Recent Changes in State Purchasing Policies August 24, 2004

Recent Changes in State Purchasing Policies

August 24, 2004

State Purchasing

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Recent Changes in State Purchasing Policies Agenda

Welcome / Session Overview

Putting Procurement in Context

Roadmap to Excellence in Contracting Audit Report

Center for Efficient Government

Recent Rule Changes

Questions

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Recent Rule Changes

Questions

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Putting Procurement in Context The Lawyer’s View The Lawyer’s View

• Chapter 287 (Purchasing (also 255, 337))

• Chapter 120 (APA)

• Chapters 119 and 286 (Public Records and Sunshine Law)

• Chapter 215 (Payment and Audit)

• Chapters 671 and 672 (UCC)

• Chapter 112 (Ethics)

• Chapters 838 and 839 (Criminal Misconduct)

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Putting Procurement in ContextThe Business View (FYE 6/30/03)

• $48.3 billion in expenses

• We’d be 25th on the Fortune 500 list (by revenue)

– Bank of America is just ahead of us

– Just behind us are Pfizer, JP Morgan Chase, Time Warner, and Proctor & Gamble

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Putting Procurement in ContextGov. Agencies’ FY 03-04 Spend ($ millions)

Other Structures/Improvements 1,700

Independent Services not classified 1,500

Engineering 754

Consulting 246

Medical Services 206

MRO Services 240

Medical Supplies 204

Construction 179

IT Services 166

Telephone 142

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Putting Procurement in ContextFla. Financial Management Info. System (215.91, FS)

• Primary means by which state government managers acquire and disseminate the information needed to plan and account for the delivery of services to the citizens in a timely, efficient, and effective manner.

• Coordinate fiscal management information and information that supports state planning, policy development, management, evaluation, and performance monitoring.

• Primary information resource that provides accountability for public funds, resources, and activities.

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Putting Procurement in Context 21st Century Challenges

Stand-alone legacy management information systems

• LAS/PBS (Budgeting - EOG)

• FLAIR (Accounting - DFS)

• COPES (Personnel and Payroll - DMS)

• SPURS (Purchasing - DMS)

• CMS (Cash Management - DFS)

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Putting Procurement in Context 21st Century Challenges

• Lack of standards among subsystems

• Lack of complete and efficient integration

• Duplication of data input and maintenance

• Insufficient management information to support decision making

• Incomplete reporting capabilities

• Lack of single chart of accounts

• Complex external interfaces

• High maintenance and modification costs

• Inconsistent data

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Putting Procurement in ContextOverview of Major FFMIS FFMIS Initiatives

Human Resources – People First

DMS working with Convergys/SAP to modernize the personnel system, leave and attendance and benefits management (http://dms.myflorida.com/workforce/people_first_initiative)

Purchasing – MyFloridaMarketPlace

DMS working with Accenture/Ariba to integrate purchasing activities for all State buyers and for vendors doing business with the State (http://marketplace.myflorida.com)

Financial Management – Aspire

DFS working with Bearing Point/PeopleSoft to replace the legacy accounting and financial system (FLAIR) with an integrated enterprise resource planning system(http://aspire.dfs.state.fl.us)

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Putting Procurement in Context Pre-FFMISPre-FFMIS Purchasing Systems

Vendor BidSystem

(Bidding)

SPURS(Purchasing)

FLAIR

SPURSView

(Reporting)

ManualProcess forMatching

Web-basedRegistration

ManualProcess for

Invoicing

Agencycontractsystem





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Putting Procurement in Context FFMISFFMIS Purchasing Subsystem Goals

FLAIR / Aspire

RegistrationPurchasing

BiddingContractsInvoicingMatchingReporting

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Putting Procurement in ContextPutting Procurement in Context

Lifecycle of SpendLifecycle of Spend

Planning &

AnalysisSource Contract Req’n Order

Interact & Receive

Invoice Payment

• Capture company-wide spend• Adequate data integrity• Identify & monitor savings• Measure ROI of procurement• Fulfill reporting requirements

