Selling to government has its challenges — and its rewards. The procurement process is becoming more complex, as government buying trends move from commodity-based to solutions-oriented RFPs (requests for proposal).
Rob Bligh, a partner with IBM’s Business Consulting Services (Canada),
who deals with the public sector, says he’s seeing increased interest by government in technology to gain business advantage. What’s driving this trend? Some governments are under budgetary pressure, and all have staff and skills shortages.
“”And frankly, there’s a demanding public — government is being asked to do more with less,”” he says. “”We’re shifting from a technology focus to solving business needs. There’s a move toward more partnership orientation, more creativity and more of a transformational-type solution that can help transform (government) from what it was to what it needs to be.””
But, for providers, the government marketplace has a number of challenges.
“”It’s more expensive to buy into, it has a longer decision cycle, and it has a very complex stakeholder environment that dictates that,”” says Bligh.
Industry players would like to see a more effective procurement cycle, he says. Government clients could improve this process, he adds, by providing clarity about their requirements, having executive approval for their business case, having stakeholders in agreement and having a budget in place.
“”If you do all that, then you can have both an effective procurement and one that respects them and the industry,”” says Bligh, “”because both sides have a lot of costs when they’re going to procurement.””
He says some clients are outstanding, while others go on fishing expeditions that are costly to the industry. “”As an industry we’d rather spend the money on creatively solving the clients’ problems and creating advantage for them versus putting bids in a proposal,”” he says. “”Overall, it’s still an area that we can all improve on.””
Jerome Thauvette, senior director of the telecommunications and informatics procurement directorate with Public Works and Government Services Canada (PWGSC), agrees. He says the main challenge with procurement is the process the government has to follow.
“”It’s a very extensive process … before we are able to award contracts and implement solutions,”” he says, “”but it’s a process we have to follow.””
Tons of paperwork
PWGSC is subject to trade agreements and must post requirements for a minimum of 40 days. And it must develop its evaluation criteria in a non-biased way to ensure fair competition.
“”There’s a lot of paperwork to be done to ensure that the process is adhered to, and it’s a long process — and in IT, it’s complex and it changes very rapidly, so sometimes we’re maybe out of sync,”” says Thauvette. However, he adds, PWGSC is putting vehicles in place that will allow it to accelerate the procurement process. “”We’re putting in place, for example, supplier arrangements that allow us to do a two-step approach,”” he says. The first step is to qualify vendors; the second step is to do a competitive RFP that is limited just to the requirement itself — without doing a full-blown RFP.
PWGSC is starting to use such supplier arrangements as a vehicle for faster procurements. It’s also putting in place the Government of Canada Marketplace that will focus on e-procurement.
“”What we’ll do with that is take a lot of the routine requirements and transition them to this Government of Canada Marketplace platform and hopefully that will accelerate the process,”” says Thauvette. “”You’ll have virtual pricing and you’ll be able to concentrate on some of the resources that are involved with those types of procurements.””
The Government of Canada Marketplace will expand e-procurement vehicles already in place to address evolving government needs. To address the concerns of both government and industry players in this changing marketplace, PWGSC has started a dialogue with industry organizations such as ITAC.
“”We’re already engaged in discussions with them to see how we can improve the relationship with the public sector,”” he says. “”What are some of the issues that need to be addressed under procurement reform? How can we better manage and use lessons learned for the management of IT projects and learn from private sector experiences?””
He says PWGSC went through a major reorganization last spring and created three program branches, one of which addresses IT policy issues. “”There’s a greater focus through the reorganization of these branches to enhance our relationship with the industry and address some of their concerns,”” he says. Procurement reform issues, for example, include revision of terms and conditions for software renewal.
Linda Oliver, executive director of government relations with ITAC, believes the government — through PWGSC — is doing a good job. But the industry still faces a number of challenges — some small, some big.
“”Technology continues to outpace most other commodities in terms of its time to market and the speed of its innovation cycle,”” she says. “”This means there are great advantages for the buyer — something newer, faster, better is always on its way.””
But this innovation-driven churn in the marketplace can also be challenging for purchasers, she says. A newer version of software always seems to be available. And parts for a year-old computer may no longer be available, causing a substitution for call-up orders to replace parts. Terms and conditions of the procurement can’t be enforced if the item doesn’t exist.
While she says these issues are manageable, the biggest challenge that government and its IT suppliers face is the need to transform business and at the same time continue to implement large projects.
Ironing out issues
“”The difficulty is that the project requirements change — in mid-project — due to re-engineering and business transformation,”” she says. “”But the demands for delivery of new services and systems can’t be stopped. When a substantial change in project requirements happens, sometimes it has a paralysing effect.””
The question then arises whether or not to cancel the bid and issue a new RFP.
“”If several companies have spent half a million dollars each on their bids, is it fair to cancel the bid?”” she says. “”Is it fair not to cancel the bid if the requirements change? What will the client department in government say if the bid is withdrawn? How will they deal with citizens who await the services that these new projects will provide? What will government ministers say about the delays?””
Over the past few years, ITAC has worked with PWGSC and the Treasury Board to iron out these types of issues. And it’s moving closer to commercial business practices for first- and third-party limitation of liability (LOL) in contracts.
“”We have achieved success by helping to create a better LOL clause for procurement,”” she says. “”This means companies can freely bid on contracts without jeopardizing their company assets. This could only have been accomplished by working closely with government.””
She says ITAC hopes to achieve similar success on improving the outcomes of large business tranformation projects.
She points out that governments around the world are facing the same business transformation challenges — such as the U.K., the U.S. and Australia. These governments, she says, have been aggressively modifying their procurement processes to allow for greater consultation and collaboration with industry to avoid delays, increased costs and cancelled bids — and they’ve had some successes.
“”Canada has participated in successful projects, too, and is reviewing ways to showcase new methods to ensure further success is achieved,”” she says. “”But we can’t move forward and cling to the old ways at the same time.””
In order for ITAC members to continue winning bids on large business transformation projects, she says they need to move forward with progressive ways of dealing with changing environments.
So what can ITAC members do?
Alex Beraskow, president and CEO of Ottawa-based IT/net and a member of ITAC, stresses the importance of having procurement mechanisms in place before doing business with government clients. Market entry is easy, he says, but survival is not. Because of the size of the marketplace, it can be frustrating for newcomers.
But the procurement arm is not the real issue, he says. “”What is becoming more complex is having the procurement mechanisms to be able to do business with clients and that’s becoming very tricky,”” he says. “”Before you deal with a large organization such as the Government of Canada — which is no different from dealing with CIBC or IBM — you have to have the procurement mechanisms. Somebody has to know who you are and what your capability is.””
If you’re not registered and don’t have the right procurement mechanisms in place, you may not be able to do business with government clients.
“”It’s a matter of being prepared and making the investment in infrastructure,”” he says. But overall, he says, dealing with government can be a positive experience.
It’s a process that’s easy to criticize, he says, because civil servants can’t respond back. “”In the private sector you’d never criticize a client and say they don’t know what they’re doing — you’d never get any more business.””