Planning Page 7 - 1

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S1 Welcome and Introduction S2 CVISN State
Program Plan S3 Planning Guidelines/ Pre-Work
Review S4 Safety Information Exchange Planning
S5 Credentials Administration Planning S6
Electronic Screening Planning S7 Procurement
Planning S8 Workshop Recap S9 Work Session
Consultation S10 State Presentations S11
Phase Planning S12 Design Workshop S13 Feedback
and Next Steps
Session 7 Procurement Planning
2
Acknowledgment
This presentation is based upon content provided
by Mr. Don J. Dempsey, an expert in ITS/CVO
procurement processes. He was a consultant to
JHU/APL.
Don Dempsey 970-726-4097 wpdon_at_rkymtnhi.com FedEx
, UPS 113 Deer Road Fraser, Colorado
80442 Mail PO Box 3454 Winter Park, CO 80482
Procurement References
3
Session Plan

• CVISN background, issues and challenges (5 min)
• Combined and coordinated procurements (3 min)
• Planning for a successful procurement (10 min)
• Procurement categories (5 min)
• Formulating a CVISN procurement strategy (10 min)
• Questions (10 min)
• Breakout Plan Instructions (2 min)
• Breakout (60 min) Develop your draft procurement
  strategy
• Total Time 1 hour 45 minutes

Outline
4
Session Objectives

• Provide overview of alternatives
• Provide overview of a process to plan and
  implement CVISN procurements
• Awareness of the calendar time involved
• Discuss components of a procurement strategy
• Provide technical procurement information to
  support development of your state procurement
  plan in a subsequent workshop session

Objectives
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Why Should You Care About Procurement Strategy??

• Your project will inherit restrictions from the
  source of funding.
• You help develop the bidders list.
• You prepare specifications.
• You develop the evaluation criteria.
• You serve on the source evaluation board.
• You will be the COTR Contracting Officers
  Technical Representative.
• You are impacted by the schedule.
• Procurement personnel are risk-averse you want
  to be an advocate for flexibility and optimism on
  your project.
• You have to live with the results.

Use a map
6
Traditional Procurement Process Focused on
Building Roads and Bridges

• Products have a static 30 year life
• Separate contracts are required for design and
  construction activities
• Designers are prohibited from participating on
  construction contract
• The use of sealed bidding could discourage
  communications during construction procurements
• Award must go to responsive and responsible low
  bidder

CVISN Background, Issues, Challenges
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Deployment of Intelligent Transportation Systems
Represents a New Procurement Paradigm

• Desired end product shifts from construction of
  physical infrastructure to operation of
  information systems
• Intermodalism requires collaboration among modal
  agencies
• ITS requires integrated working relationships
  with multiple regulatory agencies
• Procurement must be addressed at a program level
• USDOT encourages flexible and responsive CVISN
  deployment strategies

CVISN Background, Issues, Challenges
8
CVISN Program Has Unique ComplexitiesAccommodatin
g Users and Technologies

• Involving multiple users
• Integrating dispersed geographical locations
• Deploying new digital technologies
• Adding new applications to existing state systems
• Planning migration for evolving technologies
• Obtaining seamless interoperability among diverse
  users

CVISN Background, Issues, Challenges
9
CVISN Deployment PresentsProcurement Challenges

• Procuring a mix of developmental and off the
  shelf items
• Finding professionals with CVISN experience
• Coordinating the transition from paper to digital
  media
• Describing the quality assurance and functional
  testing requirements

CVISN Background, Issues, Challenges
10
Beware the Calendar Time Involved!

• Procurements are formal and time-consuming.
• Six months to a year is not unusual.
• You may wish to put draft procurements on the
  street to look for interest and perform
  pre-qualification, with the caveat that the
  procurement may never actually occur (for example
  if the funding does not become available, or if
  technical needs change).

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There Are Several Proven Ways to Combine or
Coordinate Multi-Agency/State Procurements

• Performing joint strategic planning among
  stakeholders to achieve common goals
• Example transponders along Route 95 in the
  northeast.
• Utilizing interagency contracts or agreements for
  goods and services
• Example state agency utilizes a state university
  as prime contractor.
• Forming a mission-dedicated organization or
  entity with authority to utilize innovative
  procurement techniques
• Example Colorado Intermountain Fixed Guideway
  Authority.
• Adopting open architecture and utilizing
  technical standards to achieve system
  interoperability
• Forming novel public-public or public-private
  partnering relationships to share costs, benefits
  and risks

Combined coordinated procurements
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Definitions of Collaborative Models (1 of 3)

• Joint Strategic Planning
• This approach demands that multiple agencies
  agree on a common mission and develop combined or
  coordinated business plans to support the mission
  of the group.
• An example of interagency joint strategic
  planning can be found in the E-ZPass InterAgency
  Group (IAG). The IAG is comprised of toll
  entities in the tri-state New York metropolitan
  area. The IAG was one of the earliest and most
  successful examples of combined or coordinated
  ITS procurements. E-ZPass was formed by several
  operating toll agencies in response to the
  virtual mandate from toll road users that if
  consumers were expected to embrace the use of ITS
  technologies, Electronic Traffic and Toll
  Management (ETTM) equipment must be compatible
  and inter-operable among agencies. Having a
  different Automated Vehicle Identification (AVI)
  technology reader for each agency was not a
  practical or desirable option. Because there was
  no ITS architecture or technical standards in
  place, the IAG collectively undertook a joint
  procurement to select a common vendor for their
  AVI technology. Utilizing a common vendor would
  ensure procurement of compatible and
  interoperable equipment. To coordinate the
  process the IAG formed Executive, Policy and
  Technical Committees comprised of members from
  the participating agencies. The respective
  committees met frequently and formulated a
  consensus approach in their areas of
  responsibility. The combined procurement was
  effective in utilizing the operating agencys
  collective leverage to negotiate a favorable
  irrevocable offer for ETTM.

