Guidelines for Successful Scope and Procurement The Problem Success rate for intelligent transportation systems life cycle is very low Success rate for

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


the Model

Step 5 Select

applicable systems



Step 6

Apply Differenti-

ators

Step 7

Package Assessment


Step 8 Define



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


the Model

Step 5 Select

applicable systems



Step 6

Apply Differenti-

ators

Step 7

Package Assessment


Step 8 Define



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)”


Step 2

Work Allocation

Step 4

Determine Agency

Step 3

Define Project

Categories

NO

YES


the Model

Step 5 Select

applicable systems



Step 6

Apply Differenti-

ators

Step 7

Package Assessment


Step 8 Define



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.”


Step 2

Work Allocation

Step 4

Determine Agency

Step 3

Define Project

Categories

NO

YES


the Model

Step 5 Select

applicable systems



Step 6

Apply Differenti-

ators

Step 7

Package Assessment


Step 8 Define



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


Step 2

Work Allocation

Step 4

Determine Agency

Step 3

Define Project

Categories

NO

YES


the Model

Step 5 Select

applicable systems



Step 6

Apply Differenti-

ators

Step 7

Package Assessment


Step 8 Define



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


Step 2

Work Allocation

Step 4

Determine Agency

Step 3

Define Project

Categories

NO

YES


the Model

Step 5 Select

applicable systems



Step 6

Apply Differenti-

ators

Step 7

Package Assessment


Step 8 Define



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


Step 2

Work Allocation

Step 4

Determine Agency

Step 3

Define Project

Categories

NO

YES


the Model

Step 5 Select

applicable systems



Step 6

Apply Differenti-

ators

Step 7

Package Assessment


Step 8 Define



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


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 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)


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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Documents

Guidelines for Successful Scope and Procurement The Problem Success rate for intelligent transportation systems life cycle is very low Success rate for