# Presentation: 273026

## ITS Procurement Workshop

- Module 3: Selecting a Contracting Approach

## ITS Projects

- Products
- Vehicle detectors, CCTV, lane control signals, DMS, communication medium and devices, traffic management building, conduit, pull boxes, foundations, structures, poles, hardware, computers, software, and traffic controllers
- Systems
- Incident management systems; emergency dispatch systems; freeway management system and associated metered ramps; and arterial traffic signal systems
- Services
- Architectural, surveying, mapping, engineering, design, construction, construction management, software development, system testing, and system integration.

## Mini-Cases

- Services?

- System?

- Product?

## Procurement Approach Model

**Work Structure**

**Agency Characteristics**

**Project Characteristics**

**Method of Award**

**Contract Type**

**Enabling Legal Framework **

**Other Tools**

**Notes:**
Delivery:
This is the conceptual procurement “model”.
It identifies the key factors and choices in procurement, as defined in this course.
We will now go over these items one at a time. To help in your understanding of these concepts, we have developed some “mini cases” that we will refer to during the presentations, and use to to apply the concepts. 

## Work Structure

**Work Structure**

**Agency Characteristics**

**Project Characteristics**

**Method of Award**

**Contract Type**

**Enabling Legal Framework**

**Other Tools**

**Work Structure**
- Phased
- One Step
- Multi-Contract
- Combinations

**Notes:**
Delivery:
Work structure refers to how you choose to divide the work up among various contracts. There are several choices:
Phased: ITS development is broken into sequential phases.
A phased work structure allows for “evolutionary” project delivery. This is the traditional model with planning, then design, then construction separated.
One-Step: One contract governs the entire project.
This work structure assumes that the project includes design and implementation. It could also include some level of planning. 
Multiple Contractors: More than one contractor working on elements of the same project.
Work structure is divided between more than one contractor, with work being accomplished in parallel on multiple contracts. An example would be for an agency to issue one contract for communications and another for operations center software development.

## Basic Work Structure

- Plan

-   Typical Steps in ITS Acquisition

-   Steps in Traditional Project Acquisition

- Plan

**Notes:**
Delivery:
There is a key difference between traditional and ITS acquisition. One that has a great deal to do with the nature of software development, and the rate of technological change. Traditional projects follow a very linear progression, with the traditional breaks between key stages, and usually between key contracts at the points shown.
ITS is different because the design and implementation processes have a much more blurred division. The design and implementation process is a much more iterative process. This is due to several factors, the most important being:
Software is best developed in very small modules that are connected and tested as they are created. 
Software and systems are usually described mostly by (ask the class what?) words rather than pictures, so it is difficult to understand what you are getting until you see it in action. An example is the design of a Graphical User Interface (GUI). The following is a verbatim specification for a GUI. (Have a student read the spec): 
The Graphical User Interface (GUI) shall allow the user of the ATMS to intuitively select objects on the screen by point-and-click manipulation with the mouse. The system shall also provide “hot keys” for commonly used functions.  The GUI shall incorporate:
Pop-up multiple display objects and windows
Menu “icons” and controls
Dialog boxes
Push button and other active commands
Visual and audio alarms
Use of object characteristics such as colors, highlighting, and flashing to alert users of status changes
Ask the students the following questions about the GUI spec:
1) Can you tell how many functions must be developed as point and click functions? As 	hot key functions? 
(No. These items are not very clear).
2) Can you tell how the GUI relates to system operations?
(This specification makes no reference to system operations making it difficult to understand why the design is specified as it is).
3)Can you think of different methods to meet the specification? 
(You could design the system in various ways. GUIs have infinite numbers of 
possible design outcomes. The best option is to follow an iterative design and development process such as rapid prototyping. Note how difficult it is to define a precise outcome up front).
4) Can you see how this dictates a new approach to the client-contractor relationship?
(You must work much more closely together, and accept interim outcomes that may not be “final designs”.