Combined coordinated procurements
13
Definitions of Collaborative Models (2 of 3)

• Interagency Contracts or Agreements for Goods and
  Services
• This is a common activity among public agencies.
  It involves creation of contractual agreements
  whereby one agency contracts with another State
  or local government agency to provide a service
  to the purchasing agencys citizens, similar to
  local government contracting with a private firm.
  Agencies often have more flexibility to enter
  into sole source interagency contracts without
  the need to conduct a time consuming third party
  procurement. Municipalities often contract with
  neighboring cities for trash pick-up, for
  example. For a transportation example, consider
  the arrangement where several municipalities
  individually contract with an area-wide
  transportation planning agency to purchase
  traffic signal management services along a
  corridor running through all of the
  municipalities.
• Form a Mission-Dedicated Organization or Entity
• A separate organization is jointly created which
  lends its services to aid all jurisdictions that
  are party to the agreement. An example would be
  HELP, Inc. HELP, Inc. was formed as a separate
  corporate entity by the parties to a previous
  Federally-funded operational test. The parties
  which included several State DOTs and private
  sector stakeholders, desired to continue
  Commercial Vehicle Operations (CVO) after the
  operational test funds were expended. The
  organization remains open for new participants to
  join.

Combined coordinated procurements
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Definitions of Collaborative Models (3 of 3)

• Utilization of Technical Standards
• The emergence of the ITS Architecture and CVISN
  Technical Standards reduces the need to
  coordinate procurements for technical
  compatibility and interoperability as widely
  accepted industry standards are incorporated into
  specifications.
• Partnering
• Partnering is a broad term generally used to
  describe a range of combined or coordinated
  affiliations which involve multiple parties
  (Private to Private, Public to Private, Public to
  Public) teaming to accomplish an objective while
  sharing resources, benefits or risks. Partnering
  does not require a legal relationship as any
  teaming approach to accomplish mutually
  beneficial goals and objectives can be
  characterized as partnering. CVISN is a good
  example of partnering where FHWA, State and local
  agencies and private parties cooperate to obtain
  the benefits of ITS technologies. FHWA's
  proactive role in facilitating these alliances
  and agreements is a form of partnering.

Combined coordinated procurements
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Advantages of Multi-Agency/State Procurements

• Collaboration provides the ability to implement
  regional ITS solutions
• Collaboration enables sharing of financial
  resources and technical know-how
• Collaboration promotes technical interoperability
• Larger procurements can gain economies of scale
  and negotiating leverage with suppliers
• New participants often bring with them new ideas

Combined coordinated procurements
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Disadvantages of Multi-Agency/State Procurements

• Involving additional participants brings added
  complexity
• Joint decision making requires an agency to
  surrender authoritarian control over the process
• Partners with restrictive procurement rules and
  regulations can constrain procurement flexibility
• There is potential for clash of cultures when
  participants bring differing approaches
• Building consensus among a group can be time
  consuming and sometimes frustrating

Combined coordinated procurements
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Many Procurement Issues Must Be ResolvedAt The
Program Level

• Procurement issues are often best addressed in
  the initial MOA discussions
• The number of participating agencies/stakeholders
  adds a degree of difficulty to procurement
  planning and implementation
• If not addressed early, procurement issues can
  become institutional barriers limiting project
  deployment flexibility

Planning for a successful procurement
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Incorporate CVISN Success Elements Into Your
Procurement

• Replicate CVISN success models from other states
• Incorporate ITS standards
• Comply with ITS architecture
• Seek qualified suppliers with CVISN experience
• Review CVISN and other USDOT resources
• Utilize experienced implementers and consultants
  in an advisory role

Planning for a successful procurement
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The Typical Procurement Lifecycle(This
Implements the Procurement Strategy)
1. Perform Detailed Procurement Planning
2. Draft and Issue Solicitation Documents
6. Close the Contracts
3. Evaluate proposals
5. Administer the Contracts
4. Negotiate Contracts Make Awards
Change Orders
Planning for a successful procurement
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Procurement Communications
Supplier Activities
Communications
Agency Activities
Analyze Program Issues
Match firms capabilities to agency needs
Informal Dialog
Develop Work Breakdown Structure
Identify Items for Procurement
Evidence of Capability/ Experience
Be selected for short list
Request Interest and Qualifications
Prepare and submit proposal
Formal Clarifications
Advertise for Proposals
(e.g. desired scope)
Priced Proposal
Evaluate
Performance, Schedule, and Price
Negotiate
Negotiate
Award
Planning for a successful procurement
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Prequalifying Suppliers Can Limit Quantity and
Enhance Quality of Responses Received

• A two-step process can improves the quality of
  responses to solicitations for consulting
  services
• Supplier prequalification involves requesting
  information regarding a firms interest,
  capability and experience
• Priced proposals are then evaluated/solicited
  from qualified suppliers
• A two-step process can be time consuming
• There is no substitute for hard work verifying a
  supplier's past performance by reviewing
  information beyond the four corners of a
  suppliers written proposal