• Standardized sourcing processes • Deep commodity & market

knowledge• Disseminate best practices

• Optimal pricing & terms

• Decrease time and cost of complex negotiation

• Facilitate multiple collaboration across the organization

• Apply negotiated pricing & terms

• Track supplier performance ratings

• Track rebate and volume agreement compliance

• Manage contract renewals

• Minimize cost to track and transmit orders to suppliers

• Enforce compliance with contract pricing

• Minimize time and cost to requisition, approve, receive & reconcile invoices

• Automate payment and link P.O. to payment authorization in one record

(Ariba Buyer)

•Capture early payment discounts

•Timely capture of payments information

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Putting Procurement in ContextThe Sourcing Process

Fast Track to Value

Validate & Profile

Category

Conduct Industry Analysis

Build Total Cost of

Ownership Model

Develop Category Strategy

Conduct Supplier Analysis

Build Supplier Selection Decision

MatrixConduct Auctions

Complete Prepare Fact-

Based Negotiation “Packages”

Negotiate Value

Propositions

Category Profile

Industry Profile

TCO Model

Category Strategy

Value Propositions

Benefits Realization

Develop

Measure Results & Trends

High-Level Data

Collection & Analysis

Fast Track to Value

Segment Purchases

Validate & Profile

Category


Build Total Cost of

Ownership Model


Conduct Supplier Analysis

Build Supplier Selection Decision


Complete Prepare Fact-

Based Negotiation “Packages”

Negotiate Value

Propositions

Auctions

FormCross-

Functional Sourcing

Teams

Develop


High-Data

Collection & Analysis

Fast Track to Value

Segment Purchases

Validate & Profile

Category


Build Total Cost of

Ownership Model


Conduct Vendor Analysis

Build Vendor

Selection Decision


Complete ITB/ITN/

RFQ/RFP

Develop Value

Proposition Around Options

Make Award

Decision

In-ScopeCategories

CFSTs(Cross-FunctionalSourcing Teams)

Selection Decision Matrix

ITB/ITN/RFQ/RFP

Continual Vendor

Improvement

Profile Internally & Externally

Develop Strategy

Screen Suppliers &

Selection Factors

Conduct Auctions &

Shape & Negotiate

Value Propositions

Implement AgreementsAssess

Opportunities

Profile Internally & Externally

Develop Strategy

Screen Suppliers &

Selection Factors

Conduct Auctions &

Shape & Negotiate

Value Propositions

Kick-Off &

Profile Internally

& Externally

Develop Strategy

Develop Selection Factors &

Screen Vendors

Conduct Competitive

Event

Prepare Value

Proposition & Award

Implement Agreements

Kick-Off & Assess

Opportunities

-

FormCross-

Functional Sourcing

Teams

Develop Vendors


ToolsAriba ContractsAriba Analysis

Ariba Sourcing

Ariba Sourcing

Ariba Contracts

Ariba Analysis

Award Decision (ITA)

Ariba Analysis

Typical Deliverables

Key Worksteps

- and / or -

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Recent Rule Changes

Questions

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Roadmap to Excellence in Contracting EOG Inspector General Report No. 2003-03

• Reviewed approximately 100 audits conducted by seven agencies, AG, and OPPAGA, between July 1999 and June 2002

• Extracted 494 audit findings related to procurement, contracting, and outsourcing

• Identified six core activities instrumental to outsourcing

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Roadmap to ExcellenceDistribution of the 494 Findings

• Performance monitoring (45%)

• Procurement methodology (20%)

• Contract writing (17%)

• Payment (10%)

• Needs assessment (7%)

• Contract closure (1%)

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Roadmap to Excellence Factors Contributing to Recurring Problems

• Lack of statewide guidance

• Lack of expertise in negotiating contracts

• There is no statewide system to train or certify agency contracting personnel, nor are there incentives to encourage professional development

• The state’s corporate culture does not foster the sharing of best contracting practices among agencies

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Roadmap to Excellence Factors Contributing to Recurring Problems

• Agencies’ use of different processes and procedures in awarding and managing contracts causes the contract documents to vary considerably in format and content

• Inadequate systems exist for monitoring and rating vendor performance

• A formal procedure for agencies to perform and document needs assessments has not been developed by DMS

• Piecemeal statutes and rules

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Roadmap to Excellence Recommended Solution to Recurring Problem

Lack of statewide guidance

We recommend that DMS accept the mantle of leadership bestowed by Florida Statute. Most deficiencies could be readily addressed and resolved by requiring that DMS embrace its statutory mandate.

