Michael Asner Consulting
michael@rfpmentor.com
This article is from Issue #49 of The RFP Report. The entire report can be found at:
http://www.rfpmentor.com/rfp-report.html
Information Technology (IT) Outsourcing
By Denis Chamberland, ABTS Global LP.
Preparing a Request for Proposals (RFPs) for any large and/or complex project can be challenging. But it can often be even more challenging where the RFP concerns an IT outsourcing project. Part of the reason for this is that it is typically not possible to define conclusively upfront what the solution should look like. In fact, organizations often invite creative solutions from bidders on outsourcing initiatives. Because of this flexibility, organizations will leave the door open to accommodate the possibility of extensive negotiations with one or more bidders.
The RFP template prepared by the Government of Alberta provides a good starting point for large IT outsourcing projects. It is comprehensive and includes a number of best practices.
We have chosen to review three key areas:
· Contract template
· Proposal criteria
· Objectives of outsourcing
1. Contract Template
Many organizations prepare a robust RFP but figure they will draft and negotiate the contract once they’ve selected one or more bidders. In technology outsourcing transactions, it is advisable to include a template contract in the RFP. How the key legal issues will be negotiated will normally become so important that it makes sense to show upfront how those key issues are proposed to be dealt with by the organization. For example, the ownership of intellectual property or knowledge capital developed during the course of the outsourcing is sure to be an important issue to the parties to the outsourcing. The table of contents from the Alberta outsourcing contract offers a good listing of the type of issues that should be dealt with in the RFP:
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APPENDIX 2 – STANDARD OUTSOURCING CONTRACT TABLE OF CONTENTS
Services
Price and Payment
Changes in the Services
Reporting, Contract Management and Committees
Dispute Resolution
Resolution by Information Technology Steering Committee
Resolution by Senior Management Committee
Ownership and Licenses
Security, Access and Confidentiality
Subcontractors
Obligations of the Minister
Personnel
Term, Termination and Renewal
Orderly Transition on Termination or Expiry
Warranties, Representations and Liabilities
General
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2. proposal evaluation
The evaluation criteria are always important in any RFP. But in an IT outsourcing, where the ultimate solution often needs to be defined during the procurement process, a best and final offer approach (or BAFO) can be extremely helpful, if it is allowed by the organization’s policies and regulations, which is not always the case. But where it is permitted, and if well handled, BAFO can help ensure that the right solution is chosen.
The Alberta RFP provides a good example of how the BAFO process can be laid out in the RFP:
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Best and Final Offer
A Best and Final Offer process may be undertaken prior to final selection of the preferred Vendor. This Best and Final Offer Process, if employed, will be conducted as follows:
· Vendors may be selected from the short-list process to prepare a “Best and Final Offer”;
· details regarding the “Best and Final Offer” process and expected deliverables will be provided in advance to the selected Vendors;
· Vendors will be provided a (insert time frame) period to confirm assumptions under which their Proposals were developed (i.e. conduct whatever due diligence is deemed reasonable), propose revisions to their Proposals, and provide more specific detailed Proposals in areas to be identified by the Ministry and SMB;
· Vendors must propose a workplan prior to commencing the “Best and Final Offer” process. The plan must identify specific areas that they wish to investigate further, information that would be required to facilitate analysis, and contacts with the Ministry that are desired;
· following the “Best and Final Offer” process, Vendor presentations of final Proposals will be completed;
· following Vendor presentations of final Proposals, evaluation/selection of the preferred Vendor will be determined by the Evaluation Team;
· any modifications to approaches, prices or commitments to those contained in the original submissions and/or short-list presentations must be clearly presented and justified on the basis of new or additional information secured during this process. The Ministry reserves the right to judge the acceptability of modifications that are proposed.
The Ministry reserves the right to ownership of the resulting deliverables of the Best and Final Offer process, except where proprietary rights of the Vendor are specifically identified.
The Vendor is solely responsible for all costs it incurs as a result of participation in this process.
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3. objectives of outsourcing
Many RFPs for IT outsourcing services set out the organization’s current IT environment, asking for vendor responses on how each vendor proposes to offer the services in question. In our opinion, a best practice is to describe in detail the organization’s business strategy so that vendors have a good sense of the context in which they would be providing the services.
Section 8 of the Alberta RFP template is a good example of the scope that can be covered in explaining the organization’s business strategy, and requesting some specific feedback from vendors. We reproduce below sections 8.8 and 8.9, which focus on the level of flexibility the organization will need in the outsourcing arrangement and the competing priorities for the arrangement.
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8.8 Contract Flexibility
Describe the level of flexibility required in the outsourcing arrangement. Sample wording is provided below:
Ministry programs are in a state of considerable change. It is critical that the Vendor realize how change may affect the way in which the Ministry uses IT and that the Vendor plan for those changes.
During the Contract, the Ministry:
· may undergo change in mandate, organization, and support requirements;
· may be subject to potential reductions in internal organization and functional responsibility resulting from further privatization initiatives;
· will require extensive support levels to a decentralized and privatized model of service delivery;
· may introduce new products and services as part of its business plan;
· will be seeking out innovative means of delivering and supporting systems Services to a broad range of external shareholder groups; and
· will continue to have demands that must further the business vision in times of limited funding for investments in technology solutions.
It is possible that the work load may substantially decrease or increase during the period of the Contract. The Ministry requires a Contract with the flexibility to manage any situation that may arise. This may mean a Contract adjustment if the business change is dramatic.
8.9 Competing Priorities
Describe the Ministry’s concerns with competing priorities. Sample wording is as follows:
The Ministry needs to be assured that a balanced emphasis will be placed on competing priorities. For example, if too much emphasis is placed on cost reduction, then service levels and the currency of technology environments could be adversely affected. Conversely, placing too much emphasis on technology enhancement could potentially raise costs and affect the stability or integrity of services. While balancing these priorities, the Ministry’s emphasis in its regional service delivery needs to be maintained. Add to that the need for a Contract that will allow the Ministry to meet its business objectives in a time of substantial change. The Ministry cannot allow any deterioration of service levels nor any road blocks in its business plans and directions.
The Alberta RFP template is over 100 pages and it contains a wealth of information on ways to set up a robust outsourcing arrangement. It is available at www.rfpmentor.com. Click on “RFP Report”.
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Denis is Vice President with ABTS Global LP, a consulting firm that specializes in procurement and outsourcing. He is a frequent writer on procurement and outsourcing matters and works in Canada and the United States. Denis Chamberland can be contacted at dchamberland@abtsglobal.com.
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