Pcs Audit Findings 2018 PDF

The improvement plan
to enable HHSC
Procurement and
Contracting to
take off
Phase III
31 October 2018
This work product has been prepared for The Texas Health and Human Services Commission for its use and purposes only. It is not intended
to be relied upon as professional advice for other Texas agencies or their affiliates, other Health and Human Services agencies outside Texas
or their affiliates, or any other organizations or persons. Neither Ernst & Young LLP nor any other member of the global Ernst & Young
organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this
document.
Executive letter from the EY Engagement Partner (1 of 2)
Ms. Jordan Dixon

Deputy Executive Commissioner
Office of Transformation and Innovation
Texas Health and Human Services
4900 North Lamar Boulevard
Austin, Texas 78751
Dear Ms. Dixon,
Ernst & Young LLP (EY US) was engaged in July 2018 to perform a comprehensive analysis of the Texas Health and Human Services Commission’s (HHSC, the
Commission or the Agency) procurement and contracting functions with the aim of understanding current state application, root cause analysis, and creation of a
fit-for-purpose improvement road map to alleviate the true cause of issues that are impacting HHSC’s procurement and contracting performance.
EY US applied our Procurement Maturity Model Assessment Methodology across the breadth of the Agency and observed variations in process, speed, accuracy,
information flow, and governance. Our most critical observation is that, while its name implies that it is primarily a service delivery agency, HHSC actually depends
upon the compliance, efficiency and effectiveness of its procurement and contracting function to drive many of its critical b usiness outcomes. HHSC is a
procurement agency at its core with the vast majority of the HHSC services being provided in an outsourced third party contracted configuration. The
Commission’s procurement and contracting function is regulated within a state government framework; yet at the same time, HHSC is presented with procurement
challenges akin to a large private corporation as HHSC’s spending levels and demands rival those of several Fortune 50 companies. The mechanism used in
private business when entering into an outsourced condition is to intentionally modify its operating model to help enable success. It cannot be overstated the extent
to which the success of HHSC hinges on the success of its procurement and contracting capability and teams. Those teams are still operating within a traditional
structure and now must have access to modern procurement processes, training, technology, leading practices and visionary sup ply chain leadership in order for
Texas HHSC – one of the largest state agencies in the nation – to deliver quality third party services and solutions at the right terms and conditions that the
Legislature envisions and that Texans deserve.
We see that the necessary improvement is within the Commission’s reach and thus we have developed a customized improvement road map to guide the
necessary changes. The road map is customized to your particular pain points and condition yet built upon procurement process improvement experience and
leading practices. The road map is comprehensive at the top level; however, there are many decisions to be made within the course of executing each of the
projects. This format is found to be constructive by other clients and your projects are designed with what works for state g overnments coupled with appropriate
measures necessary to support the spending volume of a Fortune 50 equivalent company.
This report (the Report) has been prepared by EY, from information and material supplied by Texas Health and Human Services for the sole purpose of assisting
the Agency in assessing its procurement process.
Proprietary and confidential. Reliance restricted. Does not constitute assurance or legal advice. Please refer
Page 1 to limitations and restrictions on page 2.
Executive letter from the EY Engagement Partner (2 of 2)
The nature and scope of our services was determined solely by the Agreement between EY and HHSC dated 15 July 2018 (the Agreement). Our procedures were
limited to those described in that Agreement. Our work was performed only for the use and benefit of HHSC and should not be u sed or relied on by anyone else.
Other persons who read this Report who are not a party to the Agreement do so at their own risk and are not entitled to rely on it for any purpose. We assume no
duty, obligation or responsibility whatsoever to any other parties that may obtain access to the Report.
The services we performed were advisory in nature. While EY’s work in connection with this Report was performed under the consulting standards of the American
Institute of Certified Public Accountants (the AICPA), EY did not render an assurance report or opinion under the Agreement, nor did our services constitute an
audit, examination, review, agreed upon procedures or any other form of attestation as those terms are defined by the AICPA. None of the services we provided
constituted any legal opinion or advice. This Report is not being issued in connection with any issuance of debt or other financing transaction.
In the preparation of this Report, EY relied on information provided by HHSC or publicly available resources, and such information was presumed to be current,
accurate and complete. EY has not conducted an independent assessment or verification of the completeness, accuracy or validity of the information obtained.
Any assumptions, forecasts or projections contained in this Report are solely those of HHSC and any underlying data were produced solely by HHSC.
Management of HHSC has the knowledge, experience and ability to form its own conclusions.
I extend my personal thanks to HHSC’s leadership team for encouraging the assessment work. During the course of our work, it became abundantly clear to the
EY US team that the public servants at HHSC are deeply committed to its success. HHSC team members were forthcoming about their needs an d hopes, and it is
evident to us that those team members are hopeful for the success of the Agency they serve. You are now at a key inflection point, and the Improvement plan
enclosed if implemented can deliver desired improvements. It is incumbent on the State of Texas and its stakeholders to make investments in HHSC with leading
tools, bolstered Agency processes and infrastructure and next-generation talent management strategies. With the unwavering support of Texas leadership, HHSC
can resolve the issues identified in this document. We appreciate the opportunity to continue to serve HHSC and Texas, we are excited about your journey ahead.
Best Regards,
Beth Gutweiler
Principal, EY Supply Chain, Procurement and Operations
Contents
A call to action 4–9

Improvement plan 10–26
Project charters 27–66
Insights and additional projects 67–116
Appendix 117–279
Phases I and II summary 119–129
Current state maturity assessment 130–172
Root cause analysis 173–178
Next steps 179–181
Detailed analysis 182–272
Operating model and strategy considerations 273–279
A call to action
Call to action
► The Agency has repeatedly faced public scrutiny surrounding procurement

and contracting concerns that has pressed the Agency into a reactive mode
► This assessment is intended to help the commission:
► Harmonize the audit reports and analysis on how procurement is performed
► Seek the root causes driving the issues
► Identify a series of projects that can be undertaken as an improvement plan/road
map to go from reactive to proactive
► Create a baseline that can be retested over time
“We made it crystal clear that HHSC has become to some extent a
contracting agency and must be structured and staffed with the right people
to reflect this responsibility. And in my opinion, these recent problems have
nothing to do with the size of this agency or boxes on an organizational
chart, but rather a failure to elevate the importance of contracting at an
agency that contracts out a very high percentage of its services. This has to
change.”
Committee Chair Senator Jane Nelson speaking to the HHSC Transition Legislative Oversight
Committee (29 May 2018).
Critical realities observed in HHSC’s translation of
strategy to operations
Overarching
Improvement opportunities
root cause
The Agency has suffered from a lack of investment in enterprise

1) The operating model, capable skills, process, systems, governance and communications
strategy and investment
to help enable the procurement and contracting function.
of HHSC, has not
evolved to meet the
needs of an outsourced Efficiency and effectiveness from the procurement and contracting
service delivery function need improvement to become high performing.
solution, which depends
upon Procurement for Partnership, accountability and interdependency from PCS,
its success. Program and Legal need improvement to achieve the value
proposition.
2) Volume of transactions
amplified the effect,
quadrupling the impact Data, reporting and visibility are inadequate to run the procurement
on an unfit model. and contracting function.
3) The communication
The traditional and heavily restricted approach for developing and
plan is built for a
smaller organization.
maintaining suppliers, vendors and providers is holding back the
Agency.
Procurement maturity assessment methodology
EY maturity model Rating Assessment
Stage 1: Informal
Stage 2: Functional
Portfolio and
Stage 3: Standardized
Stage 4: Collaborative
Stage 5: Leading
► The methodology measures an organization’s procurement practices along eight dimensions.

► Each dimension is rated based on a five-level rating that takes into consideration leading practices.
► From the assessment, a spider diagram is produced showing the current state. Based on this, the gap analysis is produced and
initiatives are identified to bridge the gap between the current state and the targeted state.
Maturity models provide analysis to align performance,
cost and risk across a number of criteria
“Hero-based” environments rely on staff to go the extra mile to complete work to compensate for a lack
of supportive and systematic technology features. System-based environments utilize technology for
reliable process completion. The findings of the assessment are consistent with the general sentiment of
the PCS team as well as their leadership.
The greatest inflection point for effectiveness
Strong
and efficiency occurs between levels 3 and 4
Leading
Impact
Recognized in the industry as

Efficiency/ Collaborative best in class
effectiveness
Integration of leading practice Supply chain as a competitive
Standardized and standardized processes advantage
Span of control
Standardized processes/defined Executive leadership directly
Optimized and efficient
Functional strategy drives improvement strategies
Capabilities in place; inconsistent E2E process design formally Performance driven; Processes integrated across
Informal processes documented and published improvement program chartered Agency boundaries
Agency standards and

Weak
Technology not optimized; Integrated technologies; Proactive aged

Tactical fixes/backlog cleanup governance established and
strategy not recognized automation, transparency with decision analytics
enforced
Reactive Maturity levels Proactive
“Hero-based” environment System-based environment
HHSC Procurement and Contracting
Current state capabilities summary
During weeks 1–6, a maturity model was used to understand the current state of HHSC. The maturity model broke down procurement
and contracting into eight pillars to assist in the identification of root cause. Based on this assessment, the Commission has
opportunities to improve across all eight dimensions. Such results should be expected and in line with the recent audit reports. New
management has begun enhancements to improve scores, but needs additional support and improved processes and systems.
Performance Strategic Strategic Direction

Management Direction
Average: 1.3 Average: 1.3

Performance People and
Management Organization People and
Technology Organization

Portfolio
and Supplier Portfolio and Supplier
Internal Stakeholder Technology
Relationship Relationship
Management Management Management
Average: 1.6 Average: 1.6*

Internal Procure to
Stakeholder Pay Process
Governance and Management and Complex Procure to Pay
Risk Management Services Process and Complex
Services
Average: 1.4 Governance
and Average: 1.7*
Risk Management
*Represents the average rating of the included subsections.
Improvement plan
Improvement plan project approach
Project timeline
Overview
Improvement plan
Approach to project creation
► Developed initial database of 113 potential projects and activities, which

address the closure of all critical and noncritical gaps
► Met individuals with key stakeholders for rounds of vetting and refining. Met
multiple times with transformation team and key PCS staff to further refine
► Tested, prioritized and rationalized project listing to a tailored set of 29 critical
“must address” projects
► Defined key activities that support transformation team chartering and
tracking of projects
► Where flexibility on project sequencing was possible, EY US prioritized that
characteristic so that HHSC has flexibility for realistic scheduling of resources
involved in multiple projects
► Ultimately change management and executive support is critical to the
success of all projects
Future state road map/improvement plan
Wave 1 Wave 2 Wave 3 Future state and beyond
Portfolio Mgt
17PM: Standardize contract management and 27PM: Vendor outreach

monitoring program
26PM: Procurement
spend analysis
25GR: Control effectiveness testing program
16GR: Procurement and

contract risk assessment 24GR: Review and approval workflow
15GR: Lines of defense

Governance and Risk
29TE: Remaining
23PP: Complex procurement
14GR: Align processes for managing services process technology
external stakeholder governance
22PP: Procurement
end to end process
13GR: Compliance monitoring
12PP: PCS forms, contract 28PO: Employee

tools, contract templates engagement plan
21TE: Fit-gap
11PP: Procurement and contract analysis
management manuals
20PO: Training
programs
10TE: eSignature tools
9TE: Immediate CAPPS

19PO:
Procure to Pay
Communication
framework 5IM: Lessons
18SD: Enhance
learned touch
policies
point
7PE: Performance 6PO: PCS Organization
management re-design
8TE: CAPPS and SCOR 4IM: Program
practice 2SD: Data cleansing
training liaison process
3IM: Dashboard 1SD: Operating model

For more information, please see EY Insights on Procurement Transformation automation creation
Technology Performance Management People and Organization Internal Stakeholder Strategic Direction
Areas of focus within the improvement plan
► PCS mission is widely known

Strategic Direction
► Cross-functional procurement planning
► People are empowered
People and Organization ► Cultural survey scores improve dramatically
► HHSC/PCS is an employer of choice in Austin
► Items are strategically sourced for economies of scale
Portfolio Management
► PCS has proficiency in sourcing in all categories
► Complex procurements are completed in a timely fashion
Procure to Pay
► Procurement function is fully automated
► Full compliance with legislative mandates
Governance and Risk
► Full adherence to internal policies and processes
Internal Stakeholders ► Collaborative work environment across appropriate stakeholders
► Integrated Procure to Pay system
Technology
► Integration across all Agency systems
Performance ► Balanced scorecards that are used to drive improvement

Management ► KPIs integrated with performance
For more information, please see EY Insights on the Future of Procurement.
Path to future state
The upper-left quadrant represents high-impact, low ease of implementation projects that HHSC can action.
High = 5
# Project name Ease Impact
2SD 23PP 1SD
Strategic Direction
Develop sufficient operating model for the Agency’s dependency

1SD 4 5
on contracting as a critical success factor 11PP
19PO 26PM 6PO

2SD Conduct data cleansing 3 5
22PP 12PP
18SD Enhance policies governing key business components 2 3
Impact
18SD 28PO 27PM 20PO
6PO Create a fit-for-purpose organization design for PCS 4 4
19PO Establish a comprehensive communication framework 2 4

People
20PO Develop comprehensive training programs 5 3 17PM
28PO Create an employee engagement plan 3 3
Low = 1
Standardize contract management and monitoring practices
17PM 4 2
Management
across HHSC
Portfolio
Low = 1 Ease of implementation High = 5

26PM Develop procurement spend analysis practice 3 4 Ease of implementation ranking legend:
► 1 = No external support required to implement and drive adoption
27PM Establish a vendor outreach program 4 3 (1–3 months)

► 2 = Little to no external support required to implement; minimal integration
and adoption complexity (1–3 months)
Update and refine procurement and contract management
11PP 4 4 ► 3 = External support required to manage, configure/integrate, test, deploy
manuals and enable adoption (1–6 months)
Procure to Pay
► 4 = External support required to manage, configure/integrate, test, deploy

Enhance PCS forms, contract tools and contract templates and enable adoption (3–12 months)
12PP 4 4
related to procure to pay process ► 5 = External support required to manage, configure/integrate, test, deploy
and enable adoption (9+ months)
22PP Redesign procurement end-to-end process 4 4 ROI impact ($, efficiencies and improved end-user experience):
► 1/2 = Low business case impact
► 3/4 = Moderate business case impact

23PP Enhance complex services process 3 5
► 5 = High business case impact
Path to future state
The upper-left quadrant represents high-impact, low ease of implementation projects that HHSC can action.
High = 5
# Project name Ease Impact
7PE 9TE 8TE
13GR Strengthen compliance monitoring processes and controls 4 2
21TE
Align processes for managing reports to governing entities 4IM
14GR 2 4
Governance
outside of HHSC 3IM 14GR 10TE

24GR
16GR 29TE
15GR Risk management – lines of defense (LOD) alignment 2 3
16GR Perform procurement and contract risk assessment 2 4
Impact
15GR
24GR Develop review and approval workflow 3 4 25GR
5IM
25GR Implement a continuous control effectiveness testing program 3 3
Enable dashboard automation for business administrative

3IM 1 4 13GR
functions
ISM
4IM Expand upon the program liaison process 3 4
Low = 1
5IM Establish a lessons learned touch point 2 3
8TE Conduct comprehensive CAPPS and SCOR training 5 5 Low = 1 Ease of implementation High = 5
Technology
9TE Resolve immediate CAPPS configuration needs 5 5 Ease of implementation ranking legend:
► 1 = No external support required to implement and drive adoption
10TE Align eSignature tools 4 4 (1–3 months)
► 2 = Little to no external support required to implement; minimal integration
21TE Perform full fit-gap analysis 5 5 and adoption complexity (1–3 months)
29TE Streamline remaining procurement-related technology 4 4 and enable adoption (1–6 months)
and enable adoption (3–12 months)
Performance

and enable adoption (9+ months)
7PE Performance management practice 3 5 ROI impact ($, efficiencies and improved end-user experience):
► 1/2 = Low business case impact
► 3/4 = Moderate business case impact
► 5 = High business case impact
Wave 1 project summaries
Dimension Project name Project situation

Strategic 1SD: Develop sufficient operating model for the ► PCS vision, mission and purpose are not fully aligned with the Agency’s vision/mission
Direction Agency’s dependency on contracting as a and not openly confirmed and communicated to all stakeholders. Misalignment drives
critical success factor inconsistent priorities in people, process, technology and governance within the
function.
2SD: Conduct data cleansing ► Historical data within CAPPS, SCOR, Budget/Finance does not appear to be aligned
with correct dollar amounts or other specific areas of data capture.
People and 6PO: Create a fit-for-purpose organization ► Unclear roles and responsibilities coupled with undefined KPIs and job openings keep
Organization design for PCS the organization from being structured appropriately. Workload inconsistent; staff doing
tasks for which they don’t have the competencies; oversight of contract quality is
inconsistent, inhibiting effectiveness, compliance and efficiency.
Portfolio 17PM: Standardize contract management and ► As a consequence of transformation, the approach to contract management and
Management monitoring practices across HHSC monitoring at HHSC has not been unified into a standardized set of policy, practice and
process guidance for programs to utilize. More recently, HHSC policy and guidance on
contract management and monitoring practices and processes have not been updated
or aligned to the state guidance on contract management. As such, contract
management and monitoring practices vary dramatically by program.
Procure to Pay 11PP: Update and refine procurement and ► Processes are often inconsistent across similar requisitions, causing inefficiencies and
contract management manuals increasing errors and noncompliance; workarounds are prevalent in part because of
lack of knowledge. Current manuals are more than two years old and have not been
updated with current information, including no specificity to HHSC procedures which
drives audit exposure.
12PP: Enhance PCS forms, contract tools and ► Processes are often not written to support a large organization, limiting opportunities
contract templates related to procure to pay for economies of scale and optimization improvements. PCS and Program have
process different templates that are created outside of CAPPS that are then imported into
CAPPS. Some forms may have the ability to be created inside CAPPS.
Governance and 13GR: Strengthen compliance monitoring ► Inconsistencies in compliance processes were noted both during the current state
Risk processes and controls assessment and identified in previously issued audit reports. A methodical approach to
Management addressing these issues will increase confidence in the integrity of the process and
reduce the risk of control failures and repeated audit findings.
14GR: Align processes for managing reports to ► Processes and controls for identifying and coordinating reporting to third-party
governing entities outside of HHSC governance entities are not defined and may lead to inaccurate or noncompliant
external reporting, resulting in unnecessary rework and loss of confidence in reports
provided to third parties to HHSC.
15GR: Risk management – lines of defense ► Roles and responsibilities for risk ownership and oversight across PCS, Compliance
(LOD) alignment and Quality Control (CQC), Programs, Legal and Budget/Finance are not clearly
defined, and may result in inefficiencies, gaps in monitoring responsibilities and
objectivity concerns of CQC auditing its own work. Without clearly delineated roles, the
risk of control failures or management override is increased.
16GR: Perform procurement and contract risk ► Generally, review and approval follow the same process and rigor regardless of the
assessment risk level of the procurement or contract, creating gaps in efficiencies, overengineering
and a false sense that risk is covered.
Internal 3IM: Enable dashboard automation for business ► Program/Agency is unable to run reporting dashboard to determine where in the life
Stakeholder administrative functions cycle inputted requisitions reside within CAPPS.
Management
4IM: Expand upon the program liaison process ► The root cause that says HHSC operates in a “hero” environment – reliant on
extraordinary individuals’ efforts to compensate for inadequate technology and
processes. Without a formal process in place, both PCS and program have noted that
whether certain tasks were completed correctly and efficiently depended on whom
from PCS or which program you were dealing with. For instance, programs noted that
direction over process, next steps and status were difficult to consistently obtain from
PCS and frequently rely on a few individuals to find the information they need.
Similarly, PCS has noted problems in obtaining necessary forecasting plans from
varying programs.
Technology 8TE: Conduct comprehensive CAPPS and ► Training programs are insufficient in content and frequency, and there are limited
SCOR training designated support resources to provide compliance and technical guidance. The
existing training programs (onboarding and ongoing) do not provide employees with
the knowledge and tools needed to be successful in their roles. The lack of training,
coupled with excessive workloads and nonstandard processes, has contributed to staff
often feeling overwhelmed and frustrated.
► The train-the-trainer model used previously was not successful. Adequate budget must
be allocated to support a robust training program to educate users on the system in its
current state and provide ongoing training as system changes are implemented in the
future.
9TE: Resolve immediate CAPPS needs ► Business needs and volume are not sufficiently synchronized to process/technology.
CAPPS has been heavily modified to accommodate State of Texas statutory
contracting requirements, as well as HHSC-specific contracting needs; however, the
system is not designed to support a specific set of agency or program purchasing
processes and procedures.
10TE: Align eSignature tools ► The lack of visibility within, and integration among, procurement-related systems (e.g.,
CAPPS and the digital signature tool) in so far as how it is configured and applied
creates risk for policy compliance issues and undermines statewide transparency
efforts.
Performance 7PE: Establish a performance management ► Current systems do not facilitate visibility and extraction of data to support
Management practice procurement-related business decisions.
► HHSC program areas are performing ad hoc and manual reporting to track and
manage the status of their procurement requests.
► The lack of integration among procurement-related systems combined with the lack of
properly configured reporting functionality in CAPPS frustrates users, precludes data-
driven procurement practices and hampers statewide transparency efforts.
Strategic 18SD: Enhance policies governing key business ► Constant change in management priorities drove suboptimal policies with frequent
Direction components revision. HHSC needs clarity.
People and 19PO: Establish a comprehensive ► Currently, procurement-related communications are not actively and comprehensively
Organization communication framework planned and managed. Communication is unstructured, inconsistent and not properly
cascaded. This has led to knowledge gaps for key roles, a systematic lack of end-user
engagement and the inability to create a culture of cooperation and collaboration. For
instance, one program noted having discontinued the use of the digital signature tool
for certain processes where it was no longer required because notice was given in a
meeting, but not documented or cascaded.
20PO: Develop comprehensive training ► Although limited training has been provided to PCS employees, a formal training
programs strategy, plan and program have not been developed or provided to procurement staff.
Training programs are generally insufficient and there are limited designated support
resources to provide compliance and technical guidance.
Portfolio 26PM: Develop procurement spend analysis ► PCS does not currently utilize data to help it to identify and execute strategic
Management practice contracting opportunities for the Agency. This coupled with the current limitations in
data integrity, accuracy and access leads to a need to establish a consistent
methodology and practice for spend analysis at the Agency to support improved data-
driven decision-making regarding procurement activities.
27PM: Establish a vendor outreach program ► Hindering communication and engagement throughout procurement planning and
contracting hampers meaningful outcomes for complex, high-risk contracts; limiting
vendor input provides an inherent advantage to incumbent vendors because a new
vendor is more challenged in its ability to communicate emerging practices or unique
products or services that the vendor may be able to offer the state agency.
► Agency vendor management policies and practices reflect unnecessarily limited vendor
interaction that is not aligned with statewide guidance that creates collaboration
opportunities. For example, TGC 2155.081 directs the CPA to establish a vendor
advisory community to provide input into state procurement practices and serve as a
channel of communication among the vendor community.
Procure to Pay 22PP: Redesign procurement end-to-end ► Due to significant changes in procurement-related organization, roles, responsibilities,
process policies and processes that will be put in place in light of this report, it will be necessary
for PCS to establish a consistent procure to pay process so that current SOPs are
tailored to align with changes as they are implemented.
23PP: Enhance complex services process ► Lack of documentation standardization, evaluation process that does not meet the
needs of the Agency.
Governance and 24GR: Develop review and approval workflow ► After the risk assessment process is complete, the approval workflow will need to be
Risk updated to align with the new process of approving contracts differently based on the
assigned risk.
25GR: Implement a continuous control ► While the CQC function has recently been established, a process has not been
effectiveness testing program consistently implemented to assess compliance with processes and procedures across
the Agency. Without a rigorous quality control testing program, the ability of the Agency
to consistently execute new and redesigned controls will be limited, increasing the risk
of process and policy noncompliance.
Internal 5IM: Establish a lessons learned touch point ► This project seeks to address the root causes: processes are often not written to
Stakeholder support a large organization, limiting opportunities for economies of scale and
optimization improvements. For instance, there is currently minimal process in place to
help prevent problems from repeating themselves, such as the repeated evaluation
mistakes. By establishing a lessons learned touch point, PCS can seek to address this
issue by having a published repository for new staff to refer to as well as the ability for
PCS staff, PCS leadership and program staff to have an effective feedback loop.
Technology 21TE: Perform full fit-gap analysis ► CAPPS was not configured/implemented to serve HHSC fit-for-purpose procurement-
related purposes (i.e., complex contract proposal evaluation, vendor performance
tracking, document management, spend analysis and public data transparency) in
function or in HHSC-level volume.
People and 28PO: Create an employee engagement plan ► Good performance and success are rewarded much less frequently than bad behavior
Organization or failure is punished. This significantly impacts morale and prevents employees from
feeling empowered and engaged. Given the preexisting fear culture in PCS, action is
warranted.
Procure to Pay 29TE: Streamline remaining procurement- ► The lack of integration among all of the procurement-related systems combined with
related technology the lack of properly configured reporting functionality in CAPPS creates difficulty for
users, precludes data-driven procurement practices and undermines statewide
transparency efforts.
Beyond
Procurement leading practices continue to evolve
Subsequently, supply chains are no longer linear but complex ecosystems, requiring a fundamental reinvention of Supply Chain and
Operations.
Com- Supply chain of the future

petitor
Con-
nector
Eng.
Level of system and data integration/usage of cloud-based IT systems
Cloud-based contractor Customer

SW Retail/
platforms Coopetition consumer
Platform-based
Supplier Engineering business model
collaboration
PLM in the cloud For-
OEM warder
Co-creation Customer
The old world: value creation
within entities, on-premise IT Supplier
Retail/
Traditionally, creators have been selling products and SC as consumer
services through linear value chains. Companies were Contract a service
External owning a dedicated part of the value chain, competing manufact. Logistics Customer
systems contractor
integration
with competitors.
SC planning
Innovation & Product Lifecycle Supplier mgmt.
Management Risk management
Suppliers Manufacturer Customers
OEM The new world: ecosystems
Sales &
Order
Mgmt
Plan-
ning
Quality
Mgmt
Mainte-
nance Marketing on cloud-enabled platforms
Sourcing &
Supply Chain & Operations Digital ecosystems do not work linearly; they are
Purchasing Service &
Pro- Ware- Logis- Distri-
Spare Parts shaping market networks and enable hybrid forms
duction housing tics bution
Management of cooperation and competition: coopetition.
On-premise Ecosystems create and serve communities, and
IT systems harness their creativity and intelligence. Entities
Finance & Controlling may play multiple roles in an ecosystem.
Degree of Taylorism/distribution of value creating processes on multiple entities within partner ecosystem
Internal Collaboration Service and
business functions with partners platform-based businesses
Taking flight
► This 10-week rapid assessment has

covered much ground in an
extremely limited amount of time with
106 interviews, 301 ThinkTank
participants and countless reviews.
► This project has been an exercise of
trust from all parties to be both
comprehensive and timely.
► You are now at a key inflection point
with a viable improvement plan, as
well as momentum to take flight.
► We are here to support you in this
journey however you determine
yields the best result.
► Thank you for the opportunity to be
involved in this work.
Project charters
Flight plan details: project charters
Project charter details
► To accelerate HHSC’s future improvement road map plan, we have initiated the
creation of a project charter for each of the 29 recommended Procurement and
Contracting improvement projects.
► Charter legend may be found on the following page.
► Some charters extend over two pages, indicated by (1 of 2) and (2 of 2).
► Each charter is meant to frame the mid-level details for the project but not meant to cover
information such as resourcing, specific time scheduling, precise project targets, project
sponsor, project owner, etc.
► Detailed project plans and Gantt charts will need to be created for each of the project charters.
► HHSC will need to determine a long-term owner for each project in advance of the
project initiation to drive and maintain progress; this is a lesson learned from HHSC.
► A detailed PMO (Project Management Office) will need to be active to keep all
projects in flight and to manage dependencies in the same way an airport control
tower passes information across all active flight plans.
► A governance board has been defined by HHSC and will need to be active and meet
regularly to facilitate decisions.
► Change management and communication are critical to the success of all projects.
Project charter legend
Project overview
Situation: The project is created in response to this finding in the current state/root cause analysis.
Project # XXX Project name This is where the project name will be found.
Project description A short description defining the project is listed here.
Areas of impact 1. Top project impacts are listed here.
2. Top project impacts are listed here.
Project start time Waves 1, 2 or 3
Project duration Short, medium term Ease of implementation (1–5) 3
Estimated costs $$$ Estimated number of project resources 2–4
Affected groups PCS, Program, Legal, Budget/Finance
Project activities
1. Key steps necessary to execute this project, to be used to develop the task level; Gantt charts required for initiation of ea ch project.
Dependencies: Other road map project dependencies as well as known Agency efforts are listed here if they create dependencies on or to this project.
Estimated costs beyond HHSC existing resources: Ease of implementation ranking legend:
$: Less than $10,000 1 = No external support required to implement and drive adoption (1–3 months)
$$: Between $10,000 and $100,000 2 = Little external support required to implement; minimal integration and adoption complexity (1–3 months)
$$$: Between $100,000 and $1,000,000 3 = External support required to manage, configure/integrate, test, deploy and enable adoption (1–6 months)
$$$$: Over $1,000,000 4 = External support required to manage, configure/integrate, test, deploy and enable adoption (3–12 months)
Project duration 5 = External support required to manage, configure/integrate, test, deploy and enable adoption (9+ months)
Short term: 0–3 months; medium term: 3–9 months
long term: 9 months or greater
Estimated number of project resources: assumes full-time resources who are skilled in the necessary areas needed to complete the project
► FTE = One Full-Time Equivalent who works at least 40 hours per week is dedicated to the particular project.
► FTE resource assumes that individual has key skills and thought leadership to complete projects.
► FTE does not include Subject-Matter Resource (SMR) – subject-matter resources will need to be consulted for every project but are not deemed full time.
Strategic direction
Develop sufficient operating model for the Agency’s dependency on contracting
as a critical success factor (1 of 2)
Project overview
Situation: PCS and the Agencies are not aligned with the procurement operating model and existing operating model is not openly confirme d and communicated to all
stakeholders. Misalignment drives inconsistent priorities in people, process, technology and governance within the function.
Project # 1SD Project name Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor
Project description Incorporate PCS into the HHSC strategic plan in a more formal manner that allows it to document and communicate its vision, mission
and purpose. Develop the requisite operating model framework to support the above.
Areas of impact 1. Common alignment of PCS priorities across the Agency’s people, process, technology, governance
2. Balancing of contract load throughout the year
3. Smoothing out impact to all Agency resources
Project state time Wave 1
Project duration Short term Ease of implementation (1–5) 4
Affected groups PCS, Program, Legal, Budget/Finance and indirectly all elements of HHSC
For more information, please see EY Insights on Procurement Operating Model and EY Insights on Procurement Transformation
Strategic direction
Develop sufficient operating model for the Agency’s dependency on contracting
as a critical success factor (2 of 2)
Project overview
Project # 1SD Project name Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor
Project activities
1. Establish an HHSC-wide strategic direction that articulates integrated responsibilities of PCS in the HHSC system.
2. Establish PCS strategic goals as well as a timeline for executing projects toward those goals given all known constraints (pe ople, budget, technical capabilities and workload).
Projects to support strategic contracting include, but are not limited to, spend analysis, contract portfolio review, staff t raining, stakeholder meetings, RFIs, market analyses and
benchmarking.
3. Establish an HHSC procurement planning practice that focuses on identifying major procurement projects from programs during t he upcoming fiscal year. The planning process
should engage HHSC management and leadership to approve and accept priorities, goals, projects and approach for alignment pri or to execution.
4. Review and update Executive Commissioner vision and goals that span five years and are incorporated in a procurement plan schedule.
5. Establish an operating model that fits both business and finance functions.
► (a) Review current state operating model design future state operating structure and implement road map for transition; (b) define role descriptions and identify pote ntial
resources who will sit in those positions; (c) assess internal resource skill set and align with HR on talent recruitment strategy; (d) clearly define triggers for the creation,
revision and decommissioning of policies vs. procedures, work methods, checklists and quick reference cards (QRC); (e) develop and finalize transition strategy for FTEs;
(f) finalize and announce vision, mission and operating guidelines; (g) develop change management strategy to effectively communic ate to stakeholders and transition from
current to future state; (h) create central Shared Services business case and develop Shared Services strategy across the HHSC system; (i) design Shared Services
management, pricing, service level agreements/support service agreements, governance and organization; (j) design, develop and conduct training; (k) transition from
current state to interim state; (l) transition from interim state to future state; and (m) standardize procurement policy definitions and socialize across PCS and
Program/Agencies.
6. Enable review of key functional areas of operating model not captured throughout other project areas.
► Functional areas of review: (a) information management, (b) commercial excellence, (c) supplier portal gateway, (d) buying channels, (e) buying assistance, (f) invoice and
payment.
► Review existing projects areas and determine whether the timing of project start and end will meet the operating model needs. If needs are not meet, reexamine whether
project area start and end time adjustments can take place: (a) governance, (b) people, (c) supplier relationship management, (d) source to contract, (e) strategy.
7. Review strategic plan, operating model, vision and mission with the Governor’s office, Legislative Budget Board (LBB) and legislature.
Dependencies: 6PO: Create a fit-for-purpose organization design for PCS, 19PO: Establish a comprehensive communication framework
For more information, please see EY Insights on Procurement Operating Model and EY Insights on Procurement Transformation.
Strategic direction
Conduct data cleansing
Project overview
Situation: Historical data within CAPPS, SCOR, Budget/Finance is not standardized or consistently populated.
Project # 2SD Project name Conduct data cleansing
Project description Conduct data cleansing exercise across the organization to improve data integrity and accuracy.
1. Improved data integrity and transparency
Areas of impact 2. Improved data accuracy will make leadership more informed and enable better decision-making
3. Increased visibility into the Agency’s performance
Project start time Waves 1–2
Project duration Medium term Ease of implementation (1–5) 3
Project activities
1. Perform data profiling and identify gaps in required fields.
2. Define approach to address gaps.
3. Work with cross-functional teams to collect data and address gaps.
4. Develop data cleansing road map.
5. Conduct comprehensive data cleanup to improve data integrity in CAPPS and SCOR. This should include correction of legacy data and known data entry errors for all records
created in SCOR and CAPPS.
6. Establish a program for ongoing monitoring of data quality.
7. Utilize data to drive Agency procurement, contract management, contract monitoring and executive leadership decision-making.
Dependencies: 9TE: Resolve immediate CAPPS needs
Procurement operating model
Strategy Governance People and Organization Information management

► The procurement vision, objectives, ► Central and operational bodies ► A clear link between strategy and operations ► Spend map in place on customer, spend,
strategies and performance scorecard is ► Delegations reflect value, risk and exists categories and suppliers by Pareto
documented, communicated and capability ► Structures reflect categories and markets ► Information is captured, analysed,
understood across the business ► Performance management regularly ► Roles and responsibilities are defined shared, reported and reviewed
► A procurement policy is documented and reviewed ► Capability and capacity known ► Performance KPIs are SMART and
communicated An organisation wide ► Risk and compliance monitored ► Recruitment and retention aligned ► Information is real time and informs
procurement plan is in place which covers management decision making
spend, project, performance targets and Procurement Operating Model
people, process and technology initiatives Commercial Excellence
Quarterly and annual procurement reports Strategy
inform strategy and drive continuous Governance & Risk Management ► Strategic Sourcing
improvement ► Negotiation tools and templates
People and Organization ► Market Indexes
Customer Portal Gateway Sourcing Enablement Procure to pay processes Supplier Mgmt
► Portal as a single point of entry into the Supplier Portal Gateway

Buying channels
Non-Purchasing Contracted
Supplier diversity “HUB” &

source to Pay landscape
relationship management
Category Management &
eRequisition
Invoice processing &

► Customer satisfaction with buying channels ► Portal as a single point of entry for P2P
Contract Lifecycle
Customer portal
ERP landscape
Supplier portal
Management
Agreements
Customer
Supplier satisfaction with portal

