Successful Best Practice In Procurement Management

Part 1

Vendor Analysis and Selection: SuccessfulBest Practices In System Procurements

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Bud Porter-Roth Porter-Roth Associates 415-381-6217 bud @rfphandbook.com http://w w w.rfphandbook.com Porter-Roth Associates 2

Request for Proposals Part One: Spring Training – Review of Essential Activities “If you need a machine and don’t buy it, you pay foritwithout getting it.” Henry Ford Porter-Roth Associates 3

Determine the Proper Procurement Type ¾Request for Quote (RFQ) À Know exactly what you are buying

¾Request for Information (RFI) À Questions about what you are buying

¾Request for Proposal (RFP) À Have a clear idea of what you are buying

¾Direct purchase from vendor(s) Porter-Roth Associates 4

Benefits of an RFP Process Requires you to: ¾ Establish a real need for new product/system ¾ Define basic requirements ¾ Estimate a budget ¾ Develop and establish project timelines ¾ Consolidate & scrub final requirements ¾ Identify and monitor potential problems ¾ Gather information on products and vendors Porter-Roth Associates 5

W hen to Use an RFP? ¾ Used when specifications cannot be sufficiently explicit to permit vendor selection based on price ¾ Vendor solutions/proposals will be based on different products ¾ Vendor proposals will differ in the services provided/offered ¾ Vendor pricing is not for “off-the-shelf” products Porter-Roth Associates 6

RFP Mechanicals ¾Pre-RFP Activities ¾Project Planning ¾Project Budgeting ¾RFP Activities ¾Post-RFP Activities ¾Evaluation

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Pre-RFP Activities ¾Identify need or problem for project ¾Quick first study to ballpark the solution ¾Organize study team ¾Develop schedules À RFP schedule À Project schedule

¾Formal needs analysis study ¾Product and technology education Porter-Roth Associates 8

Pre-RFP Activities (Cont.) ¾Build list of potential vendors ¾Vendors can include: À À À À

Original vendor VARs System integrators Teaming arrangements

More on this later.

¾Send out letters of interest ¾If list is large, try to pare it down – how? Porter-Roth Associates 9

Pre-RFP Activities – Education ¾Research products, vendors, technologies ¾Attend industry conferences/trade shows ¾Attend vendor demonstrations or bring them in-house ¾Attend user group meetings ¾Try to get references for similar types of projects/systems/technologies Porter-Roth Associates 10

W hich Vendors do W hat? ¾Document imaging ¾Electronic document management ¾Document workflow ¾Content management ¾Enterprise content management ¾Intranet (or Internet) content management ¾Knowledge management Porter-Roth Associates 11

W ho are the Vendors? ¾How do you decide on a vendor type? ¾Who do you send the RFP to? ¾Where do you get the vendor names? ¾Can you “pre-qualify” some vendors? ¾Is it ok to chat up vendors before the RFP? ¾What if a vendors says “Nope, too busy”? Porter-Roth Associates 12

Determine the Proper Vendor Type ¾Vendor direct ¾VAR ¾System integrator ¾Other?

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Vendors, VARs & System Integrators ¾Vendor – makes the product ??? Or combines products from others ¾VARs – adds “value” to a standard product and are somewhat limited in their focus ¾System Integrator – concentrates on integrating hardware and software components from different vendors Porter-Roth Associates 14

Project Planning



¾Develop reverse calendar ¾Beginning with the “go live” date & list all of the activities providing a start/stop date for each activity ¾Work the calendar backward to get the intended project starting date – “today” ¾Be amazed at how little time you have! Porter-Roth Associates 15

Overall Planning Considerations  ¾Time to write an RFP ¾Time for proposals to be written ¾Time to evaluate responses ¾Vendor questions and answers ¾Time for product demonstrations ¾Time for reference checks & site visits ¾Time for negotiations and award Porter-Roth Associates 16

Needs Analysis Study ¾Identify problem/need ¾Interview users or identify what work is processed or what work is performed by the equipment ¾Write functional requirements ¾Identify potential products/technologies ¾Estimate potential costs ¾Develop ROI Porter-Roth Associates 17

RFP Activities ¾Write RFP More on this ¾Send to vendors in Part 2. ¾Hold vendor conference ¾Respond to vendors’ questions ¾Receive proposals

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Post-RFP Activities (cont.) ¾Evaluate proposals ¾Short list of vendors established ¾Vendor demonstrations (short list only) ¾Reference site visits ¾Reference checks for non-site visits ¾Negotiate contract with potential winner ¾Award contract Porter-Roth Associates 19