## ITS Acquisition

**Vision**
**Goals**
**Schedule**
**Cost**
**Procurement Method**
**High Level Requirements**

**Requirements**
**Refine Cost and Schedule**
**Development**
**Install**
**Test**

**Maintenance and Operations**
**Contract****    Staff**
**Privatize**

**Notes:**
Delivery:
This slide describes the key elements of each step in ITS Acquisition.

## Phased Work Structure

-   One Contract for Each Step

**Notes:**
Delivery:
A phased approach is workable for most projects - as long as you do not divorce the requirements from the implementation (unless you allow requirements scrubbing). If you do separate development and implementation (requirements and implementation) allow additional time and budget for requirements scrubbing and to get the new contractor up to speed. 

Remember, as always - you must redesign your role as a client and you will spend more time than on a traditional road project.

## One-Step Work Structure

-   One Contract Encompasses All Steps

**Notes:**
Delivery:
One-Step can be modified to remove planning, or to remove M&O from the contracted work.
One step is useful if you have few, if any, staff available in house, or cannot readily build up an ITS staff. Consider this, in some ways, as contracting out the majority of your ITS office - as is being done in Louisiana.
One step, with appropriate oversight, works well for ITS. The agency must make sure the contract is structured so they can proceed in an incremental fashion, taking small steps. This requires more management resources than typical transportation. In fact, ITS always requires more management/oversight - this is because of the key concepts we discussed a bit ago that relate to the nature of software development. that you must embrace.  Remember that software development is iterative. The client relies on the contractor in a way that is new to most transportation professionals. The contractor is a true outside expert. The client is the user expert. You must trust each other and work as an integrated team.

## Multi-Contract Work Structure

-   Multiple Contracts On-Going at the Same Time

**Sub-Contractor 1: Software System**

**Sub-Contractor 2: Communications System**

**Sub-Contractor 3: Field Device Installation**

**“****System Manager”**
** ****Contractor**

**Notes:**
Delivery:
Multiple contracts can be done in many forms. This is an example of a System Manager Contract. Can you think of any other variations on multiple contractor approaches?
Also note that this example potentially implies develop/implement approaches.
System Integrator is another model for multiple contractors - but is full of risks. This is because the SI comes in after everything has been spec’d and installed and is asked to integrate it!
Overall, multiple contracts are very difficult to manage on your own. Need several safeguards.
Can be appropriate when each contract or discipline is fairly substantial. 
Can be useful when the schedule is tight.

## Why Is Work Structure Important?

- Ensure you have the proper prime contractor
- Ensure you get the help you need

## Inputs to Deciding Work Structure

- Consider the Type of ITS Project
- Majority OTS
- Field devices
- Communications
- Majority new software/integration
- Combinations
- Note: Consider degree of software development

**Notes:**
Each of these types of ITS projects are different in terms of the degree of software and the complexity. 
Examples: (Ask Class for examples of each after you give them one)
Majority Off-The-Shelf
Computer-Aided Dispatch
GPS-based AVL (with minimal communications)
Field Devices
VMS
Signal heads for ramp metering
Radar detectors
Stand alone camera systems installed on a fiber network specifically designed for CCTV.
Stand alone video detection installed on a fiber network specifically designed for it.
Communications
Remember - all communications require software to make them work.
Fiber, microwave, radio, cellular, etc.
Who owns it? Leased?
Majority new software and integration
Signal and freeway systems
These different types of projects require more or less teaming because of the degree of complexity. Which Work Structure implies the greatest amount of teaming? 

## Inputs to Deciding Work Structure

- What are the other elements of the project beyond ITS?
- Structures?
- Trenching?
- Remodeling?

**Notes:**
Delivery:

Is it required to have a certain type of contractor for projects with these types of construction elements?
Which type of contractors have the right equipment?

## Inputs to Deciding Work Structure

- How should the work be managed?
- Should an ITS Prime manage a “construction” sub? Vice-versa?
- Perhaps the ITS work should be separated?

