2. Guidelines for Successful Scope and Procurement

3. The Problem Success rate for intelligent transportation systems life cycle is very low Success rate for intelligent transportation systems life cycle is very low Problems can be traced to: Problems can be traced to: –Incorrect contracting approach –Inexperience of the agency –Failure to follow appropriate procedures –Inadequate commitment of project management and systems engineering resources

4. Systems Acquisitions 53% 16% 31% Late Okay Cancelled Source: Patterns of Software Systems Failure and Successes, Jones, Capers, 1996

5. Success is Influenced by the Purchaser Purchasers experience has greater impact on project success than any other factor Purchasers experience has greater impact on project success than any other factor Success rate has increases by more than 25% for purchasers with prior experience Success rate has increases by more than 25% for purchasers with prior experience ITS implementation must be led by experienced staff ITS implementation must be led by experienced staff Source; Patterns of Software Systems Failure and Successes, Jones, Capers, 1996

6. The Contracting Model

7. Defines the entire contracting form and process Defines the entire contracting form and process Includes four dimensions: Includes four dimensions: –Work Allocation – Responsibilities –Method of Award – Contractor selection –Contract Form – How is work organized –Contract Type – Methods of reimbursement Terms and conditions apply to all dimensions Terms and conditions apply to all dimensions

8. The Contracting Model Terms and Conditions (payment, cancellation, disputes, etc.) Procurement Work Allocation Method of Award Contract Form Contract Type Low Bid Contractor Systems Manager Systems Integrator DB(OM) Commodity (COTS) Consultant Services Outsource Contractor Other Services Low Bid Negotiated Sole Source Phased Task Order Purchase Order Fixed Price Cost Reimbursable Incentive Time and Materials

9. Use of the Contracting Model Identifies dimensions to be included in selection process Identifies dimensions to be included in selection process Procurement guidelines define the process for choosing appropriate option for each dimension Procurement guidelines define the process for choosing appropriate option for each dimension Process is simplified by assembling combinations of options – procurement packages Process is simplified by assembling combinations of options – procurement packages Project may include multiple contracts and procurement packages Project may include multiple contracts and procurement packages

10. System Procurement Packages (1 of 2) 1)Commodity Supplier –Low-bid selection of prequalified packages –Fixed price contract –Applicable only for unmodified off-the-shelf software and hardware 2)Low-Bid Contractor with Design Consultant (for 100% design) –Low-bid selection –Fixed price contract –Can use incentives –Can use phased contracts –Useful if the predominant software is off-the-shelf

11. System Procurement Packages (2 of 2) 3)Systems Manager –Negotiated procurement –Fixed price, cost plus or time & material contracts –Can use incentives –Can use either phased or task-order contracts –Separate low-bid procurements required for construction and equipment 4)Design-Build Contractor with Design Consultant (for 30% design) –Best value selection –Fixed price. Cost plus or T&M may be acceptable –Can use incentives –Can use phased contracts

12. Other Procurement Packages 5)Consultant –Negotiated –Fixed price, cost plus or time & material contracts –Can use incentives –Can use either phased or task-order contracts 6)Outsourcing either an activity (such as maintenance) or an entire function (such as traveler information) –Low-bid selection may be based on rates –Fixed price or time & material contracts –Can use incentives

13. Contracting Considerations

14. Selecting the Best Procurement Approach Organizational Level Experience Resources Personnel Project Category New or replace. Size & complex. Uniqueness CharacteristicsContracting Solutions System Development Process Procurement Package Terms and Conditions

15. Defining Organizational Level Characteristic Immature Organization Mature Organization Personnel Experience Part time, personnel have no prior experience Full time responsibility of experienced personnel Organizational Experience Never done it before Experienced with 1 or more complex projects Organizational Structure ITS responsibilities undefined Single organizational unit responsible for all ITS Resources No defined ITS budget ITS budget for systems and personnel Management Support Modest mid-level support Considered a priority by senior management Expectations Not defined Included in agencys planning process