Sourcing
payment
Managed service provider ►
Supplier
Source to Contract
Supplier website
► Demand is profited and optimised
Purchase card
► Market analysis provides insight for strategy Supplier Relationship Management
► Sourcing considerations define ‘go to Travel & expense
market’ Recurring payment ► Suppliers are segmented based on
► Contract models are aligned with category Category specific solution impact and complexity
► Tendering and evaluation are streamlined ► Relationships are established based on
► Best case scenario led negotiations deliver eProcurement systems strategic, management and operational
greater value requirements
Contract management plans are in place Information management & reporting
► ► SRM aligns with the procurement
prior to contract award People Governance. Process model Technology model governance model
► Contracts meet all legal and statutory ► Contract performance management is
requirements standardised by supplier segment and
Buying Channels Invoice and Payment used to drive value
► Governance and financial stability health
► Categories are aligned to buying channel ► Paperless invoicing and payment checks are performed for high risk high
Buying Assistance ► Buying channels align to category managers ► Balance between world class efficiency and value suppliers
and governance model effectiveness giving best value for money ► Recognition and reward mechanisms in
► Service model for procurement provides
► Goods, services and assets are visible for ► Optimised invoice solutions additional methods place to drive additional value
sourcing & admin support to allow focus on
both type and price including (PO-flip and Self-Bill) ► Collaboration valued and planned
strategic category & supplier management
► Information management requirements are
embedded
Proprietary and confidential
Strategic direction
Enhance policies governing key business components
Project overview
Situation: Constant change in management priorities drove suboptimal policies with frequent revision. HHSC needs clarity.
Project # 18SD Project name Enhance policies governing key business components
Project description Align capacities to manage policies governing key components of the business (to support efforts of Chief Policy Officer).
1. Engagement with programs and other non-PCS stakeholders around process changes and the impacts of those changes across
Areas of impact
HHSC
2. Elimination of workarounds used due to misinformation
Project start time Wave 2
Project activities
1. Establish policy governance framework.
► Create a centralized policy owner/group: (a) identify policy owner/group; (b) define roles and responsibilities; (c) clearly define triggers for the creation, revision and
decommissioning of policies vs. procedures, work methods, checklists and quick reference cards (QRC); (d) establish standardized policy creation/review process; (e)
define ownership of policies, including key stakeholders and end users; (f) determine appropriate levels of review and approval of policy documents; and (g) develop and
outline mandated review periods.
2. Align policy library.
► Create inventory of policies needed and revise/create policies as needed for all relevant areas. Key work steps include (a) prioritize policies to be created; (b) identify key
stakeholders and form working groups; (c) draft policy; (d) circulate policy among stakeholders and end users for feedback; and (e) finalize and approve policy.
3. Create a formalized policy numbering system.
► Identify a numbering structure organized by compliance topic or other logical structure.
4. Develop how to educate and communicate policies.
► Create a formal policy deployment mechanism and governance process. Key work steps include (a) create intranet site or other policy platform that is accessible to all
users; (b) develop standard communication for new policies issued or revised policies; and (c) hold education/training session (as needed).
5. Update policies to safeguard compliance with state requirements or administrative rules.
► (a) Identify technical guidance and references; (b) prepare examples; and (c) identify policy owner/contact.
6. Conduct federal and state laws, rules and regulations and HHSC policies compliance assessment.
► Examine risk-based sample or population to identify potential issues or trends in areas, including, but not limited to, timing requirements, contractor screening and
compensation, cost estimate preparation, vendor performance tracking, signature authority and required disclosures.
Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 19PO: Establish a comprehensive communication
framework, 28PO: Create an employee engagement plan, 11PP: Update and refine procurement and contract management manuals, 22PP: Redesign procurement end-to-end
process, 13GR: Strengthen compliance monitoring processes and controls
People and organization
Create a fit-for-purpose organization design for PCS (1 of 2)
Project overview
Situation: Unclear roles and responsibilities coupled with undefined KPIs and job openings keep the organization from being structured a ppropriately. Workload inconsistent; staff
doing tasks for which they don’t have the competencies; oversight of contract quality inconsistent inhabiting effectiveness, compliance and efficiency.
Project # 6PO Project name: Create a fit-for-purpose organization design for PCS
Develop an improved organization design for PCS by helping to define roles and responsibilities, balance workloads and staffi ng, create a function to
Project description
oversee contract compliance and create a formal liaison process.
1. Employees will gain clarity to responsibilities and clear accountability. This will help identify job/role gaps and eliminate redundancies. It will also be
a key component of a communication plan.
2. Clarity of roles and responsibilities will strengthen job descriptions, which would help with recruiting.
Areas of impact 3. Finally, clear roles and responsibilities will allow those responsible for training to determine – by newly defined roles – which skills will need to be
strengthened or remediated.
4. PCS will have clear communication channels, reducing inefficiencies and enabling leadership to better manage resources and wo rkloads.
5. Reduced span of control leading to greater supervisor support; workloads will be right-sized, which will help with employee retention.
Affected groups: All of PCS
For more information, please see EY Insights on People & Organization.
Create a fit-for-purpose organization design for PCS (2 of 2)
Project overview
Project # 6PO Project name: Create a fit-for-purpose organization design for PCS
Project activities
1. Compare current organizational chart to function realignment model and operating model project decisions.
► Review the functional realignment model (following) as compared with the current organizational model of PCS to finalize target future state and identify short-term
realignment opportunities.
2. Create a detailed, task-level RACI for major work streams/tasks within PCS and their association through the Agency.
► The RACI will clarify who is Responsible, Accountable, Consulted and Informed related to key work streams and tasks within PCS. The RACI will include key PCS work
streams. While many of those responsible are located within PCS, there will be instances where those who are consulted or informed are within HR, Programs,
Budget/Finance or Legal.
3. Perform a work inventory of PCS individuals. Use the results of this inventory to reorganize the function based on core tasks .
► Given turnover and change, many individuals indicated that the guidance on position responsibilities is loose, and given overtasking there were multiple instances of
individuals taking on tasks because there were not enough individuals to complete work. A work inventory should be completed to determine workload, core competencies
and tasks for work reallocation.
4. Demand forecasting (people)
► Conduct forecasting exercise to compare anticipated workloads with staffing plan. Focus on creating balanced workloads.
5. Redefine roles and responsibilities in individual position descriptions.
► Clarify responsibility and level of authority for all procurement-related staff. These should both comply with statute and enable staff to execute their duties efficiently.
Establish performance measures (KPIs) for staff within position descriptions.
6. Refine PCS organizational chart.
► Based on redefined roles and responsibilities, an updated RACI, the work inventory, skill realignment, span of control and demand forecasting, refine and tailor the PCS
organization structure.
7. Skill realignment.
► Once the organizational model is redesigned, align employees against skills needed for current and future roles.
Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 19PO: Esta blish a comprehensive communication
framework
Establish a comprehensive communication framework
Project overview
Situation: Currently, procurement-related communications are not actively and comprehensively planned and managed. Communication is unstructured, inconsistent and not
properly cascaded. This has led to knowledge gaps for key roles, a systematic lack of end-user engagement, and the inability to create a culture of cooperation and collaboration.
For instance, one program noted having discontinued the use of the digital signature tool for certain processes where it was no longer required because notice was given in a
meeting, but not documented or cascaded.
Project # 19PO Project name Establish a comprehensive communication framework
Project description Create a comprehensive and sustainable communication framework and plan for PCS to disseminate information both internally and externally.
1. Clear communications allow for all updates to policies and procedures to be properly disseminated throughout the organization.
Areas of impact 2. Version control is actively managed to instill clarity and compliance.
3. Clearly identified point of contact for managing content to help employees stay informed, reduce confusion and Align compliance.
Affected groups: Primarily PCS, but all groups within HHSC could be recipients of communications or invited to key meetings (Agency-wide)
Project activities
1. Develop comprehensive PCS communication framework and plan to include the following:
► Define and establish a plan and framework by identifying the best methods (email, CAPPS, SharePoint, newsletters, social media, etc.) to deliver timely and useful
information such as policy/procedure changes, procurement planning efforts and sharing of ideas.
► Communication plan categories would include audience, message, delivery vehicle, frequency, timing, responsibility, feedback mechanism and repository.
► Ensure status reports through CAPPS are accessible to all necessary stakeholders or establish a forum to share these reports on a recurring basis (i.e., exported Excel
report for requisition status published to SharePoint every two weeks).
► Create a process to monitor statewide contract changes via available communication tools through CPA/DIR (GovDelivery, TxSmartBuy home page, CPA purchasing web
page, DIR contracts web page), identify an owner of this responsibility and choose a forum to disseminate the information to programs (email, SharePoint, newsletter).
2. Create meeting schedule to include the following:
► Creation of meeting schedule so that all needed meetings are on the calendar of events (weekly, monthly, quarterly).
► Create a process to take, synthesize, and distribute notes and outcomes from the meeting to the appropriate distribution list as determined by the RACI development in
project 2PO.
► The meeting schedule and outputs would be included in the comprehensive communication plan.
Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 6PO: Create a fit-for-purpose organization design
for PCS, 28PO: Create an employee engagement plan
Develop comprehensive training programs
Project overview
Situation: Although limited training has been provided to PCS employees, a formal training strategy, plan and program have not been deve loped or provided to procurement staff.
Training programs are generally insufficient, and there is limited designated support resources to provide compliance and tec hnical guidance.
Project # 20PO Project name: Develop comprehensive training programs
Project description Develop a formal training strategy and robust onboarding and ongoing development programs to support PCS staff.
1. Employees will feel less frustrated and complete their tasks more efficiently and with higher accuracy.
2. Standardization and efficiencies across processes and procedures can be achieved.
Areas of impact
3. The organization will be able to maintain compliance consistently.
4. This will help drive retention.
Affected groups: PCS or any Agency roles that will require training on new governance, tools or process (e.g., contract management).
Project activities
1. Develop a training model that identifies critical procurement and contract management training course needs.
2. Develop a training program to establish critical procurement and contract management capabilities.
► The program would leverage leading practices and use of technology tools. A formal technical training program is particularly important when there is no backup for key
roles and/or there is high turnover or heavy hiring cycles. Without consistent curriculum updates and predictable training delivery schedules, it is not possible to achieve skill
standardization.
3. Develop an HHSC training program that is aligned with new policies, procedures and processes. The program should be developed to provide staff involved in the procurement
and contract management processes with the competencies necessary to complete their respective role/function in the process. Key items include:
► (a) Develop the high learning objectives for personnel and getting clarity of the scope of the training required; (b) understand the detailed training needs (competencies) of
all personnel; (c) develop content with an HHSC wrapper, training schedule creation and business engagement to book people into training; (d) develop a training delivery
model consistent to competency mapping; (e) report the number of people who have been trained and what they have been trained on; and (f) tie competency development
back to role KPIs.
4. Staff performing contracting duties are properly certified according to state requirements:
► Confirm HHSC is compliant with state requirements for performing procurement and contracting functions. HHSC should perform a review of all program staff identified as
performing said functions so that they are all properly trained and certified according to state requirements, and if not, help ensure they have proper supervision to perform
said tasks. Also, review system access and capabilities to help ensure they are aligned properly to certifications.
5. Onboarding:
► Create formal onboarding process for new hires that will help ensure a buddy system and proper role training specific to PCS.
for PCS, 19PO: Establish a comprehensive communication framework, 11PP: Update and refine procurement and contract management manuals, 22PP: Redesign procurement
end-to-end process, 4IM: Expand upon the program liaison process, 8TE: Conduct comprehensive CAPPS and SCOR training
Create an employee engagement plan
Project overview
Situation: Good performance and success are rewarded much less frequently than bad behavior and failure are punished. This significantly impacts morale and prevents
employees from feeling empowered and engaged. Given the preexisting fear culture in PCS, action is warranted.
Project # 28PO Project name Create an employee engagement plan
Project description Develop an employee engagement plan to improve trust and develop a continuous learning culture within PCS.
1. Reduce fear, cultivate talent, reward good work, build trust between PCS and Program, clarity on responsibility
Areas of impact
2. Addressing engagement and other culture-related issues will be key to improving morale, productivity, and talent retention
Affected groups: All of PCS
Project activities
1. Create continuous development culture.
► Develop and deliver a purpose-led leadership course and high performing teams course for the PCS leadership team. These two courses are designed to create alignment
on what a positive work culture should look like and how to best achieve one.
2. Culture change, employee engagement program.
► Analyze the PCS results from the HHSC SEE report. Develop a step-by-step plan to address the lowest scoring factors with the largest impact. Track improvements on
those factors on the next HHSC SEE report.
► Create team-building and/or workshop activities for groups for which it would be beneficial. This could include (but is not limited to) workshops that allow all parties a
statement in the development of a new operating model; bringing in a third-party team-building facilitator; and taking “field trips” to operating facilities, program areas, PCS,
etc., to align the groups around the true purpose of each other’s responsibility and mission.
3. Develop employee incentive program.
► Develop an employee engagement program that offers incentives for high performers. The incentives should be a combination of financial and nonfinancial benefits (time
off, preferred parking, flexible schedules, etc.).
4. Connect to purpose.
Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor , 19PO: Establish a comprehensive communication
framework, 20PO Develop comprehensive training programs
Portfolio management
Standardize contract management and monitoring practices across HHSC
Project overview
Situation: As a consequence of transformation, the approach to contract management and monitoring at HHSC has not been unified into a st andardized set of policy, practice and
process guidance for programs to utilize. More recently, HHSC policy and guidance on contract management and monitoring pract ices and processes have not been updated and
aligned to the state guidance on contract management. As such, contract management and monitoring practices vary dramatically by program.
Project # 17PM Project name: Standardize contract management and monitoring practices across HHSC
Identify, develop and document fit-for-purpose business processes for contract administration and oversight in order to develop contract management
best practices guidance that provides a framework to standardize contract management and monitoring processes and practices f or the enterprise.
Project description The guidance should provide practical suggestions as well as best practices to improve Agency contracting practices; assist contract managers in
leveraging technology, metrics, training and lessons learned for the purpose of minimizing project risks; and clearly define roles and responsibilities of
all players in the process.
1. Creates standardized practices for contract management and monitoring for consistent practices enterprise-wide.
2. Establishes clear guidance regarding roles and responsibilities in managing contract relationships to successful outcomes.
3. Establishes and enforces process that drives consistency, controls and quality.
4. Provides guidance on best practices for management of contracts and vendor relationships.
Areas of impact
5. Establishes consistent, risk-based reviews and controls.
6. Improves professionalism of contract and vendor management.
7. Identifies and unifies disparate policies into a cohesive process “how to” document.
8. Ensures adherence to state and federal requirements.
Affected groups All
Project activities
1. Work with stakeholders to map current contract management life cycle and processes.
2. Work with stakeholders to tailor processes and develop future state process maps.
3. Identify and document roles, responsibilities and expectations for all actors in the contract management life cycle processes .
4. Develop content to update and tailor the procurement and contract management manual.
5. Review and tailor Agency administrative rule for consistency and compliance.
6. Develop a training model based on the manual that identifies contract management training course needs. Ensure training addre sses the need to improve Agency contract
manager/developer SOW creation competencies.
7. Develop training course content based on model that is aligned to manual content.
8. Deliver training to staff responsible for contract management processes to improve competencies.
framework, 17PM: Standardize contract management and monitoring practices across HHS, 11PP: Update and refine procurement and contract management manuals, 13GR:
Strengthen compliance monitoring processes and controls, 16GR: Perform procurement and contract risk assessment, 7PE: Performance management practice
For more information, please see EY Insights on Procurement Transformation.
Develop procurement spend analysis practice (1 of 2)
Project overview
Situation: PCS does not currently utilize data to help it to identify and execute strategic contracting opportunities for the Agency. This coupled with the current limitations in data
integrity, accuracy and access lead to a need to establish a consistent methodology and practice for spend analysis at the Agency to support improved data-driven decision-making
regarding procurement activities.
Project # 26PM Project name: Develop procurement spend analysis practice
PCS should establish a strategy and associated practices related to employing portfolio and spend management practices appropriate for a large
Project description agency operating within state-level master contracts and individual agency purchases to help ensure the Commission is receiving maximum
economies of scale.
1. Develops the capacity and capabilities of key staff in topics necessary for PCS to begin turning toward a more strategic, data-driven approach to
contracting.
2. Ability to identify broader enterprise needs that can help to reduce workload on PCS over time.
Areas of impact
3. Improves quality of system data to improve overall ability to perform spend analyses.
4. Establishes a standardized practice for strategic contracting, including supporting tools and templates.
5. Identifies hard-dollar savings opportunities to inform future sourcing and budgeting decisions.
Affected groups PCS, Program, IT, Budget/Finance, Data Projects
Develop procurement spend analysis practice (2 of 2)
Project overview
Project # 26PM Project name: Develop procurement spend analysis practice
Project activities
1. Establish a standard commodity code category taxonomy for use in performing spend analyses.
2. Run a report of spend for a past FY from the system and perform a baseline spend analysis .
► Cleanse and streamline data files.
► Validate applicable data files for completeness and accuracy (match against taxonomy).
► Identify key data elements that inform spend analysis and develop and deliver guidance and training to procurement and program staff to improve data accuracy and the
ability to perform spend analysis.
3. Seek to identify a means to capture the required data elements (such as inclusion of contract ID) either as a system improvement or through other means.
4. Research topics and develop training for PCS staff on spend analysis that includes active participation to practice topics di scussed.
5. Conduct training with chosen staff.
6. Establish processes for reviewing, reporting and acting upon strategic sourcing activities.
7. Develop templates for category reports and opportunity assessments and other tools and templates as identified to support strategic sourcing practices.
8. Work with trained staff to identify tangible project opportunities that can be worked using the topics learned.
9. Work identified opportunities through the process, supported by PCS management.
10. Execute projects through development of category reports and opportunity assessments and, if possible, solicitations and establishment of enterprise strategic contracts.
Dependencies: 1SD: Performance management practice, 2SD: Conduct data cleansing
Establish a vendor outreach program (1 of 2)
Project overview
Situation:
► Hindering communication and engagement throughout procurement planning and contracting hampers meaningful outcomes for comple x, high-risk contracts. This limits vendor
input because a new vendor is more challenged in its ability to communicate emerging practices or unique products or services that the vendor may be able to offer the state
agency.
► Agency vendor management policies and practices reflect unnecessarily limited vendor interaction that is not aligned with sta tewide guidance that creates collaboration
opportunities. For example, TGC 2155.081 directs the CPA to establish a vendor advisory community to provide input into state procurement practices and serve as a channel
of communication among the vendor community.
Project # 27PM Project name: Establish a vendor outreach program
The vendor outreach program will create a framework for structured engagement between HHSC system procurement and program personnel and the
vendor community. The project establishes policies and implements practices that strengthen accountability, transparency and uniformity in vendor
Project description
interaction, communication, collaboration and management. This project comprises two phases, with the development of a preliminary schedule for
outreach events based on review of the HHSC System Strategic Procurement Plan.
Through structured outreach, HHSC procurement and program staff and vendor community collaboration will:
1. Provide a forum for education and insight into emerging technologies and practices for HHSC program and procurement staff.
2. Support HHSC procurement professionals in their market research and analysis.
Areas of impact 3. Update the vendor community on future program developments and procurements.
4. Enable a consistent and transparent approach to sharing HHSC program requirements, schedule and other procurement planning co nsiderations.
5. Provide a forum for potential contractors to network with potential subcontractors, subconsultants and the small business community for upcoming
procurements.
Project duration Long term Ease of implementation (1–5) 4
Affected groups PCS, HHSC Policy Office, HHSC Program and Contract Managers
Establish a vendor outreach program (2 of 2)
Project overview
Project # 27PM Project name: Establish a vendor outreach program
Project activities
Identify and assign a resource responsible for implementing and administering the vendor outreach program.
1. Create a project plan, identifying resources, responsibilities, schedule, tasks and deliverables to complete development of t he program.
2. Conduct policy reviews to identify opportunities to establish a constructive vendor engagement framework:
► Review and revise Agency policy regarding interaction with vendors, including vendors under current contracts. (Complete, HHSC Vendor Interaction Policy, effective 1
September 2018.)
► Review and revise Agency policy regarding vendor notification within a procurement event (Policy 571).
► Review and refresh HHSC guidelines for engaging vendors prior to a formal solicitation process for alignment with other vendor policies (Policy 793).
► Review other applicable policy.
► Incorporate all policy guidance regarding vendor relationship management by reference into the consolidated contract and procurement manual (refer to update/refine
procurement and contract management manuals project).
3. Develop and publish parameters of the program and procedures for vendor engagement, tailored to the nature of the procurement , and communicate procedures to program
staff and the vendor community.
4. Plan and incorporate procurement or category-specific webinars, video conferences, telephone conferences or other methods in ongoing market research activities
(short/medium term).
5. Review HHSC system strategic procurement plan to preplan industry days for vendors to showcase skills and strengths regarding specific planned procurements (medium/long
term).
framework, 17PM: Standardize contract management and monitoring practices across HHS, 13GR: Strengthen compliance monitoring processes and controls, 16GR: Perform
procurement and contract risk assessment, 4IM: Expand upon the program liaison process
Procure to pay
Update and refine procurement and contract management manuals
Project overview
Situation: Processes are often inconsistent across similar requisitions, causing inefficiencies and increasing errors and noncompliance; workarounds are prevalent in part because
of lack of knowledge. Current manuals are more than two years old and have not been updated with current information, includi ng no specificity to HHSC procedures which drives
audit exposure
Project # 11PP Project name Update and refine procurement and contract management manuals
Update and refine procurement and contract management manuals and identify administrative rule requirements for a consistent and
Project description compliant practice. Short-term requirement is to bring manuals to current state to achieve audit requirements. Long term, projec t will
include an updated manual based upon new procurement processes.
1. Increase compliance during the process of creating requisitions.
Areas of impact
2. Team members are following the same process to reduce process variations and workarounds.
Affected groups All/Agency-wide
Project activities
Short term
1. Review current procurement and contract manuals, process maps and supporting documentation, including checklists, work methods and quick reference cards (QRCs)
designed for PCS and Program, excluding comprehensive policy review referenced in a separate project charter.
2. Confirm compliance of federal and state laws/regulations are met within the procedures of the manual.
3. Update and validate process maps (Level 5 detailed Visio mapping, with interaction between all functions and technology) for all procurement processes at HHSC.
4. Create compliant manual, develop communication strategy for planned manual releases and communicate plan to affected PCS and Program business areas.
5. Remove existing manual.
Long term
1. Repeat steps 1–5 from short term in parallel with project 17PM, “Standardize contract management and monitoring practices across HHSC” so that the manual can be updated
and unified, along with 19PO, “Establish a comprehensive communication framework.”
2. Organize content to create best practice in procurement life cycle approach.
3. Consolidate procurement and contract management manuals into one.
for PCS, 19PO: Establish a comprehensive communication framework, 17PM: Standardize contract management and monitoring practi ces across HHS, 22PP: Redesign
procurement end-to-end process, 13GR: Strengthen compliance monitoring processes and controls
For more information, please see EY Insights on Policies.
Procure to pay
Enhance PCS forms, contract tools and contract templates related to procure
to pay process
Project overview
Situation: Processes are often not written to support a large organization, limiting opportunities for economies of scale and optimizati on improvements. PCS and program have
different templates that are created outside of CAPPS that are then imported into CAPPS. Some forms may have the ability to be created inside CAPPS.
Project # 12PP Project name Enhance PCS forms, contract tools and contract templates related to procure to pay process
Develop and/or refine PCS forms, contract tools and contract templates that are aligned with the revised manual to facilitate efficient and
Project description
effective procurement life cycle processes and compliance with state-required processes.
1. Compliance with state-required processes.
Areas of impact
2. Increase efficiency with which a requisition completes the procure to pay process.
Affected groups All/Agency-wide
Project activities
1. Survey program and PCS staff to identify and catalog existing procurement and contract management and monitoring-related templates, forms, checklists or other supporting
tools used to expedite procurement processes.
2. Review revised HHSC procurement and contract management manual to identify and catalog additional new tools and templates nec essary to support efficient procurement
and contract management processes.
3. Assess catalogued tools and templates to determine need for development or revision.
4. Develop a responsibility matrix assigning appropriate staff to complete development/revisions.
5. Develop new and update existing tools and templates as identified. Consider ability to develop and/or implement the tools/templates in technology systems where possible.
6. Determine necessary changes to the technology system; delete the bad templates by working with the CAPPS PCS team and intervi ewing PCS and program on the business
and function needs.
7. Implement new/updated tools and templates upon approval.
for PCS, 19PO: Establish a comprehensive communication framework, 17PM: Standardize contract management and monitoring practi ces across HHS, 11PP: Update and refine
procurement and contract management manuals, 22PP: Redesign procurement end-to-end process, 13GR: Strengthen compliance monitoring processes and controls, 9TE:
Resolve immediate CAPPS needs
Procure to pay
Redesign procurement end-to-end process (1 of 2)
Project overview
Situation: Due to significant changes in procurement-related organization, roles, responsibilities, policies and processes that will be put in place in light of this report, it will be
necessary for PCS to establish a consistent procure to pay process so that current SOPs are tailored to align with changes as they are implemented.
Project # 22PP Project name Redesign procurement end-to-end process
Build a standard, repeatable process for identification, review and optimization of PCS as procurement-related changes are implemented
Project description
at HHSC to remain aligned to implemented policies, processes, technology and organization.
1. A document that includes end-to-end process flows and interactions, including planning and forecasting, along with the business
needs and the functions within PCS and program/Agencies.
Areas of impact 2. Procurement transactions would be processed uniformly across the Agency.
3. Facilitate onboarding of new hires to provide material for them to follow to execute their new duties.
4. Increased compliance with laws and regulations.
Procure to pay
Redesign procurement end-to-end process (2 of 2)
Project overview
Project # 22PP Project name Review and tailor PCS internal SOPs
Project activities
Build a robust process and control framework through documentation of SOPs and drive implementation through training for PCS and the program. SOPs should include:
1. Catalog all existing internal PCS SOPs for easy identification.
2. Compile all SOPs into a PCS desk guide folder available to staff to improve standardization and work quality.
3. Identify and review impacted SOPs.
4. Design detailed to-be processes, including templates, to address areas of improvement identified – including streamlined governance and control.
5. Define interventions required for improved utilization along with incremental HHSC development.
6. Define KPIs for subprocesses; define baseline for KPIs identified.
7. Develop implementation plan for process improvement, including change management initiatives.
8. Develop business case for implementation, including targeted improvement on process KPIs and monitoring mechanism.
9. Obtain sign-off on to-be design, business case and implementation plan.
10. Identify pilot projects for implementation.
11. Conduct process improvement workshops to communicate to-be design to designated role holders.
12. Roll out to-be design to pilot projects; monitor development of improvements.
13. Monitor progression in KPIs, highlight risks/issues; obtain approval on resolution/mitigation; conduct change management workshops.
14. Identify and document an agreed-upon review schedule.
15. Consider more frequent reviews during project implementation (recommend including as a key component of all implementation pr oject plans).
16. Consider a less frequent, but consistent review period following project implementation that is aligned with state policy dev elopment processes.
17. Perform reviews in accordance with agreed-upon schedule.
18. Collate learnings from pilot implementation; discuss and obtain approval from Steering Committee on proposed design changes.
19. Incorporate change in to-be design post-approval; roll out updated to-be design across all HHSC.
20. Monitor benefits realization.
21. Help ensure SOPs are updated and maintained in the PCS desk guide folder upon revision.
for PCS, 19PO: Establish a comprehensive communication framework, 11PP: Update and refine procurement and contract management manuals, 9TE: Resolve immediate CAPPS
needs, 7PE: Performance management practice
Complex services
Enhance complex services process
Project overview
Situation: Lack of documentation standardization, evaluation process that does not meet the needs of the Agency.
Project # 23PP Project name Enhance complex services process
Project description Establish and document policies, processes and templates for the development and documentation of a complex solicitation.
1. Standardized approach to complex procurements and contracts.
Areas of impact 2. Speed with which a procurement is completed as templates are based off frequently used procurement types.
3. Increased confidence that procurements are being completed in compliance with state and Agency policies.
Affected groups Program, PCS
Project activities
1. Establish and document policies, processes and templates for the development and documentation of an evaluation plan for all complex solicitations detailing the processes
and other relevant aspects of the evaluation that must be drafted prior to posting of the solicitation and finalized and appr oved prior to receipt of supplier responses.
2. Establish and document policies, processes and templates for the development and documentation of a strategy plan for all complex solicitations that captures all planning
documentation and decisions made, including the specifications/SOW, in preparation for solicitation development activities.
3. Leverage the procure to pay process to create a standardized process for creation and life cycle management of complex procur ements.
4. Determine and adhere to standard skill set and competencies determined for complex services buyers and contract managers.
5. Develop modular solicitation templates that include improved contractual performance language, monitoring and compliance with contract execution.
framework.
Governance and risk management
Strengthen compliance monitoring processes and controls
Project overview
Situation: Inconsistencies in compliance processes were noted both during the current state assessment and identified in previously issued audit reports. A methodical approach to
addressing these issues will increase confidence in the integrity of the process and reduce the risk of control failures and repeated audit findings.
Project # 13GR Project name Strengthen compliance monitoring processes and controls
Project description Incorporate additional rigor into review and audit processes to improve enforcement and consistency of compliance.
1. Greater consistency and alignment of organizational structure, authorities and responsibilities with business goals.
Areas of impact 2. Reduced risk of conflicts of interest and potential impropriety.
3. Fewer audit findings and reduced scrutiny by third parties.
Estimated costs $$$$ Estimated number of project resources 8–12
Affected groups CQC and PCS
Project activities
1. Review current standard operating procedures for RFAs and establish policies, procedures and controls so that they are only used when allowed by law.
2. Improve process for identifying and evaluating potential conflicts of interest and establish mitigation policies, procedures and controls.
3. Complete policy updates related to SB 20 and related legislation (e.g., cost estimates, best value determination, enhanced co ntract monitoring, posting of solicitations,
American Steel rule, and collection and reporting requirements).
4. Ensure that Texas Administrative Code related to HHSC Procurement and Contracting is updated and aligned with policies and pr ocedures.
5. Identify and document reporting needs that support improved tracking of data related to HUB participation and monitoring of c ontract compliance items related to the use of
HUB vendors.
6. Review and update purchasing procedures, checklists and file management to improve document retention and accountability.
7. Perform a segregation of duties analysis regarding roles and duties and establish an aligned policy.
8. Assess adherence to data use agreements on contracts and revise procedures as needed.
9. Review contractor screening and onboarding processes for improvement opportunities.
10. Complete updates as needed for compliance on all task and activities related to audit compliance.
Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 6PO: PCS organization redesign, 11PP:
Procurement and contract management manuals
For more information, please see EY Insights on Risk Management and EY Insights on Policies.
Align processes for managing reports to governing entities outside of HHSC
Project overview
Situation: Processes and controls for identifying and coordinating reporting to third-party governance entities is not defined and may lead to inaccurate or
noncompliant external reporting, resulting in unnecessary rework and loss of confidence in reports provided to third parties to HHSC.
Project # 14GR Project name Align processes for managing reports to governing entities outside of HHSC
Identify, develop and document tailored business and governance review processes related to the function of external reporting
Project description requirements related to procurement, contract management and vendor performance for the Agency. Establish a role responsible for
identifying and managing governance processes helping ensure all external reporting requirements of the Agency are being met.
1. A formal review and approval process for better reporting delivered to governing agencies outside of HHSC (QAT, HUB, CPA, LBB,
DIR, federal counterparts, etc.).
Areas of impact
2. A coordinated response to required external reporting, resulting in better compliance and accuracy, less rework and improved
confidence in HHSC’s reporting process by third-party governance entities.
Estimated costs $$ Estimated number of project resources 2–6
Affected groups All
Project activities
1. Identify a role at the Agency to manage the function of tracking and monitoring Agency compliance with external reporting related to procurement, contract management and
vendor performance.
2. Perform a survey of all programs at HHSC to identify and document key data elements related to all external reporting require ments related to procurement, contract
management and vendor performance. Examples include reporting requirement(s), reporting purpose, reporting data elements, reporting cycle, report recipient, etc.
3. Formalize and document external reporting policies and practices. Reporting processes should include:
► Governance over the external reporting process.
► Forecasting, planning and scheduling the external reports.
► Establishing the approval process for each report based on identified risk factors.
► Tracking and monitoring of compliance to deadlines.
► Monitoring of accuracy of reporting (auditing on a sample basis).
4. Establish practices for the ongoing identification, cataloging and management of future reporting requirements.
Dependencies: 13GR: Strengthen compliance monitoring processes and controls
For more information, please see EY Insights on Risk Management.
Risk management – lines of defense (LOD) alignment
Project overview
Situation: Roles and responsibilities for risk ownership and oversight across PCS, CQC, Programs, Legal and Budget/Finance are not clearly defined, and may result in
inefficiencies, gaps in monitoring responsibilities and objectivity concerns of CQC auditing its own work. Without clearly de lineated roles, the risk of control failures or management
override are increased.
Project # 15GR Project name Risk management – lines of defense (LOD) alignment
Clarify the roles and accountabilities for risk ownership and risk oversight. Strengthen PCS’s accountability to own risks, c larify CQC’s
Project description mandate to oversee and monitor risks, and clarify roles of a management level oversight committee for key decisions and gover nance
activities over procurement and contracting.
Achieving clarity on division of accountability and responsibility, reducing the risk of conflicts or overrides, and creating the right balance
Areas of impact
between risk taking and risk oversight roles.
Affected groups PCS, CQC, Programs, Budget/Finance and Legal
Project activities
1. Perform an assessment of the mandates, activities, controls and risks assigned to PCS management (first LOD), CQC management (second LOD), HHSC Internal Audit (third
LOD) and a steering committee and/or HHSC Executive Council (Oversight).
2. Align the mandates and activities with three lines of defense risk management operating model. The lines of defense structure , responsibilities and accountabilities are
explained below and further explained in the three lines of defense model in Appendix A:
► First line of defense (PCS Management, Budget/Finance, Legal & Programs) – Full ownership and responsibility for day-to-day management of all business and compliance
risks. Develops policies and procedures.
► Second line of defense (Compliance and Quality Control) – Provides independent oversight of first line of defense. Monitors all frontline activities to gain an aggregate view
of procurement and contracting risks (financial and nonfinancial) relative to risk appetite and to escalate any excessive risk-taking.
► Third line of defense – HHSC Internal Audit – Independently assesses procurement and contracting processes, controls and policy compliance procedures.
► Oversight – Establishes roles within a risk management oversight committee, designated by the Executive Steering Committee and/o r chaired by the Chief Operating
Officer for oversight activities such as delegation of authority approval, policy approvals, organizational and process improvements, and risk appetite definition.
Dependencies: Adequate staffing aligned with updated mandates; ability to establish a risk management oversight committee
Perform procurement and contract risk assessment
Project overview
Situation: Generally, review and approval follow the same process and rigor regardless of the risk level of the procurement or contract, creating gaps in efficiencies,
overengineering and a false sense that risk is covered.
Project # 16GR Project name Develop a procurement and contract risk assessment
Establish a methodology for assessing procurement and contracting activities that is risk-based incorporating statutory requirements of
Project description the state, cost estimates and contract types. Leverage the existing contract risk assessment process, updating for new polici es and
approval thresholds, and develop a procurement risk assessment process.
Contract review and approval process is aligned with the risk of each procurement, increasing precision of review and efficie ncy of the
Areas of impact
procurement process.
Affected groups PCS, CQC, Budget/Finance, Legal and Programs
Project activities
Perform risk assessment across all types of procurements to develop a procurement risk assessment, categorizing procurements based on state laws, risks, Agency procedures,
policies, etc. Key steps include:
1. Identify classification process for segmenting contracts based on level of risk.
2. Develop qualitative and quantitative criteria to assign a risk rating to each contract.
3. Perform data analysis, interviews and surveys to complete the criteria and risk rating.
4. Align review and approval process to contract risk levels (see separate review and approval workflow charter).
5. Develop and implement a repeatable process to classify risks of new contracts.
6. Develop process to review and update, as needed, risk ratings of existing contracts annually.
7. Update any IT infrastructure (SCOR, CAPPS, etc.) to align with new processes as necessary.
Dependencies: 1SD: Establish a comprehensive communication framework
Develop review and approval workflow
Project overview
Situation: After the risk assessment process is complete, the approval workflow will need to be updated to align with the new process of approving contracts differently based on
the assigned risk.
Project # 24GR Project name Develop review and approval workflow
Project description Establish a delegation of authority and a risk-based approval workflow for HHSC for all procurement activities.
1. Procurement approval activities would be more efficient as contracts that are deemed to be lower risk would not need similarly
substantial approval activities as higher risk procurement transactions.
Areas of impact
2. Organizational structure, authorities and responsibilities are consistent with the goals of the business and are assigned to
appropriate personnel.
Affected groups PCS, CQC, Budget/Finance, Legal and Programs
Project activities
1. Establish (or leverage) a representative workgroup involving PCS, Legal, Finance, IT and Program.
2. Categorize typical transactions that require review in order to normalize requests to be reviewed (renewals, non-task order-based master contract use, task
order-based contract use, hinged (set of co-dependent) procurements, RFPs, etc.), Categorize current reviewers and roles and objectives for review.
3. Perform a segregation of duties analysis for roles/duties across the organization to identify and remediate conflicting dutie s between employees such as authorizing bid
evaluation criteria and evaluating RFx responses.
4. Leverage the risk-weighted set of criteria for transactions that was created as part of the risk assessment (refer to the “Perform procurement and contract risk assessment”
charter) to determine necessary reviews per transaction type.
5. Establish a procedure for requiring higher level of review regardless of new procedure if directed by HHSC executives.
6. Align documented delegation of authority to include risk-based approval thresholds and designed to meet Agency procedures and state law.
7. Validate and update as necessary process maps and standard operating procedures that comprehensively capture current review and approval flows for both initial requisitions
and contract approvals.
Dependencies: 16GR: Perform procurement and contract risk assessment
Implement a continuous control effectiveness testing program
Project overview
Situation: While the CQC function has recently been established, a process has not been consistently implemented to assess compliance wi th processes and procedures across
the Agency. Without a rigorous quality control testing program, the ability of the Agency to consistently execute new and redesigned controls consistently will be limited, increasing
the risk of process and policy noncompliance.
Project # 25GR Project name Implement a continuous control effectiveness testing program
Project description Perform continuous testing of procurement and contracting compliance with established policies and procedures.
Provide management with periodic reporting of the status of the compliance with current processes and procedures as well as a doption
Areas of impact
of new controls and risk mitigation strategies.
Affected groups CQC, PCS, Program
Project activities
Establish a testing program to assess new controls implemented in the procurement and contracting processes. Include the following key activities:
1. Align the organizational structure and tasks to future state (see “Risk management – line of defense charter”: Transition first line of defense activities to PCS, allowing CQC to
function as a second line of defense).
2. Develop testing programs to assess whether key controls are operating effectively.
3. Perform testing on key controls and assess whether the control is operating as intended to mitigate the associated risks.
4. Confirm design and operating effectiveness issues as well as improvement opportunities with control owners.
5. Provide training to control owners related to execution of control activity and how their actions are mitigating key risks in the organization.
6. Assist with development of any remediation plans and identify remediation dates to address any control operating deficiencies identified.
7. Perform additional testing after remediation to assess control operating effectiveness.
8. Report testing results and remediation progress periodically to leadership of impacted organizations and to the risk manageme nt oversight committee.
Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 11PP: Update and refine procurement and
contract management manuals, 19PO: Establish a comprehensive communication framework, 16GR: Perform procurement and contract risk assessment
Internal stakeholder management
Enable dashboard automation for business administrative functions
Project overview
Situation: Program/Agency is unable to run reporting dashboard to determine where in the life cycle inputted requisitions reside within CAPPS; extreme lack of visibility leads to
delays and stakeholder frustration.
Project # 3IM Project name: Enable dashboard automation for business administrative functions
Enable organization to automate existing high-volume and complex, multi-step data handling actions as if business users were doing the work.
Project description Capture and interpret existing applications, manipulate data, trigger responses and communicate with other systems. Primary fo cus is to allow
Program/Agency access to see where requisitions are during the life cycle of the requisition within CAPPS.
1. Enhanced timeliness and visibility into procurement processing and stages for IT spend.
2. Opportunity to repurpose human time saved for other high value-add activities.
Areas of impact
3. Improved quality and accuracy of IT procurement reporting.
4. Automation could eventually be leveraged within the procurement function and other business functional areas.
Affected groups PCS, Programs
Project activities
1. Confirm setup of the technical environment.
2. Complete process walk-through and recording of RPA scenario.
3. Document the scope automation for the as-is process.
4. Design and validate the future state process for automation.
5. Collaborate with HHSC IT stakeholders to identify test data.
6. Build the RPA POC scenario.
7. Finalize RPA output in test environment and create demo of the automated processes.
8. Perform user acceptance testing with identified process stakeholders.
9. Support transition of the completed bot into production.
10. Identify future RPA opportunities within procurement and contracting.
11. Provide monitoring support in the production environment.
Dependencies: Access to CAPPS system
For more information, please see EY Insights on Automation.
Expand upon the program liaison process
Project overview
Situation: The root cause that says HHSC operates in a “hero” environment – reliant on extraordinary individuals’ efforts to compensate for inadequate technology and processes.
Without a formal process in place, both PCS and Program have noted that whether certain tasks were completed correctly and ef ficiently depended on whom from PCS or which
program you were dealing with. For instance, programs noted that direction over process, next steps and status were difficult to consistently obtain from PCS and frequently rely on
a few individuals to find the information they need. Similarly, PCS has noted problems in obtaining necessary forecasting pla ns from varying programs.
Project # 4IM Project name: Expand upon the program liaison process
A new process has been instituted under new management; it should be extended to include regular embedded (on-site) support, better case
Project description management tools regarding status and a de-emphasis on call the top to move a procurement. Areas without enough liaisons need to review to right
size.
1. All programs and end users will be on a level playing field, and there will be fewer opportunities for customers to feel disregarded or less important.
Areas of impact
2. Lessens the burden on “extraordinary” individuals to be the known “go-to” person within PCS for outside customers.
Affected groups PCS, Programs
Project activities
1. Define the objectives and desired outcomes for the liaison role to help formulate the responsibilities and processes for the role.
2. Determine the responsibilities and competency qualifications for the liaison role that align with the objectives and desired outcomes. Factors to include:
a. How often the liaison will be on-site at the Program.
b. Types of information to be shared between Program and liaisons (process changes, requisition status, next steps, templates to use, forecast planning, etc.) and at which
intervals and via which communication channels.
3. Determine how and by whom the liaison role will be filled. Factors to consider should include division of responsibilities (procurement vs. contract administration) and
procurement type (goods, services, complex).
4. Help ensure all program areas are adequately supported. Consider size and scope of program areas in determining whether multiple liaisons should be assigned.
Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 4IM: Expand upon the program liaison process,
6PO: Create a fit-for-purpose organization design for PCS, 19PO: Establish a comprehensive communication framework
Establish a lessons learned touch point
Project overview
Situation: This project seeks to address the root causes; processes are often not written to support a large organization, limiting oppo rtunities for economies of scale and
optimization improvements. For instance, there is currently minimal process in place to help prevent problems from repeating themselves, such as the repeated evaluation
mistakes. By establishing a lessons learned touch point, PCS can seek to address this issue by having a published repository for new staff to refer to as well as the ability for PCS
staff, PCS leadership and program staff to have an effective feedback loop.
Project # 5IM Project name: Establish a lessons learned touch point to enable continuous improvement
At the end of each complex solicitation, both PCS and Program should have the opportunity to provide feedback regarding what went well and what
Project description didn’t go well at key phases in the contract development process. Responses should be recorded for reference for future solic itations of the good or
service. Any opportunities for learning regarding general process improvements should also be documented and shared for futur e reference.
1. Ability to tailor historical information to help reduce opportunities for repeat mistakes to occur.
Areas of impact
2. Opportunity to further develop customer relationship between PCS and Program.
Affected groups PCS, Programs, Legal, Budget/Finance
Project activities
1. Determine for which solicitations this lessons learned touch point will be completed. Consider dollar thresholds and level of complexity to create a more balanced workload.
2. Create a lessons learned form for both PCS, Program, and Legal to complete at the end of each solicitation that meets the criteria of step 1 (as well as whether the solicitation
resulted in a contract or was canceled). The form should have sections to indicate what went well and what didn’t go well for key phases in the process –initiation/planning,
SOW development, evaluation, award, etc. Determine whether a meeting should take place to discuss the lessons learned as a pa rt of this process.
3. Establish a process for the documents to be reviewed by PCS leadership and a process for aggregating comments related to the general process (vs. specific to the good or
service being procured).
4. Establish a process for publishing the final documents to a shared repository viewable by PCS and Program to be able to learn from for future solicitations.
Dependencies: Processes will be updated to reflect a lessons learned touch point (assumption)
Technology
Conduct comprehensive CAPPS and SCOR training
Project overview
Situation: Training programs are insufficient in content and frequency, and there are limited designated support resources to provide co mpliance and technical guidance. The
existing training programs (onboarding and ongoing) do not provide employees with the knowledge and tools needed to be succes sful in their roles. The lack of training, coupled
with excessive workloads and nonstandard processes, has contributed to staff often feeling overwhelmed and frustrated.
The train-the-trainer model used previously was not successful. Adequate budget must be allocated to support a robust training program to educate users on the system in its
current state and provide ongoing training as system changes are implemented in the future.
Project # 8TE Project name Conduct comprehensive CAPPS and SCOR training
Provide additional, immediate training in the use of CAPPS and SCOR in their current states to increase awareness and intende d
Project description
capacity.
1. Greater system proficiency among user groups resulting in increased productivity.
2. Increased compliance with system-related policies and procedures facilitated by enhanced awareness.
Areas of impact
3. Improved morale and job satisfaction through reduced system-related frustrations. Improved morale is correlated with less turnover
and increased productivity.
Affected groups All CAPPS user groups in all agencies
Project activities
1. Establish a training workgroup responsible for delivering CAPPS procurement functionality and SCOR training, comprising subje ct-matter resources skilled in training delivery.
2. In addition to standardized basic data-entry procedures and using available reports, determine topic areas for immediate training needs in the current CAPPS and SCOR
systems.
3. Develop curriculum to effectively address the organization’s immediate training needs (e.g., “first bite of the system traini ng apple”).
4. Publish written training materials to be disseminated to all user groups and made available for download from a central HHSC website.
5. Offer training to all CAPPS and SCOR users by topic area in person and online via live and/or recorded webinars.
6. Address immediate needs for system assistance with CAPPS and SCOR by identifying subject-matter resources to be available to provide hands-on assistance in the program
area. The issues reported to these subject matter resources should be tracked and used to inform future training efforts.
Dependencies: Working with CAPPS and SCOR systems staff, Agency training staff and all procurement user groups
For more information, please see EY Insights on Technology.
Technology
Resolve immediate CAPPS needs
Project overview
Situation: Business needs and volume are not sufficiently synchronized to process/technology. CAPPS has been heavily modified to accommo date State of Texas statutory
contracting requirements, as well as HHSC-specific contracting needs; however, the system is not configured to support a specific set of Agency or program purchasing processes
and procedures.
Project # 9TE Project name Resolve immediate CAPPS needs
Complete a rapid analysis to determine how the CAPPS Phase II release can be influenced to address immediate system functiona lity
Project description
priorities.
1. Mitigate the risk of wasted resources to solve low-priority issues.
2. Ensure effective use of existing resources to address priority issues.
3. Improve data integrity and transparency.
Areas of impact
4. Achieve short-term system improvements (wins).
5. Create positive momentum for CAPPS improvement projects to build the stakeholder confidence required to garner support for future
enhancement initiatives and a process to facilitate future system enhancements.
Affected groups IT, PCS, Executive Leadership, Budget/Finance, CAPPS Users
Project activities
1. Pause CAPPS Phase II development/implementation in order to critically analyze planned and potential changes.
2. Determine priority needs based on input from user groups and redirect IT resources and efforts to address higher-priority procurement functionality. Develop a plan to design
solutions for the remaining, lower-priority issues to be addressed in Project 21TE: “Perform Full Fit Gap Analysis.”
3. Compare planned scope to high-priority (as determined by HHSC leadership and programs) system issues requiring immediate resolution.
4. Examine system and user controls, approvals and access levels and adjust to align with appropriate user roles.
5. Place special emphasis on developing tools that support dashboarding and more robust access to information for end users. At a minimum, this should include the ability to see
which individuals have reviewed each step.
6. Analyze the fit and purpose of the “Collaboration” tool within CAPPS to determine whether it can be improved through system changes or should be eliminated from the process.
7. Additional short-term improvements for system response time.
8. Develop a plan to dedicate adequate resources and implement the high-priority changes within 12 to 18 months.
9. Develop and deliver in-person and online training on proper use of altered functionality before, during and after implementation (e.g., “second bite of the system training apple”).
Dependencies: Working with CAPPS system staff and procurement stakeholders, as well as obtaining executive support to obtain any necessary additional budget allocations
Technology
Align eSignature tools
Project overview
Situation: The lack of visibility within, and integration among, procurement-related systems (e.g., CAPPS and digital signature tool) creates risk for policy compliance issues and
undermines statewide transparency efforts.
Project # 10TE Project name Align eSignature tools
Solution digital signature tools for integration or end of life. Assess digital signature tools that have similar functionali ty and potentially
Project description
superior integration/costs, and determine a plan going forward.
1. Enhanced federal audit compliance through the use of additional security measures (levels of authentication) built into the Agency’s
digital signature tool.
2. Reduced costs associated with duplicative functionality.
Areas of impact
3. Increased integration with the CAPPS system (Agency’s current digital signature tool was designed to work within the Agency’s
current ERP environment).
4. Eliminate the need for PCS to “own” a digital signature software contract that is a better fit for IT.
Affected groups IT, PCS, all users of the Agency’s digital signature tool
Project activities
1. Transfer the “ownership” of the Agency’s digital signature tool to IT to remain consistent with the ownership model for other Agency software.
2. Catalog the digital signature tool functionality currently in use by HHSC.
3. Compare this functionality to the tools available in the Agency’s current digital signature solution.
4. Determine which solution offers the most relevant functionality and build comprehensive policies and procedures for use of the selected solution.
5. Develop a plan to deliver any training required for compliance with policy and to increase user satisfaction with the solutio n.
6. Communicate the policies and procedures to all user groups.
7. Provide training opportunities/online guidance and resources for proper use of the signature tool.
Dependencies: Working with CAPPS system staff, digital signature tools owners (IT), legal and procurement stakeholders
Technology
Perform full fit-gap analysis
Project overview
Situation: CAPPS has not been configured to serve many important procurement-related purposes (i.e., complex contract proposal evaluation, vendor performance tracking,
document management, spend analysis and public data transparency) in function or in HHSC-level volume.
Project # 21TE Project name Perform full fit-gap analysis
Project description Perform a comprehensive fit-gap analysis to align CAPPS and SCOR system functionality with fit-for-purpose processes.
1. Identify systems gaps to be addressed through configuration or customization of functionality.
2. Inform analysis to determine options available in the current system, as well as those requiring a third-party solution (via integration
Areas of impact
or interface with CAPPS and/or SCOR).
3. Enable system improvement solutioning by providing essential information.
Affected groups PCS, IT, CAPPS and SCOR Users
Project activities
1. Work with procurement stakeholders to review and revise procurement system-related policies and procedures to align them with purchasing staff performance and with
procurement automation best practices.
2. Determine system functionality needs based on the tailored system-related policies and procedures (to facilitate full procurement automation) and convert them to system
business requirements. Project leaders should help ensure that the requirements include tools to mitigate the risk for data -entry errors as well as tracking contract amendments.
3. Coordinate with IT and procurement stakeholders to compile a detailed list of all known gaps in CAPPS and SCOR system functio nality (e.g., adequate reporting and evaluation
tools) as compared to the Agency’s automated procurement functionality needs (in support of fit-for-purpose policies and procedures).
4. Conduct an in-depth fit-gap analysis to determine fit within the CAPPS and SCOR systems in current and/or approved future state (including all necessary and feasible
configuration and customization changes). This analysis should also consider deployment of additional modules of the Agency’s ERP platform.
5. Use the results of the fit-gap analysis to determine the potential need for a third-party solution. If substantial business requirements cannot be met through configuration or
customization of the existing systems, then third-party solutions should be evaluated for a potential acquisition.
6. Work with executive leadership to determine the best approach to meet the organization’s needs given priorities and resource constraints.
7. Develop and deliver in-person and online training on proper use of new functionality before, during and after implementation of the enhancements (e.g., “third bite of the system
training apple”).
Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 12PP: Enhance PCS forms, contract tools and
contract templates related to procure to pay process, 22PP: Redesign procurement end-to-end process
Technology
Streamline remaining procurement-related technology
Project overview
Situation: The lack of integration among procurement-related systems combined with the lack of properly configured reporting functionality in CAPPS frustrates users, precludes
data-driven procurement practices and undermines statewide transparency efforts.
Project # 29TE Project name Streamline remaining procurement-related technology
Review other procurement-related technology solutions (i.e., digital signature tool and Excel spreadsheets) outside of the CAPPS system
Project description
to verify fit and identify potential alternative solutions.
1. Identify opportunities for enhanced system alignment with fit-for-purpose procurement processes and procedures.
2. Reduced costs associated with duplicative functionality.
Areas of impact
3. Potential increased integration with the CAPPS system.
4. Streamlined automated processes.
Affected groups IT, PCS, all procurement-related system users
Project activities
1. Catalog functionality of all non-CAPPS and non-SCOR procurement-related systems remaining in use by HHSC.
2. Work with procurement stakeholders to conduct a fit-gap analysis to compare this functionality with the Agency’s procurement business requirements (established during the fit-
gap analysis in Project 21TE.
3. Determine which solution(s) should remain in use and which should be integrated or replaced by a module in CAPPS or a third-party solution available on the market. This will
require executive buy-in for adequate resource allocation to support the decision.
4. Develop comprehensive policies and procedures (with input from stakeholders) for use of the selected solutions and communicat e them to affected groups.
5. Develop a plan to deliver in-person and online training for compliance with policy and increase user satisfaction with the existing systems, as well as any new solution.
Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 9TE: Resolve immediate CAPPS needs, 10TE:
Align eSignature tools, 21TE: Perform full fit-gap analysis
Performance management
Establish a performance management practice (1 of 2)
Project overview
Situation:
► Current systems do not facilitate visibility and extraction of data to support procurement-related business decisions.
► HHSC program areas are performing ad hoc and manual reporting to track and manage the status of their procurement requests.
► The lack of integration among procurement-related systems combined with the lack of properly configured reporting functionality in CAPPS frustrates users, precludes data-
driven procurement practices and hampers statewide transparency efforts.
Project # 7PE Project name Establish a performance management practice
Coordinating with the Office of Performance Management (OPM) of the Chief Policy Office, the project will establish a continuous
improvement initiative to identify, measure and act on performance data across the procurement life cycle. Using a data -driven approach,
PCS and OPM will work with stakeholders to identify key performance indicators (KPIs) and establish methods to track and repo rt on
Project description process and subprocess cycle times, among other measures relevant to the procurement function.
PCS will work with project stakeholders to establish standards for the type of performance information that will be collected and
published, and will coordinate with OPM to establish publishing frequency, format and platform.
A formal performance management practice with PCS, consistent with Agency standards for performance management, will provide a
consistent method to track, measure and demonstrate value to internal and external stakeholders. Establishing a
data-driven approach to measuring performance through KPIs supported by system data will:
► Eliminate current ad hoc and manual reporting practices borne by HHSC program areas.
Areas of impact ► Align individual staff performance expectations with operational goals and objectives.
► Provide visibility into and ability to act on functional activities affected by resources, cycle fluctuations and other facto rs.
► Improve predictability in scheduling and developing procurement.
► Enable comprehensive contract reporting at the enterprise level to drive data-driven business decisions and identification of
opportunities for improvement.
Executive Leadership, Human Resources, Office of Performance Management, PCS, Program and Contract Managers, Program
Affected groups
Stakeholders
Establish a performance management practice (2 of 2)
Project overview
Project # 7PE Project name Establish a performance management practice
Project activities
1. Work with PCS stakeholders to review existing policies and procedures related to Support Service Agreements (SSAs) and other perfo rmance criteria related to
procurement activities to refine Program and PCS SSAs.
2. Review peer and best practice performance management and measurement frameworks focused on efficiency, quality and stewardship, for example:
► Efficiency measures: Year-over-year number of POs/contracts; staff load vs. number of contracts/bids/POs; time from requisition to PO
► Quality measures: Cost of procurement operations as a % of spend/cost avoidance; customer service survey results
► Stewardship measures: % of solicitations without protests upheld; % of special vs. overall spend; % change in volume of vendor responses to solic itations
3. Evaluate applicability of identified KPIs and determine and prioritize initial KPIs for performance management.
4. Develop and document methodology for measuring each KPI identified and determine ability to measure using current and future systems.
5. Develop standard reports and other tools that enable consistent ability to report performance using system data (staff reports, internal division reports, external
management reports, dashboards, among others).
6. Incorporate relevant KPIs into staff performance appraisal system.
Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor 2SD: Conduct data cleansing, 9TE:
Resolve immediate CAPPS needs, 21TE: Perform full fit-gap analysis, 19PO: Establish a comprehensive communication framework, 3IM: Enable dashboard automation
for business administrative functions
Insights and additional projects
1. EY Insights on Procurement Transformation

