its procurement workshop module 3: selecting a contracting approach

ITS Procurement Workshop


Module 3: Selecting a Contracting Approach


ITS Projects

• Products – Vehicle detectors, CCTV, lane control signals, DMS,

communication medium and devices, traffic management building, conduit, pull boxes, foundations, structures, poles, hardware, computers, software, and traffic controllers

• Systems – Incident management systems; emergency dispatch

systems; freeway management system and associated metered ramps; and arterial traffic signal systems

• Services – Architectural, surveying, mapping, engineering, design,

construction, construction management, software development, system testing, and system integration.


Mini-Cases


Procurement Approach Model

Work Structure

Agency Characteristic

s

Project Characteristic

s

Method of Award

Contract Type

Enabling Legal Framework

Other Tools


Work Structure

Work Structure


s


s

Method of Award

Contract Type


Other Tools

Work Structure

•Phased

•One Step

•Multi-Contract

•Combinations

Work Structure

•Phased

•One Step

•Multi-Contract

•Combinations


Basic Work Structure

Plan Design M & O

• Typical Steps in ITS Acquisition

• Steps in Traditional Project Acquisition

Plan Develop Implement M & O

Build


ITS Acquisition


•Vision

•Goals

•Schedule

•Cost

•Procurement Method

•High Level Requirements

•Requirements

•Refine Cost and Schedule

•Development

•Install

•Test

•Maintenance and Operations

•Contract Staff

•Privatize


Phased Work Structure


Contractor 1 Contractor 2Agency

(or Contractor)

• One Contract for Each Step


One-Step Work Structure

• One Contract Encompasses All Steps


One Contractor


Multi-Contract Work Structure

• Multiple Contracts On-Going at the Same Time

Sub-Contractor 1: Software System

Sub-Contractor 2: Communications System

Sub-Contractor 3: Field Device Installation

“System Manager” Contractor

“System Manager” Contractor


Why Is Work Structure Important?

• Ensure you have the proper prime contractor

• Ensure you get the help you need


Inputs to Deciding Work Structure

• Consider the Type of ITS Project– Majority OTS– Field devices– Communications– Majority new software/integration– Combinations

Note: Consider degree of software development



• What are the other elements of the project beyond ITS?– Structures?– Trenching?– Remodeling?



• How should the work be managed?– Should an ITS Prime manage a

“construction” sub? Vice-versa?– Perhaps the ITS work should be

separated?


Work Structure - Key Points

• Many ways to “slice it”• Consider the ITS elements - should

they be contracted separately?• You will have to change your

concept of the agency as project manager and devote more time no matter how you structure a project


Mini-Cases


Project Characteristics

Work Structure


s


s

Method of Award

Contract Type


Other Tools


•Determine Need For Flexibility in Contract Management


•Determine Need For Flexibility in Contract Management



• Need for Flexibility– Maturity of technology– Size/Scope/Complexity– Coordination with other work– Goals are fixed or not– Final product is stable, known, seen

or not


Project Characteristics Rating

Old Tech New TechMaturity of Technology 1 2 3 4 5

Simple ComplexSize/Scope/Complexity 1 2 3 4 5

Stand Alone Many ProjectsCoordination With Other Work 1 2 3 4 5

Fixed Not FixedFixed-ness of Goals 1 2 3 4 5

Exists Does Not ExistFixed-ness of Final Product 1 2 3 4 5


Agency Characteristics

Work Structure


s


s

Method of Award

Contract Type


Other Tools


•Determine Need For Support


•Determine Need For Support



• Need for Support– Experience with similar work– Staff Skills– Workload– Funding


Agency Characteristics Rating

Experience No ExperienceExperience w/Similar Work 1 2 3 4 5

Available Not AvailableStaff Skills 1 2 3 4 5

Low HighWorkload 1 2 3 4 5

Adequate UnknownFunding 1 2 3 4 5


Mini-Cases



Work Structure


s


s

Method of Award

Contract Type

Enabling Legal Framework (FARs)

Other Tools


• Construction• Engineering and Design Services• Common Rule

• Services• Goods

• SEP 14• Design/Build• Others



• Services• Goods

• SEP 14• Design/Build• Others



• Federal-aid procurement regulations – Code of Federal Regulations (CFR) Title 23 Parts 172, 635, 655 and Title 49 CFR Part 18

• The laws that govern the use of Federal-aid highway funds

• If you use Federal funds for your ITS project - at any proportion - procurement is guided by the Code




– Goods– Services– Construction

• SEP 14


Lessons Learned About Frameworks

• The Traditional Model - Engineering and Design Services and Construction– Contractor manages the subcontractors,

rather than the agency. – However, ITS subs are often inaccessible

under many layers of subcontractors (e.g. WSDOT)

– Construction is low bid, and usually not suitable for ITS.



• The Traditional Model - Engineering and Design Services and Construction– Imposes an artificial break between

“design” and “construction”.– System Manager or Integrator contracts

work well when risk is appropriately shared between client and contractor.

– Past failures have been due to lack of shift in client/contractor relationship.



• Common Rule– Many agencies have more flexible

procurement rules, better suited to ITS (e.g. VDOT).

– Some have rules specifically developed for technology (e.g. City of Bellevue, WA, State of Texas).



• SEP 14– Allows merging of “goods”, “services”

and “construction” (e.g. CARAT).– Allows cost and quals combined in

selection (e.g. UDOT).– Good alternative if your own

processes are rigid (Common Rule)



• SEP 14– Design/Build allowed under SEP 14– The term “Design/Build” carries a lot of

baggage - use an alternative.– ITS is inherently design/build– Like all ITS, design/build ITS

procurements require you to change your view of the client/contractor relationship.


