Chapter 2: Competitive Government
Use Innovative Practices in the Bid Solicitation Process
Summary
The state’s methods for soliciting bids for goods and services are overly bureaucratic and inhibit competition. The state’s contracting processes should be improved through the addition of a multi-step acquisition process and multiple award schedules and contracts.
Background
The processes most state agencies use to solicit bids for goods and services are governed by state law and rules adopted by the General Services Commission (GSC). While GSC’s rules provide agencies with considerable flexibility, many agencies rarely take advantage of this freedom to develop effective bids.
Too often, state agencies write overly detailed and restrictive requests for proposals (RFPs) instead of allowing companies to use their knowledge and experience to propose innovative solutions or alternatives. On the other hand, companies doing business with the state often criticize agencies’ bid requests for being unclear and ambiguous, requiring vendors to invest a significant amount of resources in their responses.[1]
Information-Gathering Prior to Final Bid
Other jurisdictions use various methods to gather vendor information prior to the actual issuance and acceptance of final bids, so that they can refine the terms of their bid requests and ensure that the bids are as responsive as possible to their actual needs.
The State of Virginia has successfully used a multi-step request for information (RFI) process to gather advance information from the vendor community on proposed work before issuing an RFP.[2] Virginia also uses a two-part invitation for bid (IFB). A first IFB requests unpriced offers, allowing respondents to outline their proposed responses; a second IFB with price ranges included then is issued to bidders whose offers are considered qualified.[3]
California uses a multi-step acquisition process that begins by asking vendors for comments on proposed bid requests. This additional step improves the quality of the ultimate contracts by allowing agencies to describe their needs in detail, so that vendors can easily understand what work is required. Next, vendors are asked to explain how they would approach the project in conceptual terms. Based on their proposals and qualifications, agencies can narrow the field of potential vendors. Vendors still in the competition then are asked to offer detailed technical proposals to meet the state’s requirements. This further culling is followed by a draft bid that includes everything except the cost. Last of all comes a final bid, which includes the price. This multi-step process can be lengthy, but each step adds value to the process. California is working to streamline its process to make it more business-friendly and faster.[4]
Australia requires its agencies to make information technology requests for tender (their equivalent of RFPs) available to potential respondents in draft form for at least one month. This gives the vendor community an opportunity to comment before the document is finalized.[5]
Eliminating Redundancy in Bidding
Similar bid solicitations for the same goods and services from different agencies can cost both the state and its vendors money unnecessarily. The consulting firm Booz Allen & Hamilton estimates that a “100-page proposal can easily cost $10,000 to prepare...even with significant adaptation of ‘canned’ or previously submitted materials.”[6]
California has employed two methods to help reduce redundancy and delays in its state purchasing processes. First, the state has created the California Multiple Award Schedules (CMAS) program, which in turn relies on the US General Services Administration’s (GSA’s) Multiple Award Schedules. The GSA administers the Federal Supply Schedule program, through which it has entered into contracts with commercial firms for more than 4 million products and services for specific prices and contract lengths. Under this system, GSA no longer awards contracts for a single product to a single vendor; instead, the federal agency now may buy the same products or services from multiple contracted vendors at varying prices. This allows federal agencies relying on GSA-approved contracts to choose from several vendors, giving them a better opportunity to obtain best value at the lowest cost.[7]
Under its CMAS program, California can purchase products and services from vendors that have already been awarded a contract through the GSA’s Multiple Award Schedule program or from any other multiple contracts that have been awarded in another jurisdiction. Eligible vendors agree to California-specific terms and conditions. California agencies and other political subdivisions can then order off the contract, directly from the vendors.[8]
The California Assembly created the CMAS program in October 1993, and the state established the first contract in May 1994. Since its inception, the state has made $1.9 billion in awards through the program, with more than $500 million in purchases in fiscal 2000 alone. As of August 2000, California had 1,966 contracts with 1,025 suppliers. While CMAS greatly improves the efficiency and cost-effectiveness of government purchasing, small businesses benefit as well. California’s law enables small businesses to “piggy-back” on the GSA’s multiple award schedules as long as a vendor with a GSA contract authorizes the small business to sell or provide the service. The small business provides written authorization from manufacturers, distributors or the federal GSA schedule owner to demonstrate eligibility to piggyback. Approximately 31 percent of the CMAS contracts are with small businesses.[9]
CMAS also enables agencies to “shop around” more efficiently for goods and services based on the best value instead of spending time on preparing and obtaining repetitive bids. The California Department of General Services has published an Agency Information Packet to assist agencies with the process.
