guidelines for successful scope and procurement
DESCRIPTION
Guidelines for Successful Scope and Procurement. 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 - PowerPoint PPT PresentationTRANSCRIPT
Guidelines for SuccessfulGuidelines for SuccessfulScope and ProcurementScope and Procurement
The ProblemThe Problem Success rate for intelligent transportation Success rate for intelligent transportation
systems life cycle is very lowsystems life cycle is very low Problems can be traced to:Problems can be traced to:
– Incorrect contracting approachIncorrect contracting approach– Inexperience of the agencyInexperience of the agency– Failure to follow appropriate proceduresFailure to follow appropriate procedures– Inadequate commitment of project management Inadequate commitment of project management
and systems engineering resourcesand systems engineering resources
Systems AcquisitionsSystems Acquisitions
53%
16%
31%
Late
Okay
Cancelled
Source: Patterns of Software Systems Failure and Successes, Jones, Capers, 1996
Success is Influenced by the Success is Influenced by the PurchaserPurchaser
Purchaser’s experience has greater impact Purchaser’s experience has greater impact on project success than any other factoron project success than any other factor
Success rate has increases by more than Success rate has increases by more than 25% for purchasers with prior experience25% for purchasers with prior experience
ITS implementation must be led by ITS implementation must be led by experienced staffexperienced staff
Source; Patterns of Software Systems Failure and Successes, Jones, Capers, 1996
The Contracting Model
The Contracting ModelThe Contracting Model
Defines the entire contracting form and processDefines the entire contracting form and process Includes four dimensions:Includes four dimensions:
– Work Allocation – ResponsibilitiesWork Allocation – Responsibilities– Method of Award – Contractor selectionMethod of Award – Contractor selection– Contract Form – How is work organizedContract Form – How is work organized– Contract Type – Methods of reimbursementContract Type – Methods of reimbursement
Terms and conditions apply to all dimensionsTerms and conditions apply to all dimensions
The Contracting ModelThe Contracting Model
Terms and Conditions (payment, cancellation, disputes, etc.)
Procurement
Work Allocation
Method ofAward
ContractForm
ContractType
Low Bid ContractorSystems ManagerSystems IntegratorDB(OM)Commodity (COTS)Consultant ServicesOutsource ContractorOther Services
Low BidNegotiatedSole Source
PhasedTask OrderPurchase Order
Fixed PriceCost ReimbursableIncentiveTime and Materials
Use of the Contracting ModelUse of the Contracting Model
Identifies dimensions to be included in Identifies dimensions to be included in selection processselection process
Procurement guidelines define the process Procurement guidelines define the process for choosing appropriate option for each for choosing appropriate option for each dimensiondimension
Process is simplified by assembling Process is simplified by assembling combinations of options – procurement combinations of options – procurement packagespackages
Project may include multiple contracts and Project may include multiple contracts and procurement packagesprocurement packages
System Procurement System Procurement Packages (1 of 2)Packages (1 of 2)
1)1) Commodity SupplierCommodity Supplier– Low-bid selection of prequalified packagesLow-bid selection of prequalified packages– Fixed price contractFixed price contract– Applicable only for unmodified off-the-shelf Applicable only for unmodified off-the-shelf
software and hardware software and hardware
2)2) Low-Bid Contractor with Design Consultant Low-Bid Contractor with Design Consultant (for 100% design)(for 100% design)
– Low-bid selectionLow-bid selection– Fixed price contractFixed price contract– Can use incentivesCan use incentives– Can use phased contractsCan use phased contracts– Useful if the predominant software is off-the-shelfUseful if the predominant software is off-the-shelf
System Procurement Packages System Procurement Packages (2 of 2)(2 of 2)
3)3) Systems ManagerSystems Manager– Negotiated procurementNegotiated procurement– Fixed price, cost plus or time & material contractsFixed price, cost plus or time & material contracts– Can use incentivesCan use incentives– Can use either phased or task-order contractsCan use either phased or task-order contracts– Separate low-bid procurements required for construction Separate low-bid procurements required for construction
and equipmentand equipment
4)4) Design-Build Contractor with Design Design-Build Contractor with Design Consultant (for 30% design)Consultant (for 30% design)