2. EY Insights on Procurement Operating Model
3. EY Insights on People and Organization
4. EY Insights on Technology
5. EY Insights on Automation
6. EY Insights on Risk Management
7. EY Insights on Policies
8. EY Insights on the Future of Procurement
EY Insights on Procurement Transformation
Procurement maturity model
Our maturity model articulates the main domains of procurement transformation in eight dimensions, each of which needs
to be considered independently to reposition an effective procurement and contracting function.
► Review current state Procurement and
Contract Services (PCS) capability
► Review existing sourcing and procurement
process documentation, including policies and
procedures and existing ERP system
documentation
► Review organizational structure
► Conduct key stakeholder interviews
Portfolio and Supplier

► Identify critical procure to pay (P2P) process
Management
Relationship
benchmarks currently managed by PCS and
compare current P2P capabilities to leading
practices
Every dimension is divided into five maturity stages:
Stage 1: Informal/no process established and is supported by
Stage 2: Functional
Stage 5: Leading
Eight facets defined
The maturity model breaks down procurement and contracting to drive at the root cause of any procurement and contracting issue:
► Strategic Direction: course of action that leads to the achievement of the goals of an organization’s strategy
► People and Organizations: how the people in the organization engage to accomplish the goals of an organization
► Portfolio and Supplier Relationship Management: how an organization interacts with its suppliers from a mutually beneficial
relationship and legal (contract) perspective
► Complex Contracts: contracts that are of high dollar value and require RFx to procure goods and services
► Contract Management: an essential function that helps support the needs of the Agency as reflected in a supplier contract are
met in order to deliver critical services to our constituents and that taxpayer dollars are being used efficiently and appropriately.
► Supplier Relationship Management: provides a framework for interacting with the vendor community across the contract
management life cycle to advance innovative solutions for the organization and equip the procurement organization with
knowledge and expertise in solicitation planning.
► Category Management: by analyzing detailed spend, transactional and pricing data, and continuously monitoring the pricing
markets, the category management team can routinely identify and implement solutions that drive incremental unit cost
reductions through additional sourcing, substitutions and better demand management.
► Procure to Pay Process: the process of obtaining and managing the materials needed for a product or service.
► Governance and Risk Management: an organization’s coordinated strategy for managing the broad issues of corporate
governance, enterprise risk management and corporate compliance with regard to regulatory requirements. A comprehensive risk
program in the opinion of EY involves the effective identification and avoidance of fraud, waste and abuse.
► Internal Stakeholder Management: an organization’s management of the people who may be affected by the decisions it makes
or can influence the implementation of its decisions.
► Technology: an enabler that allows organizations to process actions and extract materials.
► Performance Management: an ongoing process of communication between a supervisor and an employee that occurs
throughout the year, in support of accomplishing the strategic objectives of the organization.
Procurement maturity model rating and definitions
(part 1 of 2)
Topic Informal/no process Functional Standardized Collaborative Leading
Strategic No procurement strategy Procurement strategy is Procurement strategy and Full understanding of the Detailed plans updated on
Direction is in place not defined in a number of formal idea of future transformational journey a regular basis with cross-
areas and there is no initiatives exist in most that must be followed and functional executive
visibility on key future areas, but procurement a demonstrated history of support on the journey to
initiatives strategies are not always success procurement excellence
executed
People and Procurement department Procurement employees Procurement employees Procurement employees Procurement has a global
Organization is seen as a second tier exhibit transactional skill- demonstrate strategic exercise strategic thinking network of high-quality
function and focuses on sets but the department is thinking and focus more on and category management people who make the
administrative activities not recognized as a value- category management than and attract internal and department a desirable
adding function administrative tasks external talent place within the company
Portfolio and Day-to-day pressure The procurement Formal strategic sourcing Comprehensive strategic Sourcing approach is
Supplier dictates the activity of the department is driven by process, leverage global sourcing process, mid- to recognized as one of the
Relationship department, there is contract end dates, does sourcing on most long-term category plans best in the market,
Management limited leverage of not have strategic categories with mid-term with a global focus on key preferred vendors are
strategic sourcing procurement plans, plans for key categories categories, and contracts established and contracts
opportunities and no leverages regional and contracts are in place are managed by category are reviewed with
contracts are in place sourcing on an adhoc but are managed by BUs managers suppliers at least annually
basis and has few
contracts
Technology There is no P2P system in Basic P2P systems exist in P2P systems are in place Harmonized P2P systems One integrated P2P
place most business units but in all BUs and functional exist and are widely used, system across the
systems are not linked procurement areas but are manual processes have organization that links all
together, few eCatalogs not integrated, eCatalogs been eliminated and there POs and suppliers
exist and many are in place and maverick is moderate adoption of
transactions are still buying still occurs eCatalogs with key
processed manually suppliers
(part 2 of 2)
Governance No governance body in Governance exists for a Processes and systems Governance model has Governance body is in
and Risk place to support overall few key purchases, low are formally documented been established and is place, documented
Management purchasing strategy, compliance and risk and published but are not supported by executives processes and controls
noncompliance is high and management is always enforced, and there are are in place, the
organization is reactive to acknowledged within other inconsistent compliance multifunctional integrated organization is nearly
risk functions and siloed risk risk assessment, planning always compliant and
management capabilities and response capabilities predictive supplier risk
in place management exists
Internal Procurement works in its Some areas of Procurement is regularly Procurement is engaged Procurement proactively
Stakeholder silo and internal customers collaboration with other consulted but not fully early in the process and manages all categories in
Management do not think it adds value departments but is not integrated with other manages cross-functional close collaboration with
to the organization uniformly seen as high processes in other streams relevant departments
value departments
Procure to Pay No standard P2P Basic P2P process without End-to-end P2P processes Fully integrated and Lean and highly integrated
Process processes in place and guidelines and a mix of in place but low levels of automated P2P processes P2P processes, eCatalogs
existing processes require paper-based and compliance are in place and and a robust order
manual paperwork electronic processes compliance is high tracking process
Performance No monitoring of the Basic metrics are in place Formal metrics exist but Savings targets are in Sophisticated balanced
Management performance of the but provide limited insight are not consistently used place to monitor scorecards are in place
procurement department and may not be linked to and are not closely linked department performance and KPIs are integrated
business performance to performance and KPIs link to with performance
performance
Root cause analysis
Overarching Manifestations Impacts

Root Cause “Hero” environment – reliant on extraordinary individuals, efforts to compensate for
inadequate technology and processes
Training programs are generally insufficient and there is limited designated support
People resources to provide compliance and technical guidance
Success is often not rewarded; there is largely only punishment, which can significantly
impact morale and prevents employees from feeling empowered
1. The operating model,
strategy and Processes are often not written to support a large organization, limiting opportunities for
investment of HHSC, economies of scale and optimization improvements
has not evolved to
meet the needs of an Process Processes are often inconsistent across similar requisitions, causing inefficiencies and
increasing errors and noncompliance
outsourced service
delivery solution, Policies and procedures are not effectively maintained in many cases and changes often are
not effectively communicated to guarantee compliance
which depends upon
Procurement for its
Legacy system errors have been transitioned over to CAPPS, negatively impacting
success. system performance and data integrity
2. Volume of transactions Technology Business needs and volume are not sufficiently synchronized to process/technology
amplified the effect, causing risk of system overload and downtime
quadrupling the impact
on an unfit model. Systems do not always enable visibility and extraction of data to support business
decisions
3. The communication
plan is built for a Oversight of procurement processes is often not performed to test whether all necessary
control activities occur in a timely manner
smaller organization
Governance The approval process does not always sufficiently consider factors outside of the dollar
value of the contract for establishing the extent of review and approval procedures
Controls activities are not always appropriately aligned to the risk
EY Insights on Procurement Operating Model
As companies seek to optimize their operating models, we
believe they must consider each of the following questions
1. 2. 3.
4. 5. 6.
EY Insights on People & Organization
Role and function comparison example
Procurement Analyst Contract Analyst

Intake Management/Service Desk Contract Initiation and Facilitation
► Review and assess routed purchasing requests ► Review (and assess for completeness)
procurement transactions routed for contract
► Interact with end users as needed to clarify
requirements and identify best approach to initiation processes and the originating
procurement materials
fulfillment
► Place orders against existing master contracts ► Confirm proper exhibits and artifacts exist as
required for contract initiation (e.g., certificate of
and track receipt and closure
insurance)
► Perform informal quote procedures according to
state and HHSC required practices ► With designated SMEs, including staff attorneys,
complete contract documentation for contract
► Perform Invitation to Bids procedures according initiation
to state and HHSC required practices
► Review and assess requests for contract
► Confirm proper and complete documentation amendments for appropriateness
exists regarding transactions in designated
► Assemble necessary parties in order to address
systems
deficiencies and prepare amendments
► Identify procurement needs that cannot be
fulfilled adequately via master contract, informal ► Support portfolio success efforts to interact with
quote and Invitation to Bid and coordinate with programs systematically and proactively
procurement services leadership to route the ► Track assigned contracts to proactively request
need to the appropriate analyst procurement actions prior to expiration
Establish an improved communication plan
A large portion of our interviews and a clear majority of our ThinkTank observations pointed to communications as an
area of opportunity for PCS. In particular, it was noted that PCS should undertake a review of critical communication
types and vehicles; a look at accountability structures related to a RACI; and a process to more efficiently, effectively
and consistently cascade communications within and without PCS.
1) Develop comprehensive PCS communication framework and plan

► Define and establish a plan and framework by identifying the best methods to deliver timely and useful
information.
► Communication plan categories would include audience, message, delivery vehicle, frequency, timing,
responsibility, feedback mechanism and repository.
2) Create meeting schedule
► Creation of meeting schedule so that all needed meetings are on the calendar of events (weekly,
monthly, quarterly).
► Create a process to take, synthesize and distribute notes and outcomes from the meeting to the appropriate
distribution list as determined by the RACI.
► The meeting schedule and outputs would be included in the comprehensive communication plan.
Create an employee engagement plan
ThinkTank sessions conducted by EY, as well as the PCS engagement survey, clearly indicate a need for improving the
level of engagement and culture within the Agency. Given the historical cultural challenges, harsh previous leadership
team and high turnover, addressing employee engagement and other culture-related issues will be key to improving
morale, productivity, compliance and talent retention.
1) Create continuous development culture

► Develop a leadership point of view (PoV) that can be easily adopted and cascaded. This PoV should encourage
PCS staff to strive for development and skill growth in a culture of continuous improvement in order to increase
productivity and reduce errors.
2) Culture change, employee engagement program
► Prioritize PCS engagement issues that arose from the PCS engagement survey. Develop a step-by-step plan to
address those issues.
3) Develop employee incentive program
► Develop an employee engagement program that offers valuable incentives for high performers. The incentives
should be a combination of financial and nonfinancial benefits (time off, preferred parking, flexible
schedules, etc.).
Through the interviews and ThinkTank sessions, it became very apparent that significant training gaps exist in the
Agency. Onboarding training is often inadequate and opportunities for ongoing development are not readily available for
employees. Over the last few years, training programs that were scheduled for a week have been condensed to a day.
Policies and procedures are not always followed, and many processes are not standardized or documented, which
jeopardizes compliance and results in widespread inefficiencies. A comprehensive procurement manual is lacking and
members often feel as though they don’t have anywhere to turn with questions. Training on systems, tools and processes
has been insufficient to build baseline proficiency.
1) Develop training program to establish critical procurement and contract management capabilities
► The program would leverage leading practices and use of technology tools. A formal technical training program is
particularly important when there is no backup for key roles and/or there is high turnover or heavy hiring cycles.
Without consistent curriculum updates and predictable training delivery schedules, it is not possible to achieve skill
standardization.
2) Develop an HHSC training program that is aligned with new policies, procedures and processes. The program
should be developed to provide staff involved in the procurement and contract management processes with the
competencies necessary to complete their respective role/function in the process. Key items include:
► Develop the high learning objectives for personnel and getting clarity of the scope of the training required.
► Understand the detailed training needs (competencies) of all personnel.
► Content development, training schedule creation and business engagement to book people into training.
► Develop a training delivery model.
► Report number of people who have been trained and what they have been trained on.
► Tie competency development back to role KPI.
3) Staff performing contracting duties are properly certified according to state requirements
► Confirm HHSC is compliant with state requirements for performing procurement and contracting functions. HHSC
should perform a review of all program staff identified as performing said functions so that they are all properly
trained and certified according to state requirements, and if not, confirm they have proper supervision to perform
said tasks. Also review system access and capabilities so that they are aligned properly to certifications.
4) Onboarding
► Create formal onboarding process for new hires with a buddy system and proper role training.
Functional realignment model for end-to-end
accountability
Chief
QA/QC PCS Monitoring
Procurement
and Review
Officer
Key characteristics of functional
Procurement Accountability Operations realignment
Services Services Services ► Clearer lines of responsibility for intake
management, which addresses the program
(Front Office) (Middle Office) (Back Office) liaison function and management of requisitions
and standard procurements
Policy ► Master data management enabling strategic
Intake Portfolio sourcing capability to establish spend analysis
Planning and
Management Success of savings opportunities
Research ► Alignment of multiple disparate contract
management elements
Contract System ► “Portfolio success” engagement center with
Category programs regarding contract health, tracking for
Initiation and Support and
Management risk and triage of poor performance
Facilitation Planning ► Contract initiation function under contracts and
out of procurement as a new capacity
► Vendor management capacity to establish
Strategic Audit and supplier programs and oversee HUB
Logistics
Sourcing Compliance ► Operations responsibility of policy planning and
research, external reporting and system support,
all underresourced in current models
► Proactive risk management by having QA/QC
Vendor Performance report to the COO and has oversight
Management Reporting responsibility over all of PCS. Absorbs the
contract monitoring function
EY Insights on Technology
Technology deliverables truncated
Leading technology practice is to perform business requirements prior to technical requirements as well as prior to
enhancements. Business requirements need to come first.
The list below reflects deliverables truncated due to insufficient information related to the items below:
Deliverable not completed Reason team was unable to complete deliverable

Identify adoption, configuration and customization
of existing technology
Identify quick wins related to adoption and simple

configuration changes and estimated level of effort
► Leading practice indicates that business processes are to be finalized
Identify customization requirements and estimated before additional customizations should be considered confirming that
level of effort (leading practice technology business processes align with business goals is part of the project road map
requirements)
Identify new solution capabilities
Identify capability gap and shortlist portfolio of

potential marketplace solutions
Procurement technology implementation leading
practices
To help implement technology implementations, HHSC can consider using the following
implementation framework life cycle below:
Key steps to a technology implementation:

1. Develop desired procurement automation outcomes based on the enterprise’s strategic plan.
2. Consult with subject-matter resources to tailor procurement-related policies and procedures to
facilitate automation.
3. Coordinate with purchasing stakeholders to develop business (functional) requirements.
4. Engage IT experts to develop technical requirements based on business requirements and address
data architecture documentation exists for all existing systems.
5. If applicable, conduct an in-depth fit-gap analysis of existing system against the newly developed
requirements.
6. If an existing system cannot meet the enterprise’s procurement automation needs or does not exist,
explore solution options on the open market.
7. Execute the approach that best supports the enterprise’s procurement automation needs and fits
within the available budget (including customization, implementation and ongoing maintenance).
8. Confirm the implementation plan includes details on required customizations and configurations,
testing plan, rollout strategy and timeline, training delivery and ongoing support.
Technology tool gap identification
Below are a few gaps in configuration of the tools that were identified during the course of the
assessment:
► Legacy system errors have been transitioned to CAPPS, negatively impacting system performance
and data integrity.
► Data from legacy systems was loaded into the CAPPS system without a complete master data cleanup to
correct errors and without a comprehensive data conversion plan to address the upload of complete and
accurate historical information.
► Business needs and volume are not sufficiently synchronized to process/technology causing risk of
system overload and downtime .
► CAPPS was not configured to serve many important procurement-related purposes (i.e., complex contract
proposal evaluation, vendor performance tracking, document management, spend analysis and public data
transparency) in function or in HHSC-level volume.
► CAPPS has been heavily modified to accommodate State of Texas statutory contracting requirements, as well
as HHSC-specific contracting needs; however, the system is not designed to support a specific set of Agency or
program purchasing policies and/or processes. There is no baseline set of procurement processes and
procedures that can be applied across HHSC.
► HHSC does not have a complete application portfolio detailing the data architecture, relationship diagrams and
user models for all purchasing-related systems. This results in inconsistent processes, data entry redundancy,
inefficient system administration and unnecessary technology costs associated with duplicative functionality.
► Systems do not always enable visibility and extraction of data to support business decisions.
► The lack of integration among procurement-related systems combined with the lack of properly configured
reporting functionality in CAPPS frustrates users, precludes data-driven procurement practices and undermines
statewide transparency efforts.
Below are a few gaps in configuration of the tools that were identified during the course of the assessment:
System Configuration gaps Industry insights and recommendations
Procurement tools CAPPS was intended to automate 80% of HHSC’s procurement and eProcurement functionality in a modern ERP
in CAPPS – The contracting processes. The CAPPS system has been heavily modified system must facilitate automation of Agency
state’s ERP system for HHSC, but the scope of these modifications is limited by a variety of business processes and enforce all necessary
factors, including, but not limited to, hard-coding of the software, controls. In order to tailor system functionality,
licensing restrictions, CPA-mandated functionality, statutory customization should seek to address the needs
requirements, limited budget, a desire for process consistency and a of all stakeholders in accordance with Agency
complete lack of input from user groups. There was no data priorities. This effort should include
architecture planning or consideration for HHSC’s transaction volume standardization and optimization of business
included in the implementation process. While some performance processes to operate in an automated
issues still remain, the debilitating latency in system processing time environment.
has recently been addressed by PCS. Effective system customization must be preceded
As currently deployed, the CAPPS system: by an Agency-level needs assessment to inform
► Is not user-friendly system architecture design (including any
integration requirements) as well as
► Has functionality that does not support Agency business processes
comprehensive implementation planning.
(i.e., proposal evaluations, contract management, adequate
approval workflow, strategic sourcing, complex contracting or It is key to purchase a system that provides the
reporting) majority of the organization’s required
functionality without customization. The right
► Does not allow for flexibility where certain steps add no value (i.e.,
system solution should be able to meet the
“Collaboration” process outside of contract development)
majority of the organization’s requirements
► Does not offer dashboard reporting/status updates through a combination of process optimization
► Has preloaded templates that are outdated and/or have limited utility and functionality configuration.
► Has minimal data visibility
System Configuration gaps Industry insights and recommendations

SCOR – HHSC’s SCOR was developed specifically to meet the contract management As the official system of record, it is essential that
contract management needs of HHSC, so it offers functionality that is more intuitive and more the contract management component of an
system closely aligns with Agency business processes. However, there are eProcurement system contain complete and
data integrity issues in SCOR due to undertrained and overworked staff accurate procurement documentation. Validating
inputting incorrect information and errors in the legacy data conversion the integrity of the data loaded into the system is
from other systems. the key to its utility.
As currently deployed, the SCOR system: If contract management functions are performed
► Lacks complete data from legacy systems outside of the ERP, the tool should be fully
integrated with the ERP’s procurement module.
► Has some inaccurate data for current and expired contracts due to
coding and filing errors
► Lacks modern contract management automation tools (i.e.,
dashboard reports, automated reminders and supplier enablement)
► Requires updates in multiple function areas
EY Insights on Automation
Digital solutions are a journey
Digital solutions consist of more than just robotics, and include automation as a large contributing factor. There are
multiple levels to automation.
► Process automation is the

application of software that
can mimic human action and
perform many manual, Think
repetitive, rules-based tasks
at a much greater speed and
accuracy. This technology is Artificial
rapidly gaining adoption in Interact intelligence
back-office functions such as ► Data analytics,
finance, supply chain, tax and Conversational
insights, decision-
HR, as well as many intelligence making
Learn
customer-facing departments. ► Personalized tasks ► Enhanced and
Machine requiring judgment and
Incremental value
Characteristics: automated data

learning RPA conversation via chat, analytics
cognitive messaging and/or
► Focus is on eliminating voice (cognitive ► Allowing human-like
manual, repetitive, rules- ► Machine learning capabilities, dynamic reasoning to be
driven activity that can be combined with robotics rules or artificial applied in insights
anticipated and programmed. to form cognitive learning)
automation ► Replacing human
► Allowing human-like need for decision-
► Can work nonstop, with
► Nonroutine tasks reasoning to be applied making
consistency and accuracy, Perform requiring judgment in larger volumes
and at a speed much faster (cognitive capabilities,
than manual processing. dynamic rules or artificial ► For increasing value
Robotic rather than reducing
process learning)
► Net benefit is more time cost
available for existing teams to automation ► Value- and impact-driven
(RPA) implementations
focus on value-added
activities that require
judgment and
decision-making.
Digital solutions must be focused on more than achieving efficiency
targets in order to realize the full value equation
Characteristics of high potential Digital solutions have the potential to lead to

digital solution opportunities within business specific, quantifiable benefits
process hierarchy
► Need for change driven by larger business ► Automation helps address areas of high frequency of
need; automation viewed as a lever for effort reduction from automation of high-frequency,
manual, repetitive tasks and reduced exception
improvement
costs.
► Business process executed frequently, in large
Efficiency
volumes, with common components present
across functions
► Easily recognizable business process and
stakeholder engagement complexity ► Automation helps to address elimination of routine
tasks, resulting in increased value-add of talent as
► Structured (unstructured) data required can be workforce can be dynamically deployed to address
identified and accessed fluctuating demand while maintaining optimal
productivity, ultimately leading to reduced attrition.
► Business process, once started, requires People
limited human intervention and/or
unambiguous rules can be applied
► Automation helps to address improved
consistency, control and traceability of manual
activity prone to errors, as well as reduced critical
path time during peak load periods when service
levels or key deadlines are at risk.
Outcomes
Examples of process automation opportunities across
organizational functions
Procurement Risk and control Operations

• Create requisition • Quality audit • Claims
• Category analysis • Compliance audit administration –
• Budget approval • Internal audit enablement claims adjudication
and processing, payment integrity,
• Issue payment • Security tracking and monitoring
appeals and grievances
• Technical threat and vulnerability management
• Member – account setup, eligibility and
• Comparisons against role-based access control enrollment, billing benefit
rules and segregation of duties matrices
• Provider data
IT services HR services F&A

• Installation • Payroll • Record to report
• FTP download, upload • Benefits administration • Order to cash
and backup • Payslip management • Procure to pay
• Server application and monitoring • Time and attendance • Order
• Financial planning
• Synchronizing, deleting and emptying management and analysis
processing
folders • Recruiting process (FP&A) • Vendor setup
• File management, batch processing • Onboarding • Incentives claims • Trend tracking
• Email processing • Education and training processing • Finance
operations
Note: The potential opportunities will depend upon how these processes are implemented in the company, the level of existing automation and number of FTEs used.
Procurement automation segmentation*
Need to Pay Catalog Establishment Vendor Enablement

