1. ITS Procurement Workshop Module 3: Selecting a Contracting Approach

2. ITS Procurement Workshop ITS Projects Products –Vehicle detectors, CCTV, lane control signals, DMS, communication medium and devices, traffic management building, conduit, pull boxes, foundations, structures, poles, hardware, computers, software, and traffic controllers Systems –Incident management systems; emergency dispatch systems; freeway management system and associated metered ramps; and arterial traffic signal systems Services –Architectural, surveying, mapping, engineering, design, construction, construction management, software development, system testing, and system integration.

3. ITS Procurement Workshop Mini-Cases

4. ITS Procurement Workshop Procurement Approach Model Work Structure Agency Characteristics Project Characteristics Method of AwardContract Type Enabling Legal Framework Other Tools

5. ITS Procurement Workshop Work Structure Agency Characteristics Project Characteristics Method of AwardContract Type Enabling Legal Framework Other Tools Work Structure Phased One Step Multi-Contract Combinations Work Structure Phased One Step Multi-Contract Combinations

6. ITS Procurement Workshop Basic Work Structure Plan DesignM & O Typical Steps in ITS Acquisition Steps in Traditional Project Acquisition Plan DevelopImplement M & OBuild

7. ITS Procurement Workshop ITS Acquisition Plan DevelopImplement M & O Vision Goals Schedule Cost Procurement Method High Level Requirements Requirements Refine Cost and Schedule Development Install Test Maintenance and Operations Contract Staff Privatize

8. ITS Procurement Workshop Phased Work Structure Plan DevelopImplement M & O Contractor 1 Contractor 2 Agency (or Contractor) One Contract for Each Step

9. ITS Procurement Workshop One-Step Work Structure One Contract Encompasses All Steps Plan DevelopImplement M & O One Contractor

10. ITS Procurement Workshop Multi-Contract Work Structure Multiple Contracts On-Going at the Same Time Sub-Contractor 1: Software System Sub-Contractor 2: Communications System Sub-Contractor 3: Field Device Installation “System Manager” Contractor “System Manager” Contractor

11. ITS Procurement Workshop Why Is Work Structure Important? Ensure you have the proper prime contractor Ensure you get the help you need

12. ITS Procurement Workshop Inputs to Deciding Work Structure Consider the Type of ITS Project –Majority OTS –Field devices –Communications –Majority new software/integration –Combinations Note: Consider degree of software development

13. ITS Procurement Workshop Inputs to Deciding Work Structure What are the other elements of the project beyond ITS? –Structures? –Trenching? –Remodeling?

14. ITS Procurement Workshop Inputs to Deciding Work Structure How should the work be managed? –Should an ITS Prime manage a “construction” sub? Vice-versa? –Perhaps the ITS work should be separated?

15. ITS Procurement Workshop Work Structure - Key Points Many ways to “slice it” Consider the ITS elements - should they be contracted separately? You will have to change your concept of the agency as project manager and devote more time no matter how you structure a project

16. ITS Procurement Workshop Mini-Cases

17. ITS Procurement Workshop Project Characteristics Work Structure Agency Characteristics Project Characteristics Method of AwardContract Type Enabling Legal Framework Other Tools Project Characteristics Determine Need For Flexibility in Contract Management Project Characteristics Determine Need For Flexibility in Contract Management

18. ITS Procurement Workshop Project Characteristics Need for Flexibility –Maturity of technology –Size/Scope/Complexity –Coordination with other work –Goals are fixed or not –Final product is stable, known, seen or not

19. ITS Procurement Workshop Project Characteristics Rating

20. ITS Procurement Workshop Agency Characteristics Work Structure Agency Characteristics Project Characteristics Method of AwardContract Type Enabling Legal Framework Other Tools Agency Characteristics Determine Need For Support Agency Characteristics Determine Need For Support

21. ITS Procurement Workshop Agency Characteristics Need for Support –Experience with similar work –Staff Skills –Workload –Funding