16. Defining Project Complexity Characteristic Simple Project Very Complex Project Newness Off-the-shelf solutions Invention(s) needed Scope Single function Multi-function system InterfacesNone Both internal & external Maturity Many similar systems Never been done Stability Requirements well defined Not sure what is needed Institutional Being developed for single agency Many agencies involved

17. The Outputs Systems development process Systems development process –Waterfall –Evolutionary –Spiral The procurement package The procurement package Lists of terms and conditions Lists of terms and conditions

18. Time Concept of Operations High Level Requirements Detailed Requirements High Level Design Detailed Design Implementation Operations & Maintenance System Verification Subsystem Verification Integration & Test The Development Processes are Based on the Systems Engineering Life Cycle

19. Systems Development Processes Waterfall – A linear process for well-defined programs including all the activities of the V diagram Waterfall – A linear process for well-defined programs including all the activities of the V diagram Evolutionary – Development of a project in a series of well defined phases in which the V diagram is repeated for each phase Evolutionary – Development of a project in a series of well defined phases in which the V diagram is repeated for each phase Spiral – Not certain of what is needed, so project development accompanied by much prototype development and many planning steps Spiral – Not certain of what is needed, so project development accompanied by much prototype development and many planning steps

20. The Decision Process

21. Initial Decisions – Step 1 Does the agency intend to outsource? Other services being procured. Not covered by Decision Model. Use consulting process (procurement package #5)* Start No Yes Are traditional consulting services being procured? YesNo Does the project include a system development? Use outsourcing process (procurement package #6 or #7)* Go To Step 2

22. Decision Model Step 2 Work Allocation Step 4 Determine Agency Step 3 Define Project Categories NO YES Send Individual Projects through the Model Step 5 Select applicable systems engineering process(es) & candidate procurement package(s) Step 6 Apply Differenti- ators Step 7 Package Assessment and Final Selections Step 8 Define Contract Scope and Terms and Conditions Schedule Constraints Start End

23. The Fundamental Activities of the Following Process Separate the project into individual contracts Separate the project into individual contracts Determine project and agency characteristics Determine project and agency characteristics Select procurement package Select procurement package Apply discriminators to multiple solutions Apply discriminators to multiple solutions Confer with Contracts Confer with Contracts Add terms and conditions Add terms and conditions

24. Decision Model – Step 2 Step 2 Work Allocation Step 4 Determine Agency Step 3 Define Project Categories NO YES Send Individual Projects through the Model Step 5 Select applicable systems engineering process(es) & candidate procurement package(s) Step 6 Apply Differenti- ators Step 7 Package Assessment and Final Selections Step 8 Define Contract Scope and Terms and Conditions Schedule Constraints Start End

25. Initial Work Allocation (Step 2) General rules: General rules: –In general, it is best for all work to be contained in a single prime contract (exceptions noted below) –Minimize interdependency of contractors (i.e. where one contractor depends on another contractors completion) –Multiple contracts require increased project management resources Reasons to consider multiple prime contracts: Reasons to consider multiple prime contracts: –Significant software and systems development, but largest dollar amount is in construction (i.e. systems contractor would not be prime under a single contract) –Unlikely that a satisfactory prime contractor can be identified –Significant outside expertise required

26. Decision Model Step 3 Step 2 Work Allocation Step 4 Determine Agency Step 3 Define Project Categories NO YES Send Individual Projects through the Model Step 5 Select applicable systems engineering process(es) & candidate procurement package(s) Step 6 Apply Differenti- ators Step 7 Package Assessment and Final Selections Step 8 Define Contract Scope and Terms and Conditions Schedule Constraints Start End

27. Identify Project Category (Step 3) Category 1 Category 2 Category 3 Category 4 Complexity Cells of table contain description of the characteristic appropriate to each category Development Technologies Interfaces Evolution Requirements Risk Examples Example of Cell Content: Primarily application of proven well-known technology. May include non-traditional use of existing technolog(ies)

28. Decision Model – Step 4 Step 2 Work Allocation Step 4 Determine Agency Step 3 Define Project Categories NO YES Send Individual Projects through the Model Step 5 Select applicable systems engineering process(es) & candidate procurement package(s) Step 6 Apply Differenti- ators Step 7 Package Assessment and Final Selections Step 8 Define Contract Scope and Terms and Conditions Schedule Constraints Start End

29. Select Organizational Levels (Step 4) Level 1 Level 2 Level 3 Personnel Cells of table contain description of the characteristic appropriate to each category Organizational Experience Resources Organization Management Support Expectations Example of cell content: Experience with at least one category 2 project or greater.