Automation of need, Automation of establishing Automation of relationships
review, sourcing from price lists and online with suppliers and creation
catalogs, approval, order, shopping capabilities of self-service tools
receipt, payment and
verification
Sourcing Management Contract Management Data Management

Automation of the Automation of active Automation of data
development, presentation, contract management in a collection, organization and
evaluation and award of full and integrated life cycle analysis necessary to a
solicitation events strategic procurement
practice
*Leveraged in multiple current leading practice public sector solicitations.
Sample areas of procurement automation
Procurement
Manage and
Manage Manage Manage Manage Manage supplier relationship and report
Manage operational procurement
categories strategic contracts commodity risk performance procurement
sourcing performance
Define category Develop category Create contract Manage demand Create and Complete order Manage supplier Manage supplier Identify and
strategy profiles terms and planning approve purchase receipt segmentation and risk develop core
conditions requisition strategy performance KPIs
Manage category Manage future Manage contract Manage coverage Determine source Resolve order Manage supplier Manage supplier Prepare and
governance sourcing/ creation reporting of supply discrepancies integration remediation report
procurement
requirements
according
to negotiated
T&C
6 6 performance
against KPIs
Manage demand Analyze supply Execute Manage price risk Generate purchase Process invoices Collaborate with
6
and spend market penalties and order and transmit suppliers
compliance rebates RPA – high potential of
automation
Develop and agree Execute supplier Manage supply risk Maintain order Develop supplier RPA – low potential of
sourcing strategy reconciliation capabilities automation
Execute sourcing
accruals
6
Resolve supplier Manage hedging Receive goods Manage supplier
Robotics
strategy payment issues information

Digital/
(vendor master
6 data)
6
workflow
Rules
Implement sourcing Process Monitor supplier engines
strategy returns/claims performance
6 6 OCR/structured
forms
Monitor and sustain Desktop

strategic sourcing acceleration
Note: Processes will need to be agreed on and modified as leading practices before automation efforts are started.
How automation technologies create value
HR Information Talent and

Resourcing and Learning and Rewards and
and Systems Performance
Management Onboarding Development Mgmt Benefits
Time and
Query and Case

Management
Role and
Search and
Diversity and Payroll reporting

and administration
(e.g., Vendor)
Eliminate material human effort Speed time-critical process Assessment of RPA

applicability needed
Reduce costly errors and Refocus knowledge workers for Potential scope for RPA
improve quality greater value
Note: Processes will need to be agreed on and modified as leading practices before automation efforts are started.
EY Insights on Risk Management
Three lines of defense – risk management operating model
Risk accountability: first line
Front line needs clear risk responsibilities and support tools
► Individuals who engage in activities that generate revenue and enable or support risk- What firms are doing:
Principle and taking (e.g., frontline business units, operations, IT) ► Better aligning frontline
definitions ► These individuals accept full ownership and responsibility for day-to-day management compensation structures
of risks inherent in their activities (including nonfinancial risks) with risk-taking and
compliance
► Identify, assess, measure, control, monitor and report all risks related to the front responsibilities and
line or risk-taking activities against the board-approved risk appetite results
► Engage second line to gain risk-based perspective in establishing limits and policies, ► Documenting detailed
controls, risk indicators and interpretation of legal and regulatory requirements for responsibilities matrices
ownership and management of risks for risk management roles
Responsibilities and responsibilities
► Establish sound risk taxonomies and assess adequacy of controls in place to manage
risks ► Developing detailed job
descriptions and role
► Identify, remediate and report risk limit breaches or excessive risk-taking to senior
profiles for key frontline
management and board; collaborate with second line to remediate breaches or
roles
issues identified
► Developing and assessing
► Clarity as to whether activities fall into the front or second line (e.g., the development competency maps in
of controls related to new products) to enable risk ownership where appropriate and collaboration with HR
across second-line functions ► Mapping regulations and
► Structural implications for certain functions (compliance, legal, HR, IT, risk related controls to
management) to distinguish between activities that support risk-taking vs. risk detailed procedures
Implications of
measurement, required for independent view of aggregate exposure ► Conducting training on
the activities-
of these risks frontline roles and
based model
► Employee life cycle changes, including required talent (recruitment), and how talent is expectations, as well as
trained (learning and development) and compensated (balanced risk-taking via the importance of risk
incentive compensation processes that are better aligned with risk management goals management
and responsibilities); this may result in an increase in the number and qualifications of
resources (e.g., risk and control functions within the front line)
Risk accountability: second line
Independent risk management has to expand its reach
What firms are doing:

► Provide independent oversight of risk-takers and enablers – oversee all frontline
► Increasing resources,
activities to gain aggregate view of firm’s risks (financial and nonfinancial) relative to
stature and authority of
Principle and risk appetite and escalate excessive risk-taking
the second line;
definitions ► Able to provide a risk-based viewpoint where appropriate (e.g., strategic planning) and enhancing available tools
guide senior management in risk management responsibilities (e.g., by discussing to more efficiently/
risk-based implications of new products and providing counsel to the front line) effectively execute
expanded role
► Independently identify, assess, measure, control, monitor and report on aggregate ► Increasing coordination
risks against the board-approved risk profile and appetite within the second line to
► Establish enterprise risk management framework (including risk thresholds, policies eliminate role overlap and
and concentration limits) commensurate with the size, profile and complexity of the coverage gaps
business’s operations ► Improving consistency in
Responsibilities risk management
► Make certain the firm’s risk levels and business processes are consistent with
appetite, policy and regulatory requirements processes/procedures
► Centralizing any testing
► Provide independent, risk-based view of key processes owned by the front line, such
as strategic planning, limit setting and policy development activities that exist in front
or second lines
► Proper governance required to enable risk ownership remains in the front line
► Upgrading talent and
► As the three lines model is improved, some of the second-line resources may move to competencies to address
the first line. However, increased second-line resourcing and competencies may be added scope
needed to address areas that traditionally had a gap in coverage, were inappropriately ► As needed, using external
addressed or are an emerging risk area (e.g., legal, IT, cybersecurity, people, service providers to assist
Implications of independent view of compliance) with addressing emerging
the activities-
► Enhanced firmwide risk and control processes well integrated and provide increased risks or new regulatory
based model
effectiveness with coverage of financial and nonfinancial risks focus areas; oftentimes to
► Understanding of current organizational mechanisms that provide independent client help build in-house
assurance or validation of key risk-taking activities (for future leverage by the second capabilities in the long
line in meeting its responsibilities and impact on third line) term
Risk accountability: third line
Internal audit as independent verification
► Internal audit should verify that the firm’s risk governance framework complies with guidelines What firms are doing:
and is appropriate for the firm’s size, complexity and risk profile ► New skills and capabilities
Principle and ► Audit staff should have capacity, required skills and expertise to conduct an effective such as risk management
definitions assessment of the risk governance framework and financial modeling
► Internal audit should prioritize emerging risks and material issues to formulate corrective action
► Forward-looking approach
plans to report to the audit committee
to assessing risk and
“cultural risk assessment”
► Maintains complete and current inventory of material processes, product lines, services and on all audits
functions and assesses risks associated with each, including emerging risks ► Interlinkages with second-
► Establishes and adheres to an audit plan that is periodically reviewed and updated to take line coverage to minimize
into account risk profile, emerging risks, issues and the frequency with which activities should
duplication of what is
be audited
necessary, and to enable
► Audits risk framework and risk management activities (e.g., anti-money laundering (AML),
Responsibilities
model risk) and the second-line functions
consistency of risk
► Reports audit conclusions, material issues and recommendations carried out under required
assessments
audit plan, with reports identifying root causes of material issues
► Internal audit is functionally accountable to the Audit Committee, while reporting to a Senior
Executive Manager on administrative matters. Internal audit reports administratively to the CEO
► The results of the internal audit do not affect management’s compensation
► Provides independent view of subjective or judgmental matters, including an assessment of risk

culture, adequacy of model assumptions, etc.
► Additional competencies (beyond technical areas) and techniques (e.g., data analytics,
structured interviews) to support a broader understanding of governance, soundness and
Implications of sustainability
the activities- ► Focus on maintaining balance between independence and collaboration with the front and
based model second lines
► Audit plan establishes scope in the front and second lines to include an evaluation of risk
management framework (including whether it addresses financial, nonfinancial and emerging
risks), as well as the adequacy of compliance with policies, procedures and processes
established by front and second lines
EY Insights on Policies
What is a policy?
Policies establish standards of conduct and promote compliance with applicable laws and
regulations.
Policy considerations
Related to the objectives of the

Clear, concise, simple and direct
organization
Stable (changing infrequently so it can set a

A statement that guides
course for the foreseeable future), yet
decision-making and actions
flexible (capable of adapting to change)
Fact-based and objective
Catalog of policies
We recommend conducting a full inventory of policies needed based on statute, regulatory

requirements or business processes.
We reviewed the following policies and noted they were incomplete; not up to date; do not
safeguard compliance with state requirements or administrative rules; do not clearly define
roles, responsibilities and approval limits; and have not been communicated to all impacted
employees. We recommend that the following policies at a minimum be reviewed and
updated as necessary in addition to the policies identified in the aforementioned analysis:
► Texas Health and Human Services – Contract Management Handbook
► Texas Health and Human Services – Procurement Manual
► Texas Health and Human Services – Form PCS 160 – Solicitation checklist
► Texas Health and Human Services – Form PCS 138 – Electronic State Business Daily
(ESBD) – Solicitation Approval Form
► Procurement and Contracting Services Policy – Policy 400 Emergency Procurements
► Procurement and Contracting Services Policy – Policy 401 Proprietary and Sole Source
Procurements
Procurement policy library (1/4)
Governance and control framework
The following core management policies are the foundation for leading practices governing procurement:
Procurement policies Purpose Audience Scope
Policy and procedure To establish and promote the ► Procurement staff ► Policy attributes/elements/definitions
development creation and maintenance of the ► All employees with ► Policy development and review
procurement policies and procurement-related
procedures responsibilities
P2P code of To establish and promote ► Conflict of interest
conduct operating and behavioral ► Perceived impropriety
standards for the Procurement ► Confidentiality
function based on honesty, ► Responsibilities to employer
integrity, fairness and ► Issues of influence
compliance with the letter and ► Gifts and gratuities
spirit of the law ► Supplier relationships reciprocity
► Reporting misconduct, business
► Relationships with former employees
Procurement To establish the protocol for ► Commercial due diligence
governance managing the governance ► Fact-based decisions
(C-level mandate) structure for procurement
► Issue escalation
► Identification of decisions and
opportunities
► Enforce consequences
The following core management policies are the foundation for governing procurement:
P2P delegation of To determine who in the Agency ► Procurement staff ► Requisition and solicitation
authority should approve different types of ► All employees with ► Evaluation
transactions dependent upon the procurement-related ► Contract
procurement risk levels responsibilities
Source to pay (S2P) To establish the basic ► Category management

general purchasing rules of engagement ► Strategic sourcing process
and business terms for acquiring ► Signature authority
goods and services
► Purchase to pay channels
► Contract terms
► Non-disclosure agreement
► Accounts payable
► Benefits realization
Knowledge To establish the protocol for ► Record-keeping
management managing the knowledge content ► Knowledge sharing
for procurement ► New hire training and development
Performance To establish and enforce ► Key performance metrics
measurement operating standards for ► Benchmarking
procurement functions across ► Performance feedback
internal and external clients, and
► Compliance
enable effective benchmarking
Strategic category To establish the manner in which ► Procurement staff ► Demand analysis
planning the long-term category plan ► All employees with ► Supply market assessment
should be developed, including procurement-related ► Commodity inflation management
aligning with business demand responsibilities ► Category strategy development
forecasts and risks and engaging
with stakeholders ► Category strategy implementation
Supplier relationship To establish the manner in which ► Supplier relationship management

management procurement employees are to ► Bidding and solicitation
engage and manage suppliers ► Supplier selection
► Performance management
► Supplier diversity
Business partnering To establish and promote the ► Stakeholder engagement
collaboration and common ► New product development/demand
needs of procurement policies management
and procedures ► Business planning and target setting
► Requirements and specifications
gathering
► Strategy execution/category integration
Strategic sourcing To establish the manner in which ► Procurement staff ► Execute sourcing project
procurement employees are to ► All employees with ► Execute value engineering project
engage and manage sourcing procurement-related ► Provide e-sourcing services
Contract responsibilities
To establish the basic rules of
► General contract administration
management engagement for establishing
► Amendments to approved contracts
procurement contracts
► Nonstandard contracts
Requisition to pay To establish the basic payment ► Execute spot buys
rules of engagement and ► Perform customer services (helpdesk)
business terms for acquiring ► Perform procure to pay
goods and services
► Perform supplier e-enablement services
► Perform master data management
► Perform operational reporting
Travel and To establish the basic ► Air travel
entertainment purchasing rules of engagement ► Hotel
and business terms for acquiring ► Rental car
travel and entertainment
► Meals
► Entertainment
Additional policies (1 of 3)
Procurement policies Purpose

Financial services This policy encompasses all third-party fees and expenses for audit,
banking or insurance services.
Professional services This policy encompasses all third-party fees related to professional
services and outsourced services performed on an ongoing basis that do
not relate to a facility.
Outsourced business This policy includes outsourced services that are performed on an ongoing
support basis (excluding third-party sales and marketing, technology and non-
administrative outsourced services that relate to a facility).
Legal services This policy encompasses all fees and expenses paid to law firms,
independent lawyers, legal experts or notary practices for legal advice and
procedures.
Events and sponsorships This policy encompasses all expenses associated with internal events,
subscriptions, and donations, sponsorships and memberships intended to
promote the company’s reputation and image.
Company vehicles This policy encompasses all expenses associated to the leasing and rental
of vehicles or airplanes and fuel for vehicles owned by the company.

Facilities and related This policy manages expenses associated with the rent and use of office
services space and equipment, including lease expenses, site services, facility-
related benefits, and security; office supplies; and office parcel couriers. It
also includes all expenses related to commodities or services such as
water, electricity, gas and fuel.
Technology This policy encompasses all technology spend, including, but not limited to,
software as a service, application and IT support outsourcing, data center,
technology equipment and maintenance, communication services, software
maintenance and fees, and application development.
HR benefits This policy encompasses all company expenses related to hourly or
salaried employees and executives. It includes all taxes and social security
contributions related to the remuneration.
People recruitment and This policy includes the end-to-end HR cycle from sourcing, selection and
development deployment of talent, training and development.
Sales support and This policy encompasses all commercial costs related to the selling of the
resources products posted below marginal contribution (booked as SG&A).

Marketing support and This policy encompasses all expenses related to the promotion and
resources support of Client products and brands that are performed either internally
or by a third party.
Maintenance This policy encompasses all expenses and provisions associated to
maintenance of company facilities and equipment, excluding vehicle
maintenance, IT maintenance and transportation fleet maintenance.
Logistic support This policy encompasses all expenses associated with all third-party
logistics (3PL) expenses and certain other expenses that support logistics
operations in the warehouses. It also includes warehouse-related costs.
Transportation This policy encompasses all transportation costs associated with freight
distribution (both third party and own fleet), as well as some cost elements
for in-house transport of finished goods, mainly the fleet fuel and
maintenance.
Contingent staffing This policy addresses the proper execution of the contingent staffing
process and the criteria for approval, including, but not exclusive to, the
provisional group of workers who work as a non-permanent basis,
temporary contract workers, independent contractors or consultants.
EY Insights on the Future of Procurement
Other procurement organizations have successfully matured into
leading organizations
Strategic Direction ► All have support from executive leadership to manage the P2P process
► Most have established one or more global operating hubs

People and Organization ► Most weigh soft skills (influencer, global mindset) equal to technical skills in selecting
resources
Category Management
► All operate as a single global sourcing organization
and SRM
Technology ► Most have deployed enabling technologies globally
► Most own full decision rights on majority of categories (all direct and key indirect categories)
Governance and Risk
► Most have developed a risk scoring and segmentation model to manage supplier (third party)
Management
risk
Internal Stakeholder ► Most retain some degree of in-region capability to execute activity and maintain connectivity with
Management the business
Procure-to-Pay Process ► All place significant emphasis on standardized processes and training to deploy
Performance
► Most expand definition of savings to include cost avoidance and innovation to drive behaviors
Management
Additional EY Insights
Additional EY Insights
The following documents are being provided under separate cover to

HHSC. They provide context and thought leadership that may be useful
to HHSC as reference material.
► Five things – Getting the basics right in procurement

► Can you transform your third parties’ risk into a competitive
advantage?
► Infinite possibilities – Procurement in 2025
EY additional projects removed
Sample project removed
Below are a list of additional projects for HHSC to consider at a later time
to continue their evolution
► Increase commercial effectiveness
► Create a spend analysis and repeatable funnel management process
► Redefine the demand signal which initiates activity
► Establish a formal Strategic Sourcing program
► Establish/refresh modular solicitation templates
► Conduct annual or semi-annual anonymous surveys regarding Procurement function
performance
► Establish performance measures for staff in position descriptions
► Develop and strengthen communication conduit to Comptroller’s office
► Utilize a legislative champion to assist in getting updates to procurement and related
statutes that eliminate identified process inefficiencies
► Establish Supplier Summits and deeper supplier collaboration opportunities
► Create and publish vendor/provider scorecards on supplier portal
► Ensure origins codes are enabling requisitions to follow the appropriate routing flows
► Align systems to force the collection of contract IDs to enable you to tie contracts to
financial spend
Appendix
State of Texas
Health and Human Services
Commission Procurement and
Contracting Review
Phase I and Phase II
Maturity Assessment Report
27 September 2018
This work product has been prepared for The Texas Health and Human Services Commission for their use and purposes only. It
is not intended to be relied upon as professional advice for other Texas agencies, affiliates or other Health and Human Services
agencies, affiliates outside Texas. Neither Ernst & Young LLP nor any other member of the global Ernst & Young organization
can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this
document.
Phases I and II summary
The HHSC Procurement and Contracting department has
made several enhancements to the procurement process and
tools
The EY US team has noticed the beginning of a change to the procurement and contracting function with the new
management team. The initial steps below are a start in the right direction. We cannot yet assert the long-term impact and
sustainability of these improvements though we wish to acknowledge that the below collection of activities help to address
these areas.
Topic Updates
Governance and Risk ► Created policy to address effective procurement planning, scoring and execution.
Management ► The evaluation tool and calculations have been updated to remove errors noted in previous audit reports. A team has
been formed for continual creation and monitoring of the tool.
► Quality control began to provide more fair and accurate solicitation evaluations with a goal of having all required
documentation be consistently maintained (April 2018).
► Checklists are being structured to guide the compliance of procurements to stay within state requirements.
► The creation of a legal compliance checklist, PCS 160: HHSC Sollicitation Checklist, has been implemented (June
2018).
Procure to Pay ► PCS has created an initial workflow of the procurement process for Requests for Proposals (RFPs), Requests for
Process Applications (RFAs) and Requests for Quotes (RFQs), showing the interaction points between PCS, program, legal
and budget; also inclusive of consultant solicitation.
Complex Services ► The Compliance and Quality Control department was created to provide quality control on complex solicitations.
Supplier Relationship
► PCS has recently implemented a new policy that allows for initial guidance for vendor interaction.
Management
Internal Stakeholder ► PCS has assigned liaisons to some program areas and established a forum to engage HHSC programs, DSHS and
Management DFPS to collaborate and prioritize business needs.
► PCS has adopted more proactive customer engagement regarding program support, providing more flexibility with
program areas and business requirements.
People ► Strong performance and going “above and beyond” have begun to be recognized by leadership.
► PCS has begun to provide subject-matter resources to answer questions regarding CAPPS.
► PCS has begun to fill vacant positions to work toward appropriate staffing levels.
Begin with the end in mind
► The priorities of HHSC are to serve Texans by improving health outcomes and well-
being, supporting independence for people and families, and driving efficiency and
accountability.
► The primary objective of the Procurement and Contracting Review is to develop, vet
and produce a detailed improvement plan to make the Agency better. All contracted
members of the Agency have expressed throughout the process that improvement is
paramount and all parties are aligned.
► The improvement plan will be illustrated using a road map, which requires the
completion of the current state and root cause analysis.
Approach
Project timeline
Overview
Project approach
Overview
Background: Drawing from our experience in performing 110 domestic and 460 global procurement
transformation projects and civic initiatives’ experience working exclusively with public sector clients
on procurement assessment and transformation, the following methodology and approach were
applied to this project:
► Face-to-face interviews: 106 face-to-face interviews with approximately 135 people were
completed. Interviews covered the senior HHSC leadership, as well as middle management and
staff. Members of DSHS and DFPS were also interviewed.
► Crowdsourcing: Conducted 9 anonymous ThinkTank™ sessions to allow more than 300 PCS
and non-PCS personnel to have their voice heard.
► Data: Requested nearly 70 different data sets, closing ~83% of the total data sets requested and
performed fundamental analytics. In some cases, valid system reasons inhibited ability to provide
certain data requests. A listing of data and document requests is located in the Appendix.
► Hypothesis: Compared 37 pre-identified hypotheses with 8 procurement maturity dimensions.
► Experience: Utilized our procurement professional experience and engaged multiple subject-
matter resources, including EY US’s Procurement Lead for the Americas.
► Review of prior audits: The following audit reports were assessed to support the project review:
► OIG Review of the HHS Procurement Process: 2013–2018, July 2018 (OIG Report)
► Audit of PCS Procurement Processes, Office of Internal Audit Report 18-01-023, 5 July 2018 (OIA Report)
► An Audit Report on Scoring and Evaluation of Selected Procurements at the Health and Human Services
Commission SAO Report No. 18-038, July 2018 (SAO Report)
Procurement maturity assessment methodology
EY maturity model Rating Assessment
Stage 1: Informal
Stage 2: Functional
Portfolio and
Stage 5: Leading
► The methodology measures an organization’s procurement practices along eight dimensions.

► Each dimension is rated based on a five-level rating that takes into consideration leading practices.
► From the assessment, a spider diagram is produced showing the current state. Based on this, the gap analysis is
produced and initiatives are identified to bridge the gap between the current state and the targeted state.
Maturity models provide analysis to enhance
performance, cost and risk across a number of criteria
“Hero-based” environments rely on staff to go the extra mile to complete work to compensate for a lack of supportive and
systematic technology features. System-based environments utilize technology for reliable process completion. The
scoring is consistent with the general sentiment of the PCS team as well as their leadership.
The greatest inflection point for effectiveness
Strong
and efficiency occurs between levels 3 and 4
5 Leading
Impact
Recognized in the industry as

Efficiency/ 4 Collaborative best in class
effectiveness
Integration of leading practice Supply chain as a competitive
3 Standardized and standardized processes advantage
Span of control
Standardized processes/defined Executive leadership directly
Optimized and efficient
2 Functional strategy drive improvement strategies
Capabilities in place; inconsistent E2E process design formally Performance driven; Processes integrated across
1 Informal processes documented and published improvement program chartered Agency boundaries
Agency standards and

Weak
Technology not optimized; Integrated technologies; Proactive aged

Tactical fixes/backlog cleanup governance established and
strategy not recognized automation, transparency with decision analytics
enforced
Reactive Maturity levels Proactive
“Hero-based” environment System-based environment
HHSC Procurement and Contracting
Current state capabilities summary
The maturity model breaks down procurement and contracting into eight pillars to assist in the identification of root cause. Based on this
assessment, the Commission has opportunities to improve across all eight dimensions. Such results should be expected and are in line with the
recent audit reports. New management has begun enhancements to improve scores, but needs additional support and improved processes and
systems.
Performance Strategic
Management Strategic Direction
Direction

Performance People and
Management Organization
People and
Technology Organization
Average: 1.7 Portfolio

Average: 1.5
and Supplier
Technology Portfolio and Supplier
Internal Stakeholder Relationship
Management Relationship
Management Management
Average: 1.6 Internal Procure to Average: 1.6*

Stakeholder Pay Process
Management and Complex
Governance and Procure to Pay
Services Process and Complex
Risk Management Governance
and Services
Average: 1.4 Risk Management
Average: 1.7*
Note: Captures status quo baseline.
Pillars are defined in detailed analysis section pg 66–69.
*Represents the average rating of the included subsections.
Critical realities observed in HHSC’s translation of
strategy to operations
Overarching
Improvement opportunities
root cause
1. The operating model, The Agency has suffered from a lack of investment in people, alignment of
strategy and investment skills, processes, systems, governance and communications to support the
of HHSC, has not procurement and contracting function.
evolved to meet the
needs of an outsourced
service delivery Efficiency and effectiveness of the procurement and contracting function
solution, which depends need improvement to become high performing.
upon Procurement for
its success.
Partnership, accountability and interdependency from PCS, Program and
2. Volume of transactions Legal need improvement to achieve the value proposition.
on an unfit model. Data, reporting and visibility are inadequate to run the procurement and
3. The communication contracting function.
plan is built for a
smaller organization.
The traditional and heavily restricted approach for developing and
maintaining suppliers, vendors and providers is holding back the Agency.
HHSC spend tree
The figure below represents the procurement spend breakdown across HHSC’s largest programs. As a procurement analysis, this
reflects total spend data, including pass-through spend, which flows through the Agency.
HHSC ~$42b
Medicaid IDD and Health System Access and State Chief Texas Office
Financial Executive Regulatory Inspector
and CHIP Behavioral Develop- Support Eligibility Facilities Information of Civil Other
Services Commissioner Services General
Services Health Svcs mental and Services Service Division Officer Committee ~ ~ $0.001
~ $0.4 ~ $0.01 ~ $0.01 ~ $0.01
~$38.1 ~ $0.9 Indep ~ $0.9 ~ $0.6 ~ $0.4 ~ $0.3 ~ $0.2 $0.01
*Data source: HHSC budget.
The bar chart below represents the LBB spend breakdown: Client services make up 89% of the total spend based on LBB classification.
LBB Spend
Client Services 37,088,843,058
Other Operating Expense 2,454,064,210
Grants* 1,395,088,720
Professional Fees & Services 695,288,574
Rent and Utilities; Utilities; Rent - Machine and Other; Consumable supplies; Food
212,149,818
for Persons - Wards of Stat; Capital Expenditures; Fuels & Lubricants
$- $10,000,000,000 $20,000,000,000 $30,000,000,000 $40,000,000,000
*All categories include some client services spend.
Current state maturity assessment
Strategic direction
A clear and detailed procurement and
Strategic direction contracting strategy that is aligned to top-level
strategy; is easily implementable; and includes
Maturity assessment financial, environmental and ethical aspects
Leading practice companies have alignment from their corporate strategy down through the procurement operating model to guide the expectations on the
procurement and contracting systems design and execution. In HHSC, the PCS function impacts the totality of the commission’s ability to execute its
priorities, and thus the PCS function is fundamental to the Agency’s success.
Review considerations within this dimension HHSC recent audits

Operational ► The organization’s vision for success supported by its strategic goals and objectives ► “Given the magnitude of the HHSC
► The strategic planning process, frequency of review and proactive response to mission and the complexity and
strategy of the
changing conditions volume of procurements and
business,
► Stakeholder roles/involvement in planning and setting the strategic direction contracts it is imperative that HHSC
including
► Key risks and assumptions associated with the organization’s strategy and the support the integrity of the
planning, goals
organization’s competitive advantage procurement process.” (OIG Report)
and vision of ► Consideration of external forces
success ► Alignment of the organization’s strategy with those the entity serves ► With $42b in associated spending,
the supply chain is fundamental to
► How effectively the organization’s strategic goals are defined and communicated at the success of the Commission.
the business unit level
Alignment of ► How strategic goals are aligned to business unit objectives and operational plans
strategy, ► Organization of customer-facing and support functions, business units and Hypothesis testing
business departments
objectives and ► Mechanisms in place to monitor and report the achievement of business plans and ► Operational strategy of the business,
operational objectives including planning, goals and vision
plans ► The organization’s current performance as related to business plans and objectives of success, could be missing.
► Linkages between the strategy and the current capabilities and strengths of the ► There is misalignment of strategy,
organization business objectives and operational
plans.
► Organization and overall operating model of the business
► Location of operations ► Organization and overall operating
Operating ► Sourcing strategy model of the business may be
model ► Industry risk profile and risk management activities insufficient.
effectiveness ► Communication and dissemination of information ► Leading practices are not integrated
► Change management into the operating model, leading to
► Governance structure and associated functions inefficiencies and rework.
“We don’t have much of a strategic direction,
Strategic direction but we need one.”
Maturity assessment – HHSC employee, July 2018
Strategic A clear and detailed procurement and contracting strategy that is aligned to top-level strategy; is easily
Direction implementable; and includes financial, environmental and ethical aspects.
1. Informal/
2. Functional 3. Standardized 4. Collaborative 5. Leading
no process
Limited procurement Procurement strategy is not Procurement strategy and Full understanding of the Detailed plans updated on
strategy is in place. defined in a number of formal idea of future transformational journey a regular basis with cross-
areas and there is no initiatives exist in most that must be followed and a functional executive
visibility on key future areas, but procurement demonstrated history of support on the journey to
initiatives. strategies are not always success. procurement excellence.
executed.
1.3
Current state
Current state findings

Strategic vision:
► PCS vision, mission and purpose are not fully aligned with the Agency’s vision/mission and not openly confirmed and communicated to all
stakeholders.
► PCS annual priorities and goals are not widely shared across the Agency.
► Each time upper management changes, new priorities start the change management cycle all over again.
Partnership and strategic planning:
► Common alignment of PCS priorities across HHSC is lacking, there is little comprehensive planning, and programs’ goals and strategy are not
coordinated with PCS.
► Engagement with programs and other non-PCS stakeholders is minimal regarding process changes and the impacts of those changes across
HHSC.
Strategic direction
Maturity assessment
Typical operating model architecture Qualitative – by multiple observations

Strategy, design principles and business case
A
Functional Mature
► Shareholder expectations
vs vs
Supplier category Developing Alignm ent
During the interviews, it was noted that:

► Geo political environment
alignm ent and ► Economic environment and partner-
partnerships ► Competition ships
► Consumer & customer trends & insight Global Segmentation
► Regulatory vs vs
Region / Clusters Common
► Previous leadership had not developed or

Governance and performance management
B
communicated a strategy alignment to procurement
across the Agency.
Assets Costs Functional
Supplier CCC
Customer
Management cost Fulfilment Flexibility
Performance SG&A Perform-ance
Management ROA Cycle time Promo effectiveness Penetration Manage-ment
ROWC COGS Time to market Brand awareness Customer sat
► An end-to-end “systems thinking” approach is
C Supply chain network required.
In practice, we saw:
► HHSC submits a biannual strategic plan to the
Network design Customs & excise VAT
Supply chain processes

D
Supply chain
state, though we would want to see language
Source
Plan
Make Move (inl return & customer service) whereby the strategy is specifically tied to a
Product lifecycle management
Transactional procurement operating model.

Purchase to pay Record to report Order to cash
R&D ► We are not aware of an associated procurement

Discover Design Deploy
People, organization and geographic location

operating model defined for HHSC.
E
Structure Resources
In other benchmarks and/or using our experience,
Roles Location Capability
assessment
we note:
F Transactional model R&D HQ Marketing & brand
mgt
► Large (similarly sized) organizations heavily
Legal title flows
Supplier
interface SC Hubs
Financial flow s
Customer
interface
dependent on third-party suppliers for the bulk of
Suppliers
their service delivery depend on a more defined

Opcos Customers
Physical flow s
DCs
Factories
G Corporate tax and legal entity structure

and deliberate procurement system solution.
Governance and risk refers to the
Governance and risk management overall governance model and also
Maturity assessment includes policies, procedures,
compliance and risk management.
An adequately designed governance model is critical to support team members to perform duties as intended and to provide management with the
information it needs to verify that procurement activities are conducted in compliance with regulations and good business practices.
Review considerations within this dimension HHSC recent internal audits

Policies and ► Do policies and procedures adequately ► Policies and procedures are incomplete and are not updated to reflect
procedures and govern the source to contract process? current processes and statutory requirements. (OIG Report)
documentation ► Is there a process for updating policies ► None of the applicable procurements tested had all the documentation
related to changes in legislation? needed to help support the procurement process was followed as
► Is relevant documentation appropriately intended. (OIA Report)
maintained? ► PCS has neither consistently nor adequately identified and
documented potential conflicts of interest. (OIA Report)
Tools ► Are prequalified contract templates
effectively used across the Agency? ► Each purchaser appeared to have the latitude to use the evaluation
and scoring tool with which it was most comfortable. (OIG Report)
► Is there a reliable standard scoring and
evaluation tool that is used consistently? ► The lack of necessary procurement policies and procedures, including
quality assurance and training, as well as the lack of oversight,
Quality assurance ► What is the goal of the Internal quality consistency and transparency in evaluation and scoring process have
assurance function? been repeated issues for HHSC. (OIG Report)
► How effective is the Internal quality
assurance process? Hypothesis testing
Governance ► Are conflicts of interest and nepotism ► Lack of active governance of the procurement process
verifications consistently performed and ► Limited to no auditing or follow-up after noncompliance is discovered
documented?
► Lack of data to effectively manage procurement activities
Training ► Are PCS employees adequately trained ► Policies present excessive hurdles that do not support operations and
on policies and procedures? end up being ignored
► Are PCS employees adequately trained ► Approval thresholds for requisitions and contracts are not aligned with
on HHSC tools? risk and operational requirements
“Clear roles and responsibilities do
Governance and risk management not exist within PCS.”
Governance and
Governance and risk refers to the overall governance model and also includes policies, procedures, compliance and risk management.
Risk Management
1. Informal/no process 2. Functional 3. Standardized 4. Collaborative 5. Leading
No governance body in place Governance exists for a few Processes and systems are Governance model has been Governance body is in place,
to support overall purchasing key purchases, low process formally documented and established and is supported documented processes and
strategy, policies and compliance and risk published but are not always by executives, and there are controls are in place, the
procedures are not developed management is acknowledged enforced, inconsistent multifunctional integrated risk organization is nearly always
and communicated, and within other functions. compliance with process and assessment, planning and compliant with policies and
organization does not siloed risk management response capabilities in place. procedures, and predictive
adequately consider risk capabilities. supplier risk management
throughout its processes. exists.
1.4
Current state
► Policies – Many procurement policies and procedures are incomplete; are not up to date; do not safeguard compliance with state requirements or
administrative rules; do not clearly define roles, responsibilities and approval limits; and have not been communicated to al l impacted employees.
► Procedures and documentation – Several procedures and documentation requirements have not been consistently documented, resulting in inconsistent
implementation approaches related to procedures and retention of key documentation.
► Fit for purpose approval process – Although a risk rating is assigned to individual procurements, the approval process is not consistently aligned to the
level of risk of the procurement.
► Risk management – While a Compliance and Quality Control (CQC) function has recently been established, the function’s primary mandate should be
strengthened to have it operate as a pseudo-independent risk monitoring function. PCS management should own risk (identify, assess and manage the risks
in its business), and the CQC function should provide oversight of management’s effectiveness in identifying and managing those risks.
► Tools and templates – Standardized tools and templates to facilitate the accuracy, efficiency and effectiveness of controls within the procurement process
have not been designed and/or provided to staff for all procurements.
► Training – Although limited training has been provided to PCS and program employees, a formal training strategy, plan and program have n ot been
developed and provided to procurement staff.
*See details in slides 190-202
Maturity assessment
Quantitative – by the numbers
A review of documentation found a 56% failure rate or lack of evidence to Consistent themes have been identified in recent internal and external audit
determine compliance with key attributes tested by the HHSC Internal Audit reports.¹ The table below highlights the nature of observations and issues
included in select audit reports presented to HHSC management from 2013 to
department across 10 phases of the procurement life cycle. The chart below 2018.
depicts the number of attributes that passed or failed, as presented in the
Audit of PCS Procurement Processes Report (18-01-023) developed by
2016
2013
2014
2015
2017
2018
HHSC Internal Audit in July 2018. Observations or issues
100%
related to:
90%
80% Policies –    – 
70%
60% Procedures      
50%
40% Documentation      
30%
20% Policy Compliance      
10%
0% Tools   –   
Procurement planning
Solicitation process
HUB compliance
Document development
response receipt and bid
Procurement evaluations
Contract negotiations
Contract award
Evaluation tool testing

Determination of need
Recommendation for awards

Evaluation preparation,
Quality control      
opening
Risk management and

    – 
monitoring
Training      
Issue was noted in audit report.
– Issue was not noted.
Pass Fail or lack of evidence
1 Audit Reports reviewed were SAO 14-013: An Audit Report on Information and Communications Technology Cooperative Contracts at the Health and Human Services Commission (2013); SAO 14-035: An
Audit Report on Selected Contracts at the Health and Human Services Commission (2014); Sunset Advisory Commission Staff Report: HHSC and System Issues (2014); SAO 15-019: A Report on Recent
Contracting Audits (2015); SAO 15-030: An Audit Report on Procurement for Terrell State Hospital Operations at the Health and Human Services Commission and the Department of State Health Services
(2015); SAO 15-031: An Investigative Report on The Health and Human Services Commission’s and the Office of Inspector General’s Procurement of Services and Commodities from 21CT, Inc. (2015); OIG
Audit: Brain Synergy Institute Contractor Performance and Billing, and HHSC Contract Procurement and Monitoring (2016); SAO-KPMG Independent Auditor’s Report 16-317 (2016); SAO-KPMG Independent
Auditor’s Report 17-314 (2017); SAO-KPMG Independent Auditor’s Report 18-314 (2018); Texas HHSC Internal Audit – Audit of PCS Procurement Processes (2018), and SAO 18-038: An Audit Report on
Scoring and Evaluation of Selected Procurements at the Health and Human Services Commission (2018).
Maturity assessment
Qualitative – by multiple observations
Through interviews and inspection of PCS documentation, we noted the following:

► Policies: Policies and procedures for effective procurement planning, scoring and execution are not consistently defined and/or implemented.
► A formal process has not been fully established to update policies and procedures to reflect changes in current laws and regulations for all policies. Additionally, a formal
process to communicate changes or updates to policies has not been established.
► Roles and responsibilities, and associated delegations of authority, related to review and approval of requisitions and contracts are not consistently defined, resulting in
duplication and potential gaps.
► Procedures and documentation: Procedures and documentation requirements have not been consistently documented, resulting in inconsistent implementation met hods
related to procedures and retention of key documentation. Examples include lack of signed nondisclosure forms, signed nepotism forms, completed scoring evaluation
documents and approvals of the final award recommendation.
► Tools:
► A defined evaluation tool with adequate document protection is not consistently used to increase accuracy of scoring calculations.
► Prequalified standard contract templates are not effectively used across the Agency.
► Risk management:
► While a CQC function has recently been established, a process has not been consistently implemented to verify the following:
► Solicitation evaluation criteria used are fair and accurate.
► All required documentation is being consistently maintained.
► Policies and procedures are being followed and procurements are in compliance with state requirements.
► Programs are complying with PCS policies and procedures.
► Oversight of processes is not performed to verify that all necessary governance controls are consistently performed, such as discovering and documenting conflicts of
interest and nepotism verifications.
► Fit for purpose approval process: The approval process does not adequately consider risk factors outside of the dollar value of the contract when determining a ppropriate
review procedures. Additionally, although risk ratings have been assigned for procurements the approval process is not fully aligned to the level of risk of the procurement. For
example, a renewal for standard services should not warrant the same approval process as a new contract.
► Training: Although limited training, with varying effectiveness, has been provided to PCS and program employees, a formal training st rategy, plan and program have not been
developed and provided to PCS and program staff.
► Staff members are often not appropriately trained on their expected job functions and all applicable state requirements necessary for purchasing.
► Training conducted related to use of CAPPS and System of Contract Operation and Reporting (SCOR) has not been consistent to support all impacted employees.
► Adequate training has not been performed to equip vendor evaluators with the proper skills and knowledge to properly perform evaluations, such as how to properly use
Microsoft Excel templates for evaluations.
Technology
An agency’s systems that aid in the procure to
Technology pay process and can produce output reports,
preferably a single integrated system that is
Maturity assessment fully automated and produces timely reports.
Technological infrastructure affects the culture, efficiency and effectiveness of government agencies. The health of any agency’s
technological infrastructure impacts not only its ability to efficiently execute each step of the procure to pay process, but also its ability to
effectively serve its customers.
Technology ► The information technology architecture/network supporting the Agency and how
► Auditors identified errors in
architecture, it relates to key processes
the evaluations performed for
including ► Key functionality to support operational and strategic procurement all 28 procurements that
applications, ► Enterprise resource planning (ERP) design and integration with other business, were tested. (SAO Report)
platforms and operational and reporting systems
networking ► Data within the System of
► Key limitations in terms of IT hardware or software capacity, functionality, Contract Operation and
reliability or integration with other business systems that may restrict business Reporting (SCOR) is not
performance accurate or complete. (OIA
► Known issues associated with the IT infrastructure, e.g., limitations of legacy Report)
systems
► Workflow and integration of core applications
Instances of ► Instance strategy of major technology components (HHSC-specific modifications)
technology ► Use of globally consistent technology platforms and related processes (process
Hypothesis testing
standardization, where feasible)
Data model, data ► Organization and consistency of global data ► Automation and leading
organization, ► Existence of clear data definitions practices are not integrated
naming and data ► Reporting capabilities to facilitate data-driven decisions and support into the operating model
governance transparency efforts allowing for inefficiencies and
► The organization’s data governance policy and procedures rework.
► The database structure employed by the organization and links between ► Common IT system gaps are
databases not addressed
► Data integrity policy and procedures governing access to view and/or manipulate systematically, but managed
key data elements individually.
Technology
Maturity assessment
An organization’s systems that aid in the Procure to Pay (P2P) Process and can produce output reports, preferably a single integrated
Technology
system that is fully automated and produces timely reports.

