Tuesday, March 6, 2012

Ten Tips for Buying Technology

The following article on technology purchasing was originally published in The Court Manager, a publication of the National Association for Court Management, many years ago by Curt DeClue and James McMillan.

1. Consider procurement strategies outside the traditional RFP

One of the great myths of government procurement is that competitive bidding laws are designed to ensure that the government gets the best price.  Clearly this is not the case.  If it were, taxpayers would not be paying $600 for toilet seats and the private sector, which depends on the bottom line, would have adopted similar procurement procedures.  In fact, competitive bidding laws were passed to eliminate corruption, ensure fairness and transparency, and allow equal access among private vendors to government contract opportunities.  Saving money was a secondary goal at best.  The good news is that many state and local governments have moved aggressively to streamline the procurement process.  These changes are much more attuned to promoting efficiency and cost savings, while at the same time protecting the goals of fairness and equal access.   In many instances these reforms have been a direct response to the challenges of acquiring complex technology solutions.  The bad news is that many government agencies have failed to embrace these changes. A study by Government Technology News and the Aberdeen Group consulting firm found that, despite the adoption of reforms, “bureaucracy is getting in the way of sound and efficient procurement … practices” and that “complying with procurement regulations – not achieving cost savings --  is the primary driver of [procurement] strategies in the public sector.”  What can you do?  Find out what alternatives to the traditional RFP are available.  Find out what progressive procurement techniques are being used by other agencies in your jurisdiction.  Is the project appropriate for a more informal RFI-type process?  Are vendor interviews and sole sourcing permissible?  Above all, if you use a central procurement or purchasing office, make sure that the process is tailored to your particular needs and the characteristics of your project.  Don’t let your project be shoe-horned into a “one size fits all” process, RFP or otherwise.

2. Think Like a Vendor

As you craft your project and the resulting procurement effort, analyze them from the vendor’s perspective.  Keep in mind two concepts: (1) profit margin and (2) risk and reward.  Vendors are in business to make a profit for their owners and shareholders.  By doing this in a way that also serves the interests of their customers, they can grow, prosper and continue to provide valuable goods and services.  To do this, a vendor must make a reasonable profit on its investment of time, resources and money.  At the same time, not every cost involved in a project can be calculated in advance.  Every project contains potential problem situations that may or may not develop.  If they do develop, however, the vendor will be expected to resolve them.  In addition to analyzing fixed, known costs, a reputable vendor will analyze each proposal to determine its potential exposure to the costs associated with these problem situations.  A vendor must make financial provisions for such costs and it expects to be rewarded appropriately for assuming the risks of agreeing to fix such problems if they occur.  Here are just two examples of how these concepts, considered from the vendor’s perspective, might affect your procurement effort.

With respect to profit margins, many hardware components have become commodities.  As a result, it is quite possible that a vendor will buy hardware components from the same third-party supplier and at about the same price that is available to you.  The only difference is that the vendor will add a profit margin to this cost to determine the price that will be included in its proposal.  By buying these components directly, you eliminate this mark-up.

With respect to risk and reward, nothing creates more risk for a vendor than the unknown.  If the project requirements are vague, if the schedule is uncertain, if the project is dependent on numerous factors that the vendor cannot control, the vendor will have to make provisions for these unknowns in its pricing.  And, yes, that means that the price will go up!  Reducing the unknowns in a procurement effort will reduce the risk factors for a vendor and will allow it to lower its pricing.  Not all risk factors can be eliminated, however.  In particular, performance guarantees which push the technological envelope represent a major risk factor for a vendor.  You may determine that such performance standards are essential to your project.  If this is the case, make sure that these performance standards are as clear and precise as possible and accept the fact that you will pay a price for requiring a vendor to meet these guarantees.

3. Limit and Phase the Project Scope

The biggest problem that almost all Requests for Proposals or other government purchases suffer from is the size of the scope of the project.  What do we mean by the scope?  It is simply the list of problems that technology is asked to solve.  It is easy to make a statement like we would like to build a paperless court but it is very difficult to implement.  Therefore it is better to break a project and hence the RFP into phases that build one upon another.  This approach gives the court information on the costs of each phase, informs the judges and staff what is to be accomplished in each phase, provides flexibility in contracting if funding runs short, and creates proper expectations for the total project.

Also, there is often management or organizational problems that a court would like to use technology to solve, but those issues are not enumerated in the RFP.  It is best to list those issues because the technology and implementation approach can then be adjusted to address them.

