Schedule Buying Takes Off in the States

Schedule Buying Takes Off in the States

By Thomas R. Davies
Contributing Writer

Term contracts and schedules are quickly becoming the primary means for state and local governments to purchase software, hardware and services.

Cities, counties, schools, nonprofit organizations, transportation authorities and even small businesses are using these vehicles. These buyers are discovering the value and economics of these vehicles over the traditional request-for-proposal procurement process.

The typical state now has almost 20 enterprisewide technology term contracts. These are contract vehicles designed to support information technology buying across multiple agencies, branches and levels of government. They range from large catalogs with a broad array of commodities and services supplied by hundreds of vendors to single contracts with one vendor for very specific technology needs.

One arena to watch closely is the future of contract vehicles into application software and enterprise solutions.
-Tom Davies

An analysis of almost 1,000 active term contracts in state government, developed as part of a new national database, demon- strates the growing importance of these buying vehicles.

  • IT contracts and schedules are no longer limited to commodity hardware and off-the-shelf software; instead they now supply a variety of technologies and services including complex systems integration and consulting services.

  • Most state contracts allow local government entities to purchase from these vehicles and many allow schools, nonprofit institutions and special districts to do the same.

  • Two-thirds of all contracts are single-vendor contracts.

  • Buying is mandatory for the majority of the contracts and schedules.

The variety of contracts has expanded to cover almost every technology need in the public sector. Increasingly, state governments are finding that it is important to establish an attractive mix of contract vehicles. The states can thus satisfy all but the most complicated of their IT requirements.

State governments have also come to realize that with a larger purchasing pool, they can receive better pricing. Consequently, almost 90 percent of all buying vehicles now include provisions granting local governments or schools access to the contracts. This gives vendors that are on the contracts access to the tens of thousands of small and medium size cities, counties and schools.

In New York, for example, almost 60 percent of commodity and services purchases come from local governments. The only exceptions are with high-end mainframes and minicomputers, which are purchased primarily by larger buyers. This expanded pool of buyers enables better pricing arrangements and, indirectly, promotes a more standardized use of technology.

While multivendor contracts are the rule at the federal level, at the state level two-thirds of the contracts have only a single vendor. In some cases, this means the winning vendor that holds the contract is the sole provider of the commodity or service. In a move to increase competition, however, larger states are increasingly awarding contracts to multiple vendors.

With the growing use of buying vehicles, states are becoming more sophisticated in negotiating contract agreements.

Instead of contracting at a set price for the duration of the contract, states are going directly to the vendors' pricing lists or are requiring vendors to submit "mini-bids."

And many buyers are cooperating across jurisdictional boundaries, thus gaining greater leverage in establishing more favorable pricing and contract terms and conditions.

One arena to watch closely is the future expansion of contract vehicles into application software and enterprise solutions. A large state, for example, has recently established a multivendor contract for human resource and financial management systems including payroll, time and attendance, general ledger, accounts receivable and payable, budgeting and purchasing. The projected annual spending statewide from this contract is $23 million.

Does this mean the end of the standard request for proposal procurement? Probably not, since state and local governments will always have a need for large-volume buys.

And RFPs will always be valuable for purchases of comprehensive, end-to-end solutions in application areas such as land records, computer-aided dispatch and licensing. But as states gain more experience in establishing flexible and convenient contract vehicles, the traditional RFP procurement processes will be reshaped.

As centralized state procurement offices become more services oriented they can be expected to increase the quantity and quality of contract vehicles. Pressures to reduce the barriers standing in the way of gaining access to new technologies will also result in continued innovation and experimentation. Market-savvy vendors, with their state and local government business at stake, will become key contributors to shaping the future direction of these contracting practices.

Thomas R. Davies is vice president of Federal Sources State and Local Government Consulting practice in McLean, Va. David DeBrandt provided research support.

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