There is no P2P system in Basic P2P systems exist in P2P systems are in place in Harmonized P2P systems One integrated P2P system
place. most business units (BUs) but all BUs and functional exist and are widely used, across the organization links
are not linked together, few e- procurement areas but are not manual processes have been all purchase orders (POS) and
catalogs exist and many integrated, e-catalogs are in eliminated and there is suppliers.
transactions are still place and maverick buying still moderate adoption of e-
processed manually. occurs. catalogs with key suppliers.
1.7
Current state
Policies and procedures
► Business processes and system functionality modifications (current customizations) are not fully enhanced to maximize use of automated tools.
► There is often an insufficient effort by IT and leadership to identify subject-matter resources in the program areas and engage them as system stakeholders.
Governance
► CAPPS has not been entirely configured and customized to meet the governance needs of all user groups.
► Workflows in relation to approvals established in the system are often insufficient to support Agency policies and overengineered to the point that they are not entirely effective.
Training
► Staff has not been adequately trained to use CAPPS and SCOR effectively.
► System changes and staff turnover have exacerbated the overall training deficiency.
Tools
► The CAPPS system is not properly sized for volume, and requisition approvals are not correctly synced.
► Not all contracts are included in SCOR, and some contract records contain inaccurate and/or incomplete data.
► Lack of visibility and tracking significantly hinders reporting capabilities.
► The Agency’s digital signature tool is not owned by IT and is disconnected from CAPPS and SCOR.
► Inconsistent and incorrect use of system tools often results in loss of transparency and reduced system efficiency.
► As presently configured, the system tools are limiting to support business processes and users are often unaware that system enhancements and canned report development
are still in progress (they have had little input and received minimal communication).
► Legacy data conversion was executed poorly and data entry errors occur regularly, resulting in the loading of inaccurate info rmation.
► A concerted effort across all stakeholder groups to address data integrity and lack of reporting capabilities is an urgent ne ed.
► CAPPS appears to have been customized to attempt to meet business needs rather than fully exploring out-of-the-box ERP system capabilities.
Technology
Maturity assessment
Quantitative – by the numbers Qualitative – by multiple observations

ERP system During the interviews, it was noted that:
► The CAPPS system was intended to automate 80% of
► Originally sized for a $13b spend organization but is
the procurement process; that has not been realized.
now supporting a $42b spend organization
► The CAPPS system is not configured to be user
► Created roughly 24,000 custom tables, more than friendly (90+ comments).
double the number of out-of-the-box tables provided by ► Agency business processes are not supported by
the Agency’s ERP system system functionality.
► There is limited visibility into requisition status.
► Observed by users to take approximately 10 minutes to
► The information in SCOR is inaccurate.
upload a single PDF when the system is performing
poorly In practice, we saw:
► Data flows one way from CAPPS to SCOR.
► More than 100 customizations (functional use cases or
► The procurement process is still heavily manual.
EPICs) with no governance or approval process for
► The CAPPS system had latency issues that were
changes
recently improved
► The few available reports are formatted improperly,
CAPPS requiring extensive manipulation to make the data
► No detailed current state system architecture diagram useful.
and lack of development documentation creating limited
In our experience, basic functionality should include:
to no visibility into CAPPS, reliant on individual rather ► Easy to navigate tools to support the procure to pay
than institutional knowledge
process
► “Collaboration” function in CAPPS often an impediment ► Standard reports and ad hoc reporting capabilities
to progress Additional analysis on this topic is located on pages 207–227.
Procure to pay process
The complete P2P cycle, from the time a purchase
Procure to pay process requisition is created to the time the invoice is paid.
A fully integrated process will provide end-to-end
Maturity assessment coverage and tracking functionality.
A mature P2P process executes the transactional purchasing processes and requirements for release of purchase orders, expediting,
goods receipts process and exception resolution. Demonstrates awareness and adherence for internal purchasing control policies and
processes and impact on business processes.

► Standard procedures or guidelines in place for the P2P process ► CHIP rural service area – Manual process
instead of automated data entry (OIG
► List of current initiatives to automate the procurement process
Report)
► Detail flow of procedures to create a purchase requisition
► CHIP rural service area – Purchase
► Detailed list of authorization process for purchase orders transactions where the procurement
► Key performance indicator (KPI) of percentage of purchase requisitions that do process was not utilized and purchase
not have a purchase order number or contract number order was improperly changed (OIG
Report)
► KPI of receiving cycle time – from dock arrival to available in inventory/to
requisitioner (in business hours) ► Issue on transparency and objectivity of
► Detailed flow of process in case of mismatch between purchase orders and the evaluation process (SAO Report)
goods receipts and invoices receipts
Process
► Number of people involved in each step of the process and a short description Hypothesis testing
of their role and department
► Gaps in spend are caused through
► Description of technology that your department uses for each step of the
sourcing.
process
► End users are not using or
► Description of compliance level of the actual P2P processes with the discouraged from using existing tools.
recommended P2P processes ► There is reliance on Excel without
► Estimate of the level of compliance for each stage of the process and the key using existing tools, leading to zero
issues faced visibility and poor performance.
► Procedure listing of how compliance is monitored with the recommended ► Policies present excessive hurdles
processes that do not support operations and
end up being ignored.
“Process drives everything, but process and
Procure to pay process accountability can’t come at the expense of
everything else.”
Procure to The complete P2P cycle, from the time a purchase requisition is created to the time the invoice is paid. A fully integrated
Pay Process process will provide end-to-end coverage and tracking functionality.
1. Informal/
no process
Informal/no P2P processes Basic P2P process has no End-to-end P2P processes Fully integrated and There are lean and highly
in place, and existing guidelines and a mix of are in place, but low levels automated P2P processes integrated P2P processes,
processes require manual paper-based and electronic of compliance exist. are in place, and e-catalogs and a robust
paperwork. processes. compliance is high. order tracking process.
1.7
Current state
Process
► Multiple system process variations exist, inclusive of workarounds. Design not entirely fit for purpose; workarounds appear to be used with high
frequency.
► Process is not formally documented with full process flow and interactions for PCS buyers and program contract managers. As o f 31 July 2018, a
Word document showing process flow and interaction was published for RFPs, RFAs and RFQs. Process flow start time is when PCS receives the
requisition and continues until the contract is placed into SCOR.
► HHSC moved to a state contract with the Texas’ online ordering portal for office supplies; outcome resulted in extended delivery time of goods,
higher price of goods, lack of transparency and additional processing time by the Agency and PCS. This situation needs improvement.
► Lack of a dashboard means the inability to confirm with significant detail where a requisition is within the process without going directly to a buyer.
PCS manuals are often not adequately updated in a timely manner and can be misleading.
► The business needs and the functions within procurement were not sufficiently involved in the development of the CAPPS and SCOR systems.
► Pre- and post-implementation of CAPPS and SCOR had limited input from PCS on both systems.
► HHSC needs a better linkage between the purchasing function and the financial function for reporting.
► HUB – Historically Underutilized Businesses operate in a similar process as seen in other state procurement processes.
Maturity assessment
PCS KPIs
PCS KPIs show that PCS has room for improvement in areas of vendor spend management, vendor data management and requisition
forecasting.
Requisitions and POs created The average number of new vendors per There are eight vendors in the masterfile
(1 September 2017–31 August 2018) month is 360. with more than $1b in purchases.
FY 2018 total FY 2018 total per week*

Number of monthly new vendors
Category # of reqs # of POs # of reqs # of POs
Goods 22,945 17,905 459 358 800 Vendors spend over $1b
Number of vendors
700
Quantitative
Services 22,198 10,902 444 218

600
$ in billions
Complex
231 75 5 2 $4.00
contracts 500
$3.50
400 $3.00
FTE buyer total per 300 $2.50
Total (as of Aug 2018) week*
# of FTE Buyers 200 $2.00
# of reqs # of POs $1.50
12 9
100 $1.00
Goods 39
0 $0.50
Services 27 16 8 $0.00
Complex
0.2 0.1
contracts 25
*Based on 50 weeks
► There are 4,585 requisitions and 85 POs that are
outside of these categories.
► Some portion of transactional work is pure
processing, while some is based on determination ► There were 313,098 vendors. ► Total spend is $41.8b
Qualitative
(complex bidding). ► Limited supplier screening process exists for placement on ► Top 66 vendors are 80% of spend.
► Total requisition value is ~10% of total yearly spend. Centralized Master Bidders List (CMBL). ► For top 66 vendors, average spend is ~$504m and
► Related benchmarks: 1) Number of purchase orders ► Due to volume of new vendors, it is debatable who is the average number of transactions year is ~225.*
processed per FTE that performs the process “order proper administrator of the vendor checklist (PCS vs. ► For vendors with spend in the bottom 20% average spend
materials and services,” 2) overhead cost to perform program). is ~$27k and average number of transactions per year is ~
the process “order materials and services,” 3) ► A more robust vendor checklist would benefit HHSC. 0.2%.*
percentage of purchase order line items transacted ► More robust vendor master data collection would benefit ► A disproportionate amount of energy is expended on the
using e-procurement enabled catalog suppliers and HHSC. bottom 20% of spend.
4) percentage of purchase orders approved ► No closed loop connects performance to eligibility.
electronically. * Transaction calculation is based on spend 80/20 rule.
Series 1
Sources: 1) HHSC file 20180824 Req information by Team FY18, 2) HHSC file 20180824 Vendor Created since 9-5-17 data, 3) HHSC file 20180824 Total Procard, 4) PCS document OP 571 RFP Contract Procedures_FI.NAL
07-30-218.doc published 31 July 2018 and interview with HHSC employees
Maturity assessment
Qualitative review
Findings Impediment findings
► To combat the one-size-fits-all condition affiliated with PCS,
► Over-/underengineered processes exist (see Appendix),
the Agency could benefit from a defined fit for purpose
► Cycle time is not measured. buying channels and analysis to manage transaction flow.
► >90% of spend has a requisition with no dollar amount. ► Approvals in some cases are overengineered and in some
► Requisitions of zero value allow for program to expedite cases underengineered. Fit for purpose is needed.
the process, but they hinder PCS and the activities that ► Backlog builds in a cyclical manner influenced by the
need to be accomplished (see “Requisitions without PO Program and PCS’s inefficiencies of forecasting.
and without approvals” to the right). ► Much of the process is represented by the statement “it
► CAPPS configuration has allowed for a manual process depends,” reducing clarity and imposing optionality.
with multiple forms created out of the system and inserted
back into CAPPS; a large portion of the requisition process
is performed outside of the system.
► Formal buying channels are not defined sufficiently for an
organization of this size, where the method of purchase is
selected from e-catalogs, purchase cards, service
agreements and buyer-negotiated contracts.
► Scanning and comparing receipts is still a manual process.
► The routing process hinders success in limited
transparency, untracked changes and manual
determination.
► During the RFx process, sometimes the process in
programs has been to fix mistakes with an addendum as
opposed to putting the time in earlier to get it right the first
time.
Complex services
Complex services Contracts of high dollar value require RFx to
procure goods and services.
Maturity assessment
Complex contracts have been the source of many audits and inquiries. These types of procurements and subsequent contracts have
several intricate inputs that all need to be correctly done for the process to be a success. Leading companies leverage autom ation where
possible to minimize chances of error. Understanding the areas of improvement for complex contracts will help the Agency address many
audit findings.
► Procurement templates are in place. ► There is a lack of necessary

Plan ► Procurement policy and procedures are updated. procurement policies and procedures.
procurement (OIG Report)
► Procurement/contract management roles and responsibilities are clearly
defined. ► Evaluations were not correctly scored
or calculated. (SAO Report)
► Procurements are assigned to appropriate people based on skill. ► Incomplete records of the evaluator
► Procurements are provided with all appropriate inputs. score sheet exist. (OIA Report)
Solicitation ► Procurements are reviewed by skilled leadership prior to being released to the ► There is a lack of validation of
process public. accuracy of evaluation scores. (SAO
► Question-and-answer periods are handled appropriately. Report)
► An appropriate evaluation tools template is used. Hypothesis testing
Solicitation ► Appropriate scoring was done.

► Gaps in category experience to handle
evaluation ► Evaluation was validated to help support compliance with policies. complex categories lead to errors.
► Confirmation that all policy and procedural compliance activities have occurred ► Organizational turnover occurs without
exists. standard handover processes, leading
Contract
to skills mismatches.
compliance ► Confirmation that correct information has been received from vendors exists.
► Poor tools lead to incorrect evaluation.
► Confirmation that the correct contract template is being used exists.
“During the RFP process, the process in programs has been to fix mistakes
Complex services with an addendum as opposed to putting the time in on the front end to get it
right the first time. Part of the issue is PCS not having the authority/influence
Maturity assessment to require consistency from the programs.”
– HHSC employee, July 2018
Complex contracts Contracts of high dollar value require RFx to procure goods and services.
Day-to-day pressure dictates Procurement department is Formal strategic sourcing Comprehensive strategic Sourcing approach is
the activity of the department, driven by contract end dates, process, leveraged global sourcing process, mid- to recognized as one of the best
there is limited leverage of does not have strategic sourcing on most categories long-term category plans with in the market, preferred
strategic sourcing procurement plans, leverages with mid-term plans for key a global focus on key vendors are established and
opportunities and no contracts regional sourcing on an ad categories, and contracts are categories and contracts are contracts are reviewed with
are in place. hoc basis and has few in place but are managed by managed by category suppliers at least annually.
contracts. the business. managers.
1.8
Current state
All findings from P2P apply, in addition to the following:
► Workarounds: Template language in CAPPS may not be accurate based on the solicitation per program area; the correct template is sometimes stored outside of
CAPPS and/or incorrect within CAPPS. The evaluations of the complex contract occur mostly outside of the system, allowing for process errors and calculation errors,
largely and specifically detailed through the most recent audits (system issue, governance issue and training issues).
► Lack of documentation standardization: Programs have latitude to create scoring templates that work for them, but many have limited automation and are not
always aligned with best practices. SOWs and requisitions are developed/prepared differently by each program area prior to be ing sent to PCS.
► Evaluation processes do not serve the Agency: Stratification of winning vendors: there is no limit/guidance on the number of evaluation criteria that can be used
on an RFx. This results in a lack of stratification of the results (some evaluation tools have in excess of 500), often referred to as micropointing. Evaluation tool
selection criteria are not consistently adjusted based on criteria impact to the service or good. Recent safeguards have begun to improve the scoring portion of the
evaluation process.
► Competency: Staff do not routinely have the advanced expertise to fully perform complex contract procurements. Complex contracts skill attainment path within the
program is undefined. Procurement and contract staff are not consistently receiving needed training to be proficient in their roles. Job duties are blended between
buyer and purchaser (i.e., those buying off TxSmartBuy vs. sourcing through solicitation). Requisitions are being used as a triggering mechanism to start both a PO
and a solicitation.
► Teaming: As the program and others are directly impacted by changes, these stakeholders desire to be a part of designing and improving the PCS processes.
► Transparency: Visibility of complex contract requisition type appears not to be tracked through budgeting (i.e., budget cannot easily identify which contract is
complex). Requisition-to-PO cycle time appears not to be readily available or tracked.
Complex services
Maturity assessment
Transactional volume Through interviews, it was noted that:

► Complex procurement processed 231 requisitions in FY18, ► The HHSC procurement staff remarks indicate that
which represents 0.5% of PCS’s requisition volume. workarounds are needed to complete a complex contract.
► Complex contracts are the highest value, most visible and ► Changes in policies and procedures are not clearly
most scrutinized contracts for HHSC. communicated.
► Despite the volume being low in comparison to the total ► Governance over the evaluation process is lacking.
requisitions, the time to process RFAs and RFPs is 9 to 18
months (as seen below). This has resulted in a reverse
pareto, where the bulk of the time is spent on an activity that In practice, we saw:
has the least amount of volume. ► HHSC is working toward updating policies and procedures to
► Streamlining the RFA/RFP process could provide additional provide clarity.
resource time while maintaining compliance. ► The CQC department has been created to provide compliance
and governance expertise.
PCS’s processing times for requisitions and POs

(Process flow start time is from PCS receiving the requisition until the contract is Based on EY US’s past experience, the following leading
placed into SCOR) practices are generally found in government agencies:
► RFI – Request for Information: 1 month ► Exceptions are monitored and root cause analysis is
► RFA – Request for Application: grants: State or Fed 9 to performed.
18 months ► Segregation of duties exists between vendor setup, voucher
► RFQ – Request for Qualification: 1 to 2 months processing and payment processing personnel.
► RFP – Request for Proposal: 9 to 18 months depending ► Formalized documentation outlines the optimal process flow
on complexity for requisitioning, and purchase order activities exist for each
of the Agency’s expenditure areas.
► RFO – Request for Offer: 1 to 2 months
► Procurement procedures are clear, simple and detailed
accurately at the activity level.
People and organization The right people, with the right
capabilities, are in the right place, for
Maturity assessment the right cost, doing the right things.
People and Organization is a process that is impacted by a variety of programs within PCS and across HHSC: Human Resources (HR),
organization design, leadership strategies, learning and development, performance management, recruiting, staffing, retention strategies,
change management, and rewards and recognition.
► How the organization is structured so as to support a strong governance ► CHIP rural service area indicates
framework and, in particular, exert control over decentralized/outsourced inadequate staffing. (OIG Report)
functions
Organizational
► The establishment of clear reporting lines to support effective communication
structure, including
and responsibility/accountability for operational performance and decision-
reporting lines and
making
spans of control
► Awareness of any gaps in reporting/management’s control coverage
► Appropriate spans of control to produce efficient management structures and fit
business strategies
Roles, ► The extent to which roles, responsibilities and authorization levels are formally
responsibilities and defined, approved and maintained Hypothesis testing
authorization levels ► The existence of succession/contingency plans for key roles and responsibilities
► Organizational turnover may
► Defined recruitment policy and procedures to include how candidates are lead to gaps in the transitioning
identified and evaluated of roles, processes, etc.
Talent life cycle:
► Understanding of key roles and the vetting of appointments to key positions ► Roles and responsibilities may
recruitment, training
► Established training strategy, including procedures to support how training and not be well defined.
and development
development are initiated and training needs identified and addressed ► Role overlap results in
► Recording and monitoring of staff training and development undertrained resources
performing activities above their
► The extent to which skill/competency profiles have been developed and skill set, while highly trained
maintained, especially for key roles resources are performing basic
Skill profiles and
► The existence and frequency of performance appraisal and how the process is tasks.
performance
linked to training and development
appraisal
► Awareness of any skills gaps or resource needs arising from the organization’s
strategy or the underperformance of business functions
“PCS is understaffed and overwhelmed.”
People and
The right people, with the right capabilities, are in the right place, for the right cost, doing the right things.
Organization
1. Informal/
no process
Procurement department is Procurement employees Procurement employees Procurement employees Procurement has a global
seen as a second-tier exhibit transactional skill demonstrate strategic exercise strategic thinking network of high-quality
function and focuses on sets, but the department is thinking and focus more on and category management people who make the
administrative activities. not recognized as a value- category management than and attract internal and department a desirable
adding function. administrative tasks. external talent. place within the company.
1.5
Current state

► Organization structure, roles and responsibilities: The PCS organization has been siloed from the programs — organizationally and physically. Roles and
responsibilities within PCS and across PCS, programs and Legal are often unclear. True capacity in PCS is unknown; however, employees seem
overworked, high employee turnover is an issue and while many vacancies have recently been filled, many roles continue to go unfilled in both PCS and non-
PCS legal support. Spans of control are appropriate.
► Talent, skills and performance: Talent processes (sourcing, onboarding, training and development, performance management, skills alignment, and
succession planning) are generally reactive and tactical instead of strategic. Career paths are often not clearly defined. Because of the self-service HR
model, PCS managers are responsible for implementing all talent processes, with little HR oversight or assistance. Performance management processes are
conducted annually, but it is possible to stay in your role with poor performance ratings. Training is generally inconsistent and inadequate to build skills.
► Culture, leadership and compensation: Although employees are feeling more hopeful and supported with recent leadership changes, there is still a
significant culture of fear. The leadership team within PCS and across programs needs to be better aligned in relation to purpose and goals. Comptroller
regulations regarding salary caps for promotion within a function result in people leaving the organization to get higher salaries. If they return, they are paid at
higher rates than their peers who stayed and were promoted from within.
Maturity assessment
Quantitative – by the numbers Qualitative – key takeaways

► 271 ThinkTank participants voted on the following question: Communications within and outside of PCS
“Of the seven options listed below, what are the top three people and ► Communication has been repeatedly
organizational issues that you feel need to be prioritized?” flagged as a key issue for HHSC.
► PCS leadership has begun implementing
Communications within and outside of PCS 57.6% improvements (e.g., PCS Ambassadors
have been named to liaise with the
Staffing and workload levels 52.0%
programs; Tuesday leadership meetings
Role definition and clarity 44.6% are in place to provide key updates);
Ongoing training and development 31.0% however, that information is not consistently
cascaded.
Subject matter expertise 29.5%
Onboarding / training 26.6% Staffing and workload levels

Goal setting and performance measurement 17.0% ► Despite the recent hiring efforts, ~23.5% of
PCS jobs are still vacant or filled with
0% 20% 40% 60% 80% 100% temps/interns.
► We grouped “Ongoing training and development (31.0%),” “Subject matter Competence

expertise (29.5%),” and “Onboarding/training (26.6%)” into a larger issue ► Lack of new-hire competence, ongoing skill
bucket of “Competence.” development, and development and
► When the three competence areas are combined, they rise to the top of the accessibility of advanced skills are
priority list as seen in the figure below. repeatedly mentioned by PCS and program
employees.
Competence 87.1% ► Professional development has become a
Communications within and outside of PCS 57.6% key reason employees seek and stay with
an organization.
Role definition and clarity 44.6%
Goal setting and performance measurement 17.0% Additional analysis is located on
0% 20% 40% 60% 80% 100% Appendix pages 250 – 257.
Looks across all spend and manages it as a portfolio
Portfolio management inclusive of strategy, creation, authorization,
execution, governance, compliance/performance,
Maturity assessment analysis, closure and renewals.
Portfolio Management is an essential function that helps the needs of the Agency to be reflected in supplier contracts and utilizes data to identify and execute on
Agency-level procurement opportunities to drive consolidation of spend and avoid duplication of procurement efforts across programs.

Monitoring and ► The extent to which mechanisms and processes are in place to understand the
compliance requirements and terms and conditions of externally created contracts ► HHSC needs better
► Defined mechanisms for determining a contract’s risk level procedures regarding
► Existence of standard monitoring procedures for every contract contract documentation
► The extent to which contracts are monitored more closely due to higher risk levels and retention. (OIG
Report)
► Appropriate measures in place to monitor a contractor’s performance against the contract
► Established processes for the confirmation and acceptance of delivery of goods or ► Data reliability and
services completeness revealed
inaccuracies in the data
► The existence of mechanisms for resolving negative performance issues
provided and could not
► Implementation of remedies in the contract terms, including remuneration and contracting verify whether all of the
penalties
Commission’s contracts
► Availability and determination of circumstances under which a contractor could be were included in the
terminated early SCOR database. (SAO
Administration ► The establishment of clear, complete guidelines of what a procurement file should contain Report)
and how and when it should be stored
► Established closeout procedures
Hypothesis testing
► Whether contracts are tracked to know which renewals or re-solicitation needs are
upcoming
► Known processes in place for contract amendments or changes ► Lack of ongoing internal
supplier performance
Payment ► The existence and frequency of monitoring the availability of funds throughout the contract monitoring data
► The extent to which invoices are verified for accuracy ► Lack of clear contract
► The determination of payments authorized so that they are consistent with the contract terms to enforce
terms compliance
► Appropriate payment methods are being used
“It’s likely different programs have
Portfolio management contracts with the same provider

with different terms and pricing.”
Portfolio Looks across all spend and manages it as a portfolio inclusive of strategy, creation, authorization, execution, governance,
Management compliance/performance, analysis, closure and renewals.

Day-to-day pressure dictates the The procurement department is There are established portfolio Portfolio management activities are Entire portfolio is actively monitored
activity of the department; there is driven by contract end dates, does management procedures and done regularly across the for performance and compliance,
limited leverage of strategic sourcing not have strategic procurement guidelines with a centralized tracking organization, and the tracking and enabling tools and technologies
opportunities and no tracking plans, leverages regional sourcing mechanism in place. mechanism is used consistently and support the tracking and
mechanisms of contracts. on an ad hoc basis and has few effectively. management of contracts for the
contracts, tracking ad hoc. organization. Preferred vendors are
established, and results are reviewed
with suppliers at least annually.
1.9
Current state
► Technology: Current portfolio management technologies are often not reviewed for completeness or accuracy of the required information. The CAPPS/SCOR system contains known
incomplete information and intervention is lacking accuracy before final contracting. The programs commonly rely on contract amendments to address inaccuracies. Current technologies do
not provide necessary reporting capabilities. Medicaid/CHIP uses spreadsheets to track its contracts instead of CAPPS or SCOR. In addition, the availability of historical vendor spend
information to assess contract performance is limited. Current data availability and access make data-driven procurement decisions difficult. The Agency utilizes state-wide contracts
available to it for much of its commodity purchasing needs. In some cases, state-wide contracts may hinder timely purchases for simple commodities such as office supplies. Where strategic
contracts are used, data entered in CAPPS often does not properly link the contract to the purchase, making it impossible to know the spend on a contract.
► Roles and responsibilities: Portfolio monitoring it appears to vary based on the HHSC program. Each program area appears to have autonomy to choose which contract(s) and the degree
to which it monitors those contracts, leaving potential gaps in the portfolio. The roles and responsibilities of 1) central contract oversight and support group and 2) a contract administration
group appear not to be consistently understood throughout HHSC. Post-contract monitoring is currently being performed within the program area and without formal procurement guidance.
The majority of procurement staff activity in PCS is focused on tactical, reactive work. No dedicated staff in PCS is assigned to data analysis and/or portfolio management for the Agency.
► Process: There are limited cross-program coordination processes that would support the identification of common procurements that could be strategically procured on behalf of the Agency.
Programs sometimes seek to establish their own strategic contracts but do not typically seek to coordinate with other programs. No procurement planning process is in place that could help to
identify strategic category procurements. Procurements are often not strategically planned and scheduled to balance workload throughout the year, leading to high-demand periods at the start
and end of the state and federal fiscal years. Lack of portfolio management is evident in that the contract cycle is not planned to spread the workload throughout the full year.
Maturity assessment
Qualitative – by multiple observations Quantitative – by the numbers

Through our interviews, it was noted that: The table below demonstrates the readily stratified categories
available in the spend data for FY18
► SCOR appears to be the intended contract repository for HHSC
but is currently not being used by all programs. % of total
► Programs seem to have primary responsibility for contract LBB description Spend spend
management through the procurement life cycle, which could Client Services $ 37,088,843,057.89 88.6%
make segregation of duties difficult.
Other Operating Expense $ 2,454,064,210.49 5.9%
► PCS COS team has some contract management duties but is
Grants $ 1,395,088,720.15 3.3%
currently diverted to support PCS internal activities.
► The contract management job function is shared across PCS Professional Fees & Services $ 695,288,573.90 1.7%
and programs, but clear distinction in the roles is lacking. Rent and Utilities $ 93,446,505.56 0.2%
► Minimal data analysis is performed by PCS. Utilities $ 45,374,086.26 0.1%
► There is little to no cross-examining of needs by different Rent - Machine and Other $ 29,811,651.90 0.1%
programs to be considered for a single procurement. Consumable supplies $ 18,104,314.56 0.0%
► Need for better processes and communication among PCS,
Food for Persons $ 17,110,017.61 0.0%
CPA’s Statewide Procurement Division, and DIR to manage
Capital Expenditures $ 6,467,089.60 0.0%
who should perform sourcing events, when and for what.
Fuels & Lubricants $ 1,836,152.85 0.0%
► Existing tools and storage of data are not configured to facilitate
meaningful data analysis or category management.
Using our vast experience, we see that:
► Organizations can more effectively manage categories when
they create their own spend taxonomy and build it into their
system.
Supplier relationship management
Maturity assessment
Supplier Relationship Management (SRM) builds a trusting relationship with third parties (suppliers) that strengthens accountability,
transparency and performance. When such a relationship exists, the value proposition typically increases because the third party is able to
contribute solutions that benefit both parties in the relationship.

Supplier collaboration: ► Promoting communication and engagement throughout the ► Audits conducted on the HHSC
Collaboration with an procurement planning and contracting phase produces meaningful System over the past year did
organization’s supplier outcomes for complex, high-risk contracts. not examine SRM as this was
community fosters an ► Limiting input provides an inherent advantage to incumbent suppliers outside the scope and audit
integrated and constructive because it is hard for new vendors to communicate with state agencies parameters.
engagement. regarding the products and services that they may be able to offer.
Hypothesis testing
Supplier development and ► Interaction between the vendor community and an organization’s
improvement: Due procurement and program staffs provides an opportunity to gain insight
diligence in market research into market forces, supplier segmentation and innovative practices that ► The Agency may be missing out
leverages supplier and can facilitate the organization’s ability to develop a robust solicitation. on modern SRM principles due
industry expertise and to an abundance of concern of
knowledge base. showing favoritism. If so, this
would cause subpar commercial
arrangements with suppliers.
Supplier performance ► A defined framework for managing vendor performance, including ► Continuous improvement of
management: Performance service-level agreements, processes and documentation, before suppliers may be limited.
outcomes are managed and contract execution. Existing suppliers do not have
improved through ongoing continuous monitoring for
interaction. performance standards and
rework.
“Should a vendor request to meet with HHSC
staff, the vendor must submit a request to
Supplier relationship management COS and must include the purpose of the
meeting and presentation materials.”
Maturity assessment Section 1.4.1, HHSC Contract
Management Handbook
Supplier
SRM provides a framework for interacting with the vendor community across the contract management life cycle to advance innovative
Relationship
solutions for the organization and equip the procurement organization with knowledge and expertise in solicitation planning.
Management
There is no supplier Some spend data gathered; Knowledge-based spend and SRM aligns with strategic SRM aligns with
segmentation, internal stakeholders identified and performance management sourcing goals, supports organizational strategy and
stakeholder community or may be surveyed. Key supports supplier contract portfolio drives procurement
data to support SRM. performance indicators are segmentation and strategic rationalization and organization behavior.
developed and supplier sourcing practice. procurement planning. Continuous improvement
evaluation is performed, and Stakeholders and business Technology/innovation is delivers benefits in areas
risk is identified and response culture are aligned with leveraged and scorecards and outside of traditional sourcing
strategy is developed based segmentation. Risk metrics published. Detailed arena. Risk status and
on risk level. management and contingency risk management and contingency plans are
planning is present. contingency plans are in continuously monitored.
place.
1.3
Current state

► Limited implementation: Supplier relationship management as a practice lacks definition and a framework to share information
and institutionalize leading practices across the Agency.
► Overly restrictive approach to interaction: Contract management and vendor management policy as historically implemented
unnecessarily limited vendor interaction and overinterpreted relevant state policy.
► Decentralized implementation: Program areas manage their supplier relationships through individual processes and controls
according to contract terms, state and federal laws and regulations, and Agency policies.
Maturity assessment
Supplier relationship components Qualitative – by multiple observations

There is a very limited concept of SRM as it relates Through our interviews, it was noted that:
to the concepts below in the HHSC practice today, ► HHSC processes for vendor interactions may hinder
so data related to the function will be not present. innovation and effectiveness. The HHSC policy on
vendor interactions is not supported by state law or
practice.
► Refer to TGC 2155.081, which creates, as a leading
practice, a committee comprising representatives from
the vendor community to advise the CPA on matters
related to state procurement practices and serve as a
channel of communication among the vendor
community.
► New vendor interaction policy as of 1 September 2018
will assist in addressing supplier relationships.
► Guidance on contract management practices is provided

in the PCS Contract Management Handbook; however,
SRM is primarily driven within program areas. For
example:
► One program hosts monthly governance meetings
with all providers at the director level, and quarterly
governance meetings with the deputy executive
commissioner.
► Quantitative and qualitative metrics to gauge ongoing
performance are built into certain contracts but not
universally instituted.
Helps an organization measure the
Performance management performance of its P2P processes. Can use

various tools such as executive dashboards,
Maturity assessment balanced scorecards, key performance
indicators and benchmarking.
To address timeliness, quality and transparency of P2P processes, an organization must identify and track key data that inform decision -
making and strengthen its processes and operations.

Business objectives: ► The key operational and financial performance indicators and
Aligned operational associated objectives ► The procurement process relies heavily
and financial metrics to ► How performance indicators are used to monitor the organization’s on the integrity of each staff member
monitor achievement of strategic objectives and the performance of key controls and does not have checks and
business objectives balances in place. (OIA Report)
► Management actions and initiatives that address issues identified by
key performance metrics ► The Draft Request for Application (RFA)
Process Overview document does not
Monitoring and ► The responsiveness of metrics in light of changes/developments in the include statewide oversight review
analysis: Dynamic organization (such as the design and implementation of performance requirements. (OIA Report)
business monitoring metrics central to any change management plan)
and analysis, including ► The extent to which technology is used to monitor, analyze and report
design and integration key data, in particular, the use of automated process controls and Hypothesis testing
of supporting analysis tools
technology ► Lack of mature governance of the
► Gaps in the monitoring framework (such as key areas/functions where
process
performance is not fully visible to management)
► Lack of data to effectively manage
Performance ► Gaps in the monitoring framework (such as key areas/functions where activities
improvement: performance is not fully visible to management) ► Lack of mature reporting compliance
Monitoring to support ► The indicators used to monitor the performance of implemented and no auditing or follow-up to
sustainable improvements, and the extent of reporting to demonstrate the noncompliance
performance realization of anticipated benefits
improvement ► Where KPIs are known, the systems
and/or processes in place do not collect
the relevant data to measure them
“In the name of efficiency, processes are being
Performance management standardized, which often slows the
completion of work and processes.”
Maturity assessment – DSHS employee, August 2018
Performance Helps an organization gauge the performance and alignment of its P2P processes with its organizational goals. Leverages various tools
Management such as executive dashboards, balanced scorecards, key performance indicators and benchmarking against peers.
No monitoring of the Basic metrics are in place but Formal metrics exist but are Savings targets are in place to Sophisticated balanced
performance of the provide limited insight and not consistently used and are monitor department scorecards are in place and
procurement department may not be linked to business not closely linked to performance and KPIs link to KPIs are integrated with
exists. performance. performance. performance. performance.
1.3
Current state
Performance management uses various tools such as dashboards and performance indicators to measure the
efficiency in completing the procurement processes:
► Business objectives – Extremely limited access to actionable tactical and operational data on how purchases
progress through the procurement life cycle to establish trackable quality measures. Process maps detail legacy
systems’ workflows and do not inform the development of KPIs.
► Monitoring and analysis – Programs and PCS appear to be unsupported by sustainable tools to meaningfully report
on the status of a purchase in CAPPS. Program areas have developed individual ad hoc reporting constructs.
► Performance improvement – To address the backlog and workflow challenges within PCS at year-end, some HHSC
program areas have implemented internal processes that initiate procurement actions much earlier in the fiscal year.
For example, one program area indicated it began submitting contract renewal and extension requests seven months
prior to term expiration dates under prior management.
Maturity assessment

Performance goals and measures | draft SSA Through interviews and a review of documentation provided, it was
noted that:
Goal 1: Help support timely and accurate processing of procurements and
► Support services agreements (SSAs) specify metrics for PCS functions
contracts.
that have not been ratified and are in draft state. The framework is
1.1 Assign a properly approved CAPPS Fin 9.2 requisition to a 90% meaningful; however, the measures are limited to intake and
procurement team within two business days of receipt of the assignment and not representative of P2P processes.
approved CAPPS requisition. ► Additionally, there is no evidence that the practice is implemented, so it
should be revisited. For example:
1.2 Assign the approved requisition to a specific Purchaser within 90% ► PCS purchasers will notify requestors within two days of
one business day of the approved HHSAS requisition being assigned assignment – this was not demonstrated in interviews.
to the procurement team. ► Noncomplex procurements time frame is identified as a measure,
Goal 2: Help support timely and correct approvals and executions of but the period is not specified.
contracts, amendments, extensions and renewals. ► Many program areas indicate use of spreadsheets to track
procurement activities because systems of record are regarded as
2.1 Measure of the contract administration division routing for 95% having low and practical usability.
execution, HHSC system contracts, amendments, renewals and ► There is lack of visibility and relationship between departmental metrics
extensions that must be signed by the Executive Commissioner and and ability to drill down to individual performance.
other system authorized signatory staff.
Linking performance to strategic plan goals

A review of the HHSC system and Agency strategic plans provided a framework that includes administrative functions and an opportunity to
align operational performance tracking; however, the measures were not included in the plan submitted in May 2018 and the website does not
reflect an update as of 27 September 2018. Objectives: Define as outcome, output, efficiency measures
3.1.2: Review and improve procurement, contract oversight and grant management
Agency goals (driving efficiency and accountability)
processes.
3.1: Promote and protect the financial integrity of HHSC programs.
3.1.4: Maintain and enhance timeliness, quality, and transparency of statewide
3.2: Strengthen and sustain a high-functioning, efficient workforce.
financial and programmatic reports.
3.3: Optimize technology to support business strategy and goals.
3.4.1: Implement an HHSC performance management system for increased
3.4: Promote a culture of data-driven decision-making for continuous
effectiveness in governance and accountability for success.
improvement.
3.5.3: Achieve efficiencies in administrative services, including procurement,
3.5: Improve business functions and processes.
products, office space and licenses.
An organization’s management of
Internal stakeholder management the people who may be affected by
the decisions it makes or who can
Maturity assessment influence the implementation of its
decisions.
Internal Stakeholder Management provides a framework for engaging an organization’s workforce to help align operational strategies and
desired business outcomes.

