Taming the Massachusetts Procurement Beast

Two years ago, nurses at various Massachusetts hospitals complained that valves attached to hospital oxygen tanks weren't working properly. It turned out the tanks were actually welding tanks. In another instance, grossly oversized surgical gowns were shipped. And then a plague of mismatched Styrofoam coffee cup lids was visited on Massachusetts' medical community.

Small gaffes, but nevertheless the telltale signs of the fraying of the state's procurement system, which funnels more than $1 billion worth of goods and services annually to Massachusetts government offices. At the core of the system, the situation was worse-maybe even rotten. State executives estimated that nearly 25 percent of all contracts ended up canceled or went unused. Moreover, the average overhead per purchase was $65, for a grand total of $2.5 million in pure bloat.

In the summer of 1995, Massachusetts secretary of finance Charles Baker blew the whistle, demanding that the procurement bureaucracy be tamed. Now, two years later, Massachusetts is something of a procurement para-gon. Among the changes made: State offices have greater flexibility to tailor procurements; government and industry teams were formed to help hone contracts; hundreds of pages of contract boilerplate were trimmed; and some state offices had procurement authority thresholds boosted to $50,000.

With the policy grid in place, state officials have started rolling out their high-tech weapon: the Commonwealth Procurement Access and Solicitation System (Comm-PASS), a new Internet-based procurement system designed to disseminate bid information electronically and act as a foundation for electronic commerce (EC) in Massachusetts. State officials expect Comm-PASS will save up to $100,000 a week by eliminating costly manual processes.

Today vendors wishing to do business with the state can access Comm-PASS via the Internet and browse 60 to 100 active solicitations on any given day. New procurements are put up within 72 hours of being received. Small businesses without Internet access can go to any of 35 public-access sites to dial up the system. In the future, a business registry is envisioned that will eliminate some state notification chores and further reduce costs.

But while cleaning up Massachusetts' procurement system and taking the first steps toward EC sounds like it has been a smooth process, it has required stakeholders to submit to a painstaking self-analysis. For Massachusetts, it started with a bipartisan meeting of the state's top 20 purchasing officials, where some of the "blocking and tackling of government reform" was begun, said Steve Kadish, assistant secretary of management and operations for the commonwealth.

"We had over 150 years of combined state government purchasing experience in the room," he said. "They were truly the best and brightest. They knew how the current system worked and its strengths and weaknesses. Over six weeks of often intense meetings, they worked on the first stage of procurement reform: defining the existing state procurement structure," Kadish said. "It was very much like the blind men trying to visualize an elephant. Everyone saw the procurement system differently."

It was in those meetings that the frustrations over surgical gowns and mismatched coffee cups were aired, anecdotes that would strike a familiar chord in many other state shops. "These things were not done maliciously. The system was product-oriented without being strategic," said Kadish, who ascribed two basic causes to the mistakes: an obsession with taking low bids and a pervasive lack of strategic planning.

The team defined problems in the process and then, in Phase Two, came up with "certain fixes" and "procurement principles," said Kadish, including incorporating the ideas of best value, measurable outcomes and a general desire to streamline procurement administration.

"We then went and tried a couple of things," said Kadish, including simplifying some of the steps required to purchase information technology in the state. "There was this unbelievable process, which more often than not got results that were not wanted." Right off the bat, the team "junked" 130 archaic steps associated with authorizing signatures for equipment purchases. "There were sign-offs and redundant sign-offs left over from a time when IT procurement had uniqueness," Kadish said. "We just got rid of that."

Phase Three involved a commitment to weave into procurement reform an automated system that would, in turn, help change the process. "Comm-PASS was an outgrowth of procurement reform," said Gary Lambert, the state's deputy state purchasing agent. "We were looking for a tool that was going to support procurement reform but at the same time make it easier for businesses to get access and opportunity within the commonwealth, regardless of their size."

The group also decided it wanted a system that was not proprietary and would not cost an arm and a leg. "We knew we wanted to take things off-the-shelf," said Timothy Landy, the MIS director of the state's Operational Services Division. "We did not want to take the time and effort to make a system that would be unique to Massachusetts, and we knew that cost would be a concern."

So the team decided to go shopping. "We looked seriously at the Oregon system and at first said, 'Let's buy it and put it up ourselves,' " Landy said. "Kentucky had also done it and was in the process of doing some tweaking. But eventually we decided that although it is a good system based on AS/400 technology, it did not have good enough hooks to the Internet."

The group finally decided on a completely Internet-based solution. "We came down on the side of a system based on the Internet rather than a proprietary system," Lambert said. "It took a month to sort all this out, but once we made that decision, we just charged ahead, and within six months we had a system up and running."

Although Comm-PASS currently has a fairly primitive set of functions-allowing agencies to post solicitations on-line and providing users with a limited ability to search contracts-it is in the midst of a substantial upgrade that will establish it as a fully relational database system.