– Best value selectionBest value selection– Fixed price. Cost plus or T&M may be acceptableFixed price. Cost plus or T&M may be acceptable– Can use incentivesCan use incentives– Can use phased contractsCan use phased contracts
Other Procurement PackagesOther Procurement Packages
5)5) ConsultantConsultant– NegotiatedNegotiated– Fixed price, cost plus or time & material contractsFixed price, cost plus or time & material contracts– Can use incentivesCan use incentives– Can use either phased or task-order contractsCan use either phased or task-order contracts
6)6) Outsourcing either an activity (such as Outsourcing either an activity (such as maintenance) or an entire function (such as maintenance) or an entire function (such as traveler information)traveler information)
– Low-bid selection may be based on ratesLow-bid selection may be based on rates– Fixed price or time & material contractsFixed price or time & material contracts– Can use incentives Can use incentives
Contracting ConsiderationsContracting Considerations
Selecting the Best Selecting the Best Procurement ApproachProcurement Approach
Organizational Level•Experience•Resources•Personnel
Project Category•New or replace.•Size & complex.•Uniqueness
Characteristics Contracting Solutions
System Development Process
System Development Process
Procurement Package
Terms and Conditions
Defining Organizational LevelDefining Organizational Level
CharacteristicCharacteristic Immature OrganizationImmature Organization Mature OrganizationMature Organization
Personnel ExperiencePersonnel Experience Part time, personnel have Part time, personnel have no prior experienceno prior experience
Full time responsibility of Full time responsibility of experienced personnelexperienced personnel
Organizational ExperienceOrganizational Experience Never done it before Never done it before Experienced with 1 or Experienced with 1 or more complex projectsmore complex projects
Organizational StructureOrganizational Structure ITS responsibilities ITS responsibilities undefinedundefined
Single organizational unit Single organizational unit responsible for all ITSresponsible for all ITS
ResourcesResources No defined ITS budgetNo defined ITS budget ITS budget for systems ITS budget for systems and personneland personnel
Management SupportManagement Support Modest mid-level supportModest mid-level support Considered a priority by Considered a priority by senior managementsenior management
ExpectationsExpectations Not definedNot defined Included in agency’s Included in agency’s planning processplanning process
Defining Project ComplexityDefining Project Complexity
CharacteristicCharacteristic Simple ProjectSimple Project Very Complex ProjectVery Complex Project
NewnessNewness Off-the-shelf solutionsOff-the-shelf solutions Invention(s) neededInvention(s) needed
ScopeScope Single function Single function Multi-function system Multi-function system
InterfacesInterfaces NoneNone Both internal & externalBoth internal & external
MaturityMaturity Many similar systemsMany similar systems Never been doneNever been done
StabilityStability Requirements well Requirements well defineddefined Not sure what is neededNot sure what is needed
InstitutionalInstitutional Being developed for Being developed for single agencysingle agency Many agencies involvedMany agencies involved
The OutputsThe Outputs
Systems development processSystems development process– WaterfallWaterfall– EvolutionaryEvolutionary– SpiralSpiral
The procurement packageThe procurement package Lists of terms and conditionsLists of terms and conditions
Time
Conceptof Operations
High LevelRequirements
DetailedRequirements
High LevelDesign
DetailedDesign
Implementation
Operations &Maintenance
SystemVerification
SubsystemVerification
Integration &Test
The Development Processes are Based on the Systems Engineering Life Cycle
Systems Development Systems Development ProcessesProcesses
Waterfall –Waterfall – A linear process for well-defined A linear process for well-defined programs including all the activities of the “V” programs including all the activities of the “V” diagramdiagram
Evolutionary –Evolutionary – Development of a project in Development of a project in a series of well defined phases in which the a series of well defined phases in which the “V” diagram is repeated for each phase“V” diagram is repeated for each phase
Spiral –Spiral – Not certain of what is needed, so Not certain of what is needed, so project development accompanied by much project development accompanied by much prototype development and many planning prototype development and many planning steps steps
The Decision ProcessThe Decision Process
Initial Decisions – Step 1Initial Decisions – Step 1
Does the agency intend
to outsource?