Stakeholder ► The extent to which the procurement department manages all the categories ► PCS was not involved in key
engagement in close collaboration with the other relevant departments procurement planning and
► Whether internal customers’ feedback is received and, if so, how it is development processes. (OIA
recorded and monitored Report)
► The extent to which the procurement department works as a cross-functional ► There needs to be better
team collaboration regarding policies
and procedures. (OIG Report)
Integration ► Internal stakeholders understand the need to regularly communicate their
demand and forecast to the procurement department
► Existence of forecasts and use of advanced planning tools
► Established information/coordination meetings with internal stakeholders and
procurement
Demand ► The stage at which internal stakeholders enter the sourcing process with their
management procurement department Hypothesis testing
► The existence of formal service-level agreements established for internal
customers of the procurement department ► Typically, stakeholders within an
► Whether orders are set in collaboration with other departments organization are siloed and only
► The extent to which similar products/services are bought from different work within their area without
suppliers collaborating across
departments.
Compliance ► Existence of an established communication process when new contracts are ► Processes are not in place to
management signed facilitate communication.
► The extent to which controls are in place if an end user wants to buy outside
of contracts deliberately
“Success of PCS is dependent on
Internal stakeholder management a functional ecosystem.”
Maturity assessment - HHSC employee, July 2018
Internal Stakeholder An organization’s management of the people who may be affected by the decisions it makes or who can influence the implementation of
Management its decisions.
Procurement works in its silo Some areas of collaboration Procurement is regularly Procurement is engaged early Procurement proactively
and internal customers do not exist with other departments consulted but not fully in the process and manages manages all categories in
think it adds value to the but is not uniformly seen as integrated with other cross-functional streams. close collaboration with
organization. having high procurement processes in other relevant departments.
value. departments.
1.6
Current state

Stakeholder engagement
► Historically, clear communication channels and communication strategies have been lacking between PCS and HHSC programs. To improve stakeholder
relationships, PCS created a liaison role that established a forum to engage HHSC programs.
Integration
► HHSC program areas have inconsistent experiences with PCS across many functions, citing challenges in support, level of knowledge and direction.
► There is a lack of a mentality for customer service and collaboration, although there have been recent efforts made by management to shift this mentality
(such as the creation of the liaison role). DSHS and DFPS particularly express sentiment of lacking a voice in process and system design and decision-
making. Perception is reality and the customers of PCS don’t feel treated as customers.
Demand management
► Historically, program areas have felt that PCS adopted a one-size-fits-all mentality regarding program support, with little flexibility or acknowledgment of
program area or business requirements. With more touch points between PCS and the program recently established, customers hope their voices will be
heard.
Compliance management
► Program areas are creating and managing ad hoc reports based on status received through emails and manual touch points, and they pursue follow-up
actions on procurement events through a variety of communication channels.
Maturity assessment
Qualitative – by multiple observations

It was repeatedly noted in interviews that:
► There appears to be a lack of visibility once a requisition is submitted to PCS. Many identify or think of PCS as a “black hole” and
have to do many manual follow-ups to check on status.
► DFPS and DSHS generally do not feel that PCS knows enough about their needs and how they function. For example, some
terms have different meanings across programs.
► There appears to be an overall lack of voice of the customer when it comes to receiving and implementing feedback for process
changes.
► Whether a forecasting timeline of procurement needs is created varies from program to program. If program areas do complete a
procurement forecasting timeline, it is typically done with little or infrequent collaboration with PCS.
► Changes to statewide contracts are not always communicated by PCS to programs and have caused service interruptions (e.g.,
shipping contract — Lonestar to FedEx). This suggests a breakdown in communication at one of two points — between CPA
and PCS or PCS and the end user. Either way, opportunities for improving these communication channels, to the extent
possible, should be considered.
► Programs and PCS often had differing views on roles and responsibilities.
Using our vast experience, we see that:

► Regular and frequent communication between stakeholders fosters and encourages a collaborative mentality to achieve goals.
► Clearly delineated roles and responsibilities for all parties reinforce accountability and reduce opportunities for unnecessary
delays due to stakeholders being unaware of their responsibilities
Quantitative – by the numbers

► 58% of ThinkTank respondents identified communications within and outside of PCS as a top issue.
► Approximately 80 current PCS staff members manage the procurement needs for roughly 15 to 20 different
customers that are internal and external to HHSC — divisions, programs and agencies.
Root cause analysis
Root cause analysis
Overarching root cause Manifestations Impacts

The “hero” environment is reliant on extraordinary individuals’ efforts to
compensate for inadequate technology and processes.
Training programs are generally insufficient, and there are limited designated
People support resources to provide compliance and technical guidance.
1. The operating model, Success is often not rewarded, while failure brings punishment, which can
significantly impact morale and prevents employees from feeling empowered.
strategy and investment
of HHSC, has not Processes are often not written to support a large organization, limiting
evolved to meet the opportunities for economies of scale and optimization improvements.
needs of an outsourced
Processes are often inconsistent across similar requisitions, causing
service delivery solution, Process inefficiencies and increasing errors and noncompliance.
which depends upon
Procurement for its Policies and procedures are not effectively maintained in many cases, and
changes often are not effectively communicated to guarantee compliance.
success.
Legacy system errors have been transitioned over to CAPPS, negatively
2. Volume of transactions impacting system performance and data integrity.
Business needs and volume are not sufficiently synchronized to
on an unfit model.
Technology process/technology, causing risk of system overload and downtime.
Systems do not always support visibility and extraction of data to support

3. The communication plan business decisions.
is built for a smaller
organization. Oversight of procurement processes is often not performed to verify that all
necessary control activities occur in a timely manner.
Governance The approval process does not always sufficiently consider factors outside of
the dollar value of the contract for establishing the extent of review and
approval procedures.
Control activities are not always appropriately aligned to the risk.
People root causes
► The “hero” environment is reliant on extraordinary individuals’ efforts to compensate for inadequate
technology and processes
► Without streamlined processes and user-friendly tools, individuals are forced to act as “heroes” for the
organization to complete basic tasks and meet deadlines. The extra efforts needed from these individuals
distract them from their core responsibilities and leave the organization’s timeliness and confidence to meet
deadlines in a state of uncertainty.
► Training programs are generally insufficient, and there are limited designated support resources to
provide compliance and technical guidance.
► The existing training programs (onboarding and ongoing) do not provide employees with the knowledge and
tools needed to be successful in their roles. The lack of training, coupled with excessive workloads and
nonstandard processes, has contributed to staff often feeling overwhelmed and frustrated, with nowhere to turn
with questions.
► Success is often not rewarded while failure brings only punishment, which can significantly impact
morale and prevents employees from feeling empowered.
► The historical culture of punishing employees for mistakes devastated morale and has created fear across
much of the organization. By contrast, strong performance and going “above and beyond” have not been
consistently recognized by leadership, and employees do not feel incentivized. The only reward for hard work is
more hard work, while low performers are punished but allowed to remain.
Process root causes
► Processes are often not written to support a large organization, limiting opportunities for economies
of scale and optimization improvements.
► HHSC is currently operating as a small organization that delivers process updates via email, vs. routinely
posting to a SharePoint site or website. Without the proper written instruction for processes that can been seen
by all employees with a revision date and notification of update, many employees are relying on word of mouth
vs. checking a regulated source for updates, leaving a state of uncertainty.
► Processes are often inconsistent across similar requisitions, causing inefficiencies and increasing
errors and noncompliance.
► Legislation dictates how the requisitions should be processed and which forms are needed for a requisition
completion. Requisitions of the same type can vary depending on the Agency/program. With varying degrees of
change for the same type of process, a level of uncertainty and confusion remains for many purchasers. Since
June 2018, the PCS group has been working toward streamlined procedures for specific types of requisitions.
► Policies and procedures are not effectively maintained in many cases and changes often are not
effectively communicated to guarantee compliance.
► As updates are made to policies and procedures, there are few collaboration sessions between PCS and
internal customers to guarantee that all parties are updated. There is not a central repository where all
employees can see the latest updates to the policies and procedures that are affecting their specific type of
requisition.
Technology root causes
► Legacy system errors have been transitioned over to CAPPS, negatively impacting system
performance and data integrity.
► Data from legacy systems was loaded into the CAPPS system without a complete master data cleanup to
correct errors and without a comprehensive data conversion plan to help support the upload of complete and
accurate historical information.
► Business needs and volume are not sufficiently synchronized to process/technology causing risk of
system overload and downtime.
► CAPPS was not configured to serve many important procurement-related purposes (e.g., complex contract
proposal evaluation, vendor performance tracking, document management, spend analysis and public data
transparency) in function or in HHSC-level volume.
► CAPPS has been heavily modified to accommodate State of Texas statutory contracting requirements, as well
as HHSC-specific contracting needs; however, the system has not been configured to support a specific set of
Agency or Program purchasing policies and/or processes. There is no baseline set of procurement processes
and procedures that can be applied across HHSC.
► HHSC does not have a complete application portfolio detailing the data architecture, relationship diagrams and
user models for all purchasing-related systems. This results in inconsistent processes, data entry redundancy,
inefficient system administration and unnecessary technology costs associated with duplicative functionality.
► Systems do not always support visibility and extraction of data to support business decisions.
► The lack of integration among procurement-related systems and the lack of properly configured reporting
functionality in CAPPS combine to frustrate users, preclude data-driven procurement practices and undermine
statewide transparency efforts.
Governance root cause analysis
► Oversight of procurement processes is often not performed to verify that all necessary control
activities occur in a timely manner.
► All relevant documentation (both hard copy and electronic) is not sufficiently maintained by PCS staff members
to support verification that the procurement process was followed as intended.
► Prequalified standard contract templates are not consistently used across the Agency.
► Conflicts of interest and nepotism verifications are not consistently performed and documented.
► The approval process does not always sufficiently consider factors outside of the dollar value of the
contract for establishing the extent of review and approval procedures.
► A risk-based approach should be utilized pertaining to the review of solicitations and contracts and should
include factors other than just the dollar value of the contract. Applying the same amount of risk to every
solicitation/contract does not allow for the appropriate differentiation based on the specifications of the
contracts.
► Controls activities are not always appropriately aligned to the risk.
► Per inspection of the procurement process as documented in the HHSC process flow diagrams, the controls
appear to either over- or under control the process, resulting in gaps or redundancy in efforts and inefficient use
of resource time.
► Roles and responsibilities related to review of requisitions and contracts are not sufficiently defined, resulting in
duplication and potential gaps.
Next steps
Discussion and next steps
► This presentation encompasses the current state assessment and root cause
analysis (Phases I and II of the engagement).
► In Phase III, EY US will be focused on process redesign and will deliver
recommendations and an improvement plan by the end of September.
Upcoming phase of work
Phases I and II Phases III Phases IV

Wk 0 Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Wk 8 Wk 9 Wk 10 Wk 11 Wk 12 Wk 13 Wk 14
Mobilization Phase I: Assessment

Deliver
Assessment
Phase IV: Evaluation
Phase II: Root Cause Analysis Deliver Root
Deliver
cause Analysis
Evaluation
Deliver
Phase III: Process Redesign
Improvement Plan
Detail of Phase III activities on

next slide
Phase III detailed activities
Phase III
Wk 7 Wk 8 Wk 9 Wk 10
Define improvement activities Draft improvement plan Deliver improvement plan
Process Define actions and recommendations to improve process and address

failure points
Identify digital solution/automation opportunities that support process, Define improvement initiatives,
technology and people initiatives Socialize and prioritize
including a high-level business
improvement plan
case with value impact
Identify key tools/templates and improvements
Technology
Identify adoption, configuration and customization of existing technology Draft prioritization of initiatives Finalize recommendation
Identify new solution capabilities

Draft digital enablement vision Deliver plan
Define fundamental roles and reorganization recommendations

People
Define fundamental development/training needs and capabilities
Identify cultural improvement

opportunities and imperatives
Catalog policies requiring changes

Governance
Identify fundamental governance
structure for the future state
Key HHSC HHSC improvement plan

stakeholder alignment and
prioritization session
activities
Detailed analysis
Detailed analysis contents
Maturity model definitions

Strategic Direction
Governance and Risk Management: governance process gaps, policy
assessment, forms and standards
Technology: technology spotlight, systems gap analysis
Procure to Pay Process: process stage views, approvals
Complex Contracts: evaluation tool review
People and Organization: ThinkTank analysis, organizational chart, job
descriptions, compensation benchmark
ThinkTank
Our maturity model articulates the main domains of procurement transformation in eight dimensions, each of which needs
to be considered independently to reposition an effective procurement and contracting function.
► Review current state of Procurement and

Contract Services (PCS) capability
► Review existing sourcing and procurement
process documentation, including policies
and procedures and existing ERP system
documentation
► Review organizational structure
► Conduct key stakeholder interviews
Portfolio and
► Identify critical procure-to-pay (P2P)
process benchmarks currently managed
by PCS and compare current P2P
capabilities to leading practices
Every dimension is divided into

five maturity stages:
Stage 1: Informal/no process

A governance model has been
established and is supported
Stage 2: Functional by executives
Stage 5: Leading
Eight facets defined
The maturity model breaks down procurement and contracting to drive at the root cause of any procurement and contracting issue:
► Strategic Direction: course of action that leads to the achievement of the goals of an organization’s strategy
► People and Organization: how the people in the organization engage to accomplish the goals of an organization
► Portfolio and Supplier Relationship Management: how an organization interacts with its suppliers from a mutually beneficial
relationship and legal (contract) perspective
► Complex Contracts: Contracts that are of high dollar value and require an RFx to procurement goods and services
► Contract Management: Contract management is an essential function that helps support that the needs of the Agency, as
reflected in a supplier contract, are met in order to deliver critical services to HHSC’s clients and that taxpayer dollars are being
used efficiently and appropriately
► Supplier Relationship Management: Supplier relationship management provides a framework for interacting with the vendor
community across the contract management life cycle to advance innovative solutions for the organization and equip the
procurement organization with knowledge and expertise in solicitation planning
► Category Management: By analyzing detailed spend, transactional and pricing data, and continuously monitoring the pricing
markets, the category management team can routinely identify and implement solutions that drive incremental unit cost
reductions through additional sourcing, substitutions and better demand management
► Procure to Pay Process: the process of obtaining and managing the materials needed for a product or service
► Governance and Risk Management: an organization’s coordinated strategy for managing the broad issues of corporate
governance, enterprise risk management and corporate compliance with regard to regulatory requirements. A comprehensive risk
program in the opinion of EY US involves the effective identification and avoidance of fraud, waste and abuse
► Internal Stakeholder Management: an organization’s management of the people who may be affected by the decisions it makes
or who can influence the implementation of its decisions
► Technology: tools that automate the organization’s process actions and extract data
► Performance Management: an ongoing process of communication between a supervisor and an employee that occurs
throughout the year, in support of accomplishing the strategic objectives of the organization
(part 1 of 2)
Strategic No procurement strategy Procurement strategy is Procurement strategy and Full understanding of the Detailed plans updated on
Direction is in place not defined in a number of formal idea of future transformational journey a regular basis with cross-
areas and there is no initiatives exist in most that must be followed and functional executive
visibility on key future areas, but procurement a demonstrated history of support on the journey to
initiatives strategies are not always success procurement excellence
executed
People and The procurement Procurement employees Procurement employees Procurement employees Procurement has a global
Organization department is seen as a exhibit transactional skill demonstrate strategic exercise strategic thinking network of high-quality
second-tier function and sets but the department is thinking and focus more on and category management people who make the
focuses on administrative not recognized as a value- category management than and attract internal and department a desirable
activities adding function administrative tasks external talent place within the company
Category, Day-to-day pressure The procurement Formal strategic sourcing Comprehensive strategic Sourcing approach is
Contract and dictates the activity of the department is driven by process, leverage global sourcing process, mid- to recognized as one of the
Supplier department, there is contract end dates, does sourcing on most long-term category plans best in the market,
Relationship limited leverage of not have strategic categories with mid-term with a global focus on key preferred vendors are
Management strategic sourcing procurement plans, plans for key categories categories, and contracts established and contracts
opportunities and no leverages regional and contracts are in place are managed by category are reviewed with
contracts are in place sourcing on an ad hoc but are managed by BUs managers suppliers at least annually
basis and has few
contracts
Technology There is no P2P system in Basic P2P systems exists P2P systems are in place Harmonized P2P systems One integrated P2P
place in most business units in all BUs and functional exist and are widely used, system across the
(BUs) but systems are not procurement areas but are manual processes have organization that links all
linked together, few e- not integrated, e-catalogs been eliminated and there POs and suppliers
catalogs exist and many are in place and maverick is moderate adoption of e-
transactions are still buying still occurs catalogs with key suppliers
processed manually
(part 2 of 2)
Governance No governance body in Governance exists for a Processes and systems Governance model has Governance body is in
and Risk place to support overall few key purchases, low are formally documented been established and is place, documented
Management purchasing strategy, compliance and risk and published but are not supported by executives processes and controls
noncompliance is high and management is always enforced, and there are are in place, the
organization is reactive to acknowledged within other inconsistent compliance multifunctional integrated organization is nearly
risk functions and siloed risk risk assessment, planning always compliant and
management capabilities and response capabilities predictive supplier risk
in place management exists
Internal Procurement works in its Some areas of Procurement is regularly Procurement is engaged Procurement proactively
Stakeholder silo and internal customers collaboration with other consulted but not fully early in the process and manages all categories in
Management do not think it adds value departments but is not integrated with other manages cross-functional close collaboration with
to the organization uniformly seen as high processes in other streams relevant departments
value departments
Procure to Pay No standard P2P Basic P2P process without End-to-end P2P processes Fully integrated and Lean and highly integrated
Process processes in place and guidelines and a mix of in place but low levels of automated P2P processes P2P processes, e-
existing processes require paper-based and compliance are in place and catalogs and a robust
manual paperwork electronic processes compliance is high order tracking process
Performance No monitoring of the Basic metrics are in place Formal metrics exist but Savings targets are in Sophisticated balanced
Management performance of the but provide limited insight are not consistently used place to monitor scorecards are in place
procurement department and may not be linked to and are not closely linked department performance and KPIs are integrated
business performance to performance and KPIs link to with performance
performance
Critical issue: converting strategy into operating model
An operating model is the foundation for successful execution which, delivers on an

organization’s strategic intent.
Agency strategy Operating model
What is our core mission? How do we operationalize our strategy?
► Service populations ► Business process structure
► Equity, access, accountability ► Organizational structure
► Transparency, integrity and trust ► Governance and decision-making
Who are our customers/constituents? ► Performance metrics and accountability

► Citizens ► Operating locations
► Medical providers and researchers ► Technology enablement
► State leadership How will we allocate resources and

What is our service delivery strategy? measure results?
► Products and services ► Budget allocation
► Client and provider engagement ► Performance scorecard
► Education and outreach ► Service delivery vendor scorecards
Governance process gaps process flow
(heat map)
Lack of key activities leaves HHSC open to various levels of risk. Levels of risk are identified by the
triangles in the key.
Process flow developed by EY US based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.
► Interview with HHSC team members.
Note: Process flow includes “persona-based.”

Extended process flow is available in Visio format. High risk Medium risk Low risk
Governance process gaps
Highlighted risk areas from the governance process flow are listed below:
Procurement phase Process flow identifier Process gap
All phases Key documentation related to the procurement process is not consistently maintained
1 by PCS.
Document development/solicitation phase Programs do not consistently follow a formal process with the contract managers and
PCS to discuss future procurement objectives, resulting in a lack of planning and PCS
2
not being fully aware of the program's needs.
Conflict of interest checks between the employee/requestor and vendor are not being
3 consistently performed.
Standardized tools are not consistently utilized throughout the evaluation process.
4
Standard turnaround time for approval or rejection of purchase requisitions is not

5 sufficiently defined in the policies and procedures.
CAPPS has not been fully configured to route procurements for approval based on the
6 dollar amount of the transaction.
A Form 515 is completed to determine which approvals should be obtained. However,

the form is not being consistently completed accurately and/or entered accurately into
7
CAPPS.
If an approver supports multiple approval roles within the workflow, his or her initial
approval will count toward all approvals required by that individual. Once the approver
has approved the requisition at the first approval point, CAPPS will then auto-approve
him or her at later workflow approval points and the requisition will automatically move
8 to the next individual who needs to approve. Therefore, it is important that a reviewer
be aware of what his or her approval means when he or she initially approves a
requisition. However, reviewers expressed confusion related to what in the requisition
and/or contract they were responsible for reviewing.
High risk Medium risk Low risk
Conflict of interest review Conflict of interest checks between the employee/requestor and vendor are not being
Procurement evaluations
4 Standardized tools are not consistently utilized throughout the evaluation process.
Interview and selections Sufficient training is not performed to provide procurement evaluators with the skills
9 and knowledge to properly perform evaluations.
Processes do not sufficiently define which scoring criteria should be used to evaluate
10 procurements.
Procurements are not consistently being reviewed by the same team; therefore, not all
11 evaluators reviewed all proposals received.
Evaluators are not consistently scoring all respondents.

12
All relevant scoring documentation (both hard copy and electronic) is not consistently
13 maintained.
Standardized tools are not consistently utilized throughout the evaluation process.
4
Contract negotiations PCS does not have a sufficient formal appeal process for procurement protests,
including an appeal review panel or established process in handling and/or resolving
14
protests from bidding vendors.
Recommendation for awards Conflict of interest checks between the employee/requester and vendor are not
After contract award phase CAPPS has not been fully configured to route procurements for approval based on
6 the dollar amount of the transaction.
A Form 515 is completed to determine which approvals should be obtained. However,

the form is not consistently being completed accurately and/or entered accurately into
7
CAPPS.
If an approver supports multiple approval roles within the workflow, his or her initial
approval will count toward all approvals required by that individual. Once the approver
has approved the requisition at the first approval point, CAPPS will then auto-approve
him or her at later workflow approval points, and the requisition will automatically
8 move to the next individual who needs to approve. Therefore, it is important that a
reviewer be aware of what his or her approval means when he or she initially
approves a requisition. However, reviewers expressed confusion related to what in
the requisition and/or contract they were responsible for reviewing.
Standard contract templates are not consistently utilized across the Agency.
15
Policy assessment
Governance spotlight: policy assessment
Governance spotlight: policy assessment

Upon review of procurement and contract guides used by HHSC, particularly the Comptroller’s
Procurement and Contract Management Guide and HHSC’s Contract Management Handbook, some key
findings include:
► Policy at all levels (statute, rule, external guidance, internal policies) related to procurement, contract
management and reporting is not fully up to date, cohesive and consistent.
► The Agency lacks an updated procurement manual and is utilizing the Comptroller of Public Accounts
Procurement and Contract Management Guide (PCMG) as its manual in the interim.
► Requirements for engaging external governance are generally disparate and not automated.
► Reporting requirements in many cases could be consolidated or the frequency reduced to limit time
spent reporting.
► There are numerous non-value-added steps in the process that are not required by statute or rule.
► There is little to no support for procurement provided by the CPA Statewide Procurement Division
(SPD), and all procurements are considered delegated unless CPA SPD decides it wants to manage
them.
A detailed review of key policies is provided in the Appendix.
Policy/rule assessment report
Policy/rule reviewed Key gaps Overengineered policies

TAC §391 ► Rule was adopted prior to completed
(v. 6/2015) transformation and may not reflect current
HHSC PCS policies or procedures.
► Rule permits correction of minor
irregularities in vendor responses but is not
currently being allowed.
► Streamlined purchasing methods are
permitted for purchases under $25k;
however, these methods are not used.
► The open enrollment process is identified
but utilizes an RFA process that is not
allowed for use in procurement.
TAC §391, Subchapter D ► The vendor protest procedures under these
(v. 6/2015) rules align with the comptroller’s procedures
and are compliant with Texas Government
Code §2155.076; however, the procedures
can outline more specific requirements:
► For example, HHSC can require that
relevant facts should include a
description of the adverse impact to the
state and a description of the adverse
impact to the protester.
► Additionally, HHSC can specify that it
may attempt to settle and resolve a
protest by mutual agreement before
issuing a written determination.
Policy assessment report
Policy reviewed Key gaps Overengineered policies

CPA Procurement & ► No service level agreements (SLAs) ► Requirement that a cost estimate be
Contract Management provided for interactions with entities developed for all procurements
Guide (v. 8/2018) involved in required-use programs (TCI, ► Requirement that agencies submit all non-
TIBH, SPD, etc.). delegated goods and services procurements
► Requirements for delegation requests and to CPA
Agency review and approval are handled ► Requirement for monthly reporting for
outside of enterprise systems using exceptions to state use programs
disparate processes (forms, portals,
► Requirement that TCI be given a final
reporting) and communication methods
opportunity to provide a lower bid for print
(phone, fax, numerous email accounts, etc.).
services when already given an opportunity
► There are two distinct processes for SPD to bid
review of goods and services.
► Requirement that the bid tab be sent to all
► All communications with SPD are required to print shops upon award for print services
be emailed.
► Requirement to report for emergencies is not
► CPA SPD treats the process for non- based on delegated authority levels
delegated procurements as a request for
► Emergency procurements over $25k are
delegation rather than meeting its
required to be posted to the Electronic State
requirements to facilitate the procurement on
Business Daily (ESBD) and are subject to
behalf of the Agency. Agencies, even if not
CAT and QAT reviews
seeking delegation, are treated as such.
► Requirement that CPA SPD provide a
► Definitions of contract value between CPA
delegation letter for every delegation request
and DIR do not fully align.
► Requirements that purchase of IT
commodities not on contract be certified by
DIR prior to purchase

CPA Procurement & ► Delegation requests can take up to 30 days ► Requirement for DIR to review and sign
Contract Management to process, and the Agency is not allowed to Agency SOWs for certain preestablished
Guide (v. 8/2018) act until delegation has been granted even contracts (Note: dollar threshold is also
(In lieu of HHSC after the 30-day SLA. below established delegated authority levels
Procurement Manual that ► DIR statement of work (SOW) reviews for services)
is outdated and not used require submission 30 days before the ► Requirement for DIR to review final agreed-
by the Agency) anticipated procurement date. upon SOW (contract)
► Delegation, review and approval ► Requirement that agencies report to LBB
requirements between non-IT and IT within 10 days of award for certain
procurements are not aligned. professional services and consulting
► Definition of major consulting services is services contracts
below the Agency-delegated authority for ► Requirement that notice be posted to the
services. Texas Register to advertise the procurement
► No contact information provided for required within 20 days for consulting services
submission of forms to the Governor’s contracts (including new postings for
Office. renewal or extension)
► RFP and RFP processes are identical. ► Requirement that notification be given to
LBB and Governor’s Budget & Planning
► RFA is not a procurement method; it is a
Office, with receipt of a finding of fact, prior
method to request grant applications only.
to contracting for major consulting services
► Required documentation is not supported by ($15k+)
templates in many cases.
► Requirement that the entire evaluation be
► There is the ability to address minor performed again for all members following
irregularities or deficiencies in vendor oral presentations
responses to help make their submission
responsive.

CPA Procurement & ► There are conflicting reporting requirements ► HUB process and requirements, especially
Contract Management for Agency contracts (all or $100k+ only?). the disqualification of a vendor for not
Guide (v. 8/2018) ► Requirement exists that the Agency provide properly completing the HUB form, even
solicitation and contract information in though it cannot be considered in
CAPPS according to CPA rule, but no evaluation
reference to the requirements or rules exists. ► Requirement that QAT review and approve
► There is a lack of a comprehensive set of major IT contracts exceeding $10m
required documents that must be included in ► Requirement that agencies report award of
all solicitations. the contract to QAT after their review
► Requirement that all Agency contracts for
goods and services of more than $1m be
signed by the executive director
► Requirement that all Agency contracts for
goods and services of more than $5m be
verified in writing by the procurement officer
or contract management office
► Requirement that Agency purchasers
perform numerous checks of state and
federal systems to verify vendors prior to
award
Policy reviewed Key gaps Overengineered issues

CPA Procurement & ► LBB reporting requirements are not aligned
Contract Management and not consolidated
Guide (v. 8/2018) (Cont.) ► Requirement that the Agency post all
contracts and DIR SOWs not included in the
LBB contracts database on the Agency
website (redacted versions) upon award of
contract
► Requirement for vendor performance
reporting for all contracts of more than $25k
at end of contract life
► Requirement that employees who worked on
a procurement or contract in any way are not
allowed to accept employment from any
respondent to that procurement for two
years, regardless of whether the respondent
was given a contract

HHSC Contract ► Updates are communicated through ► Rule requires that contractors meet or
Management Handbook GovDelivery, which requires users to exceed standards of conduct required of
(v. 4/2018) subscribe. HHSC contract managers (PCS.122 form,
► Outdated references exist in some places recertified annually)
with issuance of new guidance from CPA in ► Legal review of procurement documents for
August 2018. purchases of more than $25k
► There are likely outdated processes in some
places with issuance of new guidance from
CPA in August 2018.
► Dates on sections of the manual vary
dramatically, from April 2016 to March 2018.
► References in the manual to HHSC
agencies and system remain and need to be
updated to reflect transformation efforts.
► Vendor interaction policy does not align with
PCS policy.
► The handbook references the HHSC
Procurement Manual that is outdated and
not utilized by staff.
► Lack of clarity on whether a cost-benefit
analysis is a “should” or a “must” process.
Key external process requirements with process/
velocity impacts
► Requirements for delegation requests and Agency review and approval are handled outside of
enterprise systems using disparate processes (forms, portals, reporting) and communication methods
(phone, fax, numerous email accounts).
► There are distinct processes for the review of goods and services in the SPD.
► Delegation requests can take up to 30 days to process, and the Agency is not allowed to act until
delegation has been granted even after the 30-day SLA.
► DIR SOW reviews require submission 30 days before the anticipated procurement date.
► Definition of major consulting services is below the Agency-delegated authority for services.
► Requirement to report for emergencies is not based on delegated authority levels.
► There is a lack of a comprehensive set of required documents that must be included in all
solicitations.
► Required documentation is not supported by templates in many cases.
► Requirement exists that the Agency provide solicitation and contract information in CAPPS according
to CPA rule, but no reference to the requirements or rules exists.
► Requirement exists that notice be posted to the Texas Register to advertise the procurement within
20 days for consulting services contracts (including new postings for renewal or extension).
► Requirement exists that notification be given to LBB and Governor’s Budget & Planning Office, and
receipt of a finding of fact, prior to contracting for major consulting services ($15k+).
► The HUB process requires disqualification of a vendor for not properly completing the HUB form.
Governance spotlight: forms and standards
General observations
► A review of forms and standards revealed that with the exception of a few areas of noncompliance or
risk noted below, forms were generally compliant; however, a comprehensive understanding of when
and how to use forms in the process is not generally shared.
► Forms, templates and internal process guides are updated ad hoc, with little to no communication to
program staff and no single repository available to all procurement stakeholders (PCS and programs).
► A rigorous document management process is lacking. During the review process, PCS forms
retrieved from the SharePoint directory reflected earlier dates than hard copies provided to the
interview team.
Identified areas of noncompliance or risk

Document Reviewed Observations
PCS.08: Justification Procurement Selection ► Issue regarding the required approval of division/program staff. It implies some level of
(v. unknown) purchasing authority by the program that should not exist.
► Document may have been created with good intentions to seek approved input from the
program. However, this blurs the line of purchasing authority and PCS’s role in the
procurement process.
PCS 144: Waiver IT Purchases ► PCS 144 appears to have been replaced by PCS 701.
(v. 2/2015) ► Purpose of either of the forms is not clear. There is no current requirement that
PCS 701: Waiver of Notification to all DIR Vendors deliverables-based IT services SOWs be sent to all DIR vendors. If either form is
(v. 3/2017) intended to be a sole source approval, the section for proposed procurement method
A detailed review of forms is provided in the Appendix. seems contradictory.
Forms and standards
Forms and standards
Document review
Document reviewed Observations

PCS.07: Engaging Vendor Guidelines ► Overall, document is compliant with the Comptroller’s Procurement and
(v. 9/2016) Contract Management Guide (CPA’s PCMG).
► However, the form only addresses one aspect of vendor communication
(presentation and demonstration). It should include a reference to CPA’s
PCMG for other types of vendor contact.
► Some key information, such as who/where to communicate the request and
expected turnaround time frame, is missing. Also, the policy number in the
document is a different number from the title of the file.
PCS.08: Justification Procurement Selection ► Issue regarding the required approval of division/program staff. It implies
(v. unknown) some level of purchasing authority by the program that should not exist.
► Document may have been created with good intentions to seek approved
input from the program. However, this blurs the line of purchasing authority
and PCS’s role in the procurement process.
RCD-16: Enterprise Risk Assessment ► Overall, document is compliant with CPA’s PCMG.
Instrument
(v. 12/2016)
PCS 111: Terms and Conditions ► Overall, document is compliant with CPA’s PCMG and Texas Government
(v. 7/2018) Code for required clauses.
Forms and standards

PCS 117A: Nondisclosure and Conflicts of ► Overall, document is compliant with CPA’s PCMG.
Interest Certification
(v. 8/2017)
PCS 126: Centralized Master Bidders List ► Overall, document is compliant with CPA’s PCMG.
(CMBL) Supplementation Approval Request ► However, it needs a signature line for approval.
(v. 11/2008)
PCS 130: Conflict of Interest, under CPA ► Overall, document is compliant with CPA’s PCMG.
delegated authority ► It is out of date; it references an old CPA procurement manual.
(v. 8/2017)
PCS 138: ESBD Solicitation Approval ► Overall, document is compliant with CPA’s PCMG.
(v. 10/2016)
PCS 144: Waiver IT Purchases ► PCS 144 appears to have been replaced-by PCS 701.
(v. 2/2015) ► Purpose of either of the forms is not clear. There is no current requirement
PCS 701: Waiver of Notification to all DIR that DBITS SOWs be sent to all DIR vendors. If form is intended to be a sole
vendors source approval, the section for proposed procurement method seems
(v. 3/2017) contradictory.
PCS 147: Vendor Performance Reporting ► Overall, document is compliant with CPA’s PCMG.
Form
(v. 5/2017)
PCS 160: HHSC Solicitation Checklist ► Overall, document is compliant with CPA’s PCMG.
(v. 6/2018)
Forms and standards

PCS 160-G: Legal Entity Screening Guide ► Overall, document is compliant with CPA’s PCMG.
(v. unknown)
PCS 201: Contract Routing $1m and Over ► Overall, document is compliant with CPA’s PCMG.
(v. 3/2017)
PCS 406: HHSC HUB Subcontracting ► Overall, document is compliant with CPA’s PCMG.
Determination
(v. 3/2017)
PCS 415: HHSC HUB Subcontracting Plan ► Overall, document is compliant with CPA’S PCMG but may want to consider
Review adding further sections that provide for comments of the review of the
(v. 10/2016) method that was selected. For example, if the contractor does not intend to
subcontract, was its self-performing justification acceptable?
► For clarity, may consider revising Section II. Method 5 (no intention to
subcontract) is included with the options for intention to subcontract.
PCS 515: Routing Form ► No information on the form is given regarding how program is selecting its
(v. 4/2018) approvers.
PCS 540 & PCS 541: Kick-off Meeting ► Overall, document is compliant with CPA’s PCMG.
Agenda & Sign-in
(v. unknown)
PCS 550: RFP Template ► While the basic recommended RFP elements are present, it is not best
(v. 3/2017) practice to use an unlocked Word document as a template. This practice
requires management and Legal to review the entire document each time it
requires their approval. Modular templates with locked sections are far more
efficient.
Technology spotlight
Core technology (1 of 3)
System Assessment description Industry insights

Procurement Tools CAPPS was intended to automate 80% of HHSC’s procurement and eProcurement functionality in a modern ERP
in CAPPS – The contracting processes. The CAPPS system has been heavily modified system must facilitate automation of Agency
state’s ERP system for HHSC, but the scope of these modifications is limited by a variety business processes and enforce all necessary
of factors, including, but not limited to, hard-coding of the software, controls. In order to enhance system
licensing restrictions, CPA-mandated functionality, statutory functionality, customization should seek to
requirements, limited budget, a desire for process consistency and a address the needs of all stakeholders in
complete lack of input from user groups. There was no data accordance with Agency priorities. This effort
architecture planning or consideration for HHSC’s transaction volume should include standardization and optimization
included in the implementation process. While some performance of business processes to operate in an
issues still remain, the debilitating latency in system processing time automated environment.
has recently been addressed by PCS. Effective system customization must be
As currently configured, the CAPPS system: preceded by an Agency-level needs assessment
► Is not user-friendly to inform system architecture design (including
any integration requirements) as well as
► Has functionality that does not support Agency business processes
comprehensive implementation planning.
(e.g., proposal evaluations, contract management, adequate
approval workflow, strategic sourcing, complex contracting or It is key to purchase a system that provides the
reporting) majority of the organization’s required
functionality without customization. The right
► Does not allow for flexibility where certain steps add no value
system solution should be able to meet the
(e.g., “Collaboration” process outside of contract development)
majority of the organization’s requirements
► Does not offer dashboard reporting/status updates through a combination of process optimization
► Contains preloaded templates that are outdated and/or have and functionality configuration.
limited utility
► Has minimal data visibility

SCOR – HHSC’s SCOR was developed specifically to meet the contract management As the official system of record, it is essential that
contract needs of HHSC, so it offers functionality that is more intuitive and more the contract management component of an
management system closely aligns with Agency business processes. However, there are eProcurement system contain complete and
data integrity issues in SCOR due to undertrained and overworked accurate procurement documentation. Validating
staff inputting incorrect information and errors in the legacy data the integrity of the data loaded into the system is
conversion from other systems. the key to ensuring its utility.
As currently deployed, the SCOR system: If contract management functions are performed
► Lacks complete data from legacy systems outside of the ERP, the tool should be fully
integrated with the ERP’s procurement module.
► Contains inaccurate data for current and expired contracts due to
coding and filing errors
► Lacks modern contract management automation tools (e.g.,
dashboard reports, automated reminders and supplier enablement)
► Requires updates in multiple function areas.

