Guidelines for Successful ITS Procurement T3 Session September 12, 2006 Presented by Phil Tarnoff University of Maryland Hosted by Mac Lister FHWA

The Problem Success rate for intelligent transportation systems life cycle is very low 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

System Acquisitions 51% 34% 15% Late Okay Cancelled Source: Standish Group, 2004

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

The Contracting Model

Defines the entire contracting form and process 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

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

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

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

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

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

Contracting Considerations

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

Defining Organizational Level CharacteristicImmature OrganizationMature Organization Personnel Experience Part time, personnel have no prior experience Full time responsibility of experienced personnel Organizational ExperienceNever done it before Experienced with one or more complex projects Organizational Structure ITS responsibilities undefined Single organizational unit responsible for all ITS ResourcesNo defined ITS budget ITS budget for systems and personnel Management SupportModest mid-level support Considered a priority by senior management ExpectationsNot defined Included in agency’s planning process

Defining Project Complexity CharacteristicSimple ProjectVery Complex Project NewnessOff-the-shelf solutionsInvention(s) needed ScopeSingle functionMulti-function system InterfacesNoneBoth internal & external MaturityMany similar systemsNever been done Stability Requirements well defined Not sure what is needed Institutional Being developed for single agency Many agencies involved

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

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

The Decision Process

Summary of the Eight-Step Procurement Approach (1) Initial decisions (2) Allocate the work (3) Select project category (4) Determine agency level (5) Using organizational levels and categories, select procurement package(s) for each project (6) Apply procurement differentiators to make final selection (7) Make final selection (8) Define contract terms and conditions

Key to a Successful Procurement Choice of procurement approach is dependent on project type and agency capabilities. “We’ve always done it that way” is not a good rationale. The right procurement approach may not guarantee success, but the wrong approach will guarantee failure.

For More Information Under highlights, select “Guide to Contracting ITS Projects” to access web-based step- by-step selection process. /ITSCurriculum.htm for courses on ITS procurement, systems engineering and project management

Contacts Phil Tarnoff Mac Lister