Guidelines for Successful

Scope and Procurement

 The Problem
 Success rate for intelligent transportation
systems life cycle is very low
 Problems can be traced to:
– Incorrect contracting approach
– Inexperience of the agency
– Failure to follow appropriate procedures
– Inadequate commitment of project management
and systems engineering resources
 Systems Acquisitions
Late
Okay
31% Cancelled

53%
16%

Source: Patterns of Software Systems Failure and Successes, Jones, Capers, 1996
 Success is Influenced by the
Purchaser
 Purchaser’s experience has greater impact
on project success than any other factor
 Success rate has increases by more than
25% for purchasers with prior experience
 ITS implementation must be led by
experienced staff

Source; Patterns of Software Systems Failure and Successes, Jones, Capers, 1996
The Contracting Model
 The Contracting Model
 Defines the entire contracting form and process
 Includes four dimensions:
– Work Allocation – Responsibilities
– Method of Award – Contractor selection
– Contract Form – How is work organized
– Contract Type – Methods of reimbursement
 Terms and conditions apply to all dimensions
 The Contracting Model
Procurement

Work Method of Contract Contract

Allocation Award Form Type

Low Bid Contractor Low Bid Phased Fixed Price

Systems Manager Negotiated Task Order Cost Reimbursable
Systems Integrator Sole Source Purchase Order Incentive
DB(OM) Time and Materials
Commodity (COTS)
Consultant Services
Outsource Contractor
Other Services

Terms and Conditions (payment, cancellation, disputes, etc.)

Use of the Contracting Model
 Identifies dimensions to be included in
selection process
 Procurement guidelines define the process for
choosing appropriate option for each
dimension
 Process is simplified by assembling
combinations of options – procurement
packages
 Project may include multiple contracts and
procurement packages
 System Procurement
Packages (1 of 2)
1) Commodity Supplier
– Low-bid selection of prequalified packages
– Fixed price contract
– Applicable only for unmodified off-the-shelf
software and hardware
2) Low-Bid Contractor with Design Consultant
(for 100% design)
– Low-bid selection
– Fixed price contract
– Can use incentives
– Can use phased contracts
– Useful if the predominant software is off-the-shelf
System Procurement Packages
(2 of 2)
3) Systems Manager
– Negotiated procurement
– Fixed price, cost plus or time & material contracts
– Can use incentives
– Can use either phased or task-order contracts
– Separate low-bid procurements required for construction
and equipment

4) Design-Build Contractor with Design Consultant

(for 30% design)
– Best value selection
– Fixed price. Cost plus or T&M may be acceptable
– Can use incentives
– Can use phased contracts
 Other Procurement Packages
5) Consultant
– Negotiated
– Fixed price, cost plus or time & material contracts
– Can use incentives
– Can use either phased or task-order contracts
6) Outsourcing either an activity (such as
maintenance) or an entire function (such as
traveler information)
– Low-bid selection may be based on rates
– Fixed price or time & material contracts
– Can use incentives
Contracting Considerations
 Selecting the Best
Procurement Approach
Characteristics Contracting Solutions
Organizational Level
•Experience
System
System Development
Development
•Resources
•Personnel Process
Process

Procurement
Package

Terms and
Project Category Conditions
•New or replace.
•Size & complex.
•Uniqueness
 Defining Organizational Level
Characteristic Immature Organization Mature Organization

Part time, personnel have Full time responsibility of

Personnel Experience
no prior experience experienced personnel
Experienced with 1 or
Organizational Experience Never done it before
more complex projects
ITS responsibilities Single organizational unit
Organizational Structure
undefined responsible for all ITS
ITS budget for systems
Resources No defined ITS budget
and personnel
Considered a priority by
Management Support Modest mid-level support
senior management

Included in agency’s
Expectations Not defined
planning process
 Defining Project Complexity
Characteristic Simple Project Very Complex Project

Newness Off-the-shelf solutions Invention(s) needed

Scope Single function Multi-function system

Interfaces None Both internal & external

Maturity Many similar systems Never been done

Requirements well
Stability Not sure what is needed
defined

Being developed for

Institutional Many agencies involved
single agency
 The Outputs

 Systems development process

– Waterfall
– Evolutionary
– Spiral
 The procurement package
 Lists of terms and conditions
The Development Processes are Based
on the Systems Engineering Life Cycle

Concept Operations &

of Operations Maintenance
High Level
Requirements System
Detailed Verification
Requirements
High Level Subsystem
Design Verification
Detailed Integration &
Design Test

Implementation

Time
 Systems Development
Processes
 Waterfall – A linear process for well-defined
programs including all the activities of the “V”
diagram
 Evolutionary – Development of a project in
a series of well defined phases in which the
“V” diagram is repeated for each phase
 Spiral – Not certain of what is needed, so
project development accompanied by much
prototype development and many planning
steps
The Decision Process
 Initial Decisions – Step 1
Start

Yes Does No
the agency intend
to outsource?

