Moving Beyond 'Low-Bid' Wins

Recognizing a need to move beyond traditional "low-bid" procurement in its information technology buys, North Carolina has moved to a "best-value" approach to IT acquisition. The shift represents more than just a change in thinking; it also recognizes the particular hazards of acquiring electronic goods and services in a complex multiagency environment.

In contrast to the low-bid approach that has long dictated that price be the main consideration in IT purchasing, awarding bids based on best value enables procurement officials to choose the vendor that offers the best trade-offs in price and performance.

Best-value considerations include total cost of ownership, technical merit, past performance and the probability that a given vendor can supply products or services in a manner that best meets a state's business objectives.

In North Carolina, the general principles of best-value buying had been in place for some time before the state legislature placed its official imprimatur on the method last fall. The law the general assembly enacted took into account the dire need for a new procurement approach.

"We were getting to a point where more of our IT projects failed than succeeded, due to the way we were contracting and the relationships we had with vendors," said John Leaston, North Carolina's state purchasing officer. "Our procurement procedures were the root cause of the failure. We knew that we had to change our traditional relationship with the vending community."

As part of its best-value concept, North Carolina encourages the use of "solution-based solicitations," which focus IT purchases on end results rather than on technical bells and whistles, and "government/vendor partnerships," which give vendors a greater role in the implementation process.

Although the new law mandating best value was not absolutely necessary-regulations already in place provided enough flexibility to accommodate the change-the legislation was important in legitimizing best-value procedures.

"In the public environment, people can't afford to make mistakes, so there is a reluctance to try new things," Leaston said. "The thought is that you can't be criticized too much for accepting the lowest bid, even though that method may not lead you to the best procurement. We now measure cost in a different way, however. We consider things like total cost of ownership, product life cycle and, ultimately, whether or not a project is successful."

A state's regulatory culture can be key to moving to best-value procurement. In Virginia, for example, where a task force is looking at possible changes to the state's public procurement act to see if the buying process can be sped up, the implications for IT purchasing are significant.

"Virginia's law is very specific in protecting the integrity of the procurement process," said Mike Thomas, deputy secretary of technology for Virginia. "It goes so far in that direction, it doesn't balance the need for integrity with the need for timeliness."

So while Virginia has looked at North Carolina's best-value method as a model, its implementation might be quite different. "Their law is more a statement of policy than a specific set of guidelines for implementing the process," Thomas said. "But by making that policy statement that the approach will be best value, they've opened the door for a lot more flexibility."

In Massachusetts, flexibility is built into the state's laws regarding procurement of all types. Because the law mandates only that procurements be "fair and open," the specifics are left to regulation. "We did not want to go to the legislature if we didn't have to, because we preferred to lead by example," said Gary Lambert, deputy state purchasing agent for Massachusetts.

In its attempt to streamline its regulations, the state put in place an innovative team approach that brings together end-user volunteers with business and technical experts. Each team has the authority to make decisions throughout the development, award and contract management phase of each purchase. The results have been encouraging.

"The key to re-engineering is to create the right business model and not to just overlay technology on the practices you already have in place," Lambert said. "We used to make assumptions on behalf of the customer, and we'd only hear their complaints at the end of the contract. Now we provide a lot of independence, and with that comes responsibility and accountability."