Digital signature tool Users are generally happy with the functionality of the digital signature The use of electronic signature and review
– HHSC’s tool for tool system was designed to provide. Issues arise when it is used software can greatly enhance an organization’s
contract document inconsistently (sometimes contract documents are routed through the ability to route documents efficiently and
review and approval digital signature tool and sometimes not) or as an alternative to the transparently. However, it is important to
approval workflow facilitated by CAPPS. The inconsistent use of safeguard that the use of this software is part of
various systems to perform procurement governance functions creates the eProcurement system process, not used
significant risk for the Agency and may result in negative audit findings. instead of it. Where an integrated solution is
HHSC’s current licensed software products include a tool that is very available, it is preferred, to reduce risk and
similar to the digital signature tool that integrates directly into the increase transparency.
software behind CAPPS. This tool can be configured to look and feel Protocol should be established for the use of the
just like the digital signature tool, and it has the added benefit of triple software and should be enforced via spot checks
authentication and compliance with Internal Revenue Service (IRS) and internal audits.
regulations.
As currently deployed, the digital signature tool:
► Only offers single authentication
► Is not integrated with CAPPS
► Creates risk through a lack of consistent use and tools for policy
enforcement
► Is a software tool not owned or managed by IT
Core technology | systems gap analysis
Current state Capability description

Capability 1: ERP system integration plan
Capability 2: The eProcurement system core process
Capability 3: User types and associated permissions
Capability 4: Configurable workflow/approvals
Capability 5: Agency-wide accounting code set
Capability 6: Resources dedicated to assist users
Capability 7: Solicitation and contract document templates
Capability 8: Centrally based contract milestones records
Capability 9: Audit trail for contract documents/actions
Capability 10: Agency procurement document management Legend:
Capability 11: Spend data leveraged for strategic contracting

Present
Capability 12: Agency data transparency requirements
Capability 13: Supplier self-service capacities Partial
Capability 14: Vendor performance tracking Not present or

inadequate
Capability 15: Dashboard capacity
Noncore technology
Enabling technology Purpose Owner

Solicitation Evaluation Excel Sheet Capture solicitation responses and calculate rankings PCS
Excel Spreadsheet Comprehensive, offline contract tracking HHSC Programs
Outlook Communicate regarding contract status and set reminders HHSC-IT
for upcoming required contract actions
CRM tool Manage document review requests from internal customers DFPS Legal
HEART Track data entry activities PCS
IMPACT Capture contract data and KPIs for service agreements DFPS
PEIR (Prevention and Early Vendor monitoring by case managers DFPS
Intervention Review)
ABCS Conduct background checks on vendors DFPS
PMET Monitor and track vendor performance DFPS
DTS Delivery tracking system Medicaid Managed
Care
CMBHS e Health Record Processing claims CM
MCATS Contract administration tracking Medicaid
Noncore technology
Enabling technology Purpose Owner

Source Processing payments CM
CMBL Centralized master bidders’ list CPA
TxSmartBuy Purchasing items from statewide contracts CPA
VPTS Vendor performance tracking CPA
ESBD Electronic State Business Daily – solicitation posting CPA
platform
Procurement Oversight and Procurement authority delegation and review CPA
Delegation Portal
Core technology
Systems gap report
Capability 1: ERP system integration plan is fully executed and all data is accurate and readily
accessible.
Legend: Present Partial Not present

Capability assessment or inadequate
Current state description Mission-critical systems have been integrated or interfaced with CAPPS, as applicable, at
a basic level. However, there are issues with data integrity, duplicate entry of data across
systems and duplicate functionality across systems.
Root cause A comprehensive system integration plan is necessary for determining which existing
systems need to integrate or interface with the new procurement system, as well as which
legacy systems can be replaced by functionality in the new system. Prior to implementing
CAPPS, HHSC-IT made an effort to confirm all key purchasing-related systems were
integrated or interfaced with the system to avoid loss of data. However, HHSC does not
have a complete application portfolio detailing the data architecture, relationship diagrams
and user models for all purchasing-related systems.
Core technology
Systems gap report
Capability 2: The eProcurement system supports documented purchasing processes, specifically

purchase request and purchase order development.

Current state description Rather than automating their purchasing processes to achieve efficiencies and
transparency, many user groups have added the CAPPS system process to their offline
processes. Users perceive CAPPS as an impediment to efficiency because its
configuration the ability to support their unique procurement needs.
Root cause CAPPS has been heavily modified to accommodate State of Texas statutory contracting
requirements as well as HHSC-specific contracting needs; however, the current system
configurations are not designed to support a specific set of Agency or Program
purchasing policies and/or processes.
Core technology
Systems gap report
Capability 3: The eProcurement system supports defined user types and associated permissions.

Current state description CAPPS supports the establishment of a distinct framework of delegated procurement
authority that can be enforced by the system through the assignment of user roles and
privileges. Unfortunately, there is no user role that allows a person to pick up the workload
of another. This results in rework.
Root cause The authority is determined by HHSC policy restrictions, which do not necessarily
coincide with state procurement statutes and rules (HHSC policy is sometimes more
restrictive). System security risk aversion is manifested in overly restrictive role
assignments with no ability to override assignments to prevent inefficiencies.
Core technology
Systems gap report
Capability 4: eProcurement system facilitates a configurable workflow and approval structure for various
users and purchase types.

Current state description Workflow in CAPPS is restricted to six levels of approval that cannot be changed at the
division level. This can result in certain required approvers being excluded from the
process.
In the absence of a dynamic approval workflow and document management tools in
CAPPS, the digital signature tool has been used beyond its initial purpose to meet users’
needs. The inconsistent use of various systems to perform procurement governance
functions creates significant risk for the Agency and may result in negative audit findings.
Root cause During configuration, the established governance practices at HHSC were not reconciled
with the workflow functionality in the system.
Core technology
Systems gap report
Capability 5: Agency-wide accounting code set loaded in the ERP is sufficient to meet the state’s needs.

Current state description The accounting codes in CAPPS are derived from the statewide codes used in the legacy
financial system, USAS. While the code set is serving its intended purpose, there is a
need for user training to certify the correct codes are entered for each transaction. Coding
errors are common and have a significant downstream impact on the accuracy of state
records.
Root cause Training is not sufficiently comprehensive to individuals needing to use the system
with quality.
Core technology
Systems gap report
Capability 6: Resources dedicated to assist users with navigating the eProcurement system.

Current state description There are user guides and a help desk (phone line and email box) dedicated to assisting
users with eProcurement functions in CAPPS. However, users report that the guides are
often outdated, help desk response rates vary and hands-on training is lacking entirely.
Some teams have developed their own internal training to try to address the most
pressing issues.
Root cause The transition to an automated procurement system can be especially burdensome to
smaller teams lacking dedicated procurement staff as well as those teams experiencing
high rates of staff turnover. Tools and guides can be incorporated into the system, but the
type and format can vary widely. Without consistent curriculum updates and predictable
training delivery schedules, it is not possible to achieve skill standardization.
Core technology
Systems gap report
Capability 7: The eProcurement system supports the use of established solicitation and contract
document templates.

Current state description CAPPS has the ability to support the use of contract instrument templates. Some
solicitation and contract documents have been developed in CAPPS; however, they are
perceived to have limited usefulness for the highly variable needs of the vast program
areas. When entering information according to system prompts, users often feel that the
options presented do not apply to their situation, which contributes to overall frustration
and loss of efficiency, and which encourages users to seek alternative methods to
process their procurements. Furthermore, many of the existing templates are in need of
updates, rendering them obsolete.
Root cause There is no baseline set of procurement processes and procedures that can be applied
across HHSC. Each area has unique needs, some of which can be standardized, some of
which cannot.
Core technology
Systems gap report
Capability 8: Records in the contract management system are tracked centrally based on key
milestones.

Current state description SCOR was developed by HHSC to facilitate uniform contract management practices;
however, contract management responsibilities are held by different staff members in
various roles across the agencies.
Root cause There is no central contract management office responsible for all HHSC contracts, and
there is no consistent reporting structure for sharing key contract information with PCS
such as whether the contract is in good status. This inconsistency of practice and lack of
visibility into contracts throughout their life cycles makes centralized tracking impossible.
Furthermore, transparency and strategic decision-making efforts are negatively impacted.
Core technology
Systems gap report
Capability 9: The eProcurement system creates a clear audit trail for all contract documents and actions.

Current state description Audits are regularly performed by Agency internal auditors, the State Auditor’s Office and
the federal government to evaluate Agency compliance with procurement regulations and
policies. During these audits, staff members are not currently able to pull reports
demonstrating all actions associated with a particular contract or procurement event.
While time stamps are present for certain activities, they are difficult to pull in a
comprehensive manner, and most staff members lack the technical knowledge to find this
information. Staff members typically piece together records from CAPPS, SCOR, email
and Excel spreadsheets to build a complete contract/transaction record for audit review.
Root cause Audit requirements were not well defined during CAPPS implementation and
configuration efforts.
Core technology
Systems gap report
Capability 10: The eProcurement system supports an Agency document management strategy (a
detailed plan for managing procurement-related documents in a procurement system).

Current state description CAPPS does not have document management capabilities. SCOR and the digital
signature tool offer some tools for storing and managing document versions, but neither
offer comprehensive document management capabilities at the Agency level. Presently,
contract documents are stored in various systems (CAPPS, SCOR, the digital signature
tool, email, shred file drives, etc.) and in paper form.
Root cause None of the procurement-related systems (CAPPS, SCOR or the digital signature tool)
were acquired to serve as a document management system. There has been no Agency-
level document management strategy that would drive development of requirements for a
document management system.
Core technology
Systems gap report
Capability 11: eProcurement system helps enable the central procurement office to conduct strategic
contracting, and spend data is used to drive strategic procurement decisions.

Current state description Strategic contracting is encouraged by leadership, but there has been no comprehensive
effort to use Agency-wide spend data to define a methodology that prioritizes action and
identifies opportunities.
Root cause Rapidly changing policy, workload backlog, high staff vacancy rates and lack of data
analysis capabilities all contribute to this deficiency.
Core technology
Systems gap report
Capability 12: The eProcurement system fulfills Agency requirements for transparency of spend data.

Current state description While reports are technically available for any data field populated in CAPPS, the spend
data reports currently available for HHSC lack detail and can be difficult to understand.
Reports have not been developed to display procurement data for ease of use by any
user group. “Dashboard” functionality (presenting user-specific statistics and info on a
homepage upon login) is not currently available in CAPPS.
Root cause CAPPS was not configured to facilitate public inquiry into contracting data. Specific report
development and/or interfacing with a public-facing site is necessary to support
transparency efforts.
Core technology
Systems gap report
Capability 13: The eProcurement system supports supplier self-service for profile management, contract
administration, invoicing and delivery management.

Current state description Presently, vendors are not able to perform self-service for contract administration (e.g.,
updating contract-specific signatories, submitting status reports, tracking invoices and
submitting advanced shipment notices) in CAPPS.
Root cause CAPPS was not configured to support these vendor self-service activities. Some vendor
profile management is available via the Centralized Master Bidder’s List, but it does not
carry over into contract/transaction records.
Core technology
Systems gap report
Capability 14: The eProcurement system supports vendor performance tracking.

Current state description CAPPS does not currently have functionality to facilitate vendor performance tracking.
Root cause CAPPS was not intended to serve as a vendor performance tracking system. The state
relies upon a stand-alone system administered by the Texas Comptroller of Public
Accounts.
Core technology
Systems gap report
Capability 15: The eProcurement system provides users with visibility into the status of their work
products in a dashboard-style presentation.

Current state description One of the most frequently reported issues with CAPPS is lack of transparency. Typical
users do not have access to a status report for their requisitions, so they have to call their
assigned purchaser in PCS to inquire about status. The few users with access to the
relevant requisition information have to run queries and manipulate the results to
determine where their requisitions are in the process. This lack of visibility results in
frustration among users submitting requisitions and adds to the workload of buyers in
PCS who spend excessive amounts of time responding to these inquiries.
Root cause CAPPS does not offer dashboard status reporting as currently configured. The
customizations made to the system for HHSC did not take into account the need for staff
to easily access requisition status reports, or the inefficiencies that would result from this
lack of functionality.
HHSC stage view Level 1–Level 3
Interviews and review of procedures showed how many process steps are needed for a requisition.
Process flow developed by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published
31 July 2018.
► Interviews with HHSC employees. Note: See Appendix for Level 4 details.
HHSC stage view Level 1–Level 3 process flow
Interviews and review of procedures showed how many process steps and number of interactions are
needed for a requisition.
Process flow developed by EYUS is based on: Note: Process flow includes
► PCS document OP 571 RFP Contract Procedures_FI.NAL 07-30-218.doc published 31 July 2018. “persona-based”
Process stage view
Procurement and contract services process overview
Step 1: Anticipating solicitation need + procurement planning Level 3–Level 4
Legislative session HHSC Agency/Program PCS Management PCS Liaison
► Forecasting
► Session comes up with directive. ► Initial procurement planning ► Request for PCS Liaison ► PCS Liaison
► Request for PCS liaison
► Contract manager to take full ownership
► Session comes up with directive. Forecasting: Request for PCS Liaison PCS Liaison
► Program leadership adopts idea. HHSC Agency/Program should have a process in place to Upon request from an HHSC Agency/Program, the The PCS Liaison will coordinate with the HHSC
► Idea comes from program; contract manager is a part manage upcoming procurement needs. Often, this may be Associate Commissioner for Procurement and the Deputy Agency/Program to assist with its procurement planning.
of program. accomplished by tracking current procurements/contracts Associate Commissioner of Complex Purchases will Resources the PCS Liaison may be asked to provide may
and by being familiar with the life cycle and end dates of assign a PCS Liaison to assist HHSC Agency/Program include, among other things:
procurements/contracts. with procurement planning. ► Prior solicitation documents
► Procurement timelines
► Assistance with identifying NIGP class/item codes
Initial procurement planning ► Guidance on procurement methods
When an HHSC Agency/Program identifies the need to ► Checklists of required forms and documentation
begin a new procurement cycle, the HHSC ► Updates on any changes to the procurement process
Agency/Program may request assistance from PCS, since the last procurement cycle
Financial Services, Legal Services and/or Information
Technology.
Requests for a PCS Liaison should be sent to the
Associate Commissioner for Procurement and the Deputy
Associate Commissioner of Complex Purchases.
Request for PCS Liaison

Upon request from an HHSC Agency/Program, the
Associate Commissioner for Procurement and the Deputy
Associate Commissioner of Complex Purchases will
assign a PCS Liaison to assist the HHSC
Agency/Program with procurement planning.
PCS Liaison
The PCS Liaison will coordinate with the HHSC
Agency/Program to assist with its procurement planning.
Resources the PCS Liaison may be asked to provide may
include, among other things:
► Prior solicitation documents
► Procurement timelines
► Assistance with identifying NIGP class/item codes
► Guidance on procurement methods
► Checklists of required forms and documentation
► Updates on any changes to the procurement process
since the last procurement cycle
Process flow created by EY US is based on: Level 2

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018. Action owner
► Interview with HHSC employees.
Level 3
List of activities
► Purple text indicates areas of risk.
Level 4
Step 2: Determination of need process Level 3–Level 4
HHSC Agency/Program PCS Manager PCS Purchaser
► Identification of need ► Verification of req and assignment

► Initial forms and requisition ► Updating the req
► Program notification
► Assignment of support staff
► Procurement file and checks
Identification of need Verification of req and assignment Updating the req

► Program must identify the need and follow approved Agency procedures and ► The PCS Manager verifies the ► When the requisition is assigned, Purchaser updates the requisition and supports the necessary
complete the required procurement forms, as applicable, to obtain appropriate requisition and that all forms are forms have been received and completed.
internal program approvals for the procurement. complete and assigns to Purchaser. If
the requisition is not complete or all of ► The purchaser:
the required forms are not attached, the ► Assigns the Purchaser’s name to requisition
requisition will be rejected and sent back ► Adds the appropriate Action Code in the supplier item ID field
to the Program to complete and/or ► Confirms the PCS 438–Contractor or Subrecipient Determination has been completed
correct. ► Reviews the PCS 438 to support the determination is vendor

► If the relationship is recipient/subrecipient, then a Request for Application (RFA) would be the
proper procurement method, not an RFP
► Confirms the PCS 552–RFP SOW Template is completed or that there is a SOW in usable format
► Completes the Risk Assessment in CAPPS Financial
► Confirms the PCS 505–Cost Benefit Analysis is completed
Initial forms and requisition
► Program requestor completes the following forms and attaches them to the
requisition:
► Helps support the PCS 552–RFP Statement of Work (SOW) Template, or a
SOW in a usable format, is completed with all pertinent information Program notification
► Helps support the PCS 438–Contractor or Subrecipient Determination has ► Purchaser notifies, via email, and requests a list of stakeholders for the kickoff meeting.
been completed and signed by Contract Oversight and Support, which is
forwarded and approved prior to the entering of the requisition
► Helps support the PCS 505–Cost Benefit Analysis is complete with all
pertinent information
► Helps support Program has provided a timeline
Assignment of support staff
► Enters the CAPPS Financial requisition
► Purchaser must support assignment of a HUB Coordinator, an HHSC Contract Attorney and a CQC
► If the budget amount is unknown, a $0.00 requisition is entered on the line
Financial Analyst.
however, the estimated dollar amount of the requisition should include the
total estimated contract value including all potential renewals entered in the
requisition entry wizard
► If the requisition document does not include the total contract value including
renewals within the request document, Purchaser or PCS Manager will notify Procurement file and checks
the program area that the requisition needs to be cancelled and reentered for ► To support all applicable forms have been received for the procurement, the Purchaser shall track all
the correct approvals requirements for the solicitation on the PCS 160–HHSC Solicitation Checklist – RFPs, RFAs, RFQs
► Needs assessment, which is generated by the requisition entry wizard
and RFOs, as well as all relevant internal correspondence, and save all required documents to the
procurement file in the designated network folder located under Procurement Resources.

Level 3
List of activities
Level 4
Step 3: Procurement planning phase Level 3–Level 4
PCS Purchaser
► RFP template
► Draft timeline
► Scheduling the kickoff meeting
► Kickoff meeting
► Nondisclosure and conflicts of Interests
RFP template
Purchaser uses the PCS 552–RFP SOW Template or the submitted SOW, completed by the HHSC Agency/Program, and inserts the required sections into the PCS 550–RFP template.
Draft timeline
The Purchaser will complete a draft timeline of the procurement using PCS 542 or 543. Timeline template is based on the antic ipated contract start date and other information provided by the HHSC Agency/Program timeline. The timeline is used to support all procurement steps have been
identified and to confirm who is responsible for each step. The timeline also includes the maximum time for each step; it is essential to modify this document as the procurement progresses.
Scheduling the kickoff meeting

Purchaser sends an email meeting notification to the HHSC Agency/Program assigned Project Manager/Contract Manager and identi fied stakeholders as well as the assigned HUB Coordinator and the HHSC Contract Attorney to schedule a kickoff meeting.
Note: The draft RFP solicitation document may not be complete when the kickoff meeting is scheduled. If possible, the RFP template should be populated by the time the kickoff meeting takes place.
Kickoff meeting
Purchaser will use the PCS 540-Kickoff Meeting Agenda and PCS 541-Kickoff Meeting Sign-In sheet to support all necessary steps are discussed and all attendees are documented.
The kickoff meeting is used to discuss the following:

► Understanding the program need
► Identify and document roles associated with the RFP process
► Discuss the timeline to support a timely contract award
► Discuss the need for a prebid/offer/proposal conference with the HHSC Agency/Program and HHSC Contract Attorney and whether i t should be mandatory (for best practices regarding prebid/offer/proposal conference, see the SPD’s State of Texas Procurement and Contract
Management Guide)
► Discuss the evaluation process and request names of those who will be on the evaluation team
Note: Any external evaluators must be approved by PCS management .
Nondisclosure and conflicts of interest

The Purchaser must support all persons involved with the solicitation sign PCS 117A–Nondisclosure and Conflicts of Interest Certification.

Level 3
List of activities
Level 4
Step 4: Solicitation development/processing Level 3–Level 4

HHSC PCS Purchaser Compliance & Quality Control PCS Purchaser HUB Co- PCS Manager
Agency/Program Team ordinator
► Program specific ► Develop/finalize RFP ► Evaluation tool selection ► RFP final review ► HUB ► PCS 126, 138
documents ► CQC Financial Analyst review of review
Nondisclosure and Conflicts RFP ► Manager final
of Interest review
Program specific Develop/finalize RFP Evaluation tool selection RFP final review HUB review of Manager PCS 126
documents ► Purchaser will coordinate with HHSC Agency/Program, HUB Coordinator, HHSC System Contracting or the appropriate ► Upon selection of the ► Once the solicitation document, has been reviewed RFP review
HHSC HHSC Agency/Program legal division and other identified stakeholders to develop/finalize the RFP document. This will appropriate evaluation tool, by all parties, the PCS Purchaser will: HUB PCS Manager will
Agency/Program include: CQC Financial Analyst will ► Coordinate the final review of the solicitation with Coordinator is review/approve the
assign a staff/ ► Updating the projected timeline to develop the solicitation, evaluate, and award the contract unlock the Evaluator Score the HHSC Agency/Program, HHSC System responsible for PCS 126–CMBL
program member to ► Providing guidance to the assigned HHS Agency/Program, HHSC System Contracting or appropriate HHSC Sheet within the posted Contracting or appropriate HHSC the following: Supplementation
edit the program- Agency/Program legal division, or other identified stakeholders in modifying the solicitation using the RFP template Agency/Program legal division or other identified
approved evaluation tool to coordinates Approval Request.
specific documents
and any other required forms or attachments enter the information stakeholders to finalize the draft RFP document requests for
that should be
► Finalizing the SOW related to the RFP provided by the Purchaser ► Submit the RFP solicitation for required external clarification Manager PCS 138
included in the
► Ensuring solicitation contains requirement that the response be sent to the PCS Bid Room and to be identified on the and will: reviews, as applicable, i.e., Contract Advisory through the review
solicitation, as well as
the following: outside of the envelope/package with the following information: ► Update the Evaluation Team (CAT) or program external reviewers sole point of PCS Manager
reviews the RFP ► Event number Tool to include ► If one or more contract(s) awarded has an estimated contact for the verifies the PCS
template in CAPPS ► Event due date and time procurement specific value of $5 million or more, the purchaser will upload RFP with 138–Electronic
Financial collaborated ► Respondent’s name and criteria and relock it, the solicitation document along with any identified State Business
by the PCS ► Purchaser’s name saving it as the specific attachments/exhibits to CAT through the respondents Daily (ESBD) –
Purchaser and ► Ensuring solicitation contains prohibition on sending response by facsimile (fax) Procurement Oversight & Delegation portal
tool for the solicitation; and Solicitation
supports the SOW is
► Ensuring solicitation has defined timeline for questions to be submitted by respondents and the anticipated release ► Review the evaluation maintained by SPD and located on the CPA website, provides Approval form has
correct and makes
changes as date of the Agency’s answers tool to support that the see “Gaining Access to Procurement Oversight & assistance as been completed
necessary; ► Ensuring HUB Coordinator provides feedback of subcontracting opportunities in the solicitation to Purchaser, using addition of the evaluation Delegation” page on the CPA’s requests for needed in and returns the
provides/reviews the the PCS 406–HUB Subcontracting Determination criteria did not affect the assistance relating to the Procurement Oversight & development form to the
evaluation criteria and ► Finalizing evaluation criteria and subcriteria to be documented within the solicitation formulas or coding of the Delegation web application may be submitted to of HUB Purchaser. By
subcriteria for the ► Purchaser will work with HHSC Agency/Program and HHSC System Contracting on scored criteria and subcriteria tool; and spd.oversight@cpa.texas.gov Subcontracting signing the form,
evaluation tool; that are prioritized and weighted according to their relative importance in delivering best value to the State; that the ► Provide the evaluator ► CAT will review the solicitation document(s) from a Plans (HSPs) PCS Manager
identifies the statutory number of criteria and subcriteria will be kept to the essential minimum and be clearly defined for the vendor score sheet to the contract management and best practices prior to certifies that all
or administrative rule community; and that scored criteria and subcriteria will be designed to assess the extent to which the respondent is perspective;
Purchaser to add as an contract requirements have
requirements that are
able to meet and exceed the requirements to perform the contract attachment/exhibit to the ► CAT will provide recommendations, identify risks award. been completed
applicable to the
► Purchaser may use: solicitation and offer risk mitigations within 30 days of receipt; prior to posting the
solicitation and
► An evaluation tool he/she developed and regularly uses which must be reviewed and approved by the CQC ► Coordinate review of CAT's recommendations with solicitation.
resulting contract;
provides a filled-out Financial Analyst prior to use Note: Adding the evaluator the HHSC Agency/Program and HHSC System
PCS 126–CMBL ► The PCS Standard Evaluation Tool (Standard Tool), which is recommended score sheet to solicitations as an Contracting or appropriate HHSC Agency/Program Manager final
Supplementation ► Purchaser sends the following to CQC Financial Analyst: attachment/exhibit is effective legal division: review
Approval Request; ► Evaluation criteria for solicitations initiated on or ► Each item will be reviewed and a response The PCS Manager
and identifies and ► Subcriteria after 1 September 2018. documented reviews/approves
provides a list of the ► Weights ► Where applicable, the recommendation will be the final RFP
evaluation team
► Incorporation of the security and privacy requirements (i.e., DUA and SPI), as necessary incorporated into the solicitation document before
subject-matter CQC Financial Analyst
► Notification of requirements in the RFP that are necessary prior to contract execution ► The Purchaser supports appropriate responses, sending to CQC.
experts which may Nondisclosure and Conflicts
► Other factors that should be considered whether they are accepted or rejected, are sent
include technical, of Interest
financial, cost and Purchaser supports that any back to CAT and supports all documentation is
advisory teams. Note: HHSC System Contracting is the legal division that reviews/assists HHSC programs with legal review of solicitations staff of CQC who review the kept in the official procurement file
and contracts. DFPS has an independent legal division that reviews the solicitations and contracts for DFPS. Purchasers solicitation sign the PCS 117A– ► Review the PCS 126–CMBL Supplementation
need to support that the appropriate legal division is included on all correspondence and during collaboration. Nondisclosure and Conflicts of Approval List and submit to their manager;
Note: The RFP template may be modified to support the best practices for the RFP process are incorporated. Interest Certification. ► support the PCS 138–Electronic State Business
Daily (ESBD) – Solicitation Approval has been
submitted to a PCS Manager for approval

Level 3
List of activities
Level 4
Step 5: Compliance and quality control review Level 3–Level 4
PCS Purchaser Compliance and Quality Control Team
► Submit for CQC review ► CQC RFP review for posting

► CQC nondisclosure and conflicts of interest ► CQC change collaboration
Submit for CQC review CQC RFP review for posting

Purchaser forwards a copy of the final solicitation to be posted with all exhibits and attachments and the PCS 138–Electronic State Business Daily (ESBD) – Solicitation CQC will review all documents for accuracy and compliance and will provide recommended changes
Approval form to CQC for review and approval. and/or approval to post the solicitation.
Note: Until CQC is included in the CAPPS system, Purchasers shall forward the documents listed above to the Associate Commiss ioner of CQC via email. Any other
documentation needed shall be provided at the request of the Associate Commissioner and/or Contract Specialist in CQC assigned to review the solicitation.
CQC change collaboration

Any collaboration necessary to make changes to the solicitation will be coordinated by CQC in
conjunction with the Purchaser.
CQC nondisclosure and conflicts of interest

Purchaser supports that any staff of CQC who review the solicitation sign the PCS 117A–Nondisclosure and Conflicts of Interest Certification.

Level 3
List of activities
Level 4
Step 6: Solicitation process/posting Level 3–Level 4
PCS Purchaser HUB Coordinator PCS Purchaser
► Submit for CQC Review ► Prebid/offer/proposal conference – HUB ► Q&A period

► CQC Non-disclosure and Conflicts of interest Attendance
Posting the RFP Prebid/offer/proposal conference – HUB Question and answer period
► Purchaser shall be responsible for advertising the solicitation and will do the following: Attendance ► Written questions must be received by
► Post the solicitation on the ESBD, using Google Chrome, for a minimum of 21 days. The minimum of 21 days is recommended to support compliance with the HUB good-faith ► The HUB Coordinator will attend the the deadline specified in the solicitation.
effort requirements as well as the posting of the solicitation prebid/offer/proposal conference and The PCS Purchaser will compile all
► Provide notice of solicitation to all possible respondents on the approved supplemental listing provide: written questions received by the
► Provide notice of solicitation to all possible respondents on the CMBL class and item identified on the solicitation document ► An overview of HUB requirements for deadline into a Q&A document.
► Send Project Manager/Contract Manager, PCS Bid Room (see Section VI below), HUB Coordinator and HHSC System Contracting Divis ion or appropriate HHSC the solicitation Questions must be compiled verbatim
Agency/Program legal division the date and time the RFP responses will be due ► an explanation of the HUB (with any spelling and grammatical
Subcontracting Plan (HSP) completion errors). Every question received, even
and any applicable forms required for similar questions submitted by different
Update procurement file – record documents
submission vendors, must be accounted for in the
► Purchaser will maintain the master version of the solicitation document at all times and support that all applicable requirements listed on the PCS 160–HHSC Solicitation
► Assistance to the respondent as Q&A document. The name of the entity
Checklist – RFPs, RFAs, RFQs and RFOs have been met and documented in the official procurement file.
needed in development of HSPs prior submitting the question and identifying
to the solicitation due date information should be omitted from the
Note: Purchaser is the sole point of contact. All communication between the respondents and the HHSC Agency/Program concerning the solicitation is strictly prohibited and must
published answers. Once the Q&A
be directed to Purchaser.
document is compiled, the Purchaser will:
► Develop or obtain answers for all
Prebid/offer/proposal conference purchasing process questions and
► Purchaser is responsible for coordinating a prebid/offer/proposal conference, if necessary, to highlight the requirements of the solicitation and the HSP requirements. coordinate with the Project
Manager/Contract Manager and
Note: Prebid/offer/proposal conferences are highly recommended for large procurements. In addition, for large, complex procurements, mandatory attendance of the HHSC System Contracting or
prebid/offer/proposal should be required. appropriate HHSC Agency/Program
legal division to obtain answers to
program-specific questions
Prebid/offer/proposal conference coordination
► Compile the answers into the Q&A
► If a prebid/offer/proposal conference is planned, the Purchaser coordinates with HHSC Agency/Program staff, HUB Coordinator and HHSC System Contracting or appropriate
document
HHSC Agency/Program legal division to:
► Insert the Q&A document into an
► Locate a meeting room and any equipment needed
addendum (PCS 121–Solicitation
► Coordinate participants’ attendance
Addendum)
► Develop material for the conference using the following forms:
► Post the addendum on the ESBD,
► PCS 132–Vendor Conference Agenda form
using Google Chrome
► PCS 133–Vendor Conference PowerPoint Template
► Work in conjunction with Project Manager/Contract Manager to:
► Lead the vendor conference
► Record all written questions received from participants and any tentative answers given in the conference (see PCS OP 574–Conducting Vendor Conferences); and
► support that all participants sign in on the sign-in sheet and names are recorded via e-mail for those who participated via conference call
► Facilitate questions/inquiries during the vendor conference
► Receive questions/inquiries related to the solicitation
► Develop or obtain answers for all purchasing process questions and coordinate with the Project Manager/Contract Manager and HHSC System Contracting or appropriate
HHSC Agency/Program legal division to obtain answers to program specific questions
► Compile the questions and answers into an addendum (PCS 121–Solicitation Addendum)
► Post the addendum on the ESBD, using Google Chrome
Note: The sign-in sheet of names of the vendors and other individuals who participated in the prebid/offer/proposal conference may also be included in an addendum posted on the
ESBD (optional, but recommended).

Level 3
List of activities
Level 4
Step 7: Evaluation preparation and response receipt Level 3–Level 4
PCS Purchaser PCS Bid Room Coordinator HUB Coordinator PCS Purchaser CQC Financial Analyst
► Bid Room notification ► Response receipt ► HUB review of HSP ► Evaluator score sheet ► Finalizing evaluator score sheet
► Providing the responses
Bid Room notification Response receipt HUB review of HSP Opening Finalizing evaluator score sheet
Purchaser must send the PCS Bid Room Coordinator All responses are to be received by the PCS The HUB Coordinator is responsible Purchaser receives all electronic and Upon receipt of the evaluation tool,
a bid opening notification via a calendar event sent to Bid Room Coordinator. Responses will be for the following: hard-copy proposals from the PCS Bid weights, names of evaluation team
PCSbids@hhsc.state.tx.us. logged as received and secured in ► Coordinates review of respondent Room Coordinator and: members and names of the qualified
accordance with the Bid Room procedures, HSPs to support compliance with ► Conducts the solicitation opening respondents, the CQC Financial
The notice must state: PCS OP 210–Response Handling for Formal statute and the HUB rules on the specified opening date and Analyst will finalize the evaluator score
► That an event has been publicly posted and Informal Solicitations. ► Sends the Purchaser a list of the time with a witness sheet.
► The due date and time of event respondents with approved HSPs ► Documents if there are responses
► The specified format for responses, such as mail, ► Hosts post-award meetings with that do not meet the solicitation Once the evaluation tool is complete,
Providing the responses
hand delivery and courier awarded contractors, if necessary requirements and possibly the CQC Financial Analyst will provide
At the due date and time, the Bid Room
Coordinator will provide all the original disqualifies the respondent it to the Purchaser to use for the
responses to the PCS Purchaser in evaluation team training.
accordance with the Bid Room procedures,
PCS OP 210–Response Handling for Formal
and Informal Solicitations. Evaluator score sheet
Following review by HUB, the
Purchaser sends the following to the
CQC Financial Analyst to finalize the
evaluator score sheet:
► Evaluation tool attached to the
solicitation
► Names of evaluation team
members
► Names of the qualified respondents

Level 3
List of activities
Level 4
Step 8: Procurement evaluations Level 3–Level 4
PCS Purchaser Evaluation Team CQC Financial Analyst PCS Purchaser HHSC Agency/Program Legal Budget HHSC
members Agency/Program
► Evaluation training ► Evaluation ► Evaluator Score ► Final evaluation tool ► Briefing staff and ► Legal reviews ► Budget Purchaser notification of
► Evaluation Sheets/Evaluation management notification winning respondents
Completion ► Interviews
Evaluation training Evaluation Evaluator score sheets Final evaluation tool Briefing staff and ► PCS has templates ► Budget is Purchaser notification
► Purchaser coordinates and facilitates the evaluation ► Evaluation Team or notification the ► Upon receipt of the final management for contracts to be notified of winning
training with members of the evaluation team, members evaluation has been evaluation tool from CQC It is the responsibility of the shared with Legal: ► Budget can respondents
including external evaluators who have prior (contract completed, the CQC Financial Analyst, the HHSC Agency/Program to ► Legal reviews in kill it if there’s ► If respondent
approval by PCS Management manager, Financial Analyst: Purchaser will: support Agency/program CAPPS, called no money interviews are not
► Provides the evaluation team mandatory training on program ► Re-reviews the ► Facilitate approval of staff and executive “collaboration” ► May change necessary, the
how the evaluation process will be administered, how leadership, legal, completed evaluation the respondents and/or management are apprised award HHSC
the evaluator score sheet will be accessed and how budget) perform tool to support that all the competitive range of next steps related to the amounts Agency/Program
to facilitate requests for clarification evaluations on evaluators’ scores are in coordination with the procurement. notifies the
the responsive in the tool accurately program–based on the Purchaser of
Note: When applicable, evaluators will be given access proposals prior to and certifies the overall evaluation Interviews approval of the
to SharePoint to streamline completing the evaluation or by the integrity of the tool criteria/score–for If the winning winning
process. requested ► Provides the final further consideration respondent(s) cannot be respondent(s).
deadline evaluation tool, which during the procurement selected based on the
► Supports, when applicable, the State Agency ► Send any includes the final process initial evaluation, HHSC
Nepotism Disclosure Form for purchases over $1m, required respondent rankings, to ► Submit selected Agency/Program will notify
is signed by all personnel involved with the clarification Purchaser respondents for the Purchaser to
solicitation evaluation at the evaluation training; questions to the ► Saves a copy of the approval to the PCS coordinate respondent
► Sends notification of any conflicts notated by the Purchaser final evaluation tool Manager interviews with the
evaluators in the disclosure form to the PCS ► Support final with aggregated scores selected respondents.
Deputy Associate Commissioner, or designee evaluator score and a ranked list of
and when applicable, contacts the HHSC Ethics sheets are sent to respondents in the
Officer for guidance and direction Purchaser or procurement file in the
► Uploads any documentation regarding potential properly saved on designated network
conflicts and how such potential conflicts were SharePoint via folder located under
resolved or not to the procurement file the established Procurement
portal when Resources and notifies
instructed by the purchaser the tool
Evaluation Purchaser is complete
► During the evaluation process, the Purchaser:
► Coordinates with the HHS Agency/Program
and/or HHSC System Contracting or the
appropriate HHS Agency/Program legal division
to obtain responses to clarification questions
asked by the evaluators
► Notifies CQC to aggregate score once the
Evaluator Score sheets are finalized by the
evaluation team
► Works with the HHSC Agency/Program and CQC
on the review of evaluator scores
► Assists with an outlier meeting, if necessary
Note: All persons identified to evaluate proposals must

score all respondents for their assigned criteria.