Does
Yes the project No
Use outsourcing include a system
process development?
(procurement
package #6 or #7)* Are
Yes traditional No
consulting services
being procured?

Use consulting Other services

Go To Step 2
process being procured.
(procurement Not covered by
package #5)* Decision Model.
 Decision Model
Schedule
Start Constraints
Step 4
Determine
Agency
Step 5
Select
applicable Step 6 Step 7
Step 2 systems Package
NO Apply
engineering Assessment
Work Differenti- and Final
process(es) &
Allocation ators Selections
candidate
procurement
package(s)
Step 3 Step 8
YES
Define
Define Contract
Project Scope and
Categories Terms and
Conditions
Send
Individual
Projects
through
the Model End
 The Fundamental Activities of
the Following Process
 Separate the project into individual contracts
 Determine project and agency characteristics
 Select procurement package
 Apply discriminators to multiple solutions
 Confer with Contracts
 Add terms and conditions
 Decision Model – Step 2
Schedule
Start Constraints
Step 4
Determine
Agency
Step 5
Select
applicable Step 6 Step 7
Step 2 systems Package
NO Apply
engineering Assessment
Work Differenti- and Final
process(es) &
Allocation ators Selections
candidate
procurement
package(s)
Step 3 Step 8
YES
Define
Define Contract
Project Scope and
Categories Terms and
Conditions
Send
Individual
Projects
through
the Model End
 Initial Work Allocation (Step 2)
 General rules:
– In general, it is best for all work to be contained in a single prime
contract (exceptions noted below)
– Minimize interdependency of contractors (i.e. where one
contractor depends on another contractor’s completion)
– Multiple contracts require increased project management
resources

 Reasons to consider multiple prime contracts:

– Significant software and systems development, but largest dollar
amount is in construction (i.e. systems contractor would not be
prime under a single contract)
– Unlikely that a satisfactory prime contractor can be identified
– Significant outside expertise required
 Decision Model Step 3
Schedule
Start Constraints
Step 4
Determine
Agency
Step 5
Select
applicable Step 6 Step 7
Step 2 systems Package
NO Apply
engineering Assessment
Work Differenti- and Final
process(es) &
Allocation ators Selections
candidate
procurement
package(s)
Step 3 Step 8
YES
Define
Define Contract
Project Scope and
Categories Terms and
Conditions
Send
Individual
Projects
through
the Model End
 Identify Project Category
(Step 3)
Category 1 Category 2 Category 3 Category 4
Example of Cell Content:
Complexity “Primarily application of
proven well-known
Development technology. May include non-
traditional use of existing
Technologies technolog(ies)”

Interfaces
Cells of table contain description of the characteristic
appropriate to each category
Evolution

Requirements

Risk

Examples
 Decision Model – Step 4
Schedule
Start Constraints
Step 4
Determine
Agency
Step 5
Select
applicable Step 6 Step 7
Step 2 systems Package
NO Apply
engineering Assessment
Work Differenti- and Final
process(es) &
Allocation ators Selections
candidate
procurement
package(s)
Step 3 Step 8
YES
Define
Define Contract
Project Scope and
Categories Terms and
Conditions
Send
Individual
Projects
through
the Model End
 Select Organizational Levels
(Step 4)
Level 1 Level 2 Level 3

Example of cell content:

Personnel
“Experience with at least one
category 2 project or greater.”
Organizational
Experience

Resources
Cells of table contain description
Organization of the characteristic appropriate
to each category
Management
Support

Expectations
 Decision Model – Step 5
Schedule
Start Constraints
Step 4
Determine
Agency
Step 5
Select
applicable Step 6 Step 7
Step 2 systems Package
NO Apply
engineering Assessment
Work Differenti- and Final
process(es) &
Allocation ators Selections
candidate
procurement
package(s)
Step 3 Step 8
YES
Define
Define Contract
Project Scope and
Categories Terms and
Conditions
Send
Individual
Projects
through
the Model End
 The Decision Matrix (Step 5)
Project Category Organizational Level

