To what degree does legislation and related policy affect either positively or negatively the government tendering process?

I write tenders & oversee tender evaluations for an Australian govt body – and I’ve always included criteria around “innovative” business processes & systems. Sadly the responses to these questions are usually very disappointing and just offer up the industry standard fare…

I don’t think that a supplier having a competitive advantage contradicts the concept of a fair and level playing field – it is almost a silly comment to my mind. Just because it is a govt tender it doesn’t mean we are looking for mediocrity and / or uniformity. I for one would love to see a tender response that made me say ‘wow’… still waiting…

comment by Veronica Whitmore in the IACCM Group on LinkedIn

Okay, so based on the tremendous response to yesterday’s post re public sector RFPs, I am postponing the FOSS theme to next week and focusing instead this week on the government tendering process.

For example, the above referenced response by Veronica Whitmore in the IACCM Group Forum on LinkedIn was interesting on so many levels that it led me to make the following statement:

Well said Veronica . . . yet rules and legislation seems to contradict the best value logic as discussed in this roundtable which featured IACCMs Tim Cummins: http://www.blogtalkradio.com/jon-hansen/2010/04/27/live-event-feed-3rd-annual-business-of-government-summit-day-1-roundtable. (NOTE: refer to the overview of the roundtable discussion including participants, at the conclusion of this post):

By the way, do you think that the standard fare responses are the result of a lack of supplier imagination, or government conditioning . . . re suppliers providing the answers based on how the RFP is structured?

There are of course many factors which influence supplier response to a government RFP including how well it is written (a point that was adeptly raised by Karen Evans, the former CIO for the US Federal Government during the roundtable), legislation and related policy, as well as other factors such as economic conditions and lingering vendor cynicism.

Perhaps even more interesting of a question is to what degree does the hide-your-head-in-the-sand mindset of some senior government bureaucrats perpetuate diminished value decision-making including vendor selection. One example that immediately comes to mind (and one which I have frequently cited) relates to a comment made by a senior Treasury Board executive with the Government of Canada. Specifically, when it was suggested that their selection of a vendor for a particular RFP was unlikely to produce the expected savings, this individual made the statement “you may be right but, we followed procedures in terms of the tendering process and that is what is important.”

In short, citing policy compliance or referencing procedural adherence does not necessarily reflect what actually happens in the real world, nor does it indicate that a best-value outcome is being achieved. Certainly these were the sentiments expressed by Colin Cram during the aforementioned roundtable discussion.

What are your thoughts?

Jon Hansen: Featured Network Host

Session 4 (Roundtable) Segment Title: What is Transparency in Government? (Click to Access)

In my keynote address “Contracting To Win: Buyer and Seller Responsibilities in 21st Century Government Procurement” this morning I made the statement that “transparency is not holding fast to the illusion of a level playing field, but to a clear understanding of the layout of the field itself.”

To expand on this concept of transparency further, I will refer to a comment that was made by Washington-based expert author Judy Bradt who, as I will mention in her introductory bio has helped more than 6,000 clients win in excess of $300 million US in government contracts, during Part 3 of our 7-Part “Seven Steps to Success: Jump Start Government Contracts” Series on Blog Talk Radio. Specifically, Judy’s point that “the process for winning government contracts is truly based on the ability of a supplier to legitimately and transparently win preference with government buyers.”

Joining me in this probing 60-minute segment on what transparency really means in the realms of public sector or government procurement is a guest panel of experts whose experience, expertise and insights will shed some much needed light on a subject that has often eluded a practical, real-world definition.

Moderator: Jon Hansen (The PI Social Media Network)

Panelists: Tim Cummins (CEO, IACCM), Judy Bradt (Summit Insights), Colin Cram (Marc1 Ltd, Towards Tesco author) and Karen Evans (former CIO, United States Government)

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Is a career in the public sector (re government) a good career choice?

The dynamics of a changing world especially as it relates to the economy as well as other factors means that a career in the public sector is not what it used to be . . . if it ever was.