30. Decision Model – Step 5 Step 2 Work Allocation Step 4 Determine Agency Step 3 Define Project Categories NO YES Send Individual Projects through the Model Step 5 Select applicable systems engineering process(es) & candidate procurement package(s) Step 6 Apply Differenti- ators Step 7 Package Assessment and Final Selections Step 8 Define Contract Scope and Terms and Conditions Schedule Constraints Start End

31. The Decision Matrix (Step 5) Project Category Organizational Level Level 1 Level 2 Level 3 1 – Low Waterfall Waterfall SM or DB* SM or DB* Waterfall Waterfall Low Bid*, commodity, SM or DB Low Bid*, commodity, SM or DB Waterfall Waterfall Lob Bid, Commodity, SM or DB Lob Bid, Commodity, SM or DB 2 – Moderately Complex Evolutionary Evolutionary SM or DB* SM or DB* Waterfall or evolutionary Waterfall or evolutionary Low Bid*, SM or DB Low Bid*, SM or DB Waterfall or evolutionary Waterfall or evolutionary Low Bid, SM or DB Low Bid, SM or DB 3 – Complex Not recommended Evolutionary Evolutionary SM or DB SM or DB Evolutionary or spiral Evolutionary or spiral SM or DB SM or DB 4 – Extremely Complex Not recommended Evolutionary or spiral Evolutionary or spiral SM or DB SM or DB Evolutionary or spiral Evolutionary or spiral SM or DB SM or DB Notes: First line is the systems engineering technique, second line is the procurement package DB = Design-Build SM = Systems Manager * - Consulting services should be used while project is underway

32. Decision Model – Step 6 Step 2 Work Allocation Step 4 Determine Agency Step 3 Define Project Categories NO YES Send Individual Projects through the Model Step 5 Select applicable systems engineering process(es) & candidate procurement package(s) Step 6 Apply Differenti- ators Step 7 Package Assessment and Final Selections Step 8 Define Contract Scope and Terms and Conditions Schedule Constraints Start End

33. Procurement Differentiators (Step 6) Systems manager is preferred to design-build for significant new software development Systems manager is preferred to design-build for significant new software development Design-build preferred over systems manager, only for major projects and when significant amounts of field construction are involved Design-build preferred over systems manager, only for major projects and when significant amounts of field construction are involved If project includes both new software and field construction, consider using multiple contracts If project includes both new software and field construction, consider using multiple contracts

34. Procurement Differentiators continued (Step 6) Low-bid contracting should only be used if: Low-bid contracting should only be used if: –Required by agency policy (rarely true) –Projects consist of field construction and off-the-shelf equipment Commodity procurement applicable if an available packages do not require modification except for: Commodity procurement applicable if an available packages do not require modification except for: –New software drivers for interface with communications and field equipment –New database reflecting system configuration –New graphics (maps, etc.) for local environment

35. Impacts of Step 6 Decisions (Step 6 continued) Low-bid contract will require design consultant & low-bid contractor Low-bid contract will require design consultant & low-bid contractor Systems manager contract will require low- bid contractors for field construction and field equipment supply Systems manager contract will require low- bid contractors for field construction and field equipment supply Design-build contract will require design consultant and design-build contractor Design-build contract will require design consultant and design-build contractor Commodity procurement may require systems integrator for system implementation and test Commodity procurement may require systems integrator for system implementation and test

