Information echnology Procurement Guidelines Box 1710, Wellington. Phone: +64 4 472 2731, Fax: +64 4 499 3318, Email:info@itanz.org.nz
able of Contents Guidelines 1. Introduction...1 2. Objectives...1 3. Statement of Requirements...2 4. Inviting proposals from vendors...3 5. Vendors...5 6. Evaluation...5 7. Contracts...6 8. Professional Services...6 9. Conclusion...7 10. Other Guidelines in this series...8 ii Information echnology Procurement Guidelines
Information echnology Procurement Guidelines 1. Introduction his paper has been prepared by the Information echnology Association of New Zealand (IANZ) to provide organisations undertaking technology purchases with some guidelines on the formal procurement process. hese guidelines are intended only as a briefing paper and are not in themselves a definitive step by step guide to procurement. he degree of detail in the procurement process (and therefore the costs for the purchaser and vendors) should of course reflect the value of the purchases. Due to the convergence and inter-linking of computing and telecommunications, this guideline series applies equally to these technologies (collectively referred to as Information echnology or I below). For example, PABXs are increasingly computerlike software-controlled devices integrating voice with data at a user s workstation. A user will take voice calls via a headset linked to the PC. he voice call may initiate the retrieval and display of data relating to the caller from a sales database. Voice and data are no longer separate parts of a system Preparing a procurement strategy, a statement of requirements and evaluating vendor proposals, is not always an exact science and this paper only sets out to discuss some of the major issues and standard tendering strategies. Not all steps described are always needed, but as a minimum, the purchaser's objectives and the vendor's proposed solution should be formally documented. Where an organisation lacks either the experience or the skills to undertake a major procurement project, it is recommended that professional advice be sought from a consultancy that is independent of the particular supply process. Other guidelines in this series, relating to I, are listed in section 10 Other Guidelines in this series. 2. Objectives he major objective for the purchaser in any procurement process should be to identify the best solution to meet a stated business need. In submitting a proposal in response to the purchaser s requirements, the vendor s major objectives will be to prepare a cost-effective solution to meet these requirements and to win the business on the strengths of their proposal. For both the parties, a common objective in any procurement process should also be to minimise the risks, costs and efforts required by all parties in pursuit of their major objectives. For the purchaser, reducing risk and costs can include: qualification of the business need through the appropriate business and I strategic planning cycles; Information echnology Procurement Guidelines 1
clear identification and specification of the business and technical requirements; identification of the selection criteria; qualification of vendors invited to submit proposals; using an appropriate procurement process and careful planning, from the statement of requirements through to contract signature; and communicating these requirements to vendors. Vendors can similarly reduce their risks and costs in competing in the procurement by: critical qualification of opportunities to submit proposals with reference to their own business and marketing plans; marketing their products and services and developing an ongoing professional business relationship; committing to the procurement process and understanding why they were (or were not) successful. 3. Statement of Requirements he need for thorough specification of the business problem is critical to the procurement process. Generally this will be identified in current business and I strategic plans which should be considered as pre-requisites to procurement. Following on from these strategic planning documents will be the appropriate specifications which could include data models, functional process descriptions, user requirements, use cases, operational requirements, architectures, standards, performance and capacity requirements,and service levels etc. All of these will be key documents in the preparation of a detailed specification of requirements for issue to the vendors who are subsequently invited to submit a proposal. In turn the vendors will expect, in the preparation of their proposal, that these specifications are complete and accurately reflect the known requirements. 2 Information echnology Procurement Guidelines
4. Inviting proposals from vendors here are a number of options to any procurement process and these may be dictated by statutory or corporate obligations. One organisation may be required to put all procurement out to open tender; another may have a multinational policy for selective purchase based on specific vendors products only. here may be instances where the exact technical requirements are known and can be issued directly to selected vendors for price and delivery and others where only the high-level business need is identified and a technical solution is sought. he procurement plan selected by the purchaser should be consistent in each instance with the technical and business requirements and with a careful consideration of the cost/benefits of any additional stages. he scope and a statement of intent with respect to each procurement option should be carefully identified and clearly communicated to the vendors. Options that the purchaser might consider are:! Registration of Interest;! Request for Information;! Request for Proposal. Registration of Interest (ROI) G enerally used where the purchaser wishes to signal to the marketplace an intention to seek out and purchase the solution to a particular business need and would like to open up dialogue with interested vendors. Vendors registering can then expect to be invited