Planning for a successful procurement
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A Well-Planned Proposal Evaluation Process Can
Enhance Procurement Effectiveness

• Award flexibility can be achieved by utilizing
  subjective evaluation criteria with objective
  scoring
• Evaluation Process and Criteria must be
  established in RFP and applied in a consistent
  manner
• Dont be afraid to look outside your agency for
  evaluators
• Multi-agency evaluation panels can mitigate real
  or perceived internal agency biases

Planning for a successful procurement
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Most Common CVISN Procurement Categories

• Commercially available off-the-shelf (COTS)
  products
• Software development
• Professional services
• Systems integrator
• Communications services

Procurement Categories
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Explanation of CVISN Procurement Categories (1 of
2)

• Commercially Available Off-the-Shelf Products
  (COTS)
• COTS are well developed and commonly used
  products. The preferred procurement methodology
  is sealed bidding (formal advertising) with lump
  sum or unit pricing. Federal grant
  administration requirements (often replicated in
  state procurement codes) require that specific
  conditions must exist to utilize sealed bidding.
• Software Development
• Software development for new or modified
  applications requires obtaining professional
  services to analyze software requirements, design
  algorithms and data structures, select tools and
  methodologies, write code, execute tests and
  provide documentation. The preferred procurement
  methodology is competitive negotiations with
  cost-reimbursable pricing.
• Professional Services
• Professional Services contracts are contracts for
  professional services (e.g., consulting services)
  from a firm or individual. The preferred
  procurement methodology is competitive
  negotiation with cost reimbursable pricing. Unit
  prices or lump sum pricing may be used if the
  level of effort can be reasonably quantified.
  Under certain circumstances, sole source
  contracting may be appropriate. Specialized
  procurement procedures regarding
  Architect/Engineering services must be followed
  if the professional services involve design of
  physical transportation infrastructure.

Procurement Categories
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Explanation of CVISN Procurement Categories (2 of
2)

• System Integrator
• This is a type of consulting contract for
  professional services where a firm or individual
  is charged with the responsibility for delivering
  a complete and working functional application or
  system.
• Communication Services
• Traditionally, this category referred to the
  transmission of analog or digital communications
  between dispersed locations. Due to industry
  deregulation, many new services related to data
  collection, data fusion, data storage, data
  dissemination may be offered by communications
  companies. Depending on the provider, these
  services can be provided on a piecemeal or
  turnkey basis.
• Definitions of procurement terms and related
  requirements are presented in later slides

Procurement Categories
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Formulating A Procurement Strategy
Commercial Off-the-shelf applications
Systems Integrator
Software Developer
Formulating a strategy
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Steps to Plan and Formulatea Procurement Strategy

• Step 1. Identify desired procurement objectives.
• Step 2. Assess impact of program issues.
• Step 3. Identify buy list items for
  procurement.
• Step 4. Identify procurement categories.
• Step 5. Bundle procurements by logical
  combinations.
• Step 6. Identify potential suppliers.
• Step 7. Determine contracting approach.

Formulating a strategy
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Procurement Strategy Worksheet
Illustrative
Formulating a strategy
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1. Examples of Desired Procurement Objectives

• Retain a systems integrator with CVISN experience
  
• Deploy CVISN Level 1 capabilities
• Upgrade existing safety information exchange
  legacy system to be CVISN compatible
• Procure commercial off the shelf software
• Develop/modify software for a new CVISN
  application
• Acquire CVISN system hardware
• Select a carrier for data transmission

Formulating a strategy
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2. Program Issues Influence Procurement Strategy

• Often addressed in the Memorandum of Agreement
• Number and types of stakeholders
• Amounts, categories and timing of funding
• Program organization for deployment
• Utilization of private sector cost, risk, and
  benefit sharing requires special handling and
  expertise
• Project management responsibilities for
  deployment
• Human, technical and financial resource
  constraints

Formulating a strategy
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3. Sample (partial) Buy List
From the WBS task list. Note that not all WBS
elements involve purchases.
Illustrative
Formulating a strategy
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4. Identify Procurement Categories

• Commercially available off-the-shelf products
• Software development
• Professional services
• Systems integrator
• Communications services

Formulating a strategy
33
5. Bundle Procurements by Logical Combinations

• Put entire program under a systems integrator
• Group by timeframe, location or user
• Bundle development activities (design, procure,
  implement, manage)
• Group by project
• Group by procurement category

Formulating a strategy
34
6. Identify Potential Suppliers

• Many potential suppliers? (a commodity)
• Or just a few potential suppliers? (a specialty)
• Single-source? (a proprietary system, or
  continuity with a legacy system)
• Give the contracting officer a head start by
  identifying potential suppliers, but remain open
  to fresh ideas and competition.

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7. Customize Your Contracting Approach

• Match contract type to statement of work
• A/E non-A/E innovative.
• Select contract payment method
• Fixed price cost reimbursable ID-IQ.
• Determine award methodology
• Sealed bid competitive negotiations sole-source.

Formulating a strategy
36
What Is The Contract Type ?