## Work Structure - Key Points

- Many ways to “slice it”
- Consider the ITS elements - should they be contracted separately?
- You will have to change your concept of the agency as project manager and devote more time no matter how you structure a project

## Mini-Cases

- One Step?

- Multiple Contractors?

- Phased?

**Notes:**
Delivery:

Let’s go back to the mini cases and discuss work structure.

For the TMC project, how might you want to structure the work?

What about for the VMS project? What might be the factors that would suggest it is okay to bundle to work into a single contract?

## Project Characteristics

**Work Structure**

**Agency Characteristics**

**Project Characteristics**

**Method of Award**

**Contract Type**

**Enabling Legal Framework**

**Other Tools**

**Project Characteristics**
- Determine Need For  Flexibility in Contract  Management

**Notes:**
Delivery:
Now we will discuss project characteristics that influence procurement.

## Project Characteristics

- Need for Flexibility
- Maturity of technology
- Size/Scope/Complexity
- Coordination with other work
- Goals are fixed or not
- Final product is stable, known, seen or not

**Notes:**
Delivery:
There are five project characteristics, that we have identified for this course, that have a major influence on procurement approach. We are using a scale of 1 (low) to 5 (highh) to indicate the “strength” of these factors. They are:
Maturity of Technology. Is this new technology? Ever been tried?
Technology is mature if the device has been installed for that purpose often in the past.  In addition, the software has been developed for the desired functionality on the desired platform and used several times in the past. The technology is fairly stable at this point, and is not changing rapidly.

Size/Scope/Complexity: How large is the system? How many components?
A project would rank high on this scale if it covers a large geographic area and/or includes a variety of ITS devices, systems and purposes or merges ITS with other work and/or is meant to address a complex institutional or technical problem.

Coordination with Other Work: How many ITS projects are active at the same time?
A project would rank high on this scale if there are multiple concurrent projects that must be considered, particularly those that include ITS devices installed by others that must be integrated. The scale also considers future work.

Fixed-Ness of Goals (What you want to do):
Are the high level operational and functional goals clear and fixed? If they are not and may change, the project would score higher on this scale.
Fixed-ness of Final Product (How you want to accomplish it):

Is this a custom application or system? Is it not possible to provide an exact example of what you need because it does not exist? Can the desired functionality be accomplished in several different ways (think about detection)? If so, the project would rank higher on this scale.

## Project Characteristics Rating

## Agency Characteristics

**Work Structure**

**Agency Characteristics**

**Project Characteristics**

**Method of Award**

**Contract Type**

**Enabling Legal Framework**

**Other Tools**

**Agency Characteristics**
- Determine Need For  Support

**Notes:**
Delivery:

## Agency Characteristics

- Need for Support
- Experience with similar work
- Staff Skills
- Workload
- Funding

**Notes:**
Delivery:
There are four agency characteristics, that we have identified for this course, that have a major influence on procurement approach. We are using a scale of 1 (low) to 5 (high) to indicate the “strength” of these factors in terms of how much support is needed. They are:
Experience with Similar Work: Is this the agency’s first ITS project?
Have you (or someone you have frequent access to) done this work several times before? If so, rank yourself on the low end of the scale. 
Staff Skills: Is the project administrator experienced in ITS?
Do you have all the needed skills on your staff? Consider the skills you need, software, systems, communications, legal, traffic engineering, etc. If you have the skills, rank yourself at the lower end of the scale.
Workload:	Can you devote the appropriate attention to the project?
This might be a full time job. If you can, rank yourself at the lower end of the scale.
Funding: How adequate is the project funding?
Do you have funds to complete the work? Do you know how much you need? If so, rank yourself at the low end of the scale.

## Agency Characteristics Rating

## Mini-Cases

- Agency Characteristics

- Project Characteristics

**Notes:**
Delivery:

Let’s go back to the mini cases and evaluate them for Project and Agency Characteristics. Let’s evaluate the TMC case. Use the score sheet in your student guide. Base your Ratings on your own agency conditions.  

