VITA and IT Procurement

1. VITA and IT Procurement VITA Supply Chain Management www.vita.virginia.gov 1

2. Topics • New value-oriented technology sourcing process • New contracting strategy for IT commodities • Vendor-managed solutions • Service Level Agreements (SLAs) • New IT procurement manual

3. Technology Sourcing Process • Follows Industry Best Practices and the VPPA • Led by sourcing professional • Maximizes team advantage • Dependent upon comprehensive requirements • Documents roles, phases and deliverables • Drives consensus selection based on data • Designed to involve all appropriate factors Data Driven Decision Process = Data Based Selection

4. SCM Role in Sourcing Project • Sourcing Process Leadership • Assist in organizing evaluation team and lead meetings • Serve as SPOC • Best Practice Process and Templates • Industry tested RFP, evaluation and Contract templates • Market Expertise • Conducts market research specific to project needs- planning for negotiation begins here • VPPA Knowledge • Ensures VPPA is followed and procurement file is preserved and made available

5. Customer/Steering Team Role • Provide overall project strategy and governance • Determine what success would look like • Confirm scope of the project • Provide appropriate evaluation team members • Obtain funding • Maintain confidentiality

6. Evaluation Team Role • Provide Subject Matter Expertise • Document requirements by area of expertise • Determine evaluation criteria and weight • Assist SPOC in responding to supplier questions • Attend presentation/site visits • Evaluate and score proposals for their area of expertise

7. Functional Technical Financial Business Relationship Comprehensive Requirements User perspective Environment and Support Best Value to Cost Ratio Contract and SLAs

8. Identify Business Need Sourcing Process Example

9. Section 5: Requirements

10. The Solution • Process arrives at best value to the Commonwealth • Solution is often a surprise. (PB, BI, Sun replacements, etc) • The surprise factor highlights the value of the process!

11. IT Commodities Strategy • VITA’s role is to provide vehicles for the Commonwealth • Multiple awards-one size does not fit all • Request for Quote concept: • Allows for further competition • Most effective in dealing with suppliers. The best deal occurs when there is money on the table

12. Managed Services • Contract with Computer Aid (CAI) • Staff Augmentation • Statement of Work projects

13. Supply Chain Management Links • Main web page: www.vita.virginia.gov/scm • VITA contracts: www.vita.virginia.gov/procurement • Managed Services: http://www.vita.virginia.gov/scm/default.aspx?id=11906 • BUY IT Manual: www.vita.virginia.gov/scm

14. Utilizing Service Level AgreementsBUY IT MANUAL Supply Chain Management www.vita.virginia.gov 14

15. SERVICE LEVEL AGREEMENTS IN CONTRACTS Service level agreements (SLAs) are contracts which specify in measurable terms the services to be provided, the standards to be attained in the execution of those services and the consequences that occur in the event the standards are not met. SLAs often include: • Percent of time services should be available • Number of users to be supported • Performance benchmarks • Schedule for advanced notification of system changes, upgrades, downtime • Response time • Usage statistics

16. Service Level Agreements (SLA’s) = VALUE How SLAs should be written: • Outcome oriented • Clearly defined objectives • Clearly defined timeframes • Performance incentives • Performance monitoring SLA Objectives: • Maximize performance – supplier delivers based on best practices and customer’s desired outcome. • Maximize competition and innovation – encourage innovation using performance requirements. • Minimize burdensome reporting and reduce use of contract provisions that tie supplier’s hands. • Shift risk to suppliers so they are responsible for achieving contract objectives through their own best practices and processes. • Achieve cost savings through performance requirements.

17. WHAT SLAS SHOULD MEASURE The contract MUST include SLAs: • Everything buying or covered by the contract; • Volume assumptions for services (particularly if there are large variable costs involved.) • Reliability, availability and performance (RAP) requirements, methods of dealing with operational issues (escalation, help desk, hot line and severity levels) and conditions of use or change of use conditions/restrictions. • Dates/deadlines where specific deliverables are due at initial switch on, ramp up, ramp down or upgrade of service; e.g. year end, implementation dates, legislation changes. • Method of delivery (paper/fax/hand, means/source or object code.) • Time after which deliverables must be consumed or tested and still supported (obsolescence limits). • Documentation/manual and standards. • Definition of what is considered a service failure and what is considered an “enhancement” to the service.

18. MEASURE WHAT CAN AND WHAT NEED TO KNOW Measure What’s Important: • TCO – Total Cost of Ownership • Quality of Goods/Services • Proposed technical performance • Financial stability • Cost of Training • Qualifications of Individuals employed/utilized by supplier • Risk Assessment • Availability and cost of technical support • Cost/Price

19. Performance Incentives • Cost-based- Relate profit/fee to results achieved by the supplier in relation to identified cost-based targets. • Award fee - Allows suppliers to earn a portion (if not all) of an award fee pool established at start of an evaluation period. • Share-in-savings - Supplier pays for developing an end item and is compensated from the savings it generates. Established baseline of costs is extremely important. • Share-in-revenue - Generates additional revenue enhancements; compensation based on sharing formula. • Balanced scorecard -Used when performance is less tangible, i.e., quality of lead personnel or communication and resolution of issues. • Non-performance Incentives - Specified procedures for reductions in payment when services are not performed or do not meet contract requirements.

20. Non-$ Incentives Non-Monetary • Revised schedule • Reduced oversight • Positive performance evaluation • Automatic extension of contract term or option exercise • More frequent payments • Lengthened contract term (award term contracting) or purchase of extra items (award purchase) • Publish article(s) in agency newsletter or speak at agency seminars • Letters of appreciation to individual employees may translate to bonuses • Use trade space for licensing, access to agency officials, etc.

21. BUY IT: THE MANUAL • Where is it? VITA web site, SCM, BUY IT or http://www.vita.virginia.gov/scm/default.aspx?id=5522 • Forms, Templates, “How tos”, Links to Code and policies • Cost/Value Ratio Evaluations, Performance-Based Contracting, Statements of Work, SLAs

22. BUY IT • Cooperative and GSA IT Purchases • Forming the IT Contract • Negotiating IT Contracts • Software Licensing and Maintenance • Intellectual Property • Telecommunications • IT Contract and Supplier Management • NG Partnership

23. BUY IT • IT Contract Administration • IT PPEAs • We strived to make the manual user-friendly, highly interactive and informative about the differences and complex issues surrounding the acquisition of IT products, solutions and services. • The goal of BUY IT is to enhance consistency in the Commonwealth’s processes for IT acquisition and inform individual procurement professionals of critical IT acquisition principles.