Report urges new procurement approach to large IT projects

California is continuing to look for ways to improve the procurement of large information technology projects. Last August, the Department of General Services (DGS) held a panel with senior officials from the Office of the State Chief Information Officer (OCIO) and the state’s Consumer Services Agency (SCSA) to talk about ways to reform IT procurement. Now, the Legislative Analyst’s Office (LAO) has issued their recommendations.

Under the reforms being considered by California’s executive branch, the new IT procurement process will be more efficient, cost less money for vendors and enhance the IT environment by cutting down the time it takes to go from project planning to contract award. During the session in August, State Chief Information Officer Teri Takai said IT vehicles are in place for about 65 percent of OCIO’s spend, and over 95 percent of contracts are procured through those vehicles. Panelists also said Requests for Proposals (RFPs) can take over 400 days, under the old procurement model.

Hastening the RFP process was central to the new procurement reforms outlined in August. 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 into RFP “boot camps,” and an expanded use of pilot projects, RFIs and “proof of concept” guidelines will be used.

This is where LAO’s recommendations come in.

According to the nonpartisan office, California should rely less heavily on fixed firm procurement (FFP) to procure large automation projects. Instead, large IT programs should go through a multi-stage process, if certain criteria of the more traditional option are not present. Although the FFP is seen as a way to ensure competition, the report states unless the solution is readily available in the marketplace and the system requirements are well-documented, the state runs the risk of cost overruns and development delays.

In two cases outlined by the report, the State Controller’s Office’s 21st Century Project and the Statewide Automated Child Support System, the FFP approach “did not increase the total number of actual bids, screen out ill–qualified vendors, or assist the state in defining its business needs,” the report says.

Under the terms of the multi-state procurement process, a single procurement is divided into multiple stages, where multiple vendors are selected through a traditional RFP then paid a lump sum to propose a “proof of concept” in what is referred to as a “bake-off.” During this second stage, vendors must also propose how to expand their “proof of concept” to the entire system. According to LAO, this process increases vendor participation, helps to weed out weaker proposals, and enhances the learning opportunity for both the state and the vendor. Although cost concerns, associated with paying multiple vendors as part of the stage-two back-off, could prohibit some system integration projects, LAO officials maintain the same process could be used in a single-vendor multi-stage procurement.

Ultimately, LAO recommends that large IT procurement approaches be incorporated into a legislative review process. LAO advocates for an up-front legislative review of large procurements, as well as notifications when approaches change.

“Complex systems integration projects should not follow a one–size, fits–all approach. Instead, the unique characteristics of each project—its complexity, scope, size, and requirements—should help determine its procurement approach,” the report concludes.

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