to participate in further stages of the procurement which may include the issue of a Request for Information or lead directly to issue of a Request for Proposal. Request for Information (RFI) he RFI may be used either to assist the purchaser to further qualify or identify possible business solutions available and/or to assist in the selection of a limited number of vendors who will participate in the further stages of the procurement. he RFI will generally state high level requirements focussed on the business needs and seek only a minimum of information to establish vendor s corporate credentials, product qualification or system approach prior to any invitation to participate in further stages of the procurement. It is not generally anticipated that an RFI leads directly to selection of a preferred vendor and a purchase. Request for Proposal (RFP) he RFP is expected to be the document that will confirm and detail the exact requirements stated in both business and technical terms. his document should include: Information echnology Procurement Guidelines 3
the terms and conditions of submitting a proposal; the form and structure of vendors proposals; background information on the organisation, its structure and systems; the scope and objectives of the RFP; a statement of intention and the final decision process; the specification of the business problem; the key evaluation criteria; the time-table for procurement and implementation; the national or international standards for compliance; detailed technical specifications and requirements; (including ongoing support) key contractual requirements; and a request for details on installed base and reference sites. he purchaser may need to include in the RFP, details of their business or plans that are considered commercially sensitive. Similarly vendors proposals will be commercially sensitive and may contain information or ideas that they consider their intellectual property. In both instances, the parties need to protect their commercial interests. he purchaser will probably require that no information be disclosed to a third party without their prior written permission and request that all copies of the RFP are returned at the conclusion of the evaluation. Vendors can also reasonably expect that the information they include in their proposals be kept confidential and that all copies of their proposal be returned at the conclusion of the evaluation. his requirement may be impacted by organisations covered under the Official Information Act. o further help them to qualify their proposed solution and assess risk, vendors may also wish to know the budget for the procurement and how many other vendors have been issued the RFP. hese are contentious issues but on the basis that this information assists the vendor to qualify the opportunity and propose an affordable solution, it is recommended that the purchaser provide indicative figures in both instances. Where possible, vendors should be given advance warning as to when the RFI/RFP documents will be available to them so that they can plan and allocate resources. Adequate time should be allowed for the vendors to then consider and prepare their responses. During this time, vendors should have reasonable access to the purchaser to seek clarification on any issues. Consideration should be given to providing each vendor with the opportunity to attend a confidential meeting to table their questions on the requirements and to further qualify the opportunity. 4 Information echnology Procurement Guidelines
5. Vendors he selection of vendors to issue an RFI or RFP to will vary subject to the background of each requirement. Ideally, at the RFP stage a maximum of five qualified vendors should be invited to submit a proposal. If these vendors cannot reasonably be identified, then consideration should be given to including an RFI stage for this purpose. he additional time spent on an RFI should easily be recovered when compared to evaluating full RFPs from a large number of vendors but the RFI stage may extend the elapsed time to identify the preferred vendor. 6. Evaluation he evaluation stage requires a plan and strategy which should be formulated during preparation of the RFP. he RFP must seek to identify all of the major evaluation criteria and require vendors to respond to or provide the appropriate information on each. hese criteria can then be assembled into an evaluation matrix, the responses assessed and ranked and this data utilised to help identify the vendor who best meets the requirements of the RFP. Prior to issue of the RFP, the evaluation team should be identified and care taken to appoint the appropriate balance of technical, business and management expertise, with an overall team leader to co-ordinate and manage the evaluation. Each team member should be formally advised of their role in the evaluation and allocated specific tasks and responsibilities. he importance of commercial confidentiality must be stressed and the time commitment on each team member during the evaluation identified and allocated. Any legal assistance required during the evaluation and in particular leading through to contract negotiations, should also be identified and arranged. Depending upon the circumstances of a procurement, a two-stage evaluation may be required. he first stage could evaluate selected major criteria to identify a short list, which will then go forward to a detailed evaluation in stage two. It is normally in the interests of both purchaser and vendor for there to be presentations and/or demonstrations. Generally, these would include only the short-listed vendors. Once any vendors are no longer under further consideration during the evaluation, they should be advised as soon as possible. his enables them to re-allocate any resources that they may have committed to the support of their proposal. It is also recommended that the vendor be given the opportunity to be de-briefed on where their proposal was not considered to meet the requirements or was not competitive. he timing of this briefing is important and, in the event the evaluation has to be re-opened, should not precede the formal conclusion of the evaluation and contract completion. o protect commercial confidentiality of all parties, care should be taken on the information relating to the evaluation and in particular vendors should only be told of the relative strengths and weaknesses of their own proposal and not any other proposals. Information echnology Procurement Guidelines 5
