3 Desire for Success – Belief in Change Single opportunity to transform procurementPhased project approach
4 Communication of Clear Vision Procurement roadmapProject communication
5 Right People on the Team IT Project ManagerContractor
6 NASPO Best Practices in IT Procurement Hourly Based IT Services (HBITS) Caveat and background- Tentative Contract awards have been issued, awaiting imminent approval of our OSC.All the information I will discuss is publicNYS spends a great deal on various types of IT ServicesHourly based, project based deliverables, training, maintenance etcWhile the existing IT Services contracts were amended numerous times, they were more than 10 years old and the consensus of almost all parties is, the contracting category was long past due for a review and overhaul.Previous contracts were a staffing drain – for the central contract office and agency usesContract spend data was based on vendor reported sales – much of our information was anecdotal - while we knew there was a lot of spend, we didn’t know what, who, how much and how the prices compared from agency to agency or even within the same agency for the same titleA procurement success story.September 12, 2012
7 BackgroundObjectives and Key QuestionsNYS attempted to address multiple objectives and answers key questions about IT Services marketplace.ObjectivesUnderstand how NYS is procuring IT ServicesPresent observations about the current state of IT Services including spend profile, contract summary and business requirementsComplete an industry analysis to identify market trends and external factors which affect potential future models for NYS IT Services procurementProvide a fact base that depicts how the OGS ITS contract is used for hourly-based services versus deliverable-basedKey QuestionsWhat are the cost drivers that can be leveraged for potential savings opportunities?What opportunities exist to reduce the cost of hourly-based IT Services?How do NYS Executive Agencies use the OGS ITS Back-Drop contract?What is the nature of the current supply base?As we moved forward with the area we knew it was important to get a deep understanding about IT Services based on facts.- We had certain objectives and wanted to answer fundamental questions
8 BackgroundNYS Data Gathering Process – External and InternalDetailed spend information was requested from New York State’s top IT Services vendors and top Agencies by spend.External and Internal Data TemplateKey fields requested: Procurement Mechanism (contract type), State Agency/Entity, Location, Job Title, Skill Category, Regular Time Pay Rate, Regular Time Bill Rate and Hours BilledThe external data request differed from the internal in that vendors were asked to provide data on deliverable based IT Services in addition to hourly-basedExternal Data Collection ResultsSent data request template to 91 vendorsThe list of data request recipients was derived from the 788 IT Services suppliers identified in the Spend Assessment which included deliverable and hourly spend from Executive Agencies during the 12/09 to 11/10 time periodVendors on this list who had over $500K in spend and NYS certified M/WBEs who had $100K or more received the data request template; this accounted for approximately 64% of the total IT Services Assessment spend (approximately $260M)Received detailed usage data from 66 suppliers totaling approximately $684.1M over two yearsSeven suppliers returned over 16,000 detailed line itemsInternal Data Collection ResultsSent data request template to eight high spend agenciesReceived data from six agenciesSo we asked the top spend users and vendors to provide very specific informationSince we knew not all service acquisitions are from the centralized contracts, in order to get the big picture we requested all of the hoursly based data from the 8 high spend users regardless of the contract acquired under (including non- contract discretionary spend).And in the case of the vendors (sent to 91 vendors) – we asked not only for Hourly based but also project based from all of the eligible contract users (state executive agencies and all other eligible users regardless of contract).
9 BackgroundKey FindingsThrough completing an internal and external profile, NYS identified several key findings regarding the IT Services marketplace in NYS.Hourly-based IT Services represented 87% of total spend on past OGS IT Services contractExecutive Agency hourly-based IT Services spend is $134.9MThe majority of deliverable-based IT Services across NYS were not procured off of the OGS ITS contractDeliverable-based spend is concentrated in New York City, rather than in the Executive AgenciesHourly rates from one supplier vary greatly across Agencies for the same job titlesThe NYS procurement process discourages Executive Agencies from engaging and promoting competition among hourly-based IT Services suppliersMany agencies have created their own backdrop contracts.The OGS Centralized contract itself contained 600+ vendors (at one point almost 800).A discussion guide was developed and interviews were conducted to collect state-wide requirements and processes from the top spend agencies.All agency discussions emphasized the procurement process as a significant pain point. Depending on the type of contract, agencies are required to obtain approvals at different stages in the process to place an IT contractorAgencies shared documents that were considered as representative of their agencies procurement practices.Documents included RFPs, vendor evaluation instruments, assignment notifications, candidate evaluation instruments (for MASA contracts), invoices, and hourly rates as specified in various contractsThese are some of the key findingsWe were spending a great deal of time administering contracts that were hard to use, the contracts included large areas of services which agencies had less than 15% of spend on, and we unknowing forced agencies to sacrifice savings for what we felt was ease of use – when in fact it cost them money and a large administrative burden.So:From this information we developed a guide to help discuss the findings and data with the large spend agencies.It was important to see what their needs are, where they had suggestions for improvement, and to gather examples of best of practices and documents.Historically, NYS had minimal enterprise-wide insight into the breakdown between hourly-based and deliverable-based IT Services spend across the State.
