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NASCIO

Procurement Modernization Initiative

Best Practices Considerations and Approaches

10828

Dennis J. Gallitano

May 8, 2013

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Topics

• Traditional Procurement Processes and Strategic Selling

• Procurement Best Practices

• Implementation Planning Studies (IPS)

• Discussion and Q & A

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Traditional Procurement Processes and Strategic Selling

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Traditional Procurement Processes Typically Involve:

RFP developed with business and technology requirements along with limited terms and conditions that are generic and not specifically tailored to the technology being purchased

Proposals delivered, initial screening Evaluations and scoring of business/technical requirements Interview and demonstrations Vendor of choice (VOC) announced Contract negotiations

If the VOC is selected prior to contract negotiations, significant negotiation leverage

has already been lost

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Strategic Selling – Common Tactics

Identify the “Coach” as early as possible to create information pipeline and navigate to buyer influencers

“Over-sell” the capabilities of the solution Push to down-select to vendor of choice at earliest possible

time Promote and “commit” with un-empowered sales

representatives to survive the down-select process, then bring in the business drivers to unhook prior commitments

Negotiate when the vendor is picked and their leverage is the greatest

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Traditional Procurement Approaches Can Result In:

Loss of negotiation leverage

“Omissions” vs. “Commissions” – when using the vendor form of contract

“Information Asymmetry”* - Buyer is at an inherent disadvantage

*Steven D. Levitt, Freakonomics

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Procurement Best Practices

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Reverse Engineer Strategic Selling Tactics

Use structured, multi-staged procurement process

Require commitments to key business and contract terms early on in the process

Require scripted and structured demos in a controlled environment that are recorded to preserve the representations made about meeting functionality requirements

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Reverse Engineer Strategic Selling Tactics

Require empowered negotiators upfront in the process

Require detailed project planning to get access to vendor’s implementation personnel responsible for implementing the solution

Use State-developed contracts and project documents specifically tailored toward the IT purchase

Maintain control over the processing of all contract and project document revisions

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Minimum & Mission Critical

Requirements ReviewInterviews

Key Business Terms

Product Demonstrations

Implementation Planning Study (IPS) WorkshopsProject Document Negotiations

Level of Detail& Commitment

Stage 1

Stage 2

Stage 3

Stage 4

Structured ProcurementProcess

Contract Negotiations

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The State will deliver to the vendor the form of contract and project documents

RFP specifies the vendors are not to provide their form contracts. If submitted, the State will not review.

Method of negotiations involve face-to-face, or, at the option of the State, by telephone

No “negotiation by emails” or via exchanging redlines Redlines from vendor will not be reviewed The State maintains the master and version control

Specific Negotiation Rules and Procedures – to be included in the RFP

Bidders required to certify compliance with the Negotiation Rules and Procedures as part of the RFP

submission as a Minimum (Mandatory) Requirement – No certification results in disqualification

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Implementation Planning Study

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Typical Lifecycle

Pro

ject

Pla

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Traditional Approach Has Problems

Precious leverage can be lost to negotiate key project commitments

Contracted “fixed fees” are subject to price increases due to overlooked, buried assumptions in the vendor’s proposal

Vendor fails to develop a project plan, statement of work and project charter that reflects project’s unique needs

Without firm project dates, real potential for slippage, in some cases, significant

Vendor unlikely to entertain any significant contract changes to close these gaps

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Reverse Engineer the Problem

Require full project planning during the procurement process, not after

Develop key project documents, including a fully documented Statement of Work, Project Plan, Joint Resource Plan, Project Management Plan, Project Charter and Quality Assurance Plan

Do NOT settle for samples or vendor-generated templates – Use your own forms and drive the process

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Revised Lifecycle

Pro

ject

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Developing the Project Schedules

Contract to include, as part of signing process (and not after):• Detailed Statement of Work• Joint Resource Plan• Detailed Project Plan• Project Management Plan• Project Charter• Quality Assurance Plan

Vendor’s project management team, including the vendor’s project manager and her/his functional and technical leads to be part of all IPS sessions

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Representative Detail for the Statement of WorkMust be comprehensive and detailed

Identify Vendor or the State as the “Accountable/Responsible” party for each major activity

Identify Critical Milestones and major deliverables

Specify due dates and consequences for vendor delays and missing critical due dates

Each major deliverable to have Certification Criteria

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Statement of Work

Detailed certification process for submitting design documents, test materials and other deliverables

Detailed solution testing and certification process Detailed knowledge transfer provisions Comprehensive project management approach:

• Project Status Reporting• Project Management• Risk Management• Issue Management• Financial Management• Communications Management• Quality Management

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Discussion and Q&A

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NASCIO

Procurement Modernization Initiative

Best Practices Considerations and Approaches

Dennis J. Gallitano

May 8, 2013