California’s second method for reducing redundancy and delays involves its Multiple Award Contracts, which prequalify vendors for consulting services and master rental agreements, making it easier for agencies to purchase vital services quickly. Once a vendor is prequalified under a California Multiple Award Contract, an agency develops a brief, general Statement of Work (SOW) and sends it to prequalified vendors. Interested vendors must respond to the terms of the SOW, but do not have to resubmit information the state already has obtained during the prequalification process.
Texas has experimented with prequalification on a limited basis. In 1998, Texas’ Department of Information Resources (DIR) prequalified vendors to provide Year 2000 remediation and testing services. Agencies could contract with these vendors based on their needs and the vendors’ qualifications and pricing. This arrangement saved time and resources because each agency did not have to develop a separate RFP, and prequalified vendors did not have to go through a lengthy bid process.
GSC and DIR are considering obtaining computer equipment through the Western States Contracting Alliance (WSCA). The alliance, which includes the states of Utah, California, Colorado, New Mexico and Arizona, has excellent contracts in place with pre-qualified computer manufacturers.[10]
Recommendations
A. The General Services Commission (GSC) should work with its Vendor Advisory Committee and representatives of other state agencies to develop guidelines for a multi-step request for information (RFI) process.
The RFI process would obtain information from vendors early in the bid solicitation process to improve the quality of agencies’ requests for proposals (RFPs) and to pre-qualify prospective vendors.
The GSC Request for Proposal (RFP) Guidelines for State Agencies should be updated to provide detailed instructions for multiple-step contracting, as well as guidelines for working with the vendor community to develop initial bid solicitations.
The current handbook “encourages” agencies to use the RFI process, and multiple-step contracting is allowed under existing state law. Adding detailed instructions on multiple-step contracting to the handbook would give state agencies the guidance necessary to improve their bid solicitations and the resulting contracts.
B. State law should be amended to authorize GSC to develop a multiple award schedule for the state based on other federal, state, and local contracts or interstate compacts.
This schedule should allow businesses with approved federal General Services Administration schedules or other competitively-bid federal, state or local contracts to extend them to Texas state agencies, higher education institutions, and local governments, after agreeing to Texas-specific terms and conditions. Businesses would benefit because they would not have to repeatedly go through the state’s certification and qualification process.
Fiscal Impact
The savings resulting from these recommendations cannot be estimated. GSC staff currently responsible for updating The GSC Request for Proposal (RFP) Guidelines should work with GSC’s Vendor Advisory Committee and representatives from other state agencies to expand the guidelines to include multi-step requests for information and contracting.
GSC purchasing resources currently assigned to statewide contracts could be shifted to implement the multiple-award schedule based on other federal, state, and local contracts or interstate compacts. Some of these multiple-award schedules may eliminate the need for current statewide contracts.
[1] Testimony of Odysseus M. Lanier, partner, McConnell, Jones, Lanier & Murphy LLP, before the Competitive Government hearing of the e-Texas Commission, Austin, Texas, March 21, 2000.
[2] Testimony of Patti Haskell, NeighborNet Community On-line, before the e-Texas Competitive Government Task Force Volunteer Meeting, Austin, Texas, June 6, 2000.
[3] Virginia Public Procurement Act, Section 11.37, July 2000.
[4] Telephone interview with Russ Guarna, California Department of General Services, Sacramento, California, August 18, 2000.
[5] Australian Department of Finance and Administration, Commonwealth Procurement Guidelines: Core Policies and Principles (March 1998) (http://www.ctc.gov.au/Publications/purchasing/cpg/cpg.htm). (Internet document.)
[6] Booz Allen & Hamilton, Contract Reform and Procurement Processes Draft Final Report (McLean, Virginia, August 2000), p. 54.
[7] General Services Administration, Federal Supply Service, The FSS Contractor Guide (Washington, DC) (http://www.fss.gsa.gov/vendorguide/section-a.cfm). (Internet document.)
[8] California Department of General Services, “How to Become a CMAS Authorized Contractor” (Sacramento, California) (http://www.pd.dgs.ca.gov/acqui/overview.asp). (Internet document.)
[9] Telephone interview with Cathy Brown, California Department of General Services, Sacramento, California, August 17, 2000.
[10] Telephone interview with Paul Schlimper, director of Central Procurement, General Services Commission, Austin, Texas, August 23, 2000.
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