Other services being procured.
Not covered by Decision Model.
Use consulting process
(procurement package #5)*
Start
No
Yes
Yes
Are traditional
consulting services being procured?
Yes No
No
Does the project
include a system development?
Use outsourcing process
(procurement package #6 or #7)*
Go To Step 2
Decision Model
Step 2
Work Allocation
Step 4
Determine Agency
Step 3
Define Project
Categories
NO
YES
Send Individual Projects through
the Model
Step 5 Select
applicable systems
engineering process(es) &
candidate procurement package(s)
Step 6
Apply Differenti-
ators
Step 7
Package Assessment
and Final Selections
Step 8 Define
Contract Scope and Terms and Conditions
Schedule ConstraintsStart
End
The Fundamental Activities of The Fundamental Activities of the Following Processthe Following Process
Separate the project into individual contractsSeparate the project into individual contracts Determine project and agency characteristicsDetermine project and agency characteristics Select procurement packageSelect procurement package Apply discriminators to multiple solutionsApply discriminators to multiple solutions Confer with ContractsConfer with Contracts Add terms and conditionsAdd terms and conditions
Decision Model – Step 2
Step 2
Work Allocation
Step 4
Determine Agency
Step 3
Define Project
Categories
NO
YES
Send Individual Projects through
the Model
Step 5 Select
applicable systems
engineering process(es) &
candidate procurement package(s)
Step 6
Apply Differenti-
ators
Step 7
Package Assessment
and Final Selections
Step 8 Define
Contract Scope and Terms and Conditions
Schedule ConstraintsStart
End
Initial Work Allocation (Step 2)Initial Work Allocation (Step 2) General rules:General rules:
– In general, it is best for all work to be contained in a single prime In general, it is best for all work to be contained in a single prime contract (exceptions noted below)contract (exceptions noted below)
– Minimize interdependency of contractors (i.e. where one Minimize interdependency of contractors (i.e. where one contractor depends on another contractor’s completion)contractor depends on another contractor’s completion)
– Multiple contracts require increased project management Multiple contracts require increased project management resourcesresources
Reasons to consider multiple prime contracts:Reasons to consider multiple prime contracts:– Significant software and systems development, but largest dollar Significant software and systems development, but largest dollar
amount is in construction (i.e. systems contractor would not be amount is in construction (i.e. systems contractor would not be prime under a single contract)prime under a single contract)
– Unlikely that a satisfactory prime contractor can be identifiedUnlikely that a satisfactory prime contractor can be identified– Significant outside expertise requiredSignificant outside expertise required
Decision Model Step 3
Step 2
Work Allocation
Step 4
Determine Agency
Step 3
Define Project
Categories
NO
YES
Send Individual Projects through
the Model
Step 5 Select
applicable systems
engineering process(es) &
candidate procurement package(s)
Step 6
Apply Differenti-
ators
Step 7
Package Assessment
and Final Selections
Step 8 Define
Contract Scope and Terms and Conditions
Schedule ConstraintsStart
End
Identify Project Category Identify Project Category (Step 3)(Step 3)
Category 1Category 1 Category 2Category 2 Category 3Category 3 Category 4Category 4
ComplexityComplexity
Cells of table contain description of the characteristic Cells of table contain description of the characteristic appropriate to each categoryappropriate to each category
DevelopmentDevelopment
TechnologiesTechnologies
InterfacesInterfaces
EvolutionEvolution
RequirementsRequirements
RiskRisk
ExamplesExamples
Example of Cell Content:“Primarily application of proven well-known technology. May include non-traditional use of existing technolog(ies)”
Decision Model – Step 4
Step 2
Work Allocation
Step 4
Determine Agency
Step 3
Define Project
Categories
NO
YES
Send Individual Projects through
the Model
Step 5 Select
applicable systems
engineering process(es) &
candidate procurement package(s)
Step 6
Apply Differenti-
ators
Step 7
Package Assessment
and Final Selections
Step 8 Define
Contract Scope and Terms and Conditions
Schedule ConstraintsStart
End
Select Organizational Levels Select Organizational Levels (Step 4)(Step 4)
Level 1Level 1 Level 2Level 2 Level 3Level 3
PersonnelPersonnel
Cells of table contain description Cells of table contain description of the characteristic appropriate of the characteristic appropriate
to each categoryto each category
Organizational Organizational ExperienceExperience
ResourcesResources
OrganizationOrganization
Management Management SupportSupport
ExpectationsExpectations
Example of cell content:“Experience with at least one category 2 project or greater.”