• Architect/Engineering design services
• Rarely used for CVISN
• Traditional Construction
• Rarely used for CVISN
• Non Architect/Engineering goods and services
• Most common CVISN Contract Type
• Many variations exist in agency procurement
  policies
• Innovative Contracting (ie, non-traditional)
• Potential tool for CVISN solutions
• See definition, slide 7-38

Formulating a strategy
37
Contract Types (1 of 2)

• Architect/Engineering Design Services (A/E)
• A/E services involve the design of buildings,
  facilities and other physical transportation
  infrastructure. Federal agencies and most
  states, require conformance with appropriate
  regulations (Title 23 CFR Part 172). A/E
  contracts are not required for most CVISN
  activities.
• Traditional Construction
• These contracts are primarily utilized for
  Infrastructure Capital Improvements. Competitive
  sealed bidding with award of a fixed price
  contract to the lowest responsive bid is the
  primary procurement methodology. Federal
  procurement requirements are codified at Title 23
  CFR Part 635. Construction contracts are rarely
  used in CVISN deployment.

Formulating a strategy
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Contract Types (2 of 2)

• Non Architect/Engineering Goods and Services
• This is a very broad category that applies to
  procurement of real property, services, goods and
  research. It is the most common CVISN
  procurement methodology that utilizes a
  competitive process with award to the lowest
  responsive bid. Many variations of this process
  exist. Federal Grant Administration
  Requirements, which have been replicated in many
  states, are codified at Title 49 CFR Part 18.36
• Innovative Contracting
• Innovative contracting refers to a broad variety
  of contract types and award methodologies
  utilized to allocate roles, responsibilities,
  costs, benefits and risks among two or more
  parties in unique ways that are allowable under
  law, but may deviate from traditional procurement
  practices or procedures. The federal government
  has implemented several programs to encourage
  innovation (FHWA Special Experimental Project 14
  (SEP 14)). Many states have similar programs
  that are authorized but may be seldom utilized.
  Legal review should be requested prior to
  deviating from traditional procurement practices.
  Even if legal, innovative approaches may
  encounter a cultural resistance to change (we
  dont do it that way). An effective technique
  when seeking approval for innovative approaches
  is not to ask Can we?but, rather to ask How
  can we?. This approach will encourage creative
  solutions. Caveat when formulating innovative
  solutions the basic integrity of the procurement
  process must not be compromised.

Formulating a strategy
39
Contract Types Can Be Further Classified By
Payment Method (1 of 2)

• Fixed price contracts - should not be used for
  research or development activities
• Cost reimbursement contracts - best when scope of
  work is not well-defined
• Incentive contracts - provides rewards to promote
  successful performance
• Definite quantity contracts - scope must be
  well-defined

Formulating a strategy
40
Contract Types Can Be Further Classified By
Payment Method (2 of 2)

• Requirements contracts - best used when
  quantities are known
• Indefinite quantity contracts - when units can be
  identified but not quantified
• Time and material contracts - utilizes
  fully-loaded rates for labor-categories (e.g.
  senior engineer)
• Options contracts - allows flexibility to price
  known contingencies
• Effective tool to plan for CVISN applications to
  be deployed subject to approval of funding

Formulating a strategy
41
Explanation of Contract Typeby Payment Method (1
of 7)

• Fixed-Price Contracts
• Fixed-price contracts may be either firm
  fixed-price contracts, or fixed-price contracts
  with an economic price adjustment. Highway
  construction is traditionally associated with
  fixed-price contracts, and thus fixed-price is
  the type of contract with which transportation
  agencies are probably most familiar. There are
  many variations of fixed price contracts.
• Firm Fixed-Price Contracts.
• This type of contract is used when risk is
  minimal or can be predicted with a good degree of
  certainty. In the context of CVISN, procurement
  of a specific quantity of a specific type of
  equipment, such as transponders for electronic
  payment of tolls, is a good candidate for a firm
  fixed-price contract. Because ITS technology is
  evolving, in some circumstances sufficient
  certainty for a firm fixed-price contract may not
  exist at the outset of an acquisition program
  changing circumstances over the life of a
  long-term contract however may make a different
  contract type appropriate in later periods than
  that used at the outset.
• Other variations include
• Fixed-Price Contracts With Economic Price
  Adjustments
• A Most Favored Customer Clause
• Fixed-Price With Prospective Price Reduction
• Fixed-Ceiling Price Contracts with Retroactive
  Price Redetermination
• Firm Fixed-Price, Level of Effort Term Contracts

Formulating a strategy
42
Explanation of Contract Typeby Payment Method (2
of 7)

• Cost-Reimbursement Contracts
• Cost-reimbursement contracts are suitable when
  uncertainties involved in contract performance do
  not permit costs to be estimated with sufficient
  accuracy for a fixed-price contract. These types
  of contracts provide for payment of allowable
  incurred costs up to a ceiling that may not be
  exceeded without approval of the government
  contracting officer.
• Cost Contracts
• In this type of cost reimbursement contract, the
  contractor does not receive a fee. The Federal
  Acquisition Regulations indicates that this type
  of contract is appropriate for research and
  development work with non-profit organizations.
• Cost-Sharing Contracts
• In this case, the contractor receives no fee and
  is reimbursed only for an agreed-upon portion of
  its allowable costs. Typically this type of
  contract is used when the contractor is willing
  to absorb a portion of the costs, usually in the
  expectation of substantial compensating benefits.