Note:

## Enabling Legal Framework

**Work Structure**

**Agency Characteristics**

**Project Characteristics**

**Method of Award**

**Contract Type**

**Enabling Legal Framework (FARs)**

**Other Tools**

**Enabling Legal Framework**
** ****Construction**
** ****Engineering and Design Services**
** ****Common Rule**
** ****Services**
** ****Goods**
** ****SEP 14**
** ****Design/Build**
** ****Others**

## Enabling Legal Framework

- Federal-aid procurement regulations – Code of Federal Regulations (CFR) Title 23 Parts 172, 635, 655 and Title 49 CFR Part 18
- The laws that govern the use of Federal-aid highway funds
- If you use Federal funds for your ITS project - at any proportion - procurement is guided by the Code

## Enabling Legal Framework

- Construction
- Engineering and Design Services
- Common Rule
- Goods
- Services
- Construction
- SEP 14

**Notes:**
Delivery:

These are as we noted in Module 2.
For Review, let’s do a short informal quiz. (Ask people to state what the various terms mean, and mark the response in their notebooks). Ask what the selection criteria are.

## Lessons Learned About Frameworks

- The Traditional Model - Engineering and Design Services and Construction
- Contractor manages the subcontractors, rather than the agency.
- However, ITS subs are often inaccessible under many layers of subcontractors (e.g. WSDOT)
- Construction is low bid, and usually not suitable for ITS.

## Lessons Learned About Frameworks

- The Traditional Model - Engineering and Design Services and Construction
- Imposes an artificial break between “design” and “construction”.
- System Manager or Integrator contracts work well when risk is appropriately shared between client and contractor.
- Past failures have been due to lack of shift in client/contractor relationship.

## Lessons Learned About Frameworks

- Common Rule
- Many agencies have more flexible procurement rules, better suited to ITS (e.g. VDOT).
- Some have rules specifically developed for technology (e.g. City of Bellevue, WA, State of Texas).

## Lessons Learned About Frameworks

- SEP 14
- Allows merging of “goods”, “services” and “construction” (e.g. CARAT).
- Allows cost and quals combined in selection (e.g. UDOT).
- Good alternative if your own processes are rigid (Common Rule)

## Lessons Learned About Frameworks

- SEP 14
- Design/Build allowed under SEP 14
- The term “Design/Build” carries a lot of baggage - use an alternative.
- ITS is inherently design/build
- Like all ITS, design/build ITS procurements require you to change your view of the client/contractor relationship.

## Mini-Cases

- Common Rule?

- SEP 14?

- Construction?

**Notes:**
Delivery:

Let’s go back to the mini cases and discuss the potential contract types. Does anyone have any suggestions for the TMC?
For the VMS?

Note:
Go back to the suggested Work Structures that the class developed and base the discussion on them.

## Method of Award

**Work Structure**

**Agency Characteristics**

**Project Characteristics**

**Method of Award**

**Contract Type**

**Enabling Legal Framework**

**Other Tools**

**Method of Award**
- Qualifications
- Cost
- Quals and Cost

## Method Of Award

- Qualifications
- Standard RFP/Interview
- Two-Step Qualifications (LOI or RFQ, then RFP and/or interview)
- Competitive Design
- Demonstrations and/or Site Visits
- Requirements Checklists
- Sole Source
- Unsolicited Proposals