Decision Model – Step 5
Step 2
Work Allocation
Step 4
Determine Agency
Step 3
Define Project
Categories
NO
YES
Send Individual Projects through
the Model
Step 5 Select
applicable systems
engineering process(es) &
candidate procurement package(s)
Step 6
Apply Differenti-
ators
Step 7
Package Assessment
and Final Selections
Step 8 Define
Contract Scope and Terms and Conditions
Schedule ConstraintsStart
End
The Decision Matrix (Step 5)The Decision Matrix (Step 5)Project CategoryProject Category Organizational LevelOrganizational Level
Level 1 Level 1 Level 2Level 2 Level 3Level 3
1 – Low1 – Low WaterfallWaterfallSM or DB*SM or DB*
WaterfallWaterfallLow Bid*, commodity, Low Bid*, commodity, SM or DB SM or DB
WaterfallWaterfallLob Bid, Commodity, Lob Bid, Commodity, SM or DBSM or DB
2 – Moderately 2 – Moderately ComplexComplex
EvolutionaryEvolutionarySM or DB*SM or DB*
Waterfall or evolutionaryWaterfall or evolutionaryLow Bid*, SM or DBLow Bid*, SM or DB
Waterfall or evolutionaryWaterfall or evolutionaryLow Bid, SM or DBLow Bid, SM or DB
3 – Complex3 – Complex Not recommendedNot recommended EvolutionaryEvolutionarySM or DBSM or DB
Evolutionary or spiralEvolutionary or spiralSM or DBSM or DB
4 – Extremely 4 – Extremely ComplexComplex
Not recommendedNot recommended Evolutionary or spiralEvolutionary or spiralSM or DBSM or DB
Evolutionary or spiralEvolutionary or spiralSM or DBSM or DB
Notes:First line is the systems engineering technique, second line is the procurement packageDB = Design-BuildSM = Systems Manager* - Consulting services should be used while project is underway
Decision Model – Step 6
Step 2
Work Allocation
Step 4
Determine Agency
Step 3
Define Project
Categories
NO
YES
Send Individual Projects through
the Model
Step 5 Select
applicable systems
engineering process(es) &
candidate procurement package(s)
Step 6
Apply Differenti-
ators
Step 7
Package Assessment
and Final Selections
Step 8 Define
Contract Scope and Terms and Conditions
Schedule ConstraintsStart
End
Procurement Differentiators Procurement Differentiators (Step 6)(Step 6)
Systems manager is preferred to design-build Systems manager is preferred to design-build for significant new software developmentfor significant new software development
Design-build preferred over systems Design-build preferred over systems manager, only for major projects and when manager, only for major projects and when significant amounts of field construction are significant amounts of field construction are involvedinvolved
If project includes both new software and field If project includes both new software and field construction, consider using multiple construction, consider using multiple contractscontracts
Procurement Differentiators Procurement Differentiators continued (Step 6)continued (Step 6)
Low-bid contracting should only be used if:Low-bid contracting should only be used if:– Required by agency policy (rarely true)Required by agency policy (rarely true)– Projects consist of field construction and off-the-shelf Projects consist of field construction and off-the-shelf
equipmentequipment
Commodity procurement applicable if an Commodity procurement applicable if an available packages do not require modification available packages do not require modification except for:except for:– New software drivers for interface with New software drivers for interface with
communications and field equipmentcommunications and field equipment– New database reflecting system configurationNew database reflecting system configuration– New graphics (maps, etc.) for local environmentNew graphics (maps, etc.) for local environment
Impacts of Step 6 Decisions Impacts of Step 6 Decisions (Step 6 continued)(Step 6 continued)
