Two Tier Contracting

Lean Improvement and ITPS Pilot

What is it?

A Two Tier Contract(s) is a prequalified bidder pool arranged in specific categories which are periodically refreshed.

• First tier includes vendor qualifications and may include “not to exceed” pricing

• Second tier competition that includes a specific SOW, final vendor selection and contract

When do we use it?

1. Scope of work varies significantly from project to project2. A prequalified pool of vendors is necessary to facilitate

the needs of the state3. Vendor community and/or service/commodity is rapidly

changing4. Where DES should have greater oversight for projects

over agencies delegation5. A broad market offering is available6. Savings to the state (cost/time/efficiency/effort/etc.)

Initial Challenges

DES Master Contracts inherited ~ 600 contracts from 4 different agencies with many different philosophies and processes.

• Inconsistent use of vendor pools• Inconsistent processing of work requests• Cumbersome and time-consuming processes• Large DES workload to manage many different

processes

Value Stream Mapping (VSM)

Three different current state pools were mapped during a 2 day session in November• Janitorial• Personal Services• Information Technology Professional Services (ITPS)

Research of 2 tier pool contracting in other states was completed in December

Future state was mapped during a 4 day session in January

Pain Points of Current State

Complex and time consuming first tier evaluation process

Duplicate information gathering between 1st and 2nd tier evaluations

Qualified contractors may have to wait up to 2 years to enter the pool

Contractors that originally qualified may no longer qualify 4 years later

Contractors required to report even when they do no business

Qualified contractors may be not be selected to the pool due to restrictive first tier price scoring models

Goals

Reduce time and complexity for 1st and 2nd tier processes

Standard process that can be applied to other contracts

Decrease customer and vendor complaints

Ability to add qualified vendors to a pool within 30 days

New Program Approach

Charter and facilitate ongoing Customer Advisory Teams to keep the contracts fresh and on point

Focus tier-one on vendor qualifications by creating a “check list” of metric driven mandatory and desirables

Create an “open pool” vendor application process with clear and transparent policies

Establish best practice Statement of Work processes for 2nd tier

Vendor Evaluations

Tier 1

• High level requirements• Objective • Specific Metrics

• May include ‘not to exceed’ $

(no evaluation)• Licenses• Certifications• Contact Info• General T’s and C’s

Tier 2

• Specific Statement of Work• Objective refined metrics• Subjective criteria

• $/Value• References• Resumes• Interviews• Site Visits

ITPS Pilot

~300 contracts

17 categories of services

Expire June 30, 2013

External Influences and Inputs

ITPS

Procurement Reform

Two Tier Lean Project

Internal Customers

External Customers

Vendor FeedbackITPS

Operational Team

Market

IT Professional Services Categories

•Created ITPS Customer Advisory Team (ITPSCAT)•Established Team Charter•Held (4) workshops & (1) WebEx session•Review of existing category strategy and set new “going forward” strategy and categories•Decided on category grouping and priorities

Accomplishments To-Date

Process Improvement

•Held a internal workshop with past and current staff to document “as-is” and pain points•Held a customer workshop to establish existing practices and brainstorm best practice ideas•Completed LEAN workshop for 2nd tier to document as-is workflows•Next Steps•Apply VSM and Workshop ideas to ITPS Processes

Accomplishments To-Date

Customers see this program as “high

value”•Lesson 1: Existing categories can be reorganized into major and sub categories which will enhance the quality of vendors and focus the procurement•Lesson 2: There is a need establish a process where we can include new vendors into categories when they become available as well as removing vendors that no longer qualify•Lesson 3: Agency participation in requirement development is key but SME resources are constrained•Lesson 4: Procurement and contracting resources are constrained and the level of effort is great

Lessons from the Teams

Proposed New Strategy

• Group “like” sub-categories and perform separate procurements in a phased approach

• Extend current contracts in categories that will take place in a later phase

• Create an ongoing “open evaluation” process, where new vendor offerings are reviewed & scored on a periodic basis

• Create annual review process for existing vendors• ITPSCAT will meet twice annually to review existing categories

and recommend improvements

Going Forward

Quality Focus

•Focus on a single major category will increase the quality of vendor pool•Phasing SME and Procurement workload significantly enhances successful completion and quality and sets up a more manageable workload going forward•“Open evaluation” keeps the vendor pool fresh•Extending current contracts will keep continuity of service•Ongoing ITPSCAT review will help keep up with technology changes

New Strategy Benefits

•Project management is the discipline of planning, organizing, motivating, and controlling resources to achieve specific goals. A project is a temporary endeavor with a defined beginning and end (usually time-constrained, and often constrained by funding or deliverables),[undertaken to meet unique goals and objectives typically to bring about beneficial change or added value.

Category Title & Definition

•Project Manager must have current PMI Certifications with at lease 1 year of experience

Mandatory requirement statements

•Project management experience with 3 years of SAP project implementation experience•Project management experience with project totaling at least $500k

Desirable requirement statements

SME FocusExamples

Category GroupingsService Strategy &

Service Improvement Service Design Service Transition & Operations Services

Cat1 – Funding & Financial Analysis

Technical Architecture

Application Development Cat12 & 15- Client/Server

Cat2 – IT Business Analysis

Cat9 - Systems Analysis

Systems Administration Cat17 - Database

Cat5 - Enterprise Architecture Cat4 - Project

Management Cat16 - Mainframe

Cat8 - Business Continuity Planning Cat3 & 11 - QA IV&V

Testing Cat13 - GIS

Cat10 - Network Cat6 - Security Cat14 - Infrastructure Mobile Web

Focused 3 Phase Effort

ServicesTechnical

ArchitectureDesign

Systems Analysis

Application Development

Transition

Security Systems Administration

OperationsClient/Server

DatabaseMainframe

GISInfrastructure

MobileWeb

Funding & Financial Analysis

IT Business Analysis

Enterprise Architecture

Business Continuity Planning

Project Management

QA IV&V Testing

Service Strategy & Improvement

Project Management

Services

Service

Strategy

2013 Early

Project

Management QA (IV&

V)2013 Late

Services

2014

Tier-One Timeline

• Existing ITPS agreements – Extended for 2 years– Categories will be terminated as new

categories come on line– Existing work orders will survive termination of

contracts but renewals will not be available

Transition Plan

Questions?

Thank you

Scott Geist Email: scott.geist@des.wa.govPhone (360) 407-9429