Here is the question by way of our Procurement Insights Poll . . . is pursuing a career in the public sector a good choice?

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Recent announcement by UK Government re open source software refocuses attention on PI 2007 post

Government departments were told in a Cabinet Office policy note (PDF) dated 31 January that they “should wherever possible deploy open standards in their procurement specifications”. In its note, it defined open standards at those that are “publicly available at zero or low cost” and that have “intellectual property made irrevocably available on a royalty-free basis”.

On Tuesday, the Business Software Alliance (BSA) lashed out at the policy, which puts software companies with proprietary standards at a disadvantage.

from March 1st, 2011 article in ZDNet UK titled BSA: Open standards will ‘increase e-government costs by David Meyer

What is the old saying about no matter how much things change they still remain the same? When the UK Cabinet Office recently announced that they were advocating the deployment of open standards in their procurement specifications, the response from the Business Software Alliance (BSA) was reminiscent of the debate that I had written about back in 2007 when the Canadian government was also looking to pursue a similar strategy.

What is interesting is that in many ways there are still contentious elements regarding open source software, especially as it relates to intellectual property ownership.

This is of course is a linchpin issue that along with other challenges that were cited by IACCM’s CEO Tim Cummins during an April 2010 roundtable broadcast from the Government of Business conference in Washington, D.C., is at the heart of the ongoing relationship strain between governments and their suppliers.

Lacking expertise and the corresponding understanding of the market lamented Cummins, the most “frequently negotiated terms and conditions” that represent the greatest “sticking points” relate to what can be called “the blame game,” and what ultimately happens when “things go wrong.” The “rigid positions that the government takes over things like indemnity, intellectual property rights, and Liquidated damages,” present real and enduring problems stressed the IACCM head.

Against this backdrop of discontent, here is a reprint of my post which was originally published on September 27th, 2007 under the heading The FOSS(ilization) of the supply chain: The risks of a strategy centered on Free and Open Source Software . . .

I recently reviewed (actually browsed as there were only10 PowerPoint slides in total) a Government of Canada presentation to attendees of the September 2006 CIO Summit in Ottawa.

Titled “IM/IT Government in Canada . . . Open to Business” the presentation emphasized the fact that “change is the only constant.” Referencing a transformation agenda which highlighted a variety of important areas including internal services such as finance, human resources and procurement, the case for open standards was offered as the best possible way to manage this ongoing evolution. More specifically, the concept of Free and Open Source Software (FOSS) as a viable solution was introduced.

Now this is a subject which is of great interest to me personally as I have been tracking the transition of traditional software licensing models to the present day Software as a Service (SaaS) model since 1998 (my recent Ariba interview post reviewed the emergence of SaaS at some length). The question that my ongoing research has attempted to answer is if SaaS is a sustainable model or merely a transitory link or bridge to FOSS? The fact that the City of Houston “shifted” to a FOSS platform in response to Microsoft’s demand that the city change to a $12 million, multi-year licensing plan is certainly worth noting. (Note: all research data at this point in time indicates that both SaaS and FOSS will likely co-exist as they each address unique requirements that are indigenous to their respective business models.)

Incorporating excerpts from an earlier Defence R&D Canada presentation (Free and Open Source Software Issues in Military Computing) by Robert Charpentier and Richard Carbone, the CIO Summit PowerPoint highlighted a number of concerns with the GoC’s intimated pursuit of a FOSS strategy.

While there were several notable risks listed such as the increased reliance on localized resources to ensure “system maintainability” (keep this one in mind as a point of reference for later in this article), for the purposes of this posting I am going to focus on the one involving Procurement challenges and the inherent “lack of imputability when software is developed via internet collaboration.”