10 NYS Current Business Requirements Buyers’ Business RequirementsNYS’ buyers found that if a need is not explicitly defined in the contract, the vendor will not always be willing to meet this need; the following were expressed as items that should be contractually required of vendors if a new contract was to be put in place.Reporting RequirementsRemoval of non-compete clausesSubcontracting ReportingEase and/or flexibility of terminationM/WBE ReportingM/WBE Recruitment and ParticipationAbility to provide in-demand skill setsMargin and/or markup informationConfirmation by vendor of consultant work/visa StatusIncentive to provide “better” candidatesConsider longer placement durationsSpecialized agency needsMandatory knowledge transfer to State staffBackground checks/fingerprintingHIPAA complianceStandardization for reimbursement of travel expensesThrough this collaborative process the sourcing team also considered the business needs of the buyers – those specific items, that through experience in this contract area, they felt were necessary to include in any contract going forwardMany of these needs were addressed at the outset of the past contract but each agency had to account for them subsequently as part of their individual engagements.Others were terms that had to change and if centrally managed could be done for the benefit of all (thus eliminating redundancy)The MWBE use and reporting requirements in NY have been intensified as a result of Executive Order.Past multi-layer subcontracting added costs. This contract requires detailed reports of sales, including markup and payments to sub-contractors, not only to assist agencies in reporting their MWBE usage in attainment of goals, but also to discourage piling on of margins at the expense of the state.
11 Opportunity Assessment Key ConsiderationsSeveral considerations as a strategy was developed for hourly-based IT Services in New York StateManaging large current vendor baseTransition from multitude of existing hourly-based IT Services agreements across the agencies to a central agreementRisk of losing institutional knowledge if existing IT Services personnel within agencies are replaced in the futureAgencies may have resistance to potential transition of long-term IT Services personnelTimeline influences by control agency approvals (OSC, DOB, OFT)Contracting effort could be extensiveThe agencies reps (including CIO’s and purchasing/finance personal) were vocal and open about their needs.In addition to the business concerns, other things were identified as key to any future contract strategy for hourly-based IT services.The team had to deal with these items as they developed the final strategy..
12 Strategy for NYS IT Services Procurement Primary DecisionThere were 3 main Hourly-Based IT Services models that were identified during the requirements gathering phase.#Strategic OptionProsConsOption 1 - Multi-VendorA competitively bid “short list” of preferred vendors that provide personnel directly to the customerMost flexibility for Agencies to find staffPre-qualifies the best of the best vendorsVendors believe that agencies benefit from a direct relationshipRequires high administrative burden on agency staffLess visibility into other agencies ratesDecentralized buying powerRisk of losing direct spend with M/WBE vendors due to “short-list”Option 2 - Managed Services ProviderA single vendor or team manages a network of multiple 2nd tier vendors on behalf of the customerCentral knowledge of rates across Executive agenciesMinimizes interagency competitionAdds a performance/feedback loop between vendors, MSP, and agenciesAlleviates resume filteringSimilar model used in Texas with successPotential administrative bottleneckCentral authority won’t have direct knowledge of agency needsPotential conflict of interest with vendors managing other vendors if MSP layer is bid outOption 3 - Master VendorA single vendor provides personnel to customer (vendor manages own sub-contractor network)Some State agencies do not currently have the resources to continue doing “mini-bids”Direct relationship with vendor can improve quality of candidates providedFormal bidding process removed as rates are pre-determinedPotential contract approval issues with OSC due to similarity to OFT ITSA procurementPotential conflict of interest with vendors managing other vendorsDifficult for new vendors to enter the process due to lack of pre-existing relationships with master vendorThese are the models identified for the contracting strategy.As we all know there are pros and cons to the contracting decisions we make. The strategy was to choose the one best suited based on all the stated needs and facts evident from the data discovery exercise.
13 Strategy for NYS IT Services Procurement Inputs into StrategyThe Category Strategy includes options and recommendations for Hourly-Based IT Services based on vendor input and agency needs.Model - What model best fits the Hourly-Based IT Services category requirements of NYS?Result: NYS chose the Managed Services Provider Option to centralize and streamline procurement of IT Services.Regionalization - Should NYS adjust the hourly rate for IT services consultants based on geographical regions?Result: NYS identified three (3) distinct geographical regions that mirrored established Civil Service regions. (NYC Metro, Mid-Hudson, Upstate)Rate Card Structure - How should the job titles and accompanying rate card be structured in the RFP?Result: NYS identified two (2) service groups of job titles; one for industry standard titles and another to introduce competition to historical large scale contracts with limited service providers.Vendor Pool - How many vendors should the State contract with for Hourly-Based IT Services?Result: NYS determined to use 25 vendors to satisfy Statewide demand.Strategy Choice reflected in bid and award:- Internally Managed Service Provider- adjusted rates based on NY’s distinct region for this type of work- one for industry standard titles and another to seek competition for the very large scale ones engagements where there is very limited service providers - the idea is not to force all users to pay hedged rates for so others can get needed high priced services- smaller vendor pool with real rates (elimination of not to exceed) 25 total vendors (only 20 active during the year)this pool will be changed out yearly as a result of previous year performance scores.