22. ITS Procurement Workshop Agency Characteristics Rating

23. ITS Procurement Workshop Mini-Cases

24. ITS Procurement Workshop Enabling Legal Framework Work Structure Agency Characteristics Project Characteristics Method of AwardContract Type Enabling Legal Framework (FARs) Other Tools Enabling Legal Framework Construction Engineering and Design Services Common Rule Services Goods SEP 14 Design/Build Others Enabling Legal Framework Construction Engineering and Design Services Common Rule Services Goods SEP 14 Design/Build Others

25. ITS Procurement Workshop Enabling Legal Framework Federal-aid procurement regulations – Code of Federal Regulations (CFR) Title 23 Parts 172, 635, 655 and Title 49 CFR Part 18 The laws that govern the use of Federal-aid highway funds If you use Federal funds for your ITS project - at any proportion - procurement is guided by the Code

26. ITS Procurement Workshop Enabling Legal Framework Construction Engineering and Design Services Common Rule –Goods –Services –Construction SEP 14

27. ITS Procurement Workshop Lessons Learned About Frameworks The Traditional Model - Engineering and Design Services and Construction –Contractor manages the subcontractors, rather than the agency. –However, ITS subs are often inaccessible under many layers of subcontractors (e.g. WSDOT) –Construction is low bid, and usually not suitable for ITS.

28. ITS Procurement Workshop Lessons Learned About Frameworks The Traditional Model - Engineering and Design Services and Construction –Imposes an artificial break between “design” and “construction”. –System Manager or Integrator contracts work well when risk is appropriately shared between client and contractor. –Past failures have been due to lack of shift in client/contractor relationship.

29. ITS Procurement Workshop Lessons Learned About Frameworks Common Rule –Many agencies have more flexible procurement rules, better suited to ITS (e.g. VDOT). –Some have rules specifically developed for technology (e.g. City of Bellevue, WA, State of Texas).

30. ITS Procurement Workshop Lessons Learned About Frameworks SEP 14 –Allows merging of “goods”, “services” and “construction” (e.g. CARAT). –Allows cost and quals combined in selection (e.g. UDOT). –Good alternative if your own processes are rigid (Common Rule)

31. ITS Procurement Workshop Lessons Learned About Frameworks SEP 14 –Design/Build allowed under SEP 14 –The term “Design/Build” carries a lot of baggage - use an alternative. –ITS is inherently design/build –Like all ITS, design/build ITS procurements require you to change your view of the client/contractor relationship.

32. ITS Procurement Workshop Mini-Cases

33. ITS Procurement Workshop Method of Award Work Structure Agency Characteristics Project Characteristics Method of AwardContract Type Enabling Legal Framework Other Tools Method of Award Qualifications Cost Quals and Cost Method of Award Qualifications Cost Quals and Cost

34. ITS Procurement Workshop Method Of Award Qualifications –Standard RFP/Interview –Two-Step Qualifications (LOI or RFQ, then RFP and/or interview) –Competitive Design –Demonstrations and/or Site Visits –Requirements Checklists –Sole Source –Unsolicited Proposals

35. ITS Procurement Workshop Method of Award Cost and Qualifications Combined –Two-Step Sealed Bids (Quals then Cost) –Competitive Proposals Best Value Life-Cycle Cost –Best and Final Offers –Competitive Negotiations –Sole Source

36. ITS Procurement Workshop Method of Award Cost (Low-bid) –Fixed cost works best for fixed outcome projects. –Cost alone is often inappropriate for ITS.

37. ITS Procurement Workshop When use Quals? When Quals and Cost? Consider what you are “buying”. –Intellectual property versus real property –Proportions of each How difficult is achieving the outcome? –Technically –Institutionally (people issues)

38. ITS Procurement Workshop Method Of Award - Lessons Learned Match selection method to outcome: –Qualifications and cost combined work well if the product is a combination of services and products. –Qualifications alone works well for software alone, or services. Beware of low bid for software: only use low bid for items with very little or no software development/integration.

