T3 Webinar:

Guidelines for Successful ITS Procurement

View text transcript of the questions and answers that followed this presentation

Host: Mac Lister, FHWA

Presenter: Phil Tarnoff, University of Maryland

The objective of this series of slides is to define the process to be used for defining the contracting and systems engineering to be applied toward the development of the system. This work will form the basis for the guidelines to be developed during Task 6.

Slides 1 and 2: The Problem

Slide 3: Systems Acquisitions

[Table represents a pie chart where there is only a 16% chance of success. Data is IT-wide not just ITS.]

Late: 53%
Cancelled: 31%
Okay: 16%

Source: Patterns of Software Systems Failure and Successes, Jones, Capers, 1996

Slide 4: Success is Influenced by the Purchaser

[Bullets below demonstrate that the degree of success can be raised to an acceptable level if all the correct experience is in place. But the point is that the agency has a tremendous influence on the outcome. The PM represents the agency.]

Source: Patterns of Software Systems Failure and Successes, Jones, Capers, 1996

Slides 5 and 6: The Contracting Model

[The following slides define the decision process. There are several steps to the process that are intermixed with explanatory slides. Slides representing specific steps in the process are labeled as such.]

Slide 7: The Contracting Model

[Table represents an organizational chart. The four dimensions of procurement along with the terms and conditions represent an organized look at the contracting process (procurement). The formal selection procedure to be described is based on the definition of work packages that include the four dimensions. Terms and conditions are isolated as a separate step. Work allocation is identified as the fundamental variable that drives the entire process.]

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
Terms and Conditions (payment, cancellation, disputes, etc.)

Slide 8: Use of the Contracting Model

Slides 9 – 11: System Procurement Packages

[These slides are also provided as background information. They are used for interpreting the recommendations of the systems implementation process and identifying procurement packages for ITS activities other than those associated with systems development. When considering the various procurement dimensions shown in slide 4, there are actually only four combinations of processes that "work". These four alternative combinations are driven by the "Work Allocation" dimension. The systems manager form of procurement also requires the agency to purchase construction services and equipment for the systems manager, using the low-bid process.

Step 5 of the decision process that follows will lead to the selection of one of these packages.]

  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
  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

    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

Slide 12: Contracting Considerations

Slide 13: Selecting the Best Procurement Approach

[Table represents a chart illustrating the relationships in the procurement process. At the NCHRP Panel meeting in August, it was agreed at the last meeting that the items listed as characteristics drive the contracting solution. In this presentation, agency and environment have been combined into a single category designated agency characteristics.]

Characteristics Contracting Solutions
Organizational Level
  • Experience
  • Resources
  • Personnel
System Development Process

Procurement Package

Terms and Conditions
Project Category
  • New or replace
  • Size & complex
  • Uniqueness

Slide 14: Defining Organizational Level

[For more details, review project complexity matrix of reference. There are actually four levels of project complexity. Only the extremes are shown here. It is up to the agency to determine the level of complexity. If you can't decide between two levels, pick the more complex of the two.]

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 agency's planning process

Slide 15: Defining Project Complexity

[For more details, review project complexity matrix of reference. There are actually four levels of project complexity. Only the extremes are shown here. It is up to the agency to determine the level of complexity. If can't decide between two levels, pick the more complex of the two.]

Characteristic Simple Project Very Complex Project
Newness Off-the-shelf solutions Invention(s) needed
Scope Single function Multi-function system
Interfaces None Both internal & external
Maturity Many similar systems Never been done
Stability Requirement well defined Not sure what is needed
Instructional Being developed for single agency Many agencies involved

Slide 16: The Outputs

Slide 17: The Development Processes are Based on the Systems Engineering Life Cycle

[A graphic in the shape of a "V" appears representing the Systems Engineering Process (listed below). It is used throughout the course to define the steps that must be taken for a successful system implementation. The flow of the graphic is from the top-left of the "V", down to the bottom of the "V", then up to the top-right of the "V". As each module is completed it is integrated into the overall system, tested and verified. If a new system is required, the steps of the "V" are begun again.]