14 Strategy for NYS IT Services Procurement Inputs into Strategy, cont’dThe Category Strategy includes options and recommendations for Hourly-Based IT Services based on vendor input and agency needs.Managed Service Provider - Should the Managed Services be provided by the State or by a 3rd party?Result: The Managed Services would be provided by the State (in-house).Approval Process - What can be done to help streamline the procurement and approval process for hourly-based IT staff?Result: NYS identified and made recommendations regarding internal approval processes that presented barriers to efficient procurement of Hourly-Based IT Services.Contract Term - How long should the term of the new contract and the placements under this contract be?Result: NYS issued RFP for a five (5) year contract with an individual placement duration of no longer than two (2) years.Interim Savings - What other strategic options can be implemented to help agencies obtain better rates for hourly-based IT Services in the interim period before a new statewide contract is implemented?Result: NYS performed additional data analysis to identify specific savings opportunities by vendor and identified areas that assisted in the engagement of rate negotiations under existing contracts.Contract includes a faster approval process so agencies can get IT staff on the bench fasterStewide contract is for 5 years with engagements allowed only for 2 year maximumSince we let the past centralized IT Services contracts lapse on 12/31/11 a coordinated plan was put in place to assist the agencies who had either existing engagements that ran beyond that time or had needs for new services until the new HBITS contracts were implemented. The needs were identified and managed.NYS selected a new model not only to deliver cost savings but also to increase efficiency by creating a defined, consistent process for all agencies for selecting Hourly Based IT Services consultantsNYS selected a new model not only to deliver cost savings but also to increase efficiency by creating a defined, consistent process for all agencies for selecting Hourly Based IT Services consultants.
15 The HBITS RFP– RFP Summary Definition of HBITS: Hourly-Based IT ServicesThe HBITS RFP implements a new model for procuring hourly-based IT services in New York State, competitively bidding out 24 Job Titles across 3 Regions*.The HBITS RFP evaluation consisted of three parts: Administrative, Financial, and Technical. It was evaluated with a 60/40 Financial/Technical split to signal to the Bidder community the State’s emphasis on competitive pricing and to further encourage Bidders to bid actual Hourly Wage/Bill Rates, rather than Not To Exceed (NTE) ratesAdministrative Evaluation: Pass/fail assessment to ensure that Bidders provided complete proposals in the proper format. Only Bidders that passed the Administrative Evaluation moved forward to the Financial EvaluationFinancial Evaluation: Calculated a Total Cost for each Bidder based on historical usage of all Job Titles and the Bidder’s proposed Hourly Wage Rates and Markup Percentages for these Job Titles. Only Bidders that received a Financial score and were deemed susceptible to Award moved forward to the Technical EvaluationTechnical Evaluation: Qualitative review of each Bidder’s Technical Proposal by a committee of evaluators. Only Bidders that received a Technical score moved forward to receive a Total ScoreAdministrative Evaluation(Pass/Fail)Financial Evaluation(Maximum 60 Points)Technical Evaluation(Maximum 40 Points)TotalScore(Maximum 100 Points)We picked 24 titles and bid them across the three regionsWe used traditional RFP process = elimination of non responsive bidders in the initial Administrative reviewThen score the remaining based on relative weight of financial and technicalAnd remember the collaborative agency data gathering and results sharing exercise – we also identified key agency personnel with the knowledge and skills to assist us as an extended RFP team member.They worked with the knowledge of their agency CIO or CFO.