39. ITS Procurement Workshop Contract Type Work Structure Agency Characteristics Project Characteristics Method of AwardContract Type Enabling Legal Framework Other Tools Contract Type Fixed Price Cost Reimbursement Incentive Contract Type Fixed Price Cost Reimbursement Incentive

40. ITS Procurement Workshop Contract Type Fixed Price –Firm Fixed Price –Variations Various Price Adjustments (Not scope-based) Fixed Price Works Best for Fixed Outcomes

41. ITS Procurement Workshop Contract Type Cost Reimbursement –Reimburses labor and direct costs, scope often very unclear. –Cost plus Fixed Fee –Time and Materials

42. ITS Procurement Workshop Contract Type Incentive –Relates fee to contractor performance –Target cost-based –Award Fee –Others

43. ITS Procurement Workshop Contract Types - Lessons Learned Fixed Price is applicable to fixed outcome work – not new software. Cost Reimbursement is applicable to software-intensive work and other work with flexible outcomes. –Long history of success in IT world. (MDSHA) Incentive applies to mature technology and software.

44. ITS Procurement Workshop Other Tools Work Structure Agency Characteristics Project Characteristics Method of AwardContract Type Enabling Legal Framework Other Tools Task Order IQC Other Tools Task Order IQC

45. ITS Procurement Workshop Other Tools Can be used with most any Contract Type (except, perhaps, construction). –IQC/On-Call Services (MinnDOT, GDOT) –IQC For Goods (UDOT) –Task Order (VDOT) –Independent Validation and Verification Contractor (MdSHA, NJ Turnpike)

46. ITS Procurement Workshop Other Tools - Lessons Learned Task Order increases control and flexibility, increases administrative burden. IQC reduces total time to contract. Little I,V & V contract experience - rely on DoD methods for conflict resolution.

47. ITS Procurement Workshop Procurement Approach Model Work Structure Agency Characteristics Project Characteristics Method of AwardContract Type Enabling Legal Framework Other Tools

48. ITS Procurement Workshop Effective Practice Summary Matrix

49. ITS Procurement Workshop Project/Agency Characteristics Diagram  High Low Traditional Practice OK Compromises In Effective Practice, Carefully Selected May Work NOTE: METHODS ARE ARRAYED IN A COMPARATIVE SENSE Apply Effective Practices Get Help! Perhaps Use I,V &V, or Think about DBOM Rethink Your Overall Approach 5 5 1 Need For Flexibility (Project Characteristics ) Need For Support (Agency Characteristics) 1

50. ITS Procurement Workshop Work Structure Agency Characteristics Project Characteristics Method of AwardContract Type Enabling Legal Framework Other Tools Effective Practices Include... Enabling Legal Framework Method of AwardContract Type Other Tools Effective Practices

51. ITS Procurement Workshop The Matrix Contractor specifies materials purchased by Client Agency. Restrictions on combining goods and services. Cost Reimbursement Fixed Price (unless it isa fixed outcome or product) Least Effective (Traditional Practices) ITS combined with other installation disciplines. Traditional approach where “design” and “construct” phases are separated. A contractor must accept the risk of other contractors or other parties. Services and goods completely separated. Low Bid selection required. None used. Cost– Do not use low bid for ITS unless you are purchasing a fixed outcome job

52. ITS Procurement Workshop Applying the Tools 1- Work Structure 2- Assess Project and Agency Characteristics 3 - Use the Diagram To Determine if Your Conditions Allow Compromises To Most Effective Practices 4- Apply Most Effective Practices Unless You Cannot Or Unless You Are Certain They Do Not Apply

53. ITS Procurement Workshop Key Points  Other procurement options exist that are more suited to ITS  ITS requires new procurement practices  ITS requires a change in management approach

54. ITS Procurement Workshop Key Points  Fixed outcomes = Fixed Costs = Cost- Based Selection  Uncertain outcome = Flexible Costs = Qualifications Based Selection  Most ITS is somewhere between these two