Low-bid contract Low-bid contract willwill require design require design consultant & low-bid contractorconsultant & low-bid contractor
Systems manager contract Systems manager contract willwill require low- require low-bid contractors for field construction and field bid contractors for field construction and field equipment supplyequipment supply
Design-build contract Design-build contract willwill require design require design consultant and design-build contractorconsultant and design-build contractor
Commodity procurement Commodity procurement maymay require require systems integrator for system implementation systems integrator for system implementation and testand test
Decision Model – Step 7
Step 2
Work Allocation
Step 4
Determine Agency
Step 3
Define Project
Categories
NO
YES
Send Individual Projects through
the Model
Step 5 Select
applicable systems
engineering process(es) &
candidate procurement package(s)
Step 6
Apply Differenti-
ators
Step 7
Package Assessment
and Final Selections
Step 8 Define
Contract Scope and Terms and Conditions
Schedule ConstraintsStart
End
Considerations When Making Considerations When Making the Final Decision – Step 7the Final Decision – Step 7
Involve the agency’s contracts Involve the agency’s contracts personnel (They should have been personnel (They should have been involved from the beginning)involved from the beginning)
Compatibility with the systems Compatibility with the systems engineering and project management engineering and project management principlesprinciples
Agency’s relative familiarity with the Agency’s relative familiarity with the recommended alternativesrecommended alternatives
Decision Model – Step 8
Step 2
Work Allocation
Step 4
Determine Agency
Step 3
Define Project
Categories
NO
YES
Send Individual Projects through
the Model
Step 5 Select
applicable systems
engineering process(es) &
candidate procurement package(s)
Step 6
Apply Differenti-
ators
Step 7
Package Assessment
and Final Selections
Step 8 Define
Contract Scope and Terms and Conditions
Schedule ConstraintsStart
End
It is Then Necessary to Define It is Then Necessary to Define Terms and ConditionsTerms and Conditions
Contract Terms and Conditions Contract Terms and Conditions (Step 8)(Step 8)
Some are common to all procurement Some are common to all procurement packages, others are unique for each packages, others are unique for each packagepackage
Requires contracting expertiseRequires contracting expertise To a certain extent, by state law, agency To a certain extent, by state law, agency
policies, and federal lawpolicies, and federal law Defined by the NCHRP documentationDefined by the NCHRP documentation
Sample Terms and Conditions (Step 8)
Commodity Supplier Commodity Supplier Terms and ConditionsTerms and Conditions
Low-Bid Contractor Low-Bid Contractor with Design Consultantwith Design Consultant
Systems ManagerSystems ManagerDesign-Build Design-Build
Contractor with Design Contractor with Design ConsultantConsultant
ConsultantConsultant Outsourcing Agency Outsourcing Agency ActivityActivity
Outsourcing Agency Outsourcing Agency FunctionFunction
Contractor Inspection Contractor Inspection RequirementsRequirements
Design within Funding Design within Funding LimitationLimitation
NegotiationNegotiation NegotiationNegotiation NegotiationNegotiation NegotiationNegotiation NegotiationNegotiation
Inspection of SuppliesInspection of Supplies Redesign Responsibility Redesign Responsibility for Design Errors or for Design Errors or DeficienciesDeficiencies
Commercial Computer Commercial Computer Software RestrictedSoftware Restricted
Design within Funding Design within Funding LimitationsLimitations
Notice of Cost Notice of Cost ComparisonComparison