**Notes:**
Delivery:
There are several Qualifications-based selection processes. Here are a few.
Standard - You all know this one. You short-list based on the proposals which include approach and qualifications, then select based on the interview.
Two-Step -   A slight variation on the standard that results in fewer proposals being submitted. Short list based on qualifications and invite proposals and interviews, or simply do a proposal or an interview.
Competitive Design – proposal phase paid for by agency. With a competitive design award, an agency pays a limited number of consultants to produce a system design, including a system architecture and functionality.  These designs, which become property of the agency, are developed to a level of detail that allows system development.  The agency then awards the system development contract to the firm that submitted the technically superior design.
Demonstrations or Site Visits - After short listing, require a proof of the proposal and system capabilities via a site visit or demonstration. Caution - make sure “live” data is used in the demo, but allow for failures in transmission.
Requirements Checklists - Create a ranked list of requirements from must have to nice to have. Either share the Rating information with the respondents or not. Have the responders note which requirements their systems meet today, which they can add readily, and which would be very difficult to add. Can be used with demonstrations and site visits. Selection based on system that best meet requirements.
Sole Source Contracting – Qualifications-based vendor selection, with or without competitive negotiation techniques. Selection of a contractor for negotiations based on its reputation or prior relationship with the agency, without first going through a competitive selection process.  Use of this method is generally limited to situations where the vendor offers a unique and innovative concept, demonstrates a unique capability to provide particular services, or offers a concept or services not otherwise available to the agency. 
Unsolicited Proposals – Proposal submitted by vendor(s). Contracts based on unsolicited proposals may be awarded only when they do not resemble any pending acquisition requirement, and the facts and circumstances preclude competition.  Some agencies require unsolicited proposals be competed before final selection. 

## Method of Award

- Cost and Qualifications Combined
- Two-Step Sealed Bids (Quals then Cost)
- Competitive Proposals
- Best Value
- Life-Cycle Cost
- Best and Final Offers
- Competitive Negotiations
- Sole Source

**Notes:**
Delivery:
There are several combined Cost and Qualifications-based selection processes. They are adaptations of the Qualifications-based selections. They keys are when is cost considered, and how much weight is assigned. Here are a few options.
Two-Step Sealed Bids – Low bid, with qualifications step
A combination of competitive practices designed to obtain the benefits of sealed bidding when adequate specifications are unavailable.  Step one involves a request for submission, discussion and evaluation of a technical proposal, with the final selection of a limited number of qualified contractors.  In step two, these qualified contractors are asked to submit fixed price bids.  
Competitive Proposals – Award takes into account other factors in addition to lowest bid
Requests for Proposals (RFP) or Requests for Quotations (RFQ) are used when contract awards are based on price and other factors.  Competitive proposals are normally conducted with more than one vendor submitting an offer, and either a fixed-price or cost reimbursement contract being awarded.  Competitive proposals allow for some subjectivity in evaluating proposals, but the process is still capable of review by a court based on objective standards.
Best Value – Award is based on lowest bid, plus other factors
A subset of competitive proposals, best value procurements take a variety of factors into consideration when evaluating a vendor’s proposal of vendors, and their demonstrated ability to complete projects on time.  For example, the state of Michigan can use a proposal scoring system in which price is less than 33 percent of the total score for vendor selection.
Life Cycle Cost – Cost of the system over its entire design life
Can be a sole criterion for vendor selection.
Best and Final Offer – Negotiated bid technique
A variation on competitive proposals, contract award is based on price after negotiation and submittal of a best and final offer.  After receipt of initial proposals, the agency has the opportunity to discuss deficiencies with potential vendors, and allow them to bring their original proposal up to a mandatory technical level.  The agency then requests the best and final offer, and awards the contract to the firm with the lowest responsible cost proposal..  Factors might include equipment maintenance cost, past performance
Competitive Negotiations – Negotiated bid technique
This method of award is similar to the best and final offer, with the exception that the agency has the flexibility to negotiate different contract terms with the selected contractor than those bid on by all the other offerors.  
Sole Source Contracting – Qualifications-based vendor selection, with or without competitive negotiation techniques
Selection of a contractor for negotiations based on its reputation or prior relationship with the agency, without first going through a competitive selection process.  Use of this method is generally limited to situations where the vendor offers a unique and innovative concept, demonstrates a unique capability to provide particular services, or offers a concept or services not otherwise available to the agency. 

## Method of Award

- Cost (Low-bid)
- Fixed cost works best for fixed outcome projects.
- Cost alone is often inappropriate for ITS.