Level 1 Level 2 Level 3

1 – Low Waterfall Waterfall Waterfall

SM or DB* Low Bid*, commodity, Lob Bid, Commodity,
SM or DB SM or DB

2 – Moderately Evolutionary Waterfall or evolutionary Waterfall or evolutionary

Complex SM or DB* Low Bid*, SM or DB Low Bid, SM or DB

3 – Complex Not recommended Evolutionary Evolutionary or spiral

SM or DB SM or DB

4 – Extremely Not recommended Evolutionary or spiral Evolutionary or spiral

Complex SM or DB SM or DB

Notes:
First line is the systems engineering technique, second line is the procurement package
DB = Design-Build
SM = Systems Manager
* - Consulting services should be used while project is underway
 Decision Model – Step 6
Schedule
Start Constraints
Step 4
Determine
Agency
Step 5
Select
applicable Step 6 Step 7
Step 2 systems Package
NO Apply
engineering Assessment
Work Differenti- and Final
process(es) &
Allocation ators Selections
candidate
procurement
package(s)
Step 3 Step 8
YES
Define
Define Contract
Project Scope and
Categories Terms and
Conditions
Send
Individual
Projects
through
the Model End
 Procurement Differentiators
(Step 6)
 Systems manager is preferred to design-build
for significant new software development
 Design-build preferred over systems
manager, only for major projects and when
significant amounts of field construction are
involved
 If project includes both new software and field
construction, consider using multiple
contracts
 Procurement Differentiators
continued (Step 6)
 Low-bid contracting should only be used if:
– Required by agency policy (rarely true)
– Projects consist of field construction and off-the-shelf
equipment
 Commodity procurement applicable if an
available packages do not require modification
except for:
– New software drivers for interface with
communications and field equipment
– New database reflecting system configuration
– New graphics (maps, etc.) for local environment
 Impacts of Step 6 Decisions
(Step 6 continued)
 Low-bid contract will require design consultant
& low-bid contractor
 Systems manager contract will require low-bid
contractors for field construction and field
equipment supply
 Design-build contract will require design
consultant and design-build contractor
 Commodity procurement may require systems
integrator for system implementation and test
 Decision Model – Step 7
Schedule
Start Constraints
Step 4
Determine
Agency
Step 5
Select
applicable Step 6 Step 7
Step 2 systems Package
NO Apply
engineering Assessment
Work Differenti- and Final
process(es) &
Allocation ators Selections
candidate
procurement
package(s)
Step 3 Step 8
YES
Define
Define Contract
Project Scope and
Categories Terms and
Conditions
Send
Individual
Projects
through
the Model End
 Considerations When Making
the Final Decision – Step 7
 Involve the agency’s contracts
personnel (They should have been
involved from the beginning)
 Compatibility with the systems
engineering and project management
principles
 Agency’s relative familiarity with the
recommended alternatives
 Decision Model – Step 8
Schedule
Start Constraints
Step 4
Determine
Agency
Step 5
Select
applicable Step 6 Step 7
Step 2 systems Package
NO Apply
engineering Assessment
Work Differenti- and Final
process(es) &
Allocation ators Selections
candidate
procurement
package(s)
Step 3 Step 8
YES
Define
Define Contract
Project Scope and
Categories Terms and
Conditions
Send
Individual
Projects
through
the Model End
It is Then Necessary to Define
Terms and Conditions
 Contract Terms and Conditions
(Step 8)
 Some are common to all procurement
packages, others are unique for each
package
 Requires contracting expertise
 To a certain extent, by state law, agency
policies, and federal law
 Defined by the NCHRP documentation
 Sample Terms and Conditions
(Step 8)
Consultant Outsourcing Agency Outsourcing Agency
Commodity Supplier Low-Bid Contractor with
Systems Manager Design-Build Contractor Activity Function
Terms and Conditions Design Consultant
with Design Consultant

Contractor Inspection Design within Funding Negotiation Negotiation Negotiation Negotiation Negotiation
Requirements Limitation

Inspection of Supplies Redesign Responsibility Commercial Computer Design within Funding Notice of Cost Fixed Fee Fixed Fee
for Design Errors or Software Restricted Limitations Comparison
Deficiencies

Option for Increased Deficiencies Rights Redesign Responsibility Allowable Costs and Incentive Fee Incentive Fee
Quantity for Design Errors Payment

Ordering Fixed Price Fixed Fee Work Oversight Fixed Fee Work Oversight Work Oversight

Definite Quantity Incentive Fee Incentive Fee Suspension of Work Incentive Fee Execution and Execution and
Commencement of Work Commencement of Work

Indefinite Quantity Performance/Payment Rights in Data Fixed Fee Performance Based Performance/Payment Performance/Payment
Bond Payments Bond Bond

Brand Name of Equal Allowable Costs and Incentive Fee Delivery Orders (Task Allowable Costs and Allowable Costs
Payment Orders) Payment

Performance/Payment Performance Based Execution and Specifications Performance Based Modifications

Bond Payments Commencement of Work Payments

  Delivery Orders (task Performance/Payment Delays and Extensions Modifications Rights in Data
orders) Bond of Time

  Specifications Specifications and Modifications Rights in Data

Drawings
 Summary of the Seven Steps
to Implementing the Process
Step (1) Initial Decisions
Step (2) Allocate the work
Step (3) Select project category
Step (4) Determine agency level
Step (5) Using organizational levels and categories, select
Procurement Package(s) for each project
Step (6) Apply procurement differentiators to make final selection
Step (7) Make final selection
Step (8) Define contract terms and conditions

Contract process is complete

Key to a Successful Procurement
 Procurement approach is dependent on
project type and agency capabilities
 We’ve always done it that way is not a good
excuse
 The right procurement approach may not
guarantee success, but the wrong approach
will guarantee failure
 For More Information
 http://www.pcb.its.dot.gov/Catalogs/ITSCurriculum
.htm for courses on procurement, systems
engineering and project management
Contact

Thank You