Formulating a strategy
43
Explanation of Contract Typeby Payment Method (3
of 7)

• Cost-Reimbursement Contracts (continued)
• Cost-Plus Fixed-Fee Contracts
• These contracts provide the contractor with a
  negotiated fee that is fixed at the inception of
  the contract, and reimbursement of allowable
  costs up to a stated ceiling. The drawback is
  that this type of contract provides the
  contractor only a minimal incentive to control
  costs. According to the FAR, this type of
  contract is suitable when the contract is for
  performance of research or preliminary
  exploration or study and the level of effort
  required is unknown, or the contract is for
  development and testing, and the cost-plus
  incentive fee contract is not practical. The FAR
  indicates that this type of contract should not
  be used in development of major systems once
  preliminary exploration, studies, and risk
  reduction have indicated a high probability that
  the development is achievable, and reasonably
  firm performance objectives and schedules have
  been established.
• Incentive Contracts
• Incentive contracts are used when a firm
  fixed-price contract is not appropriate by
  relating the amount of profit or fee payable
  under the contract to the contractors
  performance, a lower price or improved delivery
  or technical performance may be achieved.

Formulating a strategy
44
Explanation of Contract Typeby Payment Method (4
of 7)

• Incentive Contracts (continued)
• Fixed-Price Incentive Contracts
• This type of contract provides for adjusting
  profit and establishing the final contract price
  by applying a formula based on the relationship
  of the total final negotiated cost to the total
  target cost. The final price is subject to a
  price ceiling negotiated at the outset. This
  type of contact is appropriate when the
  contractors assumption of a degree of cost
  responsibility will provide a positive Payment
  Method for effective cost-control and
  performance.
• Cost-Reimbursement Incentive Contracts
• These contracts specify a target cost, a target
  fee, minimum and maximum fees and a fee
  adjustment formula. The fee may be adjusted up
  when total allowable costs are less than target
  costs, and down when total allowable costs exceed
  target costs. The increase or decrease is
  intended to incentivize the contractor
  effectively and economically. This type of
  contract is appropriate for development and test
  programs in order to motivate the contractor. A
  cost-reimbursement incentive may also be based on
  an award fee that is adjusted periodically based
  on the contractors performance.

Formulating a strategy
45
Explanation of Contract Typeby Payment Method (5
of 7)

• Incentive Contracts (continued)
• Award Fees
• The award fee concept, which is often used in
  defense contracting, builds in a monetary
  incentive for the contractor to perform certain
  tasks at highest-quality levels of performance.
  Theoretically, if the contractor knows that some
  of its compensation is discretionary, then it
  will pay more attention to performance quality.
  Award fees are useful in creating commonality of
  goals between the procuring agency and the
  contractor.
• Definite Quantity Contracts
• This type of contract is used when it can be
  determined in advance that a definite quantity of
  supplies or services will be required during a
  contract period, supplies or services are readily
  available or will be available after a short lead
  time, but the exact timing and/or quantities of
  future deliveries is not known at the time of the
  contract award. This type of contract may be
  firm fixed-price, or fixed-price with economic
  price adjustment.

Formulating a strategy
46
Explanation of Contract Typeby Payment Method (6
of 7)

• Requirements Contracts
• In a requirements contract, the government agency
  agrees to acquire all of its actual requirements
  for specific supplies or services during a
  specified contracting period from the contractor
  and the contractor is obligated to supply all of
  the buyers requirements. Usually, the contract
  will state a realistic estimated total quantity
  likely to be purchased over the term, but such
  statement is not a representation or guaranty
  that the same will be ordered. A requirements
  contract may state a maximum limit on the
  contractors obligation to deliver. It is an
  appropriate contract type when the purchaser
  anticipates recurring requirements but cannot
  predetermine the precise quantity of supplies or
  services that it will need during a definite
  period.
• Indefinite Quantity Contracts
• In this type of contract, the contractor is
  required to furnish an indefinite quantity,
  within stated limits, of specific items during a
  fixed period. The purchaser is required to order
  at least a stated minimum quantity, and the
  orders cannot exceed a stated maximum. This type
  of contract is appropriate when the purchaser
  cannot predetermine its needs above a specified
  minimum during the contract period, and it is
  inadvisable for the purchaser to commit itself
  for more than a certain minimum quantity.

Formulating a strategy
47
Explanation of Contract Typeby Payment Method (7
of 7)

• Time and Materials Contracts
• This type of contract provides for acquiring
  supplies or services on the basis of direct labor
  hours at specified fixed hourly rates that
  include wages, overhead, general and
  administrative expenses and profit, and materials
  at cost. This type of contract is appropriate
  when it is not possible at the time of placing
  the contract to estimate accurately the extent or
  duration of the work or to anticipate costs with
  a reasonable degree of certainty.
• Options Contracts
• Options provide the option holder with a
  unilateral right, for a specified time, to
  purchase additional supplies or services, or to
  extend the term of a contract. Options recognize
  the purchasers need in certain service contracts
  for continuity of operations.

Formulating a strategy
48
What Are The Common Methods Used To Award
Contracts?

