DMS approval • Uncertain as to the content of the Exceptional Purchase Request submitted to State Purchasing

Operational IssuesSingle Source Processing - Solutions State Purchasing proposes the following for comment: • To speed up the process, we will accept single source requests via email at singlesource@dms.state.fl.us. Attach signed and scanned Exceptional Purchase Request forms and supporting documents. We will return approvals by email if you provide an email address. • To reduce uncertainty as to content, we are furnishing suggested formats for the Exceptional Purchase Request for a single source purchase, and for the Vendor Bid System before-and-after postings. When posting please use an “SS” prefix to distinguish from competitive solicitations. We are investigating the cost of a posted list separate from competitive solicitations, and will keep you informed on that possibility. • You may use these suggested formats now. • Please also feel free to suggest changes, and email them to singlesource@dms.state.fl.us. If changes are incorporated, revised formats with the changes will be distributed to the agency purchasing directors.

Operational IssuesSingle Source Processing - Solutions Suggested Content for form PUR 7006 (Exceptional Purchase Request) • The following documents are attached to this request for DMS approval of a single source purchase: (1) A copy of the advertisement in the Vendor Bid System, including posting start and end date. (2) A copy of the Single Source Description (including complete justification) posted in the attached or equivalent format on the Vendor Bid System with the advertisement, including start and end dates in accordance with s. 287.057(5)(c), FS. • Responses received from other vendors during advertisement of the single source description: __ No __ Yes. If yes, attach copies of vendor responses, and any written reply by the agency, with written explanation of the agency’s decision to continue with a single source acquisition. • Registration with Department of State (sunbiz.org) ___ Copy of Dept of State registration attached. ___ Copy of Dept of State registration not attached. Agency understands DMS will verify registration if copy is not attached, and reject single source purchase if vendor has not complied with statutory requirement for corporate registration (ref. Ch. 607 FS). • Registration in MyFloridaMarketPlace: ___ Yes ___ No If “No” cite administrative rule authority for failure to register:

Operational IssuesCommodity Codes - Uses Commodity Codes are used … … to code purchases and solicitations for vendor selection and miscellaneous search and reporting purposes. … in vendor registration to facilitate buyer searches for vendors of specific commodities and services. … in vendor email notice registration in order for vendors to be notified of marketing opportunities (formal competitive solicitations, quotes, single source descriptions) … in determining where we are spending our dollars, to facilitate order consolidation/aggregation, determine bid thresholds, receive quantity discounts, strategic sourcing, etc.

Operational IssuesCommodity Codes - Problems • Some newer items/technologies/services have not been coded. • The definitions of some coding classifications and/or groups do not include all the appropriate items. • Some classes, e.g., 973 for professional services and 991 for technical services, include vastly different types of services, some of which, e.g., medical related and construction related, might better be broken out into new classes. • Commodity codes are difficult for vendors and buyers to search on the State Purchasing web site, because they are essentially scrolling through a condensed list (classes), and must open a sub-list (groups) to look for specific products.

Operational IssuesCommodity Codes - Solutions • Add/delete items to existing classes and groups • Add/delete groups to existing classes • Add new classes with appropriate groups, perhaps removed from over-broad classes • Explore the possibility of a word search capability for vendor registration in MFMP and solicitation/single source coding in VBS

Operational IssuesCommodity Codes – Next Steps YOUR HELP IS NEEDED • Email Ron Brown at brownr@dms.state.fl.us with your suggestions related to “SOLUTIONS” above, and any other related improvements you’d like to suggest • Be prepared to discuss proposed changes with Ron or his designee

Purchasing Directors’ Meeting July 10, 2003 3:30 P.M.