FOSS: this decade’s Internet

It should come as no surprise that FOSS’ growing presence is in many ways similar to that of the Internet’s. Steadily and almost imperceptibly at first, FOSS has gained considerable recognition especially within the public sector. As one publication noted, “various governments around the world have begun to take notice of FOSS,” and have “launched initiatives” in an attempt to capitalize on its purported benefits. With an increasing number of white papers and reports advocating a FOSS-centric strategy, the majority of current initiatives surprisingly originate at the local or regional level (i.e. municipalities).

Not surprisingly however is the fact that European Union countries such as the United Kingdom and Germany have what many would consider being aggressive programs already in place. Fueled by papers such as “Linking Up Europe: the Importance of Interoperability for E-government Services,” these governments see Open Standards through FOSS as a means of combating the “closed, vertical, un-scalable and frequently proprietary information systems,” that until recently had dominated the majority of public sector initiatives.

And while there is not currently an official FOSS policy in the U.S., a number of states such as California, Texas and Oregon are in the process of attempting to pass FOSS legislation. As illustrated by my earlier reference to the City of Houston, FOSS initiatives at the municipal level in the U.S. including the City of Largo, Florida’s GNU/Linux program which generated savings of more than $1 million in terms of hardware and software costs, are a clear indication of the potential benefits.

Needless to say, savings both realized and projected provide governments with more than enough incentive to actively investigate and develop a FOSS strategy.

Supply base impact and the use of intermediary resources

Once a public sector organization has determined that FOSS is a viable solution, the process of procurement and in particular key elements involving selection, implementation and ongoing maintenance requires a great deal of consideration. For example, with traditional licensed-based applications in which an ongoing maintenance agreement was an integral part of the initiative, the majority of clients grudgingly paid what they considered to be hefty fees for a service many felt was overpriced and generally ineffective. So even though there are no direct costs associated with the “source product,” value-added services such as customization, implementation and ongoing support from intermediary providers have to be quantified up-front.

The next step is to identify and effectively engage the intermediary supply base. With regards to the GoC’s CIO Summit presentation, this would include determining how the current purchasing guidelines will impact the selection process should they choose to move forward with a FOSS program? And this is where the historic challenges associated with the Way Forward initiative may potentially muddy the waters.

As is often the case a great deal of the IT industry’s innovative spark and expertise resides within the SME community. If this core competency trend holds true in terms of FOSS-centric initiatives (which is certainly a reasonable assumption), concerns such as those raised by Shane Schick in his article “IT industry outraged by Feds’ procurement strategy” (June 14, 2006, itbusiness.ca) are worth revisiting. In particular, the GoC requirement for suppliers to “pass” what was referred to as a “rigorous set of qualifying screens” to even have an opportunity to compete for government business. The main issue with the screening process is that it is generally felt that a large segment of the SME supply base will be disqualified from bidding on GoC contracts. With similar concerns being echoed by associations such as CATA, and crystallized by articles such as the September 5, 2006 “Would Gov’t Procurement Process Neglect FOSS?” by Josh Chalifour, the potential for a continuing disconnect between key stakeholders seems likely. (I think that this would be an ideal time to reference the recent Yes Virginia postings including their success in supply base management.)

Certainly a letter written by the Canadian Linux Users Exchange’s (CLUE) Policy Coordinator Russell McOrmond in late August 2006 would seem to foretell the possibility for a continued strain in the relationship between the GoC and the associations that represent its vast supply base.

In his correspondence McOrmond cites the similar challenges faced by FOSS companies and those of the CATA membership in which “the government wants to skip intermediaries when procuring products from a single source.” Besides overlooking the value added component of these intermediary relationships, McOrmond contends that a single source vendor who also offers related services results in the GoC “bypassing” the very policy that is intended to protect competition. If this is in fact the case (note my caveat), then the GoC strategy contradicts the emerging trends highlighted in a number of reports including an April 2007 U.S. Federal Government summary of three studies which revealed a noticeable shift in Federal contracting practices.

New trends that benefit small business

As a result of the backlash over the utilization of sole-source contracts with large companies in Afghanistan, Iraq and the Hurricane Katrina clean-up, studies by three independent groups have identified an emerging trend in the U.S. Federal Government’s contracting practice.