## When use Quals? When Quals and Cost?

- Consider what you are “buying”.
- Intellectual property versus real property
- Proportions of each
- How difficult is achieving the outcome?
- Technically
- Institutionally (people issues)

## Method Of Award - Lessons Learned

- Match selection method to outcome:
- Qualifications and cost combined work well if the product is a combination of services and products.
- Qualifications alone works well for software alone, or services.
- Beware of low bid for software: only use low bid for items with very little or no software development/integration.

## Contract Type

**Work Structure**

**Agency Characteristics**

**Project Characteristics**

**Method of Award**

**Contract Type**

**Enabling Legal Framework**

**Other Tools**

**Contract Type**
- Fixed Price
- Cost Reimbursement
- Incentive

## Contract Type

- Fixed Price
- Firm Fixed Price
- Variations
- Various Price Adjustments (Not scope-based)
- Fixed Price Works Best for Fixed Outcomes

**Notes:**
Fixed Price Contracts: Firm Fixed Price – Fixed price for products or services
Payment for fixed price contracts requires an agreed-upon price for products or services.  Typically, there is little flexibility regarding scope changes, or cost changes to reflect scope changes.  Fixed priced contracts should be used when effort and outcomes are specific and clear.
Fixed Price Contracts – Variations
Fixed Price with Economic Adjustment
Used when there is doubt concerning the stability of the market or labor conditions over an extended period of contract performance.  Price adjustments may be based on established prices for specific items or cost indexes.
Fixed Price with Prospective Price Re-determination
Provides for firm fixed price for an initial period and adjustment of the price at stated period(s) over the life of the contract.  May include a ceiling to future adjustments.
Fixed Price with Retroactive Price Re-determination
Used when a fair and reasonable firm fixed price cannot be negotiated at the outset, and a short contract term precludes the use of any other fixed price contract.  Appropriate only for small contracts, as the vendor has no cost control incentives.
“Most Favored Customer” Clauses
Allows the vendor to reduce the price agencies to reflect declining costs in a long-term, fixed price contract.  In other words, if the contractor’s experience or changing market conditions permit the contractor to sell its products or services at a lower price to other clients in the future, existing clients with “most favored customer” clauses will receive the benefit of the same price reductions.

## Contract Type

- Cost Reimbursement
- Reimburses labor and direct costs, scope often very unclear.
- Cost plus Fixed Fee
- Time and Materials

**Notes:**
Cost-plus Fixed Fee – Costs reimbursed, plus a fee
Provides the vendor with a negotiated fee that is fixed at the inception of the contract, with reimbursement of allowable costs up to a stated ceiling. These contracts are nominally flexible regarding scope and inflexible regarding price; even though these contracts were designed for price flexibility, in reality they are managed to a strict budget with a relatively fixed scope of services. (A drawback is the lack of incentive for the contractor to control costs).  This type of contract is suitable when the scope includes research, study, or preliminary exploration and the level of effort required is unknown.
Time and Materials – Costs reimbursed, fee included in hourly rate
Acquiring supplies or services on the basis of direct labor hours at fixed hourly rates that include wages, overhead, general and administrative expenses, profit, and materials at cost. Nominally flexible regarding scope and inflexible regarding price—even though these contracts were designed for price flexibility, in reality they are managed to a strict budget with a relatively fixed scope of services. 
Be careful not to go cost plus fixed fee with a “fixed” price. Capped price with no reserve means no flexibility. Lots of paperwork if changes are needed.

## Contract Type

- Incentive
- Relates fee to contractor performance
- Target cost-based
- Award Fee
- Others

**Notes:**
Relates fee to contractor performance
Cost-Reimbursement Incentive Contracts – Incentive-based contract
Specify a target cost, a target fee, minimum and maximum fees and a fee adjustment formula.  Intended to provide an incentive to the contractor, the fee may be adjusted up when total allowable costs are less than target costs, and down when total allowable costs exceed target goals.
Fixed Price, Incentive –  Fee based on actual vs. predicted cost 
Adjusts profit (and final contract price) based on a formula that relates the total final negotiated cost to the initial target cost.  The final price is subject to a predetermined ceiling.  Provides a positive profit incentive for effective cost control.
Award Fees – Variable fee based on performance
Monetary incentive for the contractor to provide high quality services.  Contractor’s time and materials are fully reimbursed, with the total fee based on the quality of the product(s) or service(s) provided.