36. Decision Model – Step 7 Step 2 Work Allocation Step 4 Determine Agency Step 3 Define Project Categories NO YES Send Individual Projects through the Model Step 5 Select applicable systems engineering process(es) & candidate procurement package(s) Step 6 Apply Differenti- ators Step 7 Package Assessment and Final Selections Step 8 Define Contract Scope and Terms and Conditions Schedule Constraints Start End

37. Considerations When Making the Final Decision – Step 7 Involve the agencys contracts personnel (They should have been involved from the beginning) Involve the agencys contracts personnel (They should have been involved from the beginning) Compatibility with the systems engineering and project management principles Compatibility with the systems engineering and project management principles Agencys relative familiarity with the recommended alternatives Agencys relative familiarity with the recommended alternatives

38. Decision Model – Step 8 Step 2 Work Allocation Step 4 Determine Agency Step 3 Define Project Categories NO YES Send Individual Projects through the Model Step 5 Select applicable systems engineering process(es) & candidate procurement package(s) Step 6 Apply Differenti- ators Step 7 Package Assessment and Final Selections Step 8 Define Contract Scope and Terms and Conditions Schedule Constraints Start End

39. It is Then Necessary to Define Terms and Conditions

40. Contract Terms and Conditions (Step 8) Some are common to all procurement packages, others are unique for each package Some are common to all procurement packages, others are unique for each package Requires contracting expertise Requires contracting expertise To a certain extent, by state law, agency policies, and federal law To a certain extent, by state law, agency policies, and federal law Defined by the NCHRP documentation Defined by the NCHRP documentation

41. Sample Terms and Conditions (Step 8) Commodity Supplier Terms and Conditions Low-Bid Contractor with Design Consultant Systems Manager Design-Build Contractor with Design Consultant Consultant Outsourcing Agency Activity Outsourcing Agency Function Contractor Inspection Requirements Design within Funding Limitation NegotiationNegotiationNegotiationNegotiationNegotiation Inspection of Supplies Redesign Responsibility for Design Errors or Deficiencies Commercial Computer Software Restricted Design within Funding Limitations Notice of Cost Comparison Fixed Fee Option for Increased Quantity DeficienciesRights Redesign Responsibility for Design Errors Allowable Costs and Payment Incentive Fee Ordering Fixed Price Fixed Fee Work Oversight Fixed Fee Work Oversight Definite Quantity Incentive Fee Suspension of Work Incentive Fee Execution and Commencement of Work Indefinite Quantity Performance/Payment Bond Rights in Data Fixed Fee Performance Based Payments Performance/Payment Bond Brand Name of Equal Allowable Costs and Payment Incentive Fee Delivery Orders (Task Orders) Allowable Costs and Payment Allowable Costs Performance/Payment Bond Performance Based Payments Execution and Commencement of Work Specifications Performance Based Payments Modifications Delivery Orders (task orders) Performance/Payment Bond Delays and Extensions of Time Modifications Rights in Data Specifications Specifications and Drawings Modifications Rights in Data

42. Summary of the Seven Steps to Implementing the Process Step (1) Initial Decisions Step (2) Allocate the work Step (3) Select project category Step (4) Determine agency level Step (5) Using organizational levels and categories, select Procurement Package(s) for each project Step (6) Apply procurement differentiators to make final selection Step (7) Make final selection Step (8) Define contract terms and conditions Contract process is complete Contract process is complete

43. Key to a Successful Procurement Procurement approach is dependent on project type and agency capabilities Procurement approach is dependent on project type and agency capabilities Weve always done it that way is not a good excuse Weve always done it that way is not a good excuse The right procurement approach may not guarantee success, but the wrong approach will guarantee failure The right procurement approach may not guarantee success, but the wrong approach will guarantee failure

44. For More Information http://www.pcb.its.dot.gov/Catalogs/ITSCurriculum.htm for courses on procurement, systems engineering and project management http://www.pcb.its.dot.gov/Catalogs/ITSCurriculum.htm for courses on procurement, systems engineering and project management

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