• Sealed bid - commonly used for off-the-shelf
  products and services
• Two-step sealed bid - A technical proposal is
  requested followed by a pricing proposal
• Competitive negotiations - Commonly used for
  professional services
• Sole source contracting - Use is discouraged but
  may be appropriate for proprietary applications
• Unsolicited proposals - not favored by most
  agencies
• A call for projects gives more agency control
• Irrevocable offer - utilized for E Z Pass
  transponders

Formulating a strategy
49
Methods of Awards (1 of 5)

• As stated in the FAR and the Common Rule, the
  public policy underlying the methods that may be
  used to award contracts is the promotion of full
  and open competition in the acquisition process.
  The methods of award that may be available to a
  transportation agency to ensure full and open
  competition include the following
• Sealed Bids
• Sealed (or competitive) bidding is the method
  preferred by the Federal Government and the
  procurement codes of most States for civil
  construction and off-the-shelf supply contracts.
  Sealed bidding requires that contracts be awarded
  only on a lowest cost, responsive and responsible
  bidder basis i.e., the owner is required to
  award the contract to the responsible, lowest
  price bidder whose bid meets the minimum
  standards. The rationale is that this approach
  maximizes the number of private firms competing
  against each other solely on the basis of price,
  and results in the best buy for the procuring
  agency.
• There are specific federal conditions on when
  sealed bidding can be utilized
• A complete, adequate, and realistic specification
  or purchase description is available
• Two or more responsible bidders are willing and
  able to compete effectively and for the business
  and,
• The procurement lends itself to a firm fixed
  price contract and the selection of the
  successful bidder can be made principally on the
  basis of price
• Most state procurement codes utilize some
  variation of these conditions.

Formulating a strategy
50
Methods of Awards (2 of 5)

• If sealed bids are used, the federal process
  requires
• The invitation for bids will be publicly
  advertised and bids shall be solicited from an
  adequate number of known suppliers, providing
  them sufficient time prior to the date set for
  opening of bids
• The invitation of bids, which will include any
  specifications and pertinent attachments, shall
  define the items or services in order for the
  bidder to properly respond
• All bids will be publicly opened at the time and
  place prescribed in the invitation for bids
• A firm-fixed price contract award will be made in
  writing to the lowest responsive and responsible
  bidder. Where specified in writing, factors such
  as discounts, transportation costs, and life
  cycle costs shall be considered in determining
  which bid is lowest. Payment discounts will be
  only used to determine the low bid when prior
  experience indicates that such discounts are
  usually taken advantage of and,
• Any and all bids may be rejected if there is a
  sound documented reason
• Two-Step Sealed Bids
• Two-step sealed bidding is a combination of
  competitive practices designed to obtain the
  benefits of sealed bidding when adequate
  specifications are not available. In step one,
  there is a request for submission, evaluation and
  discussion of a technical proposal, which does
  not include any discussion of pricing. Step two
  involves the submission of fixed priced bids by
  those who submitted acceptable technical
  proposals in step one.

Formulating a strategy
51
Methods of Awards (3 of 5)

• Competitive Negotiations
• In competitive negotiations, the procuring agency
  conducts an Request For Quotations/Request For
  Proposals procurement, and then chooses one or
  more of the proposers to negotiate an agreement.
  This is distinguishable from award based on price
  and other factors after discussions and Best And
  Final Offer in that the procuring agency may
  negotiate different contract terms with the
  selected contractor than those bid on by all of
  the offerors. The U.S. DOTs manual on
  contracting for vehicle maintenance services
  recommends competitive negotiations where any of
  the following criteria are satisfied (a) there
  is significant variation in the method that may
  be used to deliver a specific service (b) there
  are attributes other than price that should be
  included as criteria for accepting a contractor
  (c) there is a need for bidders to have the
  opportunity to revise their work plans after
  initial evaluation of proposals (including the
  price of services) (d) the award should be based
  on comparative evaluations and, (e) an RFP would
  result in a more beneficial contract for the
  agency.
• Federal grant requirements state that competitive
  proposals are generally used when conditions are
  not appropriate for the use of sealed bids. If
  competitive proposals are used, the following
  requirements apply
• Requests for Proposals will be publicized and
  identify all evaluation factors and their
  relative importance.
• Proposals will be solicited from an adequate
  number of qualified sources
• There must be a method for conducting technical
  evaluation of proposals received
• Awards will be made to the responsible firm whose
  proposal is most advantageous to the program,
  with price and other factors considered

Formulating a strategy
52
Methods of Awards (4 of 5)

• Sole Source Contracting
• Sole source contracting is permitted only in
  limited circumstances. This method involves
  selection of a contractor for negotiations based
  on its reputation or prior relationship with the
  owner, without first going through a competitive
  selection process. Generally, sole sourcing
  should be used only when supplies or services
  required are available from only one responsible
  source, and no other source of supplies or
  services will satisfy the procuring agencys
  requirements.
• Federal grant requirement allow sole source
  contracting only after there is a determination
  that
• The item is available only from a single source
• The public exigency or emergency for the
  requirement will not permit a delay resulting
  from the competitive solicitation
• The awarding agency authorizes noncompetitive
  proposals or,
• After a solicitation from a number of sources,
  competition is determined inadequate

Formulating a strategy
53
Methods of Awards (5 of 5)

• Unsolicited Proposals
• Unsolicited proposals are initiated by the
  private sector. They usually cannot be for a
  procurement that is planned or reasonably
  expected as part of a known agency program.
• Irrevocable Offer
• Irrevocable offers are offers made by a supplier
  to one or more agencies for their subsequent
  negotiation and individual acceptance. There is
  usually a common product offered which
  incorporates common terms offered to all. EZ
  Pass utilized this technique to allow
  jurisdictions with restrictive contracting
  requirements to award their own contracts to
  avoid an agency internal prohibition against
  delegating contracting authority to others.