[Words appearing in the graphic are as follows:]

Left side of "V", top to bottom:
Concept of Operations (defines the manner in which the system will be used), High Level Requirements (define what the system will do), Detailed Requirements, High Level Design (defines how the system will do it), Detailed Design, and Implementation (bottom of "V" — involves building the system).

Right side of "V", top to bottom:
Operations & Maintenance, System Verification, Subsystem Verification, Integration and Test, and Implementation (bottom of "V").

Slide 18: Systems Development Processes

Slide 19: The Decision Process

[The following slides define the decision process. There are several steps to the process that are intermixed with explanatory slides. Slides representing specific steps in the process are labeled as such.

Slide 20: Initial Decisions — Step 1

[A flowchart appears containing the following text in interconnected boxes; flow is dependent upon yes or no answers:]

[The decision process that is at the heart of this presentation is intended to focus on the procurement of contracting services for the implementation of a new system, or upgrading an existing system. However, there are other forms of contracting required for ITS including traditional consulting services, maintenance services, procurement of specific off-the-shelf items of hardware and software.]

[Following the logic shown here for the identification of the appropriate contracting decision process leads the user either to initiate the use of the decision process starting with the next slide, or to directly select a procurement package. If a procurement package is directly selected, the user can then skip steps 2 through 6 of the decision process and proceeds to step 7 (consultation with procurement officials).]

Slide 21: Decision Model

[A flowchart appears which is an overview of the Decision Model. The steps indicate the sequence in which work is performed when using the guidelines. This diagram will serve as the basic work flow diagram that will be repeated throughout. Additional slides (without step numbers in the title) are provided as background descriptions that define the manner in which the steps were created. It contains boxes with the following text:]

Slide 22: The Fundamental Activities of the Following Process

[As depicted in the previous diagram, the entire selection process is based on two variables designated Agency characteristics (3 levels) and Project Categories (4 levels). Project categories were defined and validated during Task 3. Agency characteristics will be validated during the work on this task.]

Slide 23: Decision Model — Step 2

[A flowchart highlighting step two in the process appears ("Work Allocation"). The second step in the process is determining whether the work should be performed as a single project or multiple projects. It is shown as the first activity of the decision model, since each of the individual projects resulting from this decision must be individually considered by the decision model. In other words, it is not necessary that each project be executed using the same contracting process. This is particularly true when the nature of the work in each contract is different. For example, one project may include the central system (including software) implementation, while another project might consist only of field installations.]

Slide 24: Initial Work Allocation (Step 2)

Slide 25: Decision Model — Step 3

[A flowchart highlighting step three in the process appears ("Define Project Categories"). The third step of the process is the definition of project categories. The step relies on the work performed during Task 3 of the project that identified categories of project difficulty using the characteristics of the work to be performed. This step must be executed for each of the projects defined during Step 2.]

Slide 26: Identify Project Category (Step 3)

[Table below illustrates sample of project categorization. This slide is followed by a copy of the actual Task 3 Table. The information in this table is used to determine whether the project is a Category 1, 2, 3 or 4 project. This step will be used to determine the type of contracting to be used. The step 3 designation indicates that this is the second step in the procurement decision process.]

Cells of table contain description of the characteristic appropriate to each category. This table contains sample text.

  Category 1 Category 2 Category 3 Category 4
Complexity        
Development        
Technologies   Example of Cell Content: "Primarily application of proven well-known technology. May include non-traditional use of existing technolog(ies)"    
Interfaces        
Evolution        
Requirements        
Risk        
Examples        

Slide 27: Decision Model — Step 4

[A flowchart highlighting step four in the process appears — "Determining Agency".]

Slide 28: Select Organizational Levels (Step 4)

[Table below illustrates sample of selecting project organizational levels. This overview slide is followed by a copy of the actual table. This is a new table which identifies the characteristics of an agency required to achieve a certain level of proficiency related to ITS procurements.]

  Level 1 Level 2 Level 3
Personnel      
Organizational Experience   Example of Cell Content: "Experience with at least one category 2 project or greater."  
Resources      
Organization      
Management Support      
Expectations      

Slide 29: Decision Model — Step 5

[A flowchart highlighting step five in the process appears ("Select applicable systems engineering process(es) & candidate procurement package(s)"). This is one of the key steps of the process. During this step, contracting and systems engineering processes are recommended.]

