Guidelines for SuccessfulGuidelines for SuccessfulITS ProcurementITS Procurement

T3 Session T3 Session September 12, 2006September 12, 2006

Presented byPresented byPhil TarnoffPhil Tarnoff

University of MarylandUniversity of Maryland Hosted byHosted by

Mac ListerMac ListerFHWAFHWA

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%

LateOkayCancelled

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 staffSource; Patterns of Software Systems Failure and Successes, Jones, Capers, 1996

The Contracting Model

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 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 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 equipment4) 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

System Development Process

Procurement Package

Terms and Conditions

Defining Organizational Level

Characteristic Immature Organization Mature Organization

Personnel ExperiencePart time, personnel have no prior experience

Full time responsibility of experienced personnel

Organizational Experience Never done it before

Experienced with one or more complex projects

Organizational Structure

ITS responsibilities undefined

Single organizational unit responsible for all ITS

Resources No defined ITS budget ITS budget for systems and personnel

Management Support Modest mid-level support

Considered a priority by senior management

Expectations Not defined Included in agency’s planning process

Defining Project Complexity

Characteristic Simple Project Very Complex Project

Newness Off-the-shelf solutions Invention(s) needed

Scope Single function Multi-function system

Interfaces None Both internal & external

Maturity Many similar systems Never been done

Stability 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• http://www.citeconsortium.org Under

highlights, select “Guide to Contracting ITS Projects” to access web-based step-by-step selection process.

• http://www.pcb.its.dot.gov/Catalogs /ITSCurriculum.htm for courses on ITS

procurement, systems engineering and project management

Contacts

Phil TarnoffTarnoff@eng.umd.edu

Mac ListerMac.lister@fhwa.dot.gov