Formulating a strategy
54
Other Definitions

• Procurement - A formal process instituted by
  agencies to obtain third party provided goods and
  services. In most agencies, a separate contracts
  group manages the procurement process from
  issuance of bid documents to contract execution.
  The functional group requesting third party
  services normally prepares the technical
  requirements for the procurement and administers
  the contract (including change orders) after
  execution. If a formal contract amendment is
  required, the procurement group will manage the
  negotiation and execution of the contract
  amendment.
• Contracting - Interchangeable term for
  procurement. The process utilized to obtain a
  contract for third party provided goods and
  services.
• Solicitation - The agency document describing the
  goods or services desired to be obtained from
  third parties. The solicitation is utilized to
  request qualifications or a formal price
  quotation from third parties wishing to provide
  the requested goods or services. Common forms
  are Request For Proposals (RFP), Requests for
  Information (RFI), Requests for Quotations (RFQ),
  and Invitations for Bids (IFB).
• Prequalification - A process that is conducted
  prior to a formal solicitation to identify and
  limit respondents to those firms who have
  established their qualifications and experience
  prior to receiving the solicitation documents.
  This process is useful to ensure that proposals
  received will be well targeted and of the highest
  quality. This process cannot be utilized to
  arbitrarily exclude otherwise qualified
  respondents.

Formulating a strategy
55
Sample Evaluation Criteria for Development
Projects

• Appropriateness of Proposed Project or Program
  (25 points)
• Consistency with the CVISN Strategic Plan
• Consistency with the intent and requirements of
  the option being responded to and,
• Applicability of proposed services to CVISN goals
  for this Request For Proposals.
• Feasibility of Proposed Project or Program (25
  points)
• Proposed hardware, software, and/or services are
  proven
• Theoretical basis for project is proven
• Clear plan for providing hardware, software, and
  services and
• Detailed, realistic time schedule.
• Technical Capabilities (15 points)
• Personnel qualified for the type of services
  being provided
• Sufficient available tools and computer resources
  to perform the proposed services and
• Location and accessibility to services in the
  state.
• Management Plan (15 points)
• The number of people to be made available
• Capability of managing costs, schedule, and
  quality and
• Disadvantaged Business Enterprise provisions.
• Cost (10 points)
• Realistic funding plan and

Formulating a strategy
56
Key Points About CVISN Procurement (1 of 2)

• Develop your procurement strategy early.
• Be objective in assessing your in-house
  capabilities.
• Buying a commercial off the shelf product (like a
  computer) requires different strategy than buying
  development services.
• Fixed price contracting is not appropriate for
  software/ system development.
• Be sure that the contract(s) make clear who is
  responsible for system integration.
• Be sure the contract(s) specify exactly what is
  to be delivered (e.g., software code vs
  executables, intellectual/ proprietary rights),
  and those deliverables are consistent with your
  OM plan.

Formulating a strategy
57
Key Points About CVISN Procurement (2 of 2)

• Do not underestimate the importance of testing
  and training.
• A well conceived procurement strategy and a well
  written statement of work are the keys to a
  successful procurement.
• Build flexibility into the process
• Address procurement at the program level.
• Prequalification of contractors, consultants or
  suppliers.
• Utilize subjective evaluation criteria.
• Leave a well documented paper trail.

Formulating a strategy
58
Questions and Discussion of Issues
Q A
59
References Courses
This is not the end!! Breakout Instructions
continue on page 64
60
Procurement References

• 1. There are numerous procurement references
  included in the reference list at the back of the
  CVISN Guide to Program and Project Planning.
• 2. http//www.state.ky.us/agencies/sas
• Website for the Commonwealth of Kentucky
  Strategic Alliance Services contracts. It
  proclaims The Strategic Alliance establishes
  long term vendor relationships for procuring
  'best practice' and 'best of the industry'
  information technology (IT) services to
  pro-actively meet Commonwealth service delivery
  and business needs. Such arrangements are
  executed in a streamlined, mutually responsive
  and shared risk environment where Commonwealth
  agencies and service providers partner to achieve
  and share in resulting benefits.

Procurement References
61
ITS Procurement CourseFHWA National Highway
Institute

• DESCRIPTION This seminar is intended to
  heighten awareness of the challenges in procuring
  ITS within the traditional construction project
  environment. It combines lectures with
  presentations of case studies to describe the
  lessons learned from past ITS projects, and
  explains how these can be incorporated to help
  ensure successful ITS procurement.
• Objectives Include
• Explain why procuring intelligent transportation
  systems is different from traditional
  construction projects.
• Describe the potential barriers that may arise
  from procuring intelligent transportation systems
  within the traditional construction-oriented
  environment.
• Apply lessons learned to existing policies and
  procedures to achieve improvements in procuring
  ITS.
• LENGTH 1 Day
• For more information http//www.nhi.fhwa.dot.gov/
  137020.html

Procurement References
62
ITS Software Acquisition Course FHWA National
Highway Institute

• DESCRIPTION This seminar provides a general
  understanding of the many issues involved in the
  ITS software development and acquisition
  processes. It is focused specifically on ITS
  software issues.
• Objectives Include
• Describe the intellectual property rights and how
  they must be considered.
• Manage the procurement of ITS software.
• Write an RFP for software procurement.
• LENGTH 2 Days
• For more information http//www.nhi.fhwa.dot.gov
  /137019.html