Slide 30: The Decision Matrix (Step 5)

[This may be the most important step of the process, in that it can be used to define the procurement package to be used for the acquisition of the ITS system. To use this matrix (see table below), it is necessary for the agency to have identified its project category, and its organizational level of capability. The agency then identifies the columns and rows of the matrix that match this combination of capabilities and levels. The intersection of the applicable column and row identifies the cell that defines the procurement package or packages that should be used.]

[The COTS entries reflect the fact that a simple system, based entirely on a COTS product should be acquired using the commodity procurement package. When COTS products are part of a larger system, other procurement packages may be used. (i.e. the product may be part of a proposal for low-bid, systems manager, or design-build procurements). A design-build contractor or a systems manager may decide to acquire a COTS product during the system implementation. If this is the case, the product would be acquired by the contractor using a commodity procurement package.]

[If more than one cell is applicable, they may define two or more different procurement packages. The following slide (step 5) is used to provide additional differentiation between multiple solutions.]

[If a project/organizational combination is not recommended, the agency should either seek more experienced staff support or redefine and simplify the project.]

Project Category Organizational Level
Level 1 Level 2 Level 3
1 — Low
  • Waterfall
  • SM or DB*
  • Waterfall
  • Low Bid*, commodity, SM or DB
  • Waterfall
  • Lob Bid, Commodity, SM or DB
2 — Moderately Complex
  • Evolutionary
  • SM or DB*
  • Waterfall or evolutionary
  • Low Bid*, SM or DB
  • Waterfall or evolutionary
  • Low Bid, SM or DB
3 — Complex Not recommended
  • Evolutionary
  • SM or DB
  • Evolutionary or spiral
  • SM or DB
4 — Extremely Complex Not recommended
  • Evolutionary or spiral
  • SM or DB
  • Evolutionary or spiral
  • 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

Slide 31: Decision Model — Step 6

[A flowchart highlighting step six in the process appears — "Apply Differentiator".]

Slides 32 – 34: Procurement Differentiators (Step 6)

[Slide 32 is used when more than one procurement package type is identified as acceptable during Step 4. It provides some additional criteria to help reduce the number of alternatives. If after considering these differentiators, multiple solutions still remain, the preferred alternative should be chosen based on the preferences of the agency's procurement officials. (See step 7)]

[Slide 33 is to be used when more than one procurement package type is identified as acceptable during Step 4. It provides some additional criteria to help reduce the number of alternatives. The differentiators are continued on slide 34. If after considering these differentiators, multiple solutions still remain, the preferred alternative should be chosen based on the preferences of the agency's procurement officials. (See step 7)]

[Slide 34 is a repeat of the activities of Step 2. It recognizes that certain types of procurement packages require additional contracting for consulting assistance and/or provision of field construction and field equipment supply. The first time it is executed based on overall considerations of the extent and type of work to be performed. The second time this work is performed, it takes into account the requirements of the contracting package(s) selected during Steps 5 and 6. There are a number of requirements associated with each of the contracting packages that must be reviewed at this point of the procurement.]

Slide 35: Decision Model — Step 7

[A flowchart highlighting step seven in the process appears ("Package Assessment and Final Selections").]

Slide 36: Considerations When Making the Final Decision — Step 7

Slide 37: Considerations When Making the Final Decision — Step 8

[A flowchart highlighting step eight in the process appears ("Define Contract Scope and Terms and Conditions").]

Slide 38: It is Then Necessary to Define Terms and Conditions

[The following slides define the decision process. There are several steps to the process that are intermixed with explanatory slides. Slides representing specific steps in the process are labeled as such.]

Slides 39 and 40: Contract Terms and Conditions (Step 8)

[This slide is a place-holder. It will be greatly expanded when the T&C work has been completed.]

Slide 41: 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

Slide 42: Key to a Successful Procurement

Slide 43: For More Information

Slide 44: Contact

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