Fixed FeeFixed Fee Fixed FeeFixed Fee
Option for Increased Option for Increased QuantityQuantity
DeficienciesDeficiencies Rights Rights Redesign Responsibility Redesign Responsibility for Design Errorsfor Design Errors
Allowable Costs and Allowable Costs and PaymentPayment
Incentive FeeIncentive Fee Incentive FeeIncentive Fee
OrderingOrdering Fixed PriceFixed Price Fixed FeeFixed Fee Work OversightWork Oversight Fixed FeeFixed Fee Work OversightWork Oversight Work OversightWork Oversight
Definite QuantityDefinite Quantity Incentive FeeIncentive Fee Incentive FeeIncentive Fee Suspension of WorkSuspension of Work Incentive FeeIncentive Fee Execution and Execution and Commencement of WorkCommencement of Work
Execution and Execution and Commencement of WorkCommencement of Work
Indefinite QuantityIndefinite Quantity Performance/Payment Performance/Payment BondBond
Rights in DataRights in Data Fixed FeeFixed Fee Performance Based Performance Based PaymentsPayments
Performance/Payment Performance/Payment BondBond
Performance/Payment Performance/Payment BondBond
Brand Name of Equal Brand Name of Equal Allowable Costs and Allowable Costs and PaymentPayment
Incentive FeeIncentive Fee Delivery Orders (Task Delivery Orders (Task Orders)Orders)
Allowable Costs and Allowable Costs and PaymentPayment
Allowable CostsAllowable Costs
Performance/Payment Performance/Payment BondBond
Performance Based Performance Based PaymentsPayments
Execution and Execution and Commencement of WorkCommencement of Work
SpecificationsSpecifications Performance Based Performance Based PaymentsPayments
ModificationsModifications
Delivery Orders (task Delivery Orders (task orders)orders)
Performance/Payment Performance/Payment BondBond
Delays and Extensions Delays and Extensions of Timeof Time
ModificationsModifications Rights in DataRights in Data
SpecificationsSpecifications Specifications and Specifications and DrawingsDrawings
ModificationsModifications Rights in DataRights in Data
Summary of the Seven Steps Summary of the Seven Steps to Implementing the Processto Implementing the Process
Step (1) Initial DecisionsStep (1) Initial Decisions
Step (2) Allocate the work Step (2) Allocate the work
Step (3) Select project categoryStep (3) Select project category
Step (4) Determine agency levelStep (4) Determine agency level
Step (5) Using organizational levels and categories, select Step (5) Using organizational levels and categories, select Procurement Package(s) for each projectProcurement Package(s) for each project
Step (6) Apply procurement differentiators to make final selectionStep (6) Apply procurement differentiators to make final selection
Step (7) Make final selectionStep (7) Make final selection
Step (8) Define contract terms and conditionsStep (8) Define contract terms and conditions
Contract process is completeContract process is complete
Key to a Successful ProcurementKey to a Successful Procurement
Procurement approach is dependent on Procurement approach is dependent on project type and agency capabilitiesproject type and agency capabilities
We’ve always done it that way is not a good We’ve always done it that way is not a good excuseexcuse
The right procurement approach may not The right procurement approach may not guarantee success, but the wrong approach guarantee success, but the wrong approach will guarantee failurewill guarantee failure
For More InformationFor More Information
http://www.pcb.its.dot.gov/Catalogs/http://www.pcb.its.dot.gov/Catalogs/ITSCurriculum.htmITSCurriculum.htm for courses on procurement, for courses on procurement, systems engineering and project managementsystems engineering and project management
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