Procurement References
63
ITS Software Acquisition Guides and Course
Materials available on the Web

• "The Road to Successful ITS Software Acquisition,
  Executive Summary July 1998 -- EDL Document
  4132
• http//www.itsdocs.fhwa.dot.gov/jpodocs/repts_te/
  36s01!.pdf
• "The Road to Successful ITS Software Acquisition
  Volume 1 Overview and Themes July 1998 -- EDL
  Document 4130
• http//www.itsdocs.fhwa.dot.gov/jpodocs/repts_te/
  36q01!.pdf
• "The Road to Successful ITS Software Acquisition
  Volume 2 Software Acquisition Process Reference
  Guide July 1998 -- EDL Document 4131
• http//www.itsdocs.fhwa.dot.gov/jpodocs/repts_te/
  36r01!.pdf
• ITS Software Acquisition Course Materials
• http//www.pcb.its.dot.gov/ITS_software.asp

Procurement References
64
Breakout Instructions
65
Breakout Goals

• Develop a draft procurement strategy.
• Continue the Issues, Action Items, Decisions
  lists youll keep building throughout the
  workshop.

Breakout
66
What inputs are needed?What outputs are created?

• Inputs
• Buy Lists from previous breakouts
• Outputs
• Draft Procurement Strategy
• Procurement Strategy Worksheet
• Issues, Action Items, Decisions

Breakout
67
Sample Buy List
Illustrative
68
Breakout Plan60 minutes (1 of 3)

• NOTE We recognize that 60 minutes is not long
  enough to fully develop a procurement strategy.
  This session is intended to give you a chance to
  chew on the ideas presented, talk about
  procurement, and begin to use the recommended
  tools for developing a procurement strategy.
• Step 1. 5 min. Assign roles and make sure that
  all decisions, action items, and system change
  highlights will be recorded in your Action Plan,
  Decision Table, and State System Change Summary.
  
• Step 2. 15 min. Discuss your plans for
  procurement.
• As a result of thinking youve already done, and
  the work on the Buy Lists you made in prior
  breakouts, you have started to formulate ideas
  about the kinds of procurement activities you
  intend to undertake. Discuss the Procurement
  Strategy questions (please see pages 7-65 to
  7-66). Note your preliminary answer to each
  question.

Breakout
69
Breakout Plan60 minutes (2 of 3)

• Step 3. 25 min. Define individual procurement
  activities.
• In this step, you are going to use the
  Procurement Strategy Worksheet. On this
  worksheet, each row represents a procurement
  activity. Some examples of how you might group
  items from your buy lists into procurement
  activities are shown.
• To begin to put some specifics into your
  procurement strategy, begin to group the buy
  items youve identified into discrete
  procurement activities. It might be easiest to
  start with the buy list you think is most
  complete. As explained in the presentation
  (pages 7-21 to 7-33) there are several ways to
  group the items. The items in one procurement
  activity fall into one category.
• If you can, identify the contract type for each
  procurement activity. (see pages 7-34 to 7-45 in
  the presentation).
• To the extent possible, name the individual
  responsible for leading the procurement activity,
  and others who will be part of the procurement
  team.
• Note when the earliest item in the group is
  needed in the Earliest Need Date column.

Breakout
70
Breakout Plan60 minutes (3 of 3)

• Step 4. 15 min. Summarize your strategy.
• Using the Procurement Strategy template,
  summarize your thoughts about how you are going
  to do procurement. Describe 3-5 major
  procurement actions you will be taking.
• NOTE You should include the results of this
  breakout in your final presentation. There is no
  report back session for this breakout.

Breakout
71
Sample Presentation Outline

• Draft Procurement Strategy
• Procurement Strategy Worksheet
• Issues, Action Items, Decisions

Breakout
72
Team Roles
Process Step 1

• Facilitator _________________________
• Presenter _________________________
• Scribe _________________________
• Time Keeper _________________________
• CSA _________________________
• Change the roles for each breakout session
• (except facilitator and CSA)

Breakout
73
Consider These Procurement Strategy Questions (1
of 2)
Process Step 2

• 1. Are you going to procure . . .
• The services of a systems architect?
• Software development services for your
  Credentials Project?
• New computers and associated commercial off the
  shelf (COTS) software?
• The services of a system integrator? What is the
  scope of the system integrators assignment?
• Technical assistance to develop a CVIEW-like
  system from scratch?
• Technical assistance to modify the generic CVIEW?
• New network communications services?
• Membership in an electronic screening program?
• Equipment installation at a roadside site?

Breakout
74
Consider These Procurement Strategy Questions (2
of 2)
Process Step 2

• 2. Building on your answers to the first
  question, which of the following categories of
  procurement do you envision for your CVISN
  program and related projects? Look at the Buy
  Lists from the previous breakouts. Cross off
  the categories you dont intend to use add new
  categories as needed.
• Commercial off-the-shelf products
• Software development
• Program manager or systems integrator
• Professional services or consulting
• Communications services
• 3. What kinds of contracts are you most likely
  to use? How do your states business practices
  impact your choices and decisions?

Breakout
75
Procurement Strategy Worksheet
Process Step 3
Illustrative
Breakout
76
Draft Procurement Strategy for your state
Process Step 4
Breakout