4. Longer is Not Better

Long (several hundred page) Requests for Proposals have not proven to help courts to achieve more successful projects.  Courts have developed very detailed RFP’s only to find that first, they inhibit vendors from competing for their business due to the cost of responding to the request and second, they are extremely difficult to administer as part of the subsequent contract.  Instead one should focus on the business problem that you wish to solve.  Let the technology companies do the work of proposing the solution.  They often have innovative approaches that are well proven in other courts and other industries but, for many reasons, may not have been tried in your courts.

5. What Do You Do Best?

Courts and justice agencies often leave vendors in the dark as to what they want their staff’s roll to be in the project.  Does your court have a good trainer?  Do you have a good project manager or web master?  If they should be part of the project let everyone know in the RFP.  Also, courts often do not tell vendors what staff is being dedicated to the project in the RFP.  If there is no court or government staff assigned to oversee or work with the project, with requisite reallocation of other duties, then this nearly guarantees project failure.  Vendors look for this in RFP’s and if this information is not provided then good companies will pass on your project because it is an indication that your court is not committing resources to the project’s success.

6. Use Technology to Improve the Process of Educating Vendors

One of the most important aspects of any procurement is the educational process.  By this we mean the disseminating of procurement documentation, the process by which vendors gather information and the process by which vendors ask questions and you provide answers.  Though less obvious than direct project costs, resources devoted to this process can be sizable.  For you, it amounts to expensive staff time and resources.  For a vendor, just the costs of sending personnel to vendor meetings and question and answer sessions can be sizable.  These are costs that must be recovered and are therefore simply passed along in the project proposal.  Use technology to reduce these costs for both you and potential vendors.  Disseminate documents electronically.  Set up web-based chat rooms for vendor questions.  Use video conferencing for vendor meetings and question and answer session.  Put a virtual facility tour on your web-site.

7. Haste Makes Waste - Give Vendors Adequate Time to Respond

Nothing is more frustrating to a vendor than to have 30 days to respond to a lengthy, complex project document, knowing full well that you have been working on the project for a year or more.  It is understandable that once you have finally gotten to the procurement stage, you are anxious to move forward as quickly as possible.  Unfortunately this haste may mean that you are short-changing your project.  Compressing the response time unrealistically has a number of negative consequences.  Proposals are not well thought out; solutions are inadequate; and, responses are sloppy.  Without time for proper analysis, a vendor may assess inordinate risk to the project and unnecessarily increase its price (See Tip No. 2 above).  Some vendors may assume that an overly-aggressive response schedule means that you don’t have a good grasp of the complexities of the project.  Others may assume that the short response time means that the procurement process is simply a formality to allow you to officially designate a vendor that has already been determined.  In either case, reputable vendors with quality solutions may simply decide not to participate in the process.  Allow vendors enough time to give your project the same thoughtful analysis that you gave to it.

8. Position Your Project for the Future

Larry Webster (our NCSC colleague) always likes to quote Wayne Gretsky as saying that the reason he is a great hockey player is because he skates to where the puck is going and not where it has been.  One overarching goal of any technology project is to position your court to build upon that purchase for the future. [For example, if purchasing a case management system, can the database be linked with the courts or local law enforcement through information sharing capabilities (i.e., NIEM awareness) to enhance public safety?] It is worth spending a few more dollars now to gain experience with the technology and expand upon it in the future.

9. Use Standards

Technology standards for hardware and software set by governmental IT or purchasing department need to be re-evaluated before they are used in an RFP.  What was the dominant technology two years ago may now be obsolete because the company went bankrupt or another technology has caused a significant disruption in the marketplace.  An example of this occurred when the Internet browser was first introduced.  The browser became the standard computer interface for the public to deal with your court.  Now that same browser interface is becoming the standard for court technology systems because there is less work and cost involved in supporting the individual system users.  However, standards are an excellent starting point for development of RFP’s and can be used as a foundation for your technology project.

10. Or more …

Computer hardware specification is a moving target.  Each month a new type and amount of memory or a new computer processor chip is being introduced.  What was standard two months ago is now not available and costs extra to obtain.  So the trick to writing specifications is to simply add phrases such as “or more” or “or greater”.  For example, the PC must contain a 3.0 Gigahertz processor or greater.  Or it must have 4 Gb of RAM or greater.  This sets your acceptable minimum standard and allows the vendor flexibility to give you the best equipment at the best price.

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