0 NASCIO Procurement Modernization Initiative Best Practices Considerations and Approaches Dennis J. Gallitano May 8, 2013

1 Topics Traditional Procurement Processes and Strategic Selling Procurement Best Practices Implementation Planning Studies (IPS) Discussion and Q & A

2 Traditional Procurement Processes and Strategic Selling

3 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

4 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

5 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

6 Procurement Best Practices

7 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

8 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

9 Minimum & Mission Critical Requirements Review Interviews Key Business Terms Product Demonstrations Implementation Planning Study (IPS) Workshops Project Document Negotiations Level of Detail & Commitment Stage 1 Stage 2 Stage 3 Stage 4 Structured Procurement Process Contract Negotiations

10 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 s” 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

11 Implementation Planning Study

12 Typical Lifecycle Customer Identified Need Market Evaluation RFP and Selection Negotiations Contract Signing Project Kickoff Project Completion and Transition Project Planning

13 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

14 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

15 Revised Lifecycle Customer Identified Need Market Evaluation RFP and Selection Negotiations Contract Signing Project Kickoff Project Completion Project Planning

16 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

17 Representative Detail for the Statement of Work Must 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

18 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

19 Discussion and Q&A

20 NASCIO Procurement Modernization Initiative Best Practices Considerations and Approaches Dennis J. Gallitano May 8, 2013