Overview of DIR Sourcing Initiatives

Sherri Parks Director

Contracting and Procurement ServicesTexas Department of Information Resources

LONE STAR CHAPTER

NATIONAL CONTRACT MANAGEMENT ASSOCIATION

October 1, 2008

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Who is DIR? DIR is the state agency responsible for

• Effective planning, implementation and management of a statewide technology infrastructure that supports agency business operations

• Pooling the purchasing power of government and leveraging it to drive down costs and add value to ICT purchases for state government entities

• Adopting statewide technology rules and standards that contribute to effective enterprise management of ICT

• Promoting security and privacy of state data and networks

Key operations• TexasOnline, the official State of Texas website

• Data Center Services

• Telecommunications and IP Network

• Security

• ICT Cooperative Contracts Program

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448 Cooperative Contracts• 290 Total Resellers

• 140 HUB Prime Vendors

• 121 HUB Resellers

38% Growth in Last 2 Years (FY05-07)

Over $1 Billion Projectedfor FY08

Customer Base• Market Segmentation Analysis

45% Education

29% State Agencies

26% Local Government

ICT Cooperative Contracts – Statistics

ICT Cooperative Contract Sales

$719$805

$993

$571

$0$100$200$300$400$500

$600$700$800$900

$1,000

Millions

FY05 FY06 FY07 FY08YTD

Sep 07 – Feb 08

Sep 07 – Feb 08

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Where are DIR’s Customers Located?

REGIONAL DISTRIBUTION OF FY08 YTD SALES

$248

$133

$105

$34$15 $13 $12 $11

$0

$100

$200

$300

$400

Millions

3 2 1 4 5 7 8 6

Reg. 5

$15 M

Reg. 2

$133 MReg. 8

$12 MReg. 7

$13 M

Reg. 6

$11 M

Reg. 1

$105 MReg. 3

$248 M

Reg. 4

$34 M

*Telecommunications Go DIRect

sales of $36 M were distributed to regions

via prorated percentage of sales.

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ICT Cooperative Contracts – Cost Savings/Avoidance

DIR CUSTOMERS/TAXPAYERS

Savings calculated as difference between DIR price and price available in other states and from other cooperative contracting programs

Additional value (soft costs) not included in calculation• Time/salary savings

associated with streamlined procurement process

• Additional services or benefits such as “free training”

• Improved performance standards and accountability requirements

ICT Cooperative ContractCost Savings/Avoidance

$70.2$82.0

$114.8

$60.9

$0$10$20$30$40$50$60$70$80$90

$100$110$120

Millions

FY05 FY06 FY07 FY08YTD

Sep 07 – Feb 08

Sep 07 – Feb 08

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Strategic Sourcing Strategies: Knowledge-Driven Supply Chain

Skills, knowledge, and organizational structure

Move from traditional transactional purchasing to strategic supply chain management

Comprehensive, integrated supply chain services

PEOPLE

Contracting andProcurement Services manages all phases of contract lifecycle

●

Supply Chain Management provides business intelligence/analytics, bench-marking, etc., used to identify and prioritize contracting opportunities, develop new contracts, and implement new sourcing strategies

●

Revenue and Sales Reporting (RASR) analytical platform

DIRect Compare

TECHNOLOGY

Online interactive tool enables customers to easily review and compare contract pricing

●

New, metric-drivenbusiness processes

● Spend analysis

● Demand/opportunity analysis

● Improved performance standards and accountability requirements

● Specifications based on market intelligence

● Category management

● Streamlined administrative requirements

● Benchmarking

● Channel management

BUSINESS PROCESSES

Industry-standard data warehouse and business intelligence portal collects data, generates information to support sourcing decisions

●

●

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Business Model: ICT Cooperative Contracting Program

NEGOTIATIONS (RFO Process) Leverage state’s buying power Benchmark pricing with competitive regional and national cooperative

buying options, federal government, and other states

MULTIPLE AWARDS Provides flexibility to meet unique business needs of statewide

customers

“NOT-TO-EXCEED/QUANTITY OF ONE” PRICING Customers allowed and encouraged to negotiate additional discounts

for volume purchases

Go DIRect PURCHASING, ONLINE DIR STORE Customers deal directly with vendors for ordering, delivery, payment

DIR ADMINISTRATIVE FEE INCLUDED IN NEGOTIATED PRICING Capped at two percent (2%). FY07 average: .81% Vendor invoices customers (included in contract price), remits to DIR

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RASR Analytical Platform

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Supply Chain Life Cycle

RFO DEVELOPMENT RESEARCH

• With DIR customers, other states and federal government, Gartner, Forrester, Infotech

SOURCING STRATEGY

• Prequalification of vendors for IT project contracts in specific technical areas

• Limited to 10 categories and projects of $10 M or less

BUSINESS CASE

Value to state = cost savings + more effective contracting vehicle

RFO ISSUANCE

• Webcast of pre-bid conference

Deliverables-Based Information Technology Services Contract (DBITS)

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Sourcing Strategies Augmenting RFOs

• IT Staffing Services

• Software

• Networking Equipment

• Surveillance Cameras

DBITS• Prequalification of vendors in specific technical areas

Regional-Based Contracts• Break/Fix (equipment repair)

• Cabling

Managed Services• Contract with multiple qualified service vendors, to drive innovation,

capacity and marketplace competition allowing customers to improve service levels, reduce operating costs and extend capabilities while remaining focused on their core missions

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Online Contract Gateway: The DIR Store

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Online Contract Comparison: DIRect Compare

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Future Contracting Opportunities

CURRENT CONTRACTING INITIATIVES

Posted on DIR’s Web site (www.dir.state.tx.us/store/cci) to improve communications between DIR vendors and customers

Lists initiatives by procurement stage• Planning

• RFO Postings – links directly to the posting on theElectronic State Business Daily (ESBD)

• Evaluation

• Negotiation

• Recent Awards

Each initiative has a brief description, expected phase completion date, and contact information

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Major Procurements in Process: TexasOnline

TexasOnline Reprocurement Vision

The TexasOnline procurement will establish the next generation e-government infrastructure that implements the components required to support the TexasOnline vision. The TexasOnline vision leverages the state’s cooperative contracting program and the state’s existing investment in both computing and communications infrastructure.

TEXASONLINE VISION STATEMENTTexasOnline will provide a single point of access to government information and services that is private, secure, convenient, efficient, service-oriented, and accessible.

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TexasOnline Re-Procurement Milestones, Estimated

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Major Procurements in Process: TEX-AN

CURRENT TEX-AN TELECOMMUNICATIONS CONTRACT EXPIRES AUGUST 31, 2009.

RE-PROCUREMENT WILL TAKE PLACE FALL 2008 THROUGH SUMMER 2009.

GOALS AND OBJECTIVES

Simplify service acquisition

Simplify service establishment and support

Enhance value from sharing

Establish solutions driven marketplace

Enhance vendor partner/supplier performance