Referred to as a “major and growing bonanza for small business firms, particularly those run by veterans, women and minorities,” the data indicates that a dramatic shift in favor of small business in three key areas; Information and Technology (IT); Operations & Maintenance (O&M); and Architecture, Engineering Construction & Environmental (AEC) has put them “back on top of much of the federal contracting world.”

For example, the number of federal IT contracting opportunities available to small business increased from 35% in 2002 to 46% in 2007. And while “larger firms still tend to dominate more of the advertised IT opportunities,” the overall IT opportunities for large contractors declined from 71% in 2002 to 62% in 2007.

The upward trend for SME’s also extended to include Pre-RFP contracting set-asides for small businesses which saw opportunities in this area increase from 40% in 2002 to 52% in 2007. Conversely, the number of full and open opportunities, (which tend to favor the larger organizations) decreased from 65% in 2002 to 55% in 2007.

Of the five emerging small federal contractor trends identified in the summary the two that are most relevant to this posting are the “demise of sole-source contracting and a resulting focus on heightened competition.” Besides validating McOrmond’s position regarding the GoC’s purported circumvention of intermediary suppliers when procuring products from a single source, this shift in U.S. Government contracting policy will clearly create more opportunities for small business.

The second is an actual reversal of a recent trend whereby more “big” federal contracts will be “unbundled” for small contractors. Initiatives by agencies such as NASA, whose breaking up of a number of their mega-contracts into more manageable opportunities for small businesses and small business teams, is an example of how the “new shift to smaller contractors will take place.”

And it is here that the tie-in to the procurement challenges that were raised in the 2006 CIO Summit presentation comes into play. Challenges which I might add are not unreasonable given the nature of the FOSS development community.

In a 2006 editorial paper on FOSS development processes, several thought leaders from various institutions throughout the U.S. and U.K., made an interesting observation. In the paper they stated that the “enactment of complex software development processes” was mostly being performed by a “loosely coordinated group of software developers and contributors,” who are “globally dispersed.” (Does anyone else notice the similarity with how Service Oriented Architecture is defined?) This “loose” coordination has led some organizations to pay their own internal software development staff to work on FOSS projects as part of their overall job.”

Three choices?

Obviously concerns which go beyond the procurement process itself to include version control, system maintainability and the adjunct need to increase localized resources, higher levels of technical skill and potential limitations in terms of integration and user-friendliness (it sounds more like SOA with every sentence) need to be addressed. The question that remains is how? And this I believe is where the GoC faces its most difficult, certainly most politically sensitive issue with FOSS. Given the above, I believe that the GoC has three choices.

The first is to “fall back” into a reliance on a large vendor who may offer the illusion of security associated with a one-stop shop (does anyone recall the old precept – no one ever got fired for buying IBM?). This was the Foss(ilization) to which the title of this post refers.

Another alternative would be to follow the lead of the U.S. Government and in particular NASA and really cultivate the expertise of a more localized supply base such as is available through the SME community. (An important byproduct of this option is domestic cluster development as outlined in my August 28th post, Public Sector Procurement Practice and the Principles of External Economies, Clustering and the Global Value Chain.)

The third option is to assess and develop where necessary an internal capability along the lines of the organizations referenced in the editorial paper. As a firm believer in recognizing and utilizing the expertise within one’s own organization (see Acres of Diamonds – not my paper, but the actual story by Russell H. Conwell), this is both an interesting and viable alternative.

That said there is actually a fourth option which is a combination of two or more of the three. However, given my belief that the days of being outnumbered in the boardroom by white shirts in blue suits is long gone, the most likely scenario (if pursued) would be a combination of SME cultivation with an internal capability that keeps the GoC in control of the ship.

The question I pose to you my readers is this . . . what do you believe is the future of open source software, especially as it relates to the public sector? Does the BSA have a valid point regarding their expressed concerns associated with the recent UK Government announcement or, are they merely looking after their own interests?