16 The HBITS RFP- Evaluation Summary Scoring Overview101 proposals were received by NYS in response to the HBITS RFP. A summary of the evaluation process is below.Administrative Evaluation (Pass/Fail)Financial Evaluation(60 Points)Technical Evaluation(40 Points)101 Bidders94 Bidders88 Bidders78 BiddersAdvancement of Bidders through Evaluation-7 DQ’d Bidders-6 DQ’d Bidders-10 DQ’d Bidders3 proposals were not accepted or opened because they were received after Bid Opening (January 24, 2012 – 11AM)78 Bidders received Technical Scores and were sent for score compilation to the Financial Evaluation CommitteeThe Financial Evaluation Committee Chair combined Technical and Financial scores to create Total Scores for the 78 BiddersThe Bidders were ranked from 1 to 78 according to Total Score; the top 25 Bidders have been recommended and notified of they are a tentative awardeeHere is overview of the bids we received
17 The HBITS RFP- ResultsSeveral positive outcomes were delivered to New York State as a result of this competitive exercise.HBITS awardees included several Minority and Women-Owned Business Enterprises (M/WBE) and Small Business Enterprises (SBE)HBITS awardees are a mixture of historically large-spend vendors and new players, thus introducing much needed competition to the marketplace.The Vendor Performance Criteria will ensure only the 20 best vendors (out of 25 total) will be on contract in any given year.A streamlined process was developed for obtaining HBITS in NYS. This included implementation and administration of the resultant HBITS contractsNYS was able to identify tens of millions in savings.As I indicated – awards are at our State Comptroller’s Office for final approval. There are recent law change as a result of NY’s Budget including:As of April 1, 2012 centralized contracts which will no longer require OSC pre-contract approval. Past agency engagements from the IT Services award required prior OSC approvalImportant to the administration of this contract area which will be State Managed Service (In-house). OGS now has the capability and has been provided the financial resources to not only centrally manage, but also centrally bill agencies for the engagementsWe are well on our way to finalize and train the state’s managed services team who will work on behalf of the agencies to bid and award Hourly Based IT Services, track spend and savings, and actively ensure contract compliance.Other users not under the control of the central contracting agency may use the contracts and we have included directions which will assist them in doing so.
18 IT Service Procurements – Best Practices** Engage IT commodity strategy teams - integrate purchasingEngage vendors to understand technology roadmapsCreate strategy - propose requirements and standardsEnsure enterprise adherance to requirements and standardsRisks – initial IT costs are significant – reduce risk when standards are set to design for the futureWhy:Cost savings occur from proper architectural decisions/standardsIT investments are long-term and switching costs are sometimes prohibitive**Read NASCIO’s - Leveraging Enterprise Architecture for Improved IT ProcurementState of Idaho
19 Idaho and the PIPS (BV) Process Performance Information Planning SystemCONCEPT:Hire smart people, and allow them to demonstrate their expertisePreplan projects from beginning to end while identifying potential risksand their solutionsMeasure performance as well as any deviation from the planRESULTS IN:Quicker time to supplier selectionGreater emphasis on project planning – project successReduction of client management requirementsMotivation towards continuous improvementCreation of accountability, through measurementState of Idaho
20 Idaho and the PIPS (BV) Process Performance Information Planning SystemFilter 6Weekly Report &Post-RatingFilter 1PastPerformanceInformationFilter 2Project CapabilityFilter 3InterviewFilter 4Prioritize(IdentifyBest Value)Filter 5Pre-AwardPhase(Pre-Plan)HighOld method – 300 pages per supplierpPointMethodOfAwardIncludingcostNegotiate – clear issuesDetail planning with the state and theVendor10 pages5 pagesPanel-Risk Assessment (RA)-Value Added (VA)ScheduleCost -SupplierQualityAssuranceRFP – Current Conditions/Expected OutcomesQuality of VendorsIntent to AwardAwardThe process can be explained in the following diagram. This diagram illustrates the different steps that are involved in assisting a client in identifying the potential best-valued contractor. As we go through the process, the lower performers will drop out, and we should be left with the higher performing vendorsThe first filter is the process is Past Performance Information (click)Assumes: one vendor is the expertClientQualityControlEvaluation TeamBlindLowAppealsDominant Information (1, 5, 10)2020
21 Idaho and the PIPS (BV) Process Pros:Greater time spent planning project prior to award – service project successBV partner identified quickerEase for evaluatorLess bias due to blind processControl shift to the supplier expert – weekly reportingSupplier uses best processes at lower cost, increases profit, assumes riskClient lowers cost through monitoring, not controllingDominant information focus for BV selection – less timeSignificant value in pre-planning prior to award—clarifies risk ownership and project details for both vendor and client prior to awardBlind selection prevents BiasLimits scope creep – forces decisions for cost, schedule – customer expectationPushes risk back to the vendor expertConsChange in control – supplier does all planning and reporting – overcoming resistance is significantNeed to train both vendor and clientBlind process sometimes selects vendors folks don’t likeState laws on selecting best value vs. costState of Idaho
22 Idaho and the PIPS (BV) Process Cons:Requires vendor and client training – breaking the ParadigmSuppliers have hard time taking the lead as expert and creating dominant information around risk and minimization-”you’re the customer – tell us what you want us to do” –Suppliers have a difficult time planning - reactive versus proactive not BVEvaluators have a hard time grasping dominant information for RFP scoring differentiationProblem with client control shift to the supplier expertClient says-- “we like controlling and directing the supplier – we are theexperts”Purchasing’s job becomes more difficult – internal resistanceState of Idaho