The Procurement Process

Reasons and Approaches for Procurement of Products and Services

Some organizations have all the resources (skilled staff, equipment, software) necessary for completing projects on which they work. In other cases, however, it is necessary for organizations to procure products and services for a project--normally by private sector companies with a business focus on GIS. The term outsourcing is sometimes used to refer to contracted services procured for GIS projects. The types of products and services that may be needed, depends on the type of project and the nature of the organization carrying out the project. For GIS projects and programs, procurements often involve one or more of the following types of products and services:

GIS Consulting Services: Needs Assessment, technical specifications, organizational development, strategic and implementation planning, business case development, support in procurement of GIS products and services.
System Infrastructure and Software Specifications, Procurement, and Configuration: Preparation of technical specifications for system infrastructure; purchase of computer hardware and software licenses; set-up and configuration of hardware, software, and networks; hardware maintenance and software support services; cloud-based server resources, cloud-based GIS software and application services.
GIS Application Development Services: Custom application design and development, application training, integration of GIS with external systems and databases.
Database Development Products and Services: GIS database design, field inventory and data collection, aerial imagery and LiDAR collection and processing, hard copy map conversion services, data quality assurance, ongoing data maintenance services, purchase or licensing of GIS data.
Technical Implementation and Operational Support: Training, software installation and configuration, on-site contracted staff to support GIS operations or project management.

Organizations use a variety of procedures and vehicles to specify and select GIS products and service providers. To a significant extent, the form, substance, and procedures are dictated by organization-wide policies and procedures, and, in some cases, by law. Most GIS procurements use one of the following types:

Sole-Source Procurements: Direct selection of a vendor or consultant without pre-qualification or competitive review of offerings from others. This approach can save time, but does not allow for formal evaluation of bids and proposals from multiple companies.
Open Competitive Procurements: Used for products and services when the evaluation of offerings from multiple companies is expected to result in the best value. Not only do competitive procurements comply with fairness policies of organizations, they also provide an opportunity for serious review of multiple proposals, approaches, and capabilities to select products and services that best suit the organization’s needs at a competitive price. Competitive procurements use a variety of specific instruments--most often a request for proposal (RFP), request for qualifications (RFQ), or request for bid (RFB). The RFP and RFQ approach allows for a competitive selection based on the quality of proposed products or services as well as the proposed price (best value selection). The RFB approach is most effectively used when there are well-defined commodity products (e.g., computer hardware) or technical services and focuses on lowest price proposals for company selection. Other competitive purchase vehicles, similar to the RFP, RFQ, and RFB approach used by some organizations, include the expression of interest or EOI (similar to RFQ), invitation to bid or ITB (similar to RFB), and a formal tender (similar to RFP).
Selection from a pre-qualified pool of providers (or price contract): This approach allows selection of a provider of a product or service from a pre-qualified pool of companies. This pool is the result of a previous competitive selection based on a qualification process. The result is a schedule of products and services, corresponding prices, and a set of companies which have agreed to provide the products and services and the specified prices. This procurement vehicle is best suited to specifically defined commodities and services and is less appropriate for procurement of custom services. The best example is the U.S. Federal government establishment of General Services Administration (GSA) "purchase schedules" also known as "multiple award schedules" (MAS).
Extension or amendment of an existing contract: A contractor or vendor is awarded new work or provision of additional products through an existing contract. Usually, this requires a formal amendment to the existing contract. This is an administratively expedient approach, providing that procurement rules in an organization allow. This approach eliminates the significant time in selection and contracting and, if the contractor has performed well under the existing contract, gives reasonable assurance of future performance.

The specific rules and processes governing each of these types of procurements vary among organizations. Normally, the organization’s purchasing department controls and documents them. Competitive procurements and price contract selections are common for public sector organizations (especially for products and services that exceed a certain maximum price level). Private firms may use any of the procurement vehicles and typically make more frequent use of sole source procurements since this is typically more administratively expedient and company policies do not mandate the use of competitive procurement approaches. GIS project managers should gain familiarity with their organization's procurement policies and follow these policies closely. Lack of adherence to policies could result in protests (by bidders) and possible cancelation of the procurement.

The review of submitted proposals and bids, in response to these formal procurement solicitations, should follow a clear, documented process of evaluation and scoring that includes technical merit and proposed price. The end result is a formal agreement or contract defining the terms of product and service provision.

Refer to Croswell Section 5.2 for more information about procurement approach and procurement management.

Contracting

A contract or service agreement is a legally binding document that establishes terms for the provision of products or services from a contractor or vendor. In the public sector, if your organization supplies services to another organization for a particular project, you generally sign a different type of contract, like a memorandum of agreement (MOA) or an interagency agreement. Some organizations have designated personnel to write and review such contracts; if you are consulting on your own, it is likely up to you to understand the contract. Contracts for GIS products and services typically include the following:

identification of the client or purchaser and the party providing the products and services
time period for which the contract is valid, with terms covering grounds for contract extension or termination
for services, a clear definition of the scope, deliverables, quality criteria, and performance measures
for products (e.g., computer hardware, data products, etc.), an identification of applicable make and model numbers and data deliverable content
role and responsibilities for all parties
standard legal terms and conditions (sometimes referred to informally as "boiler plate" required by the organization

Most organizations have personnel with responsibilities for contract preparation and negotiation to ensure compliance with all applicable policies, laws, and regulations. As a GIS project or program manager, you will need to become familiar with your organization's procurement rules, policies, and standard terms for procurement documents and contracts. From a financial perspective, contracts include terms for invoicing and payment, which normally use one of the following methods:

fixed-price contract
cost-reimbursable contract
time and expense contract
unit price contract

Fixed-price contracts define a price for specific products, deliverables, or services. This is a common approach for services from GIS database contractors, in which data deliverables (e.g., aerial acquisition and processing of orthoimagery) are provided for an agreed monetary amount. Cost-reimbursable contracts are designed to pay suppliers for costs that can be traced back to the project in ways that are both cost-effective and cost ineffective. These are called direct and indirect costs, respectively, and we will talk more about these in Lesson 6. Time and expense contracts establish invoicing and payment for an itemized reporting of labor time and rates (in person-hours or person-days) for project personnel and for expenses directly connected with project work (e.g., travel expenses). Time and expense contracts often have a price cap which cannot be exceeded without a formal contract amendment. Unit price contracts define a price the supplier will be paid for a given unit of service. In a contract to provide individual GIS training courses for all new workers in an organization over a fixed period of time, a unit price contract may be most appropriate.

Note: When companies cite a "billable rate" as an hourly or daily dollar amount for project personnel, it is most often presented as a "burdened rate" meaning that it covers the cost of the employee (salary and benefits) as well as company overhead and profit.

Read Croswell, 5.2 for more information about contracting and contract management for GIS projects.

The Procurement Process