Mini-Cases


Method of Award

Work Structure


s


s

Method of Award

Contract Type


Other Tools

Method of Award

•Qualifications

•Cost

•Quals and Cost

Method of Award

•Qualifications

•Cost

•Quals and Cost


Method Of Award

• Qualifications– Standard RFP/Interview– Two-Step Qualifications (LOI or RFQ, then

RFP and/or interview)– Competitive Design– Demonstrations and/or Site Visits– Requirements Checklists– Sole Source– Unsolicited Proposals


Method of Award

• Cost and Qualifications Combined– Two-Step Sealed Bids (Quals then Cost)– Competitive Proposals

• Best Value• Life-Cycle Cost

– Best and Final Offers– Competitive Negotiations– Sole Source


Method of Award

• Cost (Low-bid)– Fixed cost works best for fixed

outcome projects.– Cost alone is often inappropriate for

ITS.


When use Quals? When Quals and Cost?

• Consider what you are “buying”.– Intellectual property versus real

property– Proportions of each

• How difficult is achieving the outcome?– Technically– Institutionally (people issues)


Method Of Award - Lessons Learned

• Match selection method to outcome:– Qualifications and cost combined work

well if the product is a combination of services and products.

– Qualifications alone works well for software alone, or services.

• Beware of low bid for software: only use low bid for items with very little or no software development/integration.


Contract Type

Work Structure


s


s

Method of Award

Contract Type


Other Tools

Contract Type

•Fixed Price

•Cost Reimbursement

•Incentive

Contract Type

•Fixed Price

•Cost Reimbursement

•Incentive


Contract Type

• Fixed Price– Firm Fixed Price– Variations

• Various Price Adjustments (Not scope-based)

• Fixed Price Works Best for Fixed Outcomes


Contract Type

• Cost Reimbursement– Reimburses labor and direct costs,

scope often very unclear.– Cost plus Fixed Fee– Time and Materials


Contract Type

• Incentive– Relates fee to contractor performance– Target cost-based– Award Fee– Others


Contract Types - Lessons Learned

• Fixed Price is applicable to fixed outcome work – not new software.

• Cost Reimbursement is applicable to software-intensive work and other work with flexible outcomes.– Long history of success in IT world. (MDSHA)

• Incentive applies to mature technology and software.


Other Tools

Work Structure


s


s

Method of Award

Contract Type


Other Tools

Other Tools

•Task Order

•IQC

Other Tools

•Task Order

•IQC


Other Tools

• Can be used with most any Contract Type (except, perhaps, construction).– IQC/On-Call Services (MinnDOT, GDOT)– IQC For Goods (UDOT)– Task Order (VDOT)– Independent Validation and Verification

Contractor (MdSHA, NJ Turnpike)


Other Tools - Lessons Learned

• Task Order increases control and flexibility, increases administrative burden.

• IQC reduces total time to contract.• Little I,V & V contract experience -

rely on DoD methods for conflict resolution.


Procurement Approach Model

Work Structure


s


s

Method of Award

Contract Type


Other Tools


Effective Practice Summary Matrix


Project/Agency Characteristics Diagram

High

High

Low

Low

Traditional

Practice OK

Compromises In Effective Practice, Carefully

Selected May Work

NOTE:METHODS ARE ARRAYED IN A COMPARATIVE SENSE

Apply Effective Practices

Get Help! Perhaps

Use I,V &V, or Think about DBOM

Rethink Your

Overall Approach

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Need For Support (Agency Characteristics)

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Work Structure


s


s

Method of Award

Contract Type


Other Tools

Effective Practices Include...


Method of Award

Contract Type

Other Tools

EffectivePractices


The MatrixEFFECTIVE PRACTICES

Work Structure Enabling Legal Framework

Additional Tools (As Appropriate)

Method Of Award Contract Type

Most Effective

Separate ITS – do not bury ITS.

Combine develop and implement phases for software.

Maintain ITS team continuity throughout development and implementation.

Contractor accepts only their own risks.

Both services and goods (and even construction) can be supplied.

Selection allows a “best value” approach.

IDQ/On -Call Contracts (For Goods and/or Services)

Task Order

I,V & V

Qualifications –or- Qualifications and

cost.

Incentive (When outcome is fixed)

Contractor specifies materials purchased by Client Agency.

Restrictions on combining goods and

services.

Cost Reimbursement

Fixed Price (unless it is a fixed outcome or product)

Least Effective (Traditional Practices)

ITS combined with other installation disciplines.

Traditional approach where “design” and “construct” phases are separated.

A contractor must accept the risk of other contractors or

other parties.

Services and goods completely separated.

Low Bid selection required.

None used. Cost – Do not use low bid for ITS unless you are purchasing a

fixed outcome job


Applying the Tools

1 - Work Structure2 - Assess Project and Agency

Characteristics3 - Use the Diagram To Determine if

Your Conditions Allow CompromisesTo Most Effective Practices

4 - Apply Most Effective Practices UnlessYou Cannot Or Unless You AreCertain They Do Not Apply


Key Points

Other procurement options exist that are more suited to ITS

ITS requires new procurement practices

ITS requires a change in management approach


Key Points

Fixed outcomes = Fixed Costs = Cost-Based Selection

Uncertain outcome = Flexible Costs = Qualifications Based Selection

Most ITS is somewhere between these two

its procurement workshop module 3: selecting a contracting approach

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