The debate I am certain will continue!

Just to note, and based on the response to our cloud computing week series of post, this upcoming week we will focus exclusively on the debate surrounding the utilization of open source software in both the public and private sectors.

Click here to join the new Public Sector Supplier Group (UK)

Remember to check out the UK Public Sector Supplier Group on the new Supplier Relationship Management Portal.

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Join the new Procter & Gamble Supplier Forum

There is a great deal happening over at the new Supplier Relationship Management Portal, including the launch of the new Procter & Gamble Supplier Forum.

Click To Join Now

Forum Overview:

Have you been a supplier for Procter & Gamble, or are you trying to be? Sharing your experiences as a supplier to the $80 billion giant can help both yourself and others to understand how to do business with a global player, which is the purpose of this forum.

We are not talking about giving away trade secrets here, or diminishing competitive edges. What the Procter & Gamble Supplier Forum is designed to do is to create a neutral platform through which you can use those who share similar interests and experiences as a sounding board . . . an echo of insight if you will.

Of course, P&G buyers are also welcome to join . . . who knows you may learn something that you might otherwise never had known.

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What is Procter & Gamble Thinking?!

It never ceases to amaze me how the bigger companies lack the creative insight to look beyond the old standby of vendor compression or rationalization as a means of driving procurement savings.

With Procter & Gamble’s latest move to save money “plan,” the industry heavyweight is looking to reduce the number of production companies with whom it’s brand agencies can deal from a current 125 to 30 through what they are referring to as a “preferred vendor” status.

I cannot help but think of the Federal Government of Canada’s attempts to implement a shared services strategy by offering their “preferred vendors” an eight year contract to undertake a task that has little chance for success. The Government’s “plan” has been greeted (although not quite as verbosely) by the vendor community with similar disdain, demonstrating that these silver or lead proposals only serve to damage supplier relations, while at the same time attracting the least desirable vendors.

In an excerpt from the Creativity Online post, this very sentiment was expressed by one executive producer who stated “When you’re in a world blasted with so much imagery and you need to stand out to make a difference, you want to get the most talented, most creative people to make your stuff stand out. The way to do that is not to bully their creative choices or create a shallower talent pool.”

With the emergence of SaaS vendors, whose sophisticated, algorithm-driven solutions enable companies to intelligently and effectively engage suppliers in all areas of spend (including services), purchasers should actually be looking for ways to expand rather than compress their supply base.

I guess the P&G brain trust were off that day? Now I know why the dinosaurs are extinct.

To coin a phrase from the old Johnny Rivers song (and yes I am giving away my age) “When will they ever learn?”

Editor Comment:

While some may point to P&G’s Brand Agency Leader model* which was launched in early 2009, and the “enormous faith and trust” they are placing in their agencies” that is similar to the relationship between clients and management consultants or lawyers, who are seen as trusted advisers rather than suppliers,” as a means of justification for the reduction, I am not sure that it will produce the desired outcome.

* BAL overview: http://www.marketingweek.co.uk/analysis/pg-gets-more-from-agencies-by-treating-them-as-trusted-advisers/2064107.article

Reverse Auctions and the automotive industry (Part 1): A history of discontent?

This was a memorable keynote to more than 200 senior automotive industry executives from the supplier side of the industry if for no other reason than it was at the height of the tensions between the manufacturers and their supply base as a result of Covisint and other failed initiatives.

Within the context of the present day SaaS platforms that utilize advanced algorithms to streamline both the procurement process itself as well as the corresponding results, the at times acrimonious and adversarial relationship between manufacturing buyers and their suppliers of that era have ceded to a more collaborative approach.

My belief is that this atmosphere of cooperative interaction only became possible when the costly, monolithic ERP-based initiatives crumbled under their own weight of unrealized expectations. This alone is what freed the manufacturers to focus on getting the relationship with their suppliers’ right, versus having to ramrod a misaligned application through as a means of justifying an ever increasing capitalized expenditure.