Level 3
List of activities
Level 4
Step 9: Interview and selection Level 3–Level 4
PCS Purchaser HHSC Agency/Program
► Interviews/oral presentations ► Conduct interviews/oral presentations

► CQC
Interviews/Oral Presentations Conduct interviews/oral presentations

If notified that HHSC Agency/Program wants to conduct respondent If HHSC Agency/Program wants to conduct respondent interviews/oral
interviews/oral presentation, the Purchaser: presentation, program contacts the Purchaser to set up:
► Locates a meeting room and any equipment needed ► A meeting room and any equipment needed
► Coordinates participants’ attendance ► Coordinate participants’ attendance
► Coordinates the development of a list of questions to be asked of each ► Working with Purchaser during the development of a list of questions to be
respondent during the interviews, or the appropriate format to be followed, asked of each respondent during the interviews, or the appropriate format
if necessary to be followed, if necessary
► Coordinates the method for scoring of the interviews and determining the ► Coordination of the method for scoring of the interviews and determining
winning respondent(s) the winning respondent(s)

► Supports presentations, when applicable, adhere to criteria in the
solicitation and the interview questions
► Supports all participants sign in on the sign-in sheet
► Coordinates the rescoring of the respondents after the interviews
► Establishes time limits for the interviews/oral presentations
CQC
If the interviews are scored using the evaluation tool, Purchaser will need to
coordinate review of the new scores with the CQC.

Level 3
List of activities
Level 4
Step 10: Contract negotiations Level 3–Level 4
PCS Purchaser HHSC Agency/Program
► Negotiation phase ► Conduct negotiation phase

► Vendor checks
► Reference checks
Negotiation phase Conduct negotiation phase

Upon the selection of the winning respondent(s), the Purchaser facilitates the negotiation process, as ► Upon the selection of the winning respondent(s), assist in the coordination of best and final offers
applicable, toward contract execution and award with the winning respondent(s) in negotiations and (BAFOs) with respondents to finalize all negotiations
documents the results and: ► Assist in the collaboration of the contract document through CAPPS
► Coordinates best and final offers (BAFOs) with respondents to finalize all negotiations
► Routes all BAFOs to the HHSC Agency/Program and HHSC System Contracting or appropriate
HHSC Agency/Program legal division for review and concurrence
► Coordinates collaboration of the contract document through CAPPS with the HHSC
Agency/Program and HHSC System Contracting or appropriate HHSC Agency/Program legal
division
► Supports all requirements of the solicitation, including the HSP requirements, when applicable, are
incorporated into the final contract and reporting requirements are included in the terms and
conditions of the final contract
► Supports all of the appropriate approvals of the contract document are sought and documented in
the procurement file
Vendor checks
In concurrence with the negotiation phase, the Purchaser will be verifying PCS 160–HHSC
Solicitation Checklist – RFPs, RFAs, RFQs and RFOs vendor checks and reference checks.
.
Reference Checks
Once respondents have been selected for approval, the Purchaser:
► Sends an email to the listed vendors for reference checks using the PCS 145–Vendor Reference
Survey Form
► Follows up with a phone call to the listed vendors if no response is received within three days

Level 3
List of activities
Level 4
Step 11: Recommendation for awards Level 3–Level 4
PCS Purchaser
► Justification for award
Justification for award

Upon selection of the winning respondent(s), the Purchaser will:
► Initiate drafting of the proposed justification for award using the
PCS 08-Justification of Award
► Coordinate review by HHSC Agency/Program for approval and
HHC System Contracting or appropriate HHSC Agency/Program
legal division for concurrence
► If applicable, receive and review the action item memo from HHSC
Agency/Program
► Submit award recommendations to executive management for final
approval

Level 3
List of activities
Level 4
Step 12: Contract award phase Level 3–Level 4
PCS Purchaser HHSC Agency/Program – Contract Manager PCS Purchaser PCS Manager
► Finalized evaluation and reward ► Execution, SCOR and funding ► Purchase order ► Final review
► Contract record ► Completes procurement file
► Vendor notification
► Formal approval routing
► the digital signature tool
► Post-execution
Finalized evaluation and award Execution, SCOR and funding Purchase order Final review, PCS Manager
Purchaser enters the finalized evaluation into CAPPS and award to Once the contract is fully executed, the assigned contract manager The Purchaser copies the requisition to a purchase order and The PCS Manager reviews the procurement file and
the respective respondents. will load the contract document into SCOR. If the awarded contract attaches it to the contract record in CAPPS Financial. the completed PCS 160–HHSC Solicitation Checklist
is encumbered, the HHSC Agency/Program enters the CAPPS – RFPs, RFAs, RFQs and RFOs and signs to certify
funding requisition(s) with current fiscal year funding. that the file is complete.
Contract record
Completes procurement file
The Purchaser will create a contract record in CAPPS and There are three points of entry before information is sent to SCOR
The Purchaser completes uploading all documents’
collaborates the contract template to the HHSC Agency/Program (follow up with Charles E.).
correspondence and other documentation to the procurement file
and HHSC system contracting.
and signs the PCS 160–HHSC Solicitation Checklist – RFPs,
RFAs, RFQs and RFOs to certify that the file is complete.
Vendor notification
The Purchaser notifies vendor of potential award and requirement
to file Form 1295 as applicable, for contracts valued at $1m or
more.
Formal approval routing

The Purchaser will:
► Finalize the contract packet for all potential awardees;
► Receive the PCS 515–Routing Request Form from the HHSC
Agency/Program
► Send the final contract packet for formal approval routing in
CAPPS to PCS Procurement QA
► Support that contracts valued at $10m or more have an
attestation letter completed by the Agency/Program and are
included in the final contract packet for signature
the digital signature tool

Once fully approved, the Purchaser sends the contract packet, the
PCS 515, the request document and the requisition to Procurement
QA for execution through the digital signature tool.
Post-execution
After execution, the Purchaser posts the award notice on the ESBD
using Google Chrome.
Note: Approvals are needed for documents requiring external

reviews, such as QAT, CMS and OAG.

Level 3
List of activities
Level 4
Step 13: After contract award phase Level 3–Level 4
PCS Purchaser Agency/Program
► Debriefing request ► Change in ownership and final formalities
Debriefing request Now contract becomes contract manager’s responsibility

If a respondent requests a debriefing, the Purchaser coordinates with Do monitoring
the Program Manager/Contract Manager and HHSC System ► Monitor deliverables
Contracting or the appropriate HHSC Agency/Program legal division in ► Review invoices
accordance with PCS OP 578-Debriefings for Solicitations. ► Send to AP to cut the check
► Can send with cover sheet or AP voucher
► Info with payment terms
► Assign account code
► Comptroller pays
► May amend/extend
► Contract ends
► Contract manager closeout process
► Complete PCS closeout form

Level 3
List of activities
Level 4
PCS solicitation checklist
The solicitation process requires multiple different forms to be completed outside of CAPPS. The process involves
manually completing the form, emailing it and/or and uploading it back into CAPPS. Cycle time is not tracked. Below are
some examples of forms that may be completed outside of CAPPS.
Historically underutilized business (HUB) checklist
All solicitations of more than $100k must be reviewed and submitted with a HUB checklist. There is a
minimum of three active HUB vendors per solicitation. The HUB program operates in a similar process
as other states.
PCS approval process
Based on the dollar value of the requisitions, a certain number of approvals and level of approvals must
take place, regardless of the spend level, slowing down CAPPS and backlogging other requisitions.
Evolution of the traditional supply chain to the supply chain of the
future
Supply chain of the future

Competitor
Connector
Eng.
Cloud-based contractor Customer
SW platforms Retail/
Coopetition
Level of system and data integration/usage of cloud-based IT systems
Platform-based consumer
Supplier business model
Engineering
collaboration
PLM in the cloud
OEM For-
The old world: value creation within entities, co-creation
warder Customer
on-premise IT
Supplier
Traditionally, creators have been selling products and
Retail/
services through linear value chains. Companies consumer
SC as
were owning a dedicated part of the value chain, Contract a service
manufact. Logistics Customer
External
systems
competing with competitors. contractor
integration
SC Planning
Supplier mgmt.
Innovation and Product Lifecycle Management Risk management
Suppliers Manufacturer Customers The new world: ecosystems on cloud-enabled

OEM platforms
Order Plan- Quality Mainte- Sales and
Mgmt ning Mgmt nance Marketing Digital ecosystems do not work linearly; they are
Sourcing and
Purchasing
Supply Chain and Operations
Service and
shaping market networks and support hybrid forms
Pro-
duction
Ware-
housing
Logis-
tics
Distri-
bution Spare Parts of cooperation and competition: coopetition.
Management
On-premise
Ecosystems create and serve communities while
IT systems harnessing their creativity and intelligence. Entities
Finance and Controlling may play multiple roles in an ecosystem.
Degree of Taylorism/distribution of value-creating processes on multiple entities within partner ecosystem

Internal Collaboration with Service and
business functions partners platform-based
businesses
PCS evaluation tool review
Since June 2018, PCS has begun to address issues in the evaluation tool related to the evaluator, score
sheet migration and the aggregation of formulas. The weighting of the scores remains inconsistent as it
varies by RFx evaluation and by agency.
Source: 20180807 TTOR Score Sheet.xls.
‘Of the seven options listed below, what are the top three people
and organizational issues that you feel need to be prioritized?’
(voting and free response ThinkTank activity)
As we analyzed the qualitative results of our interviews and ThinkTank sessions, the issue of competence rose as a
priority area for PCS. The three separate options in the red box below address competence in three different ways: new
hire competence, ongoing skill development, and development and accessibility of deep skills.
Communications within and outside of PCS 57.6% (156 votes)
Staffing and workload levels 52.0% (141 votes)
Role definition and clarity 44.6% (121 votes)
Ongoing training and development 31.0%

Competence
Subject matter expertise

Subject-matter 29.5%
Onboarding/training
Onboarding / training 26.6%
Goal setting and performance measurement 17.0%
0% 20% 40% 60% 80% 100%
Results based on 271 total votes of 301 participants.
When the three competence areas are combined, they rise to the
top of the priority list
Competence 87.1% What we heard

Communications within and outside of PCS 57.6% “Develop standard training sessions for PCS job
duties required at hire and annually.
Staffing and workload levels 52.0% Supplement with monthly or quarterly refresher
training opportunities, or outside training”
“There should be training manuals that address
Goal setting and performance measurement 17.0% each functional area and should be updated as
needed! Management should be in charge of this
0% 20% 40% 60% 80% 100% and actual on-going trainings”
“Put all new employees in a training room with
Results based on 271 total votes of 301 participants. computers to learn and practice. Other
employees should not have to take time from their
The new competence category combines: 1) Ongoing training development
work to train. It puts them behind in their own work”
2) Subject-matter expertise
“First, there needs to be standard procedures that
3) Onboarding/training are followed by everyone and everyone has to
buy into learning and applying what is offered in
Learning has become a differentiator in an ongoing search to find the training; then, management has to follow up to
great talent. Organizations recognize that continuous development be sure that their people are following those
drives employee engagement and is a reason employees seek and procedures and becoming proficient in their job
stay with an organization. duties”
With the new groupings, communications becomes the second
priority area for both PCS and non-PCS employees
Competence 87.1% Communication with and outside PCS

Communications within and outside of PCS 57.6% “There needs to be open dialogue between
management and employees so trust can be
Staffing and workload levels 52.0% built”

“Create a communication board internally and
externally. There are policies and procedures
Goal setting and performance measurement 17.0% that do not get communicated clearly to
external customers that creates confusion as to
0% 20% 40% 60% 80% 100% how a procurement needs to be initiated. Create
purchase liaisons throughout the divisions to
help communicate these policies and procedures
Results based on 271 total votes of 301 participants.
so there is not so much frustration at the end of the
procurement cycle”
“Provide HONEST and FREQUENT communication
to staff regarding what is happening and where
things are going. Don't keep the ‘plan’ only among
management. Provide org charts to see who is
PCS leadership has already implemented some of these ideas. PCS
doing what – positions and individuals”
Ambassadors have been named to liaise with the programs. There
are regular Tuesday leadership meetings to share organization
changes and policy/procedure changes; however, that information is
not consistently cascaded.
Both PCS and non-PCS employees identified staffing and workload
levels as areas that need to be addressed
Competence 87.1% Staffing and workload

Communications within and outside of PCS 57.6% “Analyze current FTEs and realign staff to fit
workload and peak times”
“Align staff with their areas of expertise in which
they excel”
“Develop processes to assist in effectively defining
Goal setting and performance measurement 17.0% the role of the employee and hire the actual
0% 20% 40% 60% 80% 100%
number of staff needed to the do the work”
“Distribute workload to staff that have been hired to
fill vacancies. Unfortunately, the staff that have
Results based on 271 total votes of 301 participants. been hired to fill vacancies do not have the
experience to do the work so existing staff
continue to be dumped on”
“We email our manager weekly our queue. Some
people’s queue never goes down. You might
have 500 and reduce it by 80, but the next day that
Creating an effective organization to support the strategic, business
same person will get 120. Then there are some
or cultural goals can improve efficiencies, drive desired behavior, employees that stay at 75 and the manager never
spark innovation and distribute responsibility evenly distributes the work load. Nor does the
employee help the ones with a lot in their queue. I
think the work load should be distributed
evenly across the team”
PCS organization chart findings
► Although PCS has made great strides in hiring recently, 23.5% of the jobs were still
vacant or filled with temps and interns as of September 2018, and several of the people
filling senior leadership positions are new.
► Interviews revealed that there was a lack of clarity regarding the responsibilities of the
Contract Administration and the Contract Oversight & Support (COS) groups.
► Additionally, due diligence indicated that COS is currently reporting to Contract
Administration, which can potentially blur the stated responsibilities of COS, as COS
reports to an area that COS would investigate.
HHSC’s description of procurement and contracting
functions
HHSC job descriptions provide some differentiation within the general description; however, the
examples of work performed do not differentiate as clearly.
Functions Description
PCS QA/QC – Performs advanced (senior-level) Internal quality assurance work. Work involves coordinating the planning, development
Internal quality and administration of internal quality assurance and compliance activities. May supervise the work of others. Works under
assurance Specialist limited supervision, with considerable latitude for the use of initiative and independent judgment.
III
Contract Performs highly advanced (senior-level) contract administration work. Work involves overseeing the execution and
Administrator administration of contracts for large scope or high-dollar contracts by defining requirements and negotiating, awarding,
Manager II developing and monitoring contracts. May plan, assign and/or supervise the work of others. Works under minimal
supervision, with extensive latitude for the use of initiative and independent judgment.
Legal – Attorney III Performs moderately complex (journey-level) attorney work. Work involves planning and organizing work, interpreting laws
and regulations, preparing legal documents, rendering legal advice and counsel, consulting with trial attorneys, conducting
hearings and assisting in preparing cases for Agency hearings and/or trials. May train others. Works under general
supervision, with moderate latitude for the use of initiative and independent judgment.
Budget Analyst III Performs highly complex (senior-level) budget preparation and analysis work. Work involves coordinating budgetary
activities, reviewing and analyzing budgets and performance measures, and providing technical advice and assistance on
budgetary matters. May supervise the work of others. Works under limited supervision, with considerable latitude for the
use of initiative and independent judgment.
PCS Purchaser III Performs complex (journey-level) purchasing and procurement work. Work involves purchasing and procuring
commodities, equipment and services using guidelines, rules, policies and laws. May train others. Works under general
supervision, with moderate latitude for the use of initiative and independent judgment.
Source: http://www.hr.sao.texas.gov/CompensationSystem/JobDescriptions/.
Compensation benchmarking
Health and Human Services published survey competitive market analysis –
actual total compensation (dollars stated in 000s) (part 1 of 2)
HHSC provided competitive compensation for the financial analyst position; however, the other job
functions were not as competitive.
Salary for Administrative Assistant III Salary for Auditor IV Salary for Financial Analyst II
100 80
49 78
95 $95.80
$77.00
47 76
$46.50 90
45 74
85 $86.50
72
USD
USD
USD
43 80 70
$41.90
41 $76.90 68 $67.90 $68.10
75
39 $39.20 66
70
$37.90 64
37 65 62
$63.60
$60.80
35 60 60
Top Median Bottom HHSC Top Median Bottom HHSC Top Median Bottom HHSC
Salary for Manager V Salary for Director IV (1) Generally, a level of pay that is between 85% and
115 115% of the market consensus is considered
$114.30 220 $219.70 competitive. This assumes that the incumbent has a
210 moderate level of experience and is performing as
110 200 $200.60 expected
190 (2) Total cash compensation = market consensus base
105 180 salary + market consensus annual incentive (actual).
USD
170 $173.30
USD
100 $100.20 (3) HHSC salary is based on salary range midpoint from
160
http://www.sao.texas.gov/reports/main/17-701.pdf.
150
95 140 Source: EY Internal Benchmark 2017 and 2018 (includes
$93.40 public, not-for-profit and commercial companies).
130
90 $90.00 $124.30
120
Top Median Bottom HHSC Top Median Bottom HHSC
Compensation benchmarking
Health and Human Services published survey competitive market analysis –
actual total compensation (dollars stated in 000s) (part 2 of 2)
HHSC was benchmarked to a compilation of nonprofit, private and public companies, as attracting
procurement personnel has been challenging across the state of Texas.
Salary for Purchaser II Salary for Purchaser IV Salary for Purchaser VI
60 65 100 $99.80
$64.20
58 63
95
56 $55.70 61
54 59 90
$57.90 $87.80
52 57 85
USD
USD
USD
50 55
$49.30 80
48 53 $79.30
$52.00
46 51 75
$45.00 $49.70
44 49
70
42 $41.90 47 $68.00
40 45 65
Top Median Bottom HHSC Top Median Bottom HHSC Top Median Bottom HHSC
Salary for Contract Specialist IV (1) Generally, a level of pay that is between 85% and
90 115% of the market consensus is considered
competitive. This assumes that the incumbent has a
85 $85.60 moderate level of experience and is performing as
expected
80 (2) Total cash compensation = market consensus base
$78.00
salary + market consensus annual incentive (actual).
75
USD
(3) HHSC salary is based on salary range midpoint from

70 http://www.sao.texas.gov/reports/main/17-701.pdf.
$68.20
65 Source: EY Internal Benchmark 2017 and 2018 (includes
public, not-for-profit and commercial companies).
$61.50
60
Top Median Bottom HHSC
Salary for Contract Specialist IV is
based on Program Specialist IV.
ThinkTank
Overview
► Nine ThinkTank sessions were held with 301 team members

from 7 August to 10 August. 58%
of participants identified
► Four of the sessions included only PCS team members, communications within
and five included individuals outside of PCS. This report and outside of PCS as a
includes combined results from all nine sessions. top issue.
► Clear and consistent themes from the sessions include:

►
►
Insufficient communication within the Agency
Undocumented and inconsistent policies and
56%
of participants identified clarity
procedures of roles and responsibilities
► Significant gaps across onboarding, training and between Program and PCS as
a top issue.
development
► Workload levels and fairness issues
Insufficient technology and reporting capabilities
►
►
The input we received helped identify quick win

48%
of participants stated that they
opportunities. “frequently” or “very frequently”
► The comments in the ThinkTank section are the opinion of use workarounds to get
around processes or
anonymous HHSC participants and do not reflect opinions of inadequate technology.
EY
Recommended quick wins
► Middle-level PCS management should increase frequency of

communication to increase transparency and keep staff more
informed.
► Executive through middle-level PCS management could increase face
time and interaction with staff to help them feel more recognized and
heard.
► Improve the lighting in the PCS work areas, which is deemed to be
too dim; brighter working environment is needed.
► Increase cleaning of office bathrooms and break areas.
► Plan and execute a social event (e.g., quarterly) for all staff possibly
tied to the end of “crunch” period.
Session feedback from participants
(free response anonymous comments from PCS participants)
“Leaving this with

“This was really interesting and
“This is the first time anyone at any hopes that we are
enjoyed doing it. Felt like I was
job has asked my opinion. I really making progress and
able to say whatever I wanted
liked having a voice” heading in the right
without feeling hesitant”
direction”
“Would love to know the results of

“This was a great way to
this exercise and the
know others feel similarly to “I think this is great and it
recommendations that are made
what I experience at work” shows people do care and in
to management”
asking for our opinions. I
hope that this is truly taken
and heard. Looking forward
to more clarity, training and
“The session was good, but
“Looking forward to the report streamlining the processes of
honestly it’s not going to matter;
and recommendations to our jobs better”
management is going to do what
make our jobs better”
they want”
Session feedback from participants
(free response anonymous comments from PCS participants)
“We need “Nice to know that agency

“I’m thankful that the agency decided to hold this continuous is wanting to know issues
session. I hope someone uses the results. It mechanisms we are experiencing and
would be great if the agency publicizes HOW they to SAFELY looking forward to changes
addressed the concerns mentioned and where offer input” that will make the
improvements will be made” procurement process more
effective and efficient”
“Will the results be shared? “Enjoyed this! Go do great work

Who is responsible for synthesizing and make results
making actual changes?” happen!!!”
“Great opportunity to gather “Asking our input is great, but “Loved it! It's the first
feedback. And really gains executive management has done this time that I’ve felt
confidence that something will many times over the years. And to completely free to
be done to better this process” what effect???” express my thoughts”
‘If you could improve only one thing about the environment/culture,
what would it be?’
(free response ThinkTank question)
Career track for

Physical work promotion
environment Increased
transparency
Increase telework
opportunities Communication
Clearly defined roles Increased automation

and responsibilities
Improve salaries Break down silos
Training Morale
Improved
retention
‘Of the seven options listed below, what are the top people and
organizational issues that you feel need to be prioritized?’
Communications within and outside of PCS 57.6% (156 votes)
Staffing and workload levels 52.0% (141 votes)
Role definition and clarity 44.6% (121 votes)
Ongoing training and development 31.0%
Subject-matter
Subject matter expertise 29.5%
Onboarding / training
Onboarding/training 26.6%
Goal setting and performance measurement 17.0%
0% 20% 40% 60% 80% 100%
Results are based on 271 total votes.
‘Of the seven options listed below, what are the top people and
organizational issues that you feel need to be prioritized?’
Communications within and

Staffing and workload levels Ongoing training and development
outside of PCS
► “Open communication needs to be established ► “The ‘producers’ are awarded more work – ► “Training is minimal at best; essentially you
within all levels of PCS, we can work together workload needs to be kept equal” get thrown into the deep end of the pool”
if we all know what is expected” ► “The experienced staff needs to mentor ► “The train the trainer method for CAPPS and
► “Create a communication board internally and inexperienced staff” SCOR was lacking”
externally” ► “Need more experienced team members; ► “Designate 'Mentors' to provide individualized
► “Processes continually change but no one is promotions and merit raises would help retain guidance, to support that procedure is fully
made aware - it needs to be addressed and experienced employees” understood”
documented” ► “New hires come in with no experience but ► “Overhaul entire onboarding process to also
► “PCS Management has to be serious about at higher pay grades” include 6-8 weeks training. Stop relying on
creating an atmosphere where real dialogue ► “Managers should closely follow workloads to PDF manuals for everything to address the
can take place without retaliation and really identify who is assigned multiple tasks and issues”
develop a strategy to address the real who has very little to do”
issues” ► “No secret that PCS is understaffed, and this Role definition and clarity
► “Information doesn’t seem to flow at all” is creating delays and satisfaction issues
► “It’s a challenge to actually speak with within an already stressed dept.”
someone in PCS”
► “It is unclear who staff should turn to
► “Automation needs to be the priority”
“From the outside, it seems like things go into for assistance and who the decision
► ► “PCS needs a recruitment and retention plan”
a ‘black hole,’ requiring extensive follow-up on makers are. Clarifying roles and
► “People are overwhelmed and not
status of reqs” appreciated”
responsibilities also assists with
► “Seem to get passed around a lot; when ► “Create an environment that makes people
accountability”
people do not know the answer, they just pass want to stay, not run” ► “Figuring out who does what is always a
you to someone else” ► “Need for project management function within challenge”
► “There should be a published HHSC” ► “Need RACI charts for PCS, Legal, and
process/manual/flow chart that describes who Program”
is responsible for what and when”
► “Staffing in PCS are normally in the dark
on new processes ... It’s very sad”
► “There has been so much change, roles
In total, HHSC participants made 1,215 freeform comments within this section of remain unclear”
ThinkTank. Note: these do not reflect the opinions or statements of EY
‘Of the 11 options listed below, what are the top process issues that
you feel need to be prioritized to address first?’
Clarity of roles and responsibilities betweenProgram

program and PCS 55.7% (152 votes)
Documented policies and procedures by role 42.1% (115 votes)
Review and approval process for procurements and contracts 37.0% (101 votes)
Prioritization and funneling of procurements (one size fits all) 30.8%
Visibility and transparency in the process (status) 28.9%
Qualityassurance
Assurance of processes 19.8%
Managing
Managing‘work arounds’
workarounds 15.8%
Automating certain workflows 15.4%
Controls to mitigate the risk of noncompliance

non-compliance 15.0%
Evaluation and scoring process 11.4%
Dashboard summarizing overall activities and performance 9.9%
0% 20% 40% 60% 80% 100%
Results are based on 271 total votes.
‘Of the 11 options listed below, what are the top process issues that
you feel need to be prioritized to address first?’
Clarity of roles and responsibilities between Documented policies and procedures

Controls to mitigate the risk of noncompliance
Program and PCS by role
► “There is always some kind of confusion ► “The job description I was hired for is 100% ► “This just needs to be revamped period”
between program and PCS” not what I am doing today” ► “We are forced to come up with
► “Hold program responsible instead of ► “It seems processes are being made up as workarounds to make up for Program's
changing our policies and procedures to we go along” errors. Enforcing accountability and
accommodate” ► “I’m never sure if I’m doing something right planning would drastically reduce non-
► “Provide additional training to the program to because things can change daily” compliance issue”
help them understand what their responsibility ► “Executives and upper management should ► “Controls seem to be circumvented and there
is” consult the people who actually do the work does not appear to be a method to support the
► “Need Liaisons for each Program and before revising policies” system of records are maintained”
assigned PCS team to effectively and ► “Develop a policy handbook”
efficiently procure for that Program”
► “It is never clear what area is supposed to do
what” Review and approval process for procurements Visibility and transparency in the process
► “Never know who to contact when problems and contracts (status)
arise”
► “Need clear processes and role definitions. ► “Too many approvals required. There ► “PCS = Black hole”
Publish processes. Be transparent and should be distinctions between types of ► “Need reporting mechanism that does not
accountable” activities and associated risk” require staff to search individual contract
► “RACI would be super helpful to define roles ► “Need to identify duplicate steps/approvals. actions”
and responsibilities” Identify who really needs to approve as part of ► “ ‘The Abyss’ is the nickname for the PCS
► “Provide training to all staff that touch the ‘value-added’ reviews” funnel of work. We submit items and never
procurement process” ► “More transparency is needed and crucial” know where it goes nor can we see what the
status is from either CAPPS financials, SCOR,
or any other avenue”
In total, HHSC participants made 1,057 freeform comments within this section of ThinkTank. Note: these do not reflect the opinions or statements of EY
‘I believe there are sufficient policies and procedures governing the
procurement and contracting processes in place today’
(ThinkTank voting assessment)
Rate your level of agreement from strongly disagree (1) to strongly agree (5):
70 votes 73 votes 2.44
1 2 3 4 5
Strongly Disagree Neutral Agree Strongly
disagree agree
Average rating is based on 270 votes.
Anonymous HHSC participant comments provided in ThinkTank sessions:

► “There are too many overly complex procedures. Things ► “No clue where to find anything other than asking co-
need to be simplified” workers. You may get several answers depending on who
► “P&Ps are out of date and not published anywhere you ask”
(anywhere easy to find, at least)” ► “It seems contracting and procurement staff are unclear
► “Policies and especially procedures need input from where to locate or identify requirements for procurement
customers. Current P&Ps are unclear and complicated” and contracting”
► “There are no policies and procedures that I have seen. ► “Depends on which area of PCS you work in”
Ever since CAPPS went live, no one seems to know how ► “All stakeholders should be involved when developing
the process works like they did in HHSAS” these. They are being updated without including
► “There are a lot of policies and procedures; however, they everyone that is involved”
need to be broken down per area, the PCS manuals are too ► “Procedures are constantly changing”
broad and at times unhelpful for specific needs for your
area”
HHSC participants made optional freeform comments within this section of ThinkTank. Note: these do not reflect the opinions or statements of EY
‘The Agency’s technologies allow me to complete the duties of my
job effectively’
Rate your level of agreement from strongly disagree (1) to strongly agree (5):
1 2 3 4 5
Strongly Disagree Neutral Agree Strongly
disagree agree

► “CAPPS is a hindrance to getting work done ► “CAPPS implementation has stalled contracting and
efficiently” purchasing significantly. Incorrect mapping, approvers
► “The learning curve has been extraordinary difficult, out of office, users not knowing what to do or how to
especially for CAPPS” use it”
► “Technology should be implemented with the input of the ► “Training for the technology is not sufficient to provide a
users” certain level of competency”
► “System sometimes runs very slow but I make it work” ► “Too many systems which do not communicate or
share with one another. Retrieval of information is
► “We are wayyyy behind the times technology wise. It’s
painful and wasteful”
really sad. We are one of the largest agencies in the
state and do not have adequate technology” ► “We have IT problems constantly and sometimes systems
shut down for days. This is a serious issue”
► “The systems are consistently down. Users don’t seem to
know their roles/responsibilities in the systems (CAPPS,
SCOR)”
‘How often do you use workarounds to get around processes or
inadequate technology?’
Choose a level of frequency from very frequently (1) to never (6):

1 2 3 4 5 6
Very Frequently Occasionally Rarely Very rarely Never
frequently

► “CAPPS has left us unable to perform simple contract ► “Daily. Never know where our procurements or
actions without moving mountains” contracts are. Must use offline tracking as the systems
► “Without workarounds nothing would ever get done” are not effective (e.g., have to request PCS to push a
button to keep workflow going)”
► “I have to jump through hoops just to print a PO. CAPPS
requires a lot of redundant information and steps that are ► “I rely on my personal relationships with staff to help me
not necessary to complete the task” with things”
► “Lack of understanding system causes the perception that a ► “Almost every requisition requires a different strategy
workaround is needed” to achieve the same goal, execution of a contract”
► “I don’t even know. I think almost everything is a ► “We have to keep our own spreadsheets and records to
workaround” keep track of reqs and funding”
In recognizing the recent changes in PCS leadership, process and
approach, we wanted to understand early indicators to the department –
‘What do you appreciate the most about the current environment/culture within the organization?’
Management Friendly staff Flexibility
► “I think everyone knows that we need to make changes, ► “Seems like new management listens and wants to
and that most people are open to change” improve”
► “The passion people have for the type of work we do in ► “Relaxed atmosphere/dress code”
public health”
► “Opportunity to help others”
► “Most people are supportive and knowledgeable. There
► “Flexibility”
is always an opportunity to learn from teammates,
whether it be policy and procedure, or historical ► “Most people here are friendly and helpful”
perspective” ► “No micromanagement”
► “Responsiveness and open to constructive criticism” ► “Dedicated staff”
► “Support of management and the true sense that we ► “Managers understanding of life outside of work”
are trying to make things better”
► “Diligent in remaining in compliance with procurement and
► “Employees are willing to help each other and their external contract management activities”
customers”
► “We are all in this together and want to help each other
► “Dedicated staff who want to make a positive difference” succeed”
‘If you could give leadership one piece of advice to preserve,
improve or change the culture, what would it be?’
“Communicate! Communicate! Communicate!” “Promote from within”
“If you want to retain talent, allow merit pay

increases and pay people in vital positions “Stop the favoritism”
what they deserve”
“Know your staff, respect your staff, praise your staff, reward your
staff and you’ll see the results”
“Communication, presence, transparency” “Boost staff morale in these

challenging times”
“Increase accountability throughout”
“Stop leading from the top of the

“Level employee pay to recognize
mountain and get in the trenches
experience and hard work”
with the people doing the work”
‘If you could give leadership one piece of advice to preserve,
improve or change the culture, what would it be?’
“Transparency and consistency would increase morale. Provide

adequate training so that PCS staff is not worried about repercussions
if mistakes are made.”
“Need automation to make things faster and easier”
“Recognize employees that consistently perform well

as well as hold those who do not accountable” “Break down the silos”
“Communicate all the way down - “Talk to the staff in the trenches doing the work”
not just to the level just below
you”
“Be open and honest and reward
“Acknowledge past failures and set a clear employees that deserve it”
path to improving all aspects of HHSC”
“Ease the current fear based culture. For awhile, it seems that
PCS staff was afraid to do anything for fear of being fired”
Operating model and strategy considerations
Critical issue: converting strategy into operating model
An operating model is the foundation for successful execution, which delivers on

an organization’s strategic intent.
Agency strategy Operating model
What is our core mission? How do we operationalize our strategy?
► Service populations ► Business process structure
► Equity, access, accountability ► Organizational structure
► Transparency, integrity and trust ► Governance and decision-making
Who are our customers/constituents? ► Performance metrics and accountability

► Citizens ► Operating locations
► Medical providers and researchers ► Technology enablement
► State leadership How will we allocate resources and

What is our service delivery strategy? measure results?
► Products and services ► Budget allocation
► Client and provider engagement ► Performance scorecard
► Education and outreach ► Service delivery vendor scorecards
Document list
Data request list
Document(s) requested
Organizational chart for the Agency

Organizational chart for Procurement and Contracting Services
Lines of defense – is there a formal structure in place for first, second and third lines of defense along with roles and responsibilities? If yes, please advise
State procurement statute/rules
Policy, procedures and process manuals for procurement, budgeting, contracting (pre-award and post-award) and subcontracting processes/functions (with all
amendments)
Internally or externally published Contract Administration Guides and (if available) HHSC contract manual
Process flowcharts showing procurement process (if available)
Any reports used to track and report performance internal to HHSC procurement or external to management and leadership
All assessment reports (Texas State Auditor’s Office, HHSC OIG, HHSC IA, etc.)
Training – need details for formal or informal training programs run by the department along with the content
List of governance/user groups related to procurement and the procure to pay life cycle
Tools and systems used – need list of all technology solutions/tools deployed by the department in the process, with the purpose and high-level functionality
Any other documents in addition to the above that may help provide foundational knowledge of the department and the procurement function
List of spend categories along with value and % of spend
Spend by vendors
Three effective complex contracts that occurred in the last 12 months
Three complex contracts that were found in fault by the audit reports
Data request list
Process for black-listing/removing vendor from the approved list

Number of incidents or protest/complaints log by vendor and status
Number of contracts terminated early with reason in the last 12 months
Latest contract management reports (vendor scorecards/contract health status/compliance status/cost savings)
Survey results (user function, vendor, subcontractors) in the last year
Percentage of cases where liquidated damages/penalties that were levied by/on the Agency in the last 12 months
Documents for sample transactions (end to end)
Salary compensation by job/role plus any additional compensation information
Number of contracts/bids pulled back/canceled based on internal issues (incorrect scope, evaluation, etc.) within the last 12 months
PCS plan to meet 31 August timeline (prioritized list of contracts to achieve 31 August deadline)
Revised procurement guide
Summarized deltas between previous procurement guide requirements and the new procurement guide requirements
Sunset report (2014)
Rider from last session that prohibits contract extensions beyond three years
Support service agreements draft (from transformation office)
Bid evaluation criteria from Jimmy Ramirez (a few examples)
Bid evaluation criteria from other programs for all major categories of spend (a few examples from each (grants, open enrollment, RFx))
Data request list
Obtain access to Medicaid performance dashboard

Form 515 for approval
IT portfolio rubric
IT (CAM, QAM, SAM)
C046 – Delegation of Authority Document
Compliance/QA – all documents, checklist, desk procedure (draft or final)
Volume of contracts that come through budget office
MSS CM Guide/HDIS CM Guide
PCS 160 – HHSC Solicitation Checklist
Aging report example
Sample of Excel monitoring tool
Delegation of authority (or equivalent document defining who is required to approve what for requisitions and contracts)
Mapping of system workflow for approvals in CAPPS
Process for adding vendors to the masterfile
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The improvement plan

Ms. Jordan Dixon

Dear Ms. Dixon,

A call to action 4–9

► The Agency has repeatedly faced public scrutiny surrounding procurement

The Agency has suffered from a lack of investment in enterprise

EY maturity model Rating Assessment

► The methodology measures an organization’s procurement practices along eight dimensions.

and efficiency occurs between levels 3 and 4

Recognized in the industry as

Agency standards and

Technology not optimized; Integrated technologies; Proactive aged

“Hero-based” environment System-based environment

Performance Strategic Strategic Direction

Average: 1.3 Average: 1.3

Average: 1.7 Average: 1.5

Average: 1.6 Average: 1.6*

► Developed initial database of 113 potential projects and activities, which

17PM: Standardize contract management and 27PM: Vendor outreach

25GR: Control effectiveness testing program

16GR: Procurement and

15GR: Lines of defense

12PP: PCS forms, contract 28PO: Employee

9TE: Immediate CAPPS

3IM: Dashboard 1SD: Operating model

► PCS mission is widely known

Performance ► Balanced scorecards that are used to drive improvement

Develop sufficient operating model for the Agency’s dependency

19PO 26PM 6PO

19PO Establish a comprehensive communication framework 2 4

20PO Develop comprehensive training programs 5 3 17PM

28PO Create an employee engagement plan 3 3

Low = 1 Ease of implementation High = 5

27PM Establish a vendor outreach program 4 3 (1–3 months)

► 4 = External support required to manage, configure/integrate, test, deploy

► 3/4 = Moderate business case impact

outside of HHSC 3IM 14GR 10TE

16GR Perform procurement and contract risk assessment 2 4

Enable dashboard automation for business administrative

4IM Expand upon the program liaison process 3 4

► 5 = External support required to manage, configure/integrate, test, deploy

► 3/4 = Moderate business case impact

► 5 = High business case impact

Dimension Project name Project situation

Dimension Project name Project situation

Dimension Project name Project situation

Dimension Project name Project situation

Dimension Project name Project situation

Dimension Project name Project situation

Com- Supply chain of the future

Cloud-based contractor Customer

► This 10-week rapid assessment has

Strategy Governance People and Organization Information management

► Portal as a single point of entry into the Supplier Portal Gateway

Supplier diversity “HUB” &

Invoice processing &

Supplier satisfaction with portal

Proprietary and confidential

For more information, please see EY Insights on People & Organization.

For more information, please see EY Insights on People & Organization.

For more information, please see EY Insights on People & Organization.

For more information, please see EY Insights on Procurement Transformation.

For more information, please see EY Insights on Policies.