Kentucky Derby

The rapidly evolving world of information technology has wrought changes

in virtually every area of state and local government, but its most immediate

impact may be on the procurement process. The need for speedier procurement

and increased interaction between state or local agencies and the vendor

community is driving procurement officials to seek new ways of buying IT

products and services.

In the commonwealth of Kentucky, the pace of change has resulted in

a new procurement program designed to do away with the venerable requests

for proposals (RFPs) that have been the basic instrument of virtually every

government procurement process for decades.

In place for nearly a year, the state's Strategic Alliance Services

(SAS) program establishes a long-term contract with a pool of 15 IT vendors.

The wide-ranging program covers "milestone-based" services, such as enhancements

and modifications to existing systems, and project-oriented IT services,

such as life-cycle development, integration and outsourcing of nonstrategic

responsibilities. The SAS program does not cover hardware and software procurement

and task-based hourly services.

"With the RFP process, you spend weeks crafting a tedious set of technical

requirements, and then you put it out there for vendors to respond. There's

limited interaction between the vendor and the agency. It's not a good procedure

for us," said Robin Morley, executive assistant for the governor's Office

for Technology. "With SAS, agencies craft a business problem statement and

then let the vendors provide their experience to solve the problem."

The state's Revenue Cabinet was the first beneficiary of the new procurement

approach. The agency crafted two RFPs for a $12 million to $15 million integrated

tax system over a three-year period, but neither resulted in a contract

being issued. The project then became the first to be "shopped" to vendors

with the SAS program. The resulting interaction between the Revenue Cabinet

and IT service suppliers led to the selection of a vendor in about six months.

"The members of the Revenue Cabinet feel that the SAS process gave them

a much better understanding of what they will receive from the vendors,

and the vendors feel that they have a much better understanding of what

the job requires," Morley said.

Although the SAS approach helped to speed the cabinet's tax system procurement,

saving time is not the primary benefit, Morley said.

"We had initially hoped that SAS would make the procurement process

faster than it was with the RFP process. In practice, we've found that some

procurements do proceed faster, and some don't. But the real value is in

the quality of the interaction between the commonwealth teams and the vendor

teams," Morley said.

However, the system does have drawbacks. When the state's Labor Cabinet

issued an SAS request for a special fund management system, it received

no response from the vendor community. The agency eventually asked that

the request be closed and has scheduled the work to be completed internally.

The project's small size and the special expertise it required were

the main reasons for its failure to attract a response from the SAS service

suppliers, Morley said.

But whatever the specifics of a particular procurement, the overall

aim of replacing the RFP process remains focused on defining and solving

IT business problems and increasing the amount of interaction between agencies

and vendors.

"It's a challenge to get agencies to let go of the technical specifications

that they are used to including in the RFP process and to get them to focus

on their business environment instead," Morley said. "But we have seen the

need to replace the RFP with a problem-oriented approach. It's a much more

interactive process for vendors and agencies because we no longer presuppose

that we know the best solution to the problem at hand."

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