Evaluation Criteria Philosophy ¾Consistent with, and based on, RFP requirements ¾Points or weights consistent with project objectives

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Purpose of Evaluation Criteria Is To Determine That…. ¾Vendor has relevant experience ¾Vendor understands the task ¾Vendor can demonstrate appropriate resources ¾Vendor has appropriate products ¾Vendor has appropriate management/implementation skills Porter-Roth Associates 21

Proposal Evaluation Strategies ¾Provide evaluation criteria or not? ¾Requirements and evaluation points go together ¾Evaluation is a way to measure compliance ¾Evaluation can be both subjective and objective Porter-Roth Associates 22

Evaluation Recommendation & Report ¾Names of all vendors ¾Outstanding issues/problems ¾Evaluation criteria review ¾Review of short listed vendors ¾Final recommendation ¾Reasons why

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Subjective Evaluation ¾ Follow the letter or spirit of the RFP ¾ Professionalism of proposal and communications ¾ Professionalism of vendor personnel (However, don’t confuse a salesman with the product/company.) ¾ Are there clues that a company is struggling? (Annual report, 10K, recent layoffs, sale rumors) ¾ Can you work with this group? Porter-Roth Associates 24

Objective Evaluation ¾Meets mandatory administrative requirements ¾Meets mandatory technical requirements ¾Meets mandatory management requirements ¾Pricing can be normalized and is within the competitive range Porter-Roth Associates 25

W hat is the Co mpetitive $$ Range? ¾Consistent with estimated budget ¾Consistent with other proposals ¾Within approximately 25% of each other for pricing

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Scoring and Evaluations ¾Simple good/bad/maybe? ¾Numerical scoring À Technical = 50 pts Management = 50 pts

¾Weighted scoring À Project plan multiplier *2

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Exam ple Matrix – Non-weighted Description

Points

Administrative requirements

100

Technical requirements

100

Management requirements

100

Price

100

Presentation & demonstration

100

Total

500

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Non-W eighted Evaluation Detail RFP Reference 2.5 Search Requirements 2.5.1 Search methods 2.5.1.1 Std key word search 2.5.1.2 Std Boolean search 2.5.1.3 Natural language search 2.5.1.4 Proximity search 2.5.2 Use of Metatags Bonus points for additional search methods

Point Value 200

Total Points

25 25 25 25 100 10

25 20 15 25 100 0

Based on an equal point value of 200 for each section.

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Simple Matrix - Weighted Description

Points

Administrative requirements

50

Technical requirements

400

Management requirements

200

Price

300

Presentation & demonstration

50

Total

1000

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Co mplex Matrix - Weighted Section Admin Tech Manag Ref Price

Weight 0.1 0.4 0.3 0.1 0.1 (=100)

Score

Total 90 80 75 86 90

9 32 22.5 8.6 9 81.1

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Evaluating Risk ¾“Risk” is a potential issue with À À À À

a vendor a product your staff the project itself

¾Risk can be an important evaluation factor ¾Note what are some examples of risk in your project Porter-Roth Associates 32

Evaluating Price ¾Not “only” evaluation factor if “value” is primary consideration ¾Ratio of overall score to price to get a value per dollar figure ¾Must have apples to apples comparison ¾What happens when prices range from $500,000 to $5,000,000 Porter-Roth Associates 33

Validating Vendor Pricing ¾Compare with other vendors ¾Compare to estimated budget ¾Outside estimates from consultants ¾Prior projects

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Price Variations Among Vendors When pricing varies by more than twenty-five percent in either direction, the RFP requirements should be reviewed to determine where the pricing discrepancy lies. For example, based on an estimated budget of $750,000, you receive the following: $300,000 $325,000 $675,000 $1,700,000 $1,825,000 $2,000,000 If we are trying to keep within a 25% differential, pricing should fall between: $560,000 to $940.000 If the above prices were received, something was wrong. Where did this RFP possibly go wrong? Porter-Roth Associates 35

Price Variations Among Vendors A more reasonable price spread, based on $750,000 budget, would look like: $550,000 $625,000 $700,000 $825,000 $1,000,000 Remember the 25% spread would be $560,000 to $940,000 Also, remember that prices submitted with the proposal are not the “final” prices and (sometimes) the list pricing could easily be reduced.

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Conclusion ¾Questions? Thank You

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