7. Contracts O nce the evaluation of proposals is completed, negotiations on the appropriate purchase and support contracts should begin with the preferred vendor. he scope and basis of these negotiations will usually depend on the risk and commercial value of the procurement and could vary from an exchange of letters to the negotiation and drafting of complex legal documents. It would be expected that if the procurement warranted a formal RFP and extended evaluation process then it would also require the preparation of contract documents. If the purchaser has a requirement to use a particular contract, it will usually be beneficial to include the contract in the RFP package and to require the vendors to identify any amendments they would want to make to it in their response. his reduces the potential for contract negotiations to become unnecessarily extended, or for contract agreement problems to arise after a vendor has been selected by the RFP processes. Key to the contract documents will be the RFP and the preferred vendor s proposal, which should always become attachments to the agreements. Any other major documents that supersede or modify the RFP or proposal should also be attached. Issues that the contracts will need to specify include: the contract deliverables; the specification for the deliverables; the implementation plan; performance and service standards; the purchaser s responsibilities; purchaser and vendor project management roles; the acceptance procedures; the commercial terms, conditions and schedule; issues of confidentiality, intellectual property and liabilities; and the consequences and remedies for both parties of default by the other. 8. Professional Services M ost organisations may not have the expertise or resource to carry out or manage a large and complex procurement process. In addition, many of the skills required are specialised. Industry knowledge and experience of preparing RFPs, of the evaluation of proposals and of contract negotiation can be very important, particularly when the stakes are high. It may be appropriate to consider the services of an I consultant to either assist or guide the procurement process through from specification to contract completion. Whilst this may represent an additional cost to the process, the added value, independent advice, reduction of risk and timely completion may justify the expense. In seeking consulting services for the procurement process, the purchaser should look for: professional consulting organisations; strict independence from the particular supply process; 6 Information echnology Procurement Guidelines
a proven track record in procurement projects through all stages; a methodology; and consultants who have the respect and confidence of the vendors. See Professional Services Guidelines in this series for guidance on using such services. 9. Conclusion W e hope this paper will be used by vendors, consultants and purchasers as a guideline document to help improve the effectiveness of the I procurement process. his should be in the interest of all parties, particularly the purchaser. Information echnology Procurement Guidelines 7
10. Other Guidelines in this series Guideline opic Information echnology Procurement Information echnology Agreement System Maintenance Software Agreement Software Licensing Facilities Management Outsourcing System Integration Professional Services Scope he formal process for technology procurement. Follows on from the identification of a preferred supplier in the procurement process. Addresses the subsequent supply contract negotiations stage. It includes an agreement template. An agreement for the maintenance and support of systems. his may be for a new system acquisition or for an existing system. It includes an agreement template. he development of software by a supplier. Also, the purchase and enhancement of off-the-shelf application packages. It does not include the supply of general-purpose shrink-wrapped PC tools but it is applicable to developments using these tools. It includes an agreement template. he licensing of unmodified package software with the associated maintenance. It includes an agreement template. he contracting out and management of an organisation s own systems at their own locations. Also covers the supply of associated services. It assumes that the decision to engage a facilities manager has been made and the supplier selection is complete. It includes an agreement template. he management and provision of systems and services where the provider supplies a total service including the provision of all defined facilities (hardware, software etc.) at the supplier s location. he implementation by a supplier of a set of distinct and complementary I products or services to provide a defined and seamless service or system to a client. he products could be hardware, software, communications networks, services and perhaps operations services. It includes an agreement template he provision of special knowledge, skills and experience to a client for a fee. ypically by rendering advice, helping to successfully implement a solution, and/or providing technical or managerial assistance with and for the client. 8 Information echnology Procurement Guidelines
Copyright is reserved to IANZ but copying for non commercial purposes in limited quantities is acceptable. his and the other guidelines in the series are available for downloading at no charge from the IANZ homepage at: http://www.itanz.org.nz Printed copies and a diskette version are also available from: Box 1710, Wellington. Phone: +64 4 472 2731, Fax: +64 4 499 3318, Email: info@itanz.org.nz