California unveils new IT procurement process

The state of California is in the closing stages of a process that began over two years ago to reform information technology procurement.

On July 28, 2009 Governor Schwarzenegger signed a new budget, which included a number of reforms for IT procurement – especially for large, complex systems integrations.

A panel of senior officials from the Office of the State Chief Information Officer (OCIO), the State and Consumer Services Agency (SCSA), and the Department of General Services (DGS) met Tuesday in Sacramento to discuss the state’s new IT purchasing processes.

The new IT procurement process is intended to be more effective, cost less money for vendors and enhance the IT environment by cutting down the time it takes to go from project planning to awarding the contract.
Currently, the average large IT project procurement takes nearly 30 months. Sometimes it can take three to five years to implement a large IT project, which is, “a lifetime in the IT world,” said Fred Aguiar, Secretary of the State and Consumer Services Agency. “IT projects are a crucial component of the government of California…however the procurement process is long and needlessly drawn out.”

calif it procure old timeline

A Need to focus on big ticket items

According to State Chief Information Officer Teri Takai, IT vehicles are in place for about 65 percent of OCIO’s spend, and over 95 percent of contracts are procured through those vehicles. According to Ms. Takai, the problems are with the big contracts, usually starting at $20 or $25 million dollars, because they take the longest to procure and also are the most expensive for the private sector.

Jim Butler, the state’s chief procurement officer, said the problem was compounded because 30 – 35 percent of IT dollars are tied up in such projects, where the Request for Proposals (RFPs) can take over 400 days. “We must work to stop the multi-year procurement process. The Governor’s plan will cut our purchasing time from five years to one, while also cutting costs and enhancing our ability to collect more revenues,” Mr. Butler said in a statement.

Hastening the RFP process is central to the new procurement reforms. Sprawling and extremely detailed RFPs made it hard on both sides of the procurement process, so moving forward there will be much more collaboration between state and private sector stakeholders. Small RFP teams will be organized to include stakeholders from DGS, OCIO, and attorneys. RFP “boot camps” will help accelerate RFP development, Mr. Butler said, as well as parallel review processes and an expanded use of pilot projects, RFIs and “proof of concept” guidelines.

Calif it procure timeline

Under this new process, complex IT systems could be awarded in as little as ten months. Even if the project takes twenty-six months, that would still represent a nearly 66 percent reduction from the prior IT procurement timeline worst case scenario.

Additionally, the plan also incorporates elements commonplace to to private sector procurement, but prohibited under California’s old procurement rules. Projects can now allow staged procurements, which allow a small number of winning first round bidders to create pilot or prototype versions of the systems they have bid on. “When we advertise and say there will be three or four stages to a project and everyone can bid, the new law won’t punish anyone who participates in earlier stages of procurement,” Mr. Butler said during the forum. The opportunity to evaluate working version of systems in pilots or prototypes is expected to greatly improve the final products.

For vendors, new legislation has reduced financial withholding amount to 5 percent for some contracts over $10 million and to 3 percent for contracts under $10 million, based of the projects level of risk.

“We’re not done. It’s a good start, but it will take some tweaking,” Mr. Butler said.

And the tweaking is expected to begin immediately. Starting tomorrow, CalTRANS will implement a construction management system using the new procurement process with a schedule that is expected to take place in little under a year, according to an official at DGS. “We’re looking forward to getting metrics and proving the process’s validity,” she said.

A webcast of the forum can be found by clicking here.

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