Of course what is even more interesting is that a 2001 study by the software industry had predicted the fall of traditional ER-based licensing models. Unfortunately this knowledge was confined to the industry players and therefore was not made available to the larger market. I wonder how many tens if not hundreds of millions of dollars could have been saved had this information been more readily accessible . . .

Reverse Auctions and the Automotive Industry (Part 1)

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Gender issues in buyer-seller relationships: does gender matter in purchasing?

Findings of few differences, along with the mixed findings of Dion, Easterling and Javalgi (1997) and Moncrief and colleagues (2000), clearly suggest that gender may not be as significant an issue today as was previously thought. As Moncrief and colleagues point out, much of the research that found differences is now somewhat dated. Our findings and those of other recent studies reflect the results of diversity programs and the changes that have occurred in society and the workplace over years.

from the study paper Gender issues in buyer-seller relationships: does gender matter in purchasing? by Ellen Pullins Bolman, David A. Reid and Richard E. Plank

Yesterday’s Supreme Court decision regarding what has been referred to as the largest class action suit in American history started me thinking. Is there sexual discrimination within the purchasing profession?

Now for those who may be unfamiliar with the Wal-Mart case, and according to CNN, the suit involving hundreds of thousands of current and former female workers was dismissed because it was “simply too large.” By the way, if you would like to know more about the Wal-Mart action, as well as employment law in general, here is the link to my interview with the suit’s lead counsel Brad Seligman.

In the meantime, and refocusing our attention on the issue of gender bias in procurement, I came across the above referenced report from the summer of 2004 titled Gender issues in buyer-seller relationships: does gender matter in purchasing?, and thought that I would share it with you while seeking your opinion re the question of the day . . . is there gender bias in the purchasing profession?

Take our poll and let your fellow readers know what you think:

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GSA $2.5 Billion Cloud Computing Procurement RFQ: Real Opportunity or a Mirage for SME Vendors

The Federal Cloud Computing Initiative is partnering with GSA SmartBuy and the Defense Department’s Enterprise Software initiative for the cloud services contracts. The contracts are reported to be worth an estimated $2.5 billion over five years. Multiple contracts are expected to be awarded.

from May 10th, 2011 Washington Technology article GSA launches $2.5B cloud computing procurement

Let’s play a round of Government Procurement Jeopardy . . .

Answer: Fat and Slim

Question: What is the real opportunity for SME vendors to successfully pursue and win the recently announced GSA $2.5 Billion Cloud Computing RFQ?

Okay, maybe it is not quite Jeopardy . . . after all, Alex Trebek was busy today. However the end point is still the same in that announcements of large dollar government contract opportunities are often dismissed by the majority of SME’s as an elusive quest that warrants little more than a mumbled chagrin of why bother.

However, if one is to believe that cloud computing and in particular Enterprise-as-a-Service (although I like the Everything-as-a-Service version of the acronym) is as Peter Fingar wrote in an April 2010 article Enterprise-as-a-Service – That’s where BPM Comes in, is a disruptive delivery model that represents an economic versus technological shift, we could be talking about an entirely new playing field that might actually favor qualified SME vendors.

Focusing on what the RFQ refers to as being the five key areas of acquisition interest, which are; mandatory email-as-a-service, migration and integration services; and optional office automation and electronic record management services, that can be provided as a government community cloud, provider-furnished-equipment private cloud, secret enclave or public cloud, may be an indication that the government has finally eschewed the overarching, monolithic platform mindset of yesteryear that favored the big players. Or to put it another way, the government has realized that the best way to eat an elephant is one bite at a time.

It will of course be interesting to watch this one as the RFQ progresses, to actually see if the apparent glitter of government opportunity is indeed laced with SME gold. In the meantime, and over the next week, I will be examining the likely vendor candidates for each of the five areas of service focus referenced in the RFQ in an effort to identify the likely winning candidates. That’s right, a qualified opinion in which I hope I do a better job than I did in picking this year’s Stanley Cup playoff contenders.

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