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Lack of GuidanceAction to Date

• Reorganization of State Purchasing

• New hires of experienced purchasing managers

• All of the other actions listed!

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Lack of expertise in negotiating contracts

We recommend that legislation be proposed similar to the Truth in Negotiations Act to assist contract negotiators in determining whether the contractor’s proposal is reasonable.

We also recommend that DMS immediately begin to offer a negotiating training program for state employees.

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Contract NegotiationsAction to Date

• Bills introduced last session (HB 1819 / SB 2932)

• DMS developed and delivered training and certification (more below)

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No statewide training or certification

We recommend a statewide training initiative led by DMS be undertaken using the foundation developed in some agencies. In addition, we recommend incentives to encourage professionalism and certification for contract administrators, negotiators, monitors and managers.

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Training ProgramAction to Date

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The state’s corporate culture does not foster the sharing of best contracting practices

We recommend that DMS create and foster user groups of professional procurement staff that meet on a regular basis to share best practices and common problems.

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Sharing Best PracticesAction to Date

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Agencies’ use of different processes and procedures in awarding and managing contracts causes the contract documents to vary considerably in format and content

We recommend DMS, with the assistance of other agencies, develop standard contract formats for use by all state agencies.

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Standardize Contract FormatsAction to Date

• New forms PUR 1000 and 1001

• Also, MyFloridaMarketPlace will help drive processes and procedures

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Inadequate systems exist for monitoring and rating vendor performance

We recommend a uniform vendor monitoring and rating system be created which incorporates links to contract monitoring reports, vendor websites, closeout evaluations, and a method for other agencies to access performance evaluations.

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Vendor Rating SystemAction to Date

• Surveyed existing agency systems

• Exploring MyFloridaMarketPlace possibilities

• Exploring third-party solutions

• In the meantime, training on best practices and forms

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Piecemeal statutes and rules

We recommend an initiative, led by DMS and a core group of procurement staff, to monitor outsourcing practices for inadequacies and inconsistencies, and propose improved legislative and regulatory changes. This process, over time, could replace the myriad of overlapping and conflicting statutes and guidelines with one unified, effective system of controls.

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Piecemeal Statutes and RulesAction to Date

• Ch. 2002-207 (eff. July 2002)

• Bills introduced last session (HB 1819 / SB 2932)

• Center for Efficient Government (more below)

• Major rule revision (more below)

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Recent Rule Changes

Questions

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Center for Efficient GovernmentWeb Location

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Governor’s Center for Efficient Government Authority and Oversight Board

Authority Executive Order 2004-45

Oversight Board MembersSecretary Bill Simon, DMS

Dr. Jim Zingale, Department of Revenue

Secretary José Abreu, Department of Transportation

Dr. John Agwunobi, Department of Health

Director Susan Pareigis, Agency for Workforce Innovation

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Governor’s Center for Efficient GovernmentInitial Goals

• Develop statewide outsourcing standards and a business case template applicable to any proposed outsourcing project.

• Review existing outsourcing plans within the state agencies to ensure compliance with Center standards and business case, execution of effective contract language with vendors and implementation of successful change management.

• Propose for the Governor’s consideration by July 1 an initial list of specific outsourcing projects and initiatives that can be developed over the next 3 years.

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Business Case

Gate 1

Procurement

Gate 2 Gate 3 Gate 4

Change Management

Contract Management

Post Implementation

Governor’s Center for Efficient GovernmentProject Gate Management Process

Stage 1 Stage 4 Stage 5Stage 3Stage 2

Monitor

Current Projects

New Projects

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Recent Rule Changes

Questions

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• Update – bring the rules into line with statutory changes

• Single Subjects – create smaller rules that each focus on one subject

• Reorganization – order the rules in a more logical manner

• See separate materials, and see overview on web

Recent Rule ChangesMajor Goals

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Recent Rule ChangesOverview of Changes

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Recent Rule ChangesOverview of Changes

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Recent Rule Changes

Questions

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Questions or CommentsContact Information

http://dms.myflorida.com/purchasing

Fred SpringerDirector, State [email protected] 487-1898

Rich BrownOperations Manager, [email protected] 488-3049

Al DominguezGeneral [email protected] 488-0229

Documents

Recent Changes in State Purchasing Policies August 24, 2004