Comm-PASS is "basically a pilot that went live," Landy said. Launched on a WAIS (Wide-Area Information Server), the system was scheduled to be moved in March onto a Windows NT platform running Microsoft Corp.'s SQL Server and Internet Information Server. "We brought it up knowing it had limited functionality and, with the WAIS server, that it would not be able to handle the volume," Landy said. The migration to SQL will make it easier for end users to access the system, upload and download files, and search the system, said Helen Goldbert, a senior systems analyst at Waltham, Mass.-based WT Chen&Co., a consultant on the project.

"All of the design was done in-house; the coding was contracted out. It was really cheap," said Landy, who estimated development costs at around $300,000. The team is quick to point out that the projected savings make the investment seem like small potatoes. "We estimate that Comm-PASS will result in an overall cost savings of 5 to 20 percent," said Kadish, who put savings from the consolidation of the state's food contracts alone at $19 million over five years.

With the current upgrade, the state plans to develop a sophisticated business registry it hopes will evolve into a marketing channel for vendors. By spurring interaction among them, the state hopes to remove itself from the job of linking primes and subcontractors and to ease its burden of recruiting women and minority-owned businesses to state jobs.

"We are doing away with bidders' lists and no longer want to maintain them," Lambert said. "With the system, companies can give basic information about themselves, like where and what they are, their e-mail and mailing address, company size and profile, along with what products they sell." The information would be protected by passwords chosen by companies when they register.

After registering, the state hopes companies will use the system to browse solicitations and market themselves to other bidders. "We ask, 'Are you interested as a prime or a sub, or are you willing to be either?' " Lambert said. "The goal is to allow company-to-company dialogue to commence. In cases where subs are required, we are hoping to create a ready-made list for those wanting to be primes to tap. We are trying to bring companies together rather than having companies waiting for the government to give them a contract."

Further out, Comm-PASS' future is a bit unclear. The logical next step would be to inject full-fledged electronic purchasing and ordering features into the system, but the technical and legal hurdles associated with full EC have become "a huge nightmare," Landy said. Although the state has talked with companies that were willing to test electronic data interchange transactions with the state, "the vendors in industries that said they would be ready usually aren't," he said. "The other problem we run into is that the smaller shops just don't do EDI," he added. "The cost to integrate it is too much for them to swallow."

Cycle of Improvement

But there are problems on the state's side as well. Laws still on the books essentially require the state to do business on paper. And digital signature and digital certificate technology has not matured. But even so, the Massachusetts team is not pessimistic, especially given the rate of improvement in the last two years. "We assume we will be rolling out something better to the community every six months," Lambert said.

"Right now the government in Massachusetts is open to anyone with Internet access," he added. "You can see contracts that are available, who won the ones that are closed, how the scoring is done. All of that is public information, and now the vendors don't have to call us for it"-a savings in itself because just answering phone calls and shifting paper costs the taxpayers. "Just not having to mail out solicitations will save this agency between $70,000 and $100,000 a week," Lambert said.

Although tying the Internet to procurement reform has already saved money, the ultimate benefit may come in turning up the heat in competition for government business.

"The Internet has proved a great leveler," Landy added. "You look at IBM and Joe's Computer Shop both on an 18-inch screen, and they look the same."

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Public-Access Sites: The Heart and Soul of Comm-PASS

Not wanting to limit Comm-PASS to the Internet-savvy, Massachusetts has set up 35 public-access sites where companies can access the system in libraries, chambers of commerce, state colleges and unemployment offices. "These are places where any member of the public can have direct access to the Internet and to Comm-PASS," said Steve Kadish, assistant secretary of management and operations. "We wanted them to be in places that people go anyway."

The sites are more than simply Internet access terminals. "There are people there who know how to put together a bid," Kadish said. "Once a user has logged onto Comm-PASS at the public-access site, there are trained staff there that have materials for anyone who wants to bid on a job."

The expense tied to the sites is minimal. "The investment was really in a part-time contractor who went out and made the literal connections," Kadish said. "We didn't want to build a whole new infrastructure." Although there are no solid figures on usage at the public sites, the state has demoed the system at various public road shows. "I think we've got them located well," Landy said. "They are where they should be, at chambers of commerce and the like, so we're not trying to drag someone in to use them."

* * * * *

Massachusetts' Problems:

* System focused on rules, not outcomes.

* Low bids outranked total costs.

* Procurement officers distanced from end users.

* 11 percent of contracts canceled/ suspended each year.

* 10 percent of contracts never used.

* State purchasing bulletin underused by vendors.

* Vendors bogged down with requirements.

* Agencies could run multimillion-dollar procurements but not $1,500 orders.

Solutions:

* Using requests for responses that allow offices to tailor procurements to meet needs.

* Industry/government Procurement Management Teams.

* Streamlining 100 pages of regulations to eight pages.

* Cutting 50 pages of contract boilerplate to two pages of terms and conditions.

* Increasing agency purchasing authority to $50,000.

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