## Contract Types  - Lessons Learned

*Fixed Price* is applicable to fixed outcome work – not new software.
*Cost Reimbursement* is applicable to software-intensive work and other work with flexible outcomes.
- Long history of success in IT world. (MDSHA)
*Incentive* applies to mature technology and software.

## Other Tools

**Work Structure**

**Agency Characteristics**

**Project Characteristics**

**Method of Award**

**Contract Type**

**Enabling Legal Framework**

**Other Tools**

**Other Tools**
- Task Order
- IQC

## Other Tools

- Can be used with most any Contract Type (except, perhaps, construction).
- IQC/On-Call Services (MinnDOT, GDOT)
- IQC For Goods (UDOT)
- Task Order (VDOT)
- Independent Validation and Verification Contractor (MdSHA, NJ Turnpike)

**Notes:**
Indefinite Quantity Contracts: Agencies can issue one or many contracts covering various disciplines. Basically, this is a pre-qualification process, and allows the agency to get the selection and contracting out of the way and expedite work. Minnesota, Arizona, Maryland, FHWA and others issue multiple awards. They can sometimes sole-source work orders or they can compete them between the contractors. VDOT issues a single contract - they have one contract for technical services and one for non-technical services. You can issue a Services Agreement, or some other type of contract under an IQC structure. On-call or IQC contracts are to allow an agency to procure a specific type of ITS, but they do not know the details of any work order or have any specific projects in mind.

IQCs can also be used for Goods procurements. UDOT issued IQC type contracts to two suppliers for each device they wished to procure in bulk. There was no guarantee of quantity. These types of contracts should usually have fairly short terms, given the rate of technological change in today’s environment. Of course, clauses for upgrades could be included. 

The Task Order tool can also be applied to almost any type of contract (except, perhaps, construction which requires a fully defined scope of work). Task Order contracts are for projects with specific outcomes, but for which there is no specified method for accomplishing the outcome. For example, you could hire a consultant to help install a freeway management system on a specific portion of freeway, including a TMC (as VDOT did in Richmond). The first task might be to quantify needs and establish the vision, goals and objectives of the project. The next might be to establish high level requirements. The next might be to develop a concept of operations and so on. The tasks could also be issued concurrently. 
Task orders can be paid in any manner, and contracts can be developed that allow multiple methods of payment. One task order might be to procure and integrate a known device that has been procured and integrated in the past. This might be an appropriate Fixed Price pay item. Another task might be to create a build 0 software prototype. This might better be priced as a Cost Reimbursement task.  
IV&V is a type of approach that has been used for years by DoD and others. It helps you by providing an independent party to review processes and outcomes. It is essentially a separate support contract.

## Other Tools - Lessons Learned

- Task Order increases control and flexibility, increases administrative burden.
- IQC reduces total time to contract.
- Little I,V & V contract experience - rely on DoD methods for conflict resolution.

## Procurement Approach Model

**Work Structure**

**Agency Characteristics**

**Project Characteristics**

**Method of Award**

**Contract Type**

**Enabling Legal Framework**

**Other Tools**

**Notes:**
Delivery:
This is the conceptual procurement “model”.
It identifies the key factors and choices in procurement, as defined in this course.
We will now go over these items one at a time. To help in your understanding of these concepts, we have developed some “mini cases” that we will refer to during the presentations, and use to to apply the concepts. 

## Effective Practice Summary Matrix

- Most Effective Practices

- -VS-

- Least Effective Practices

## Project/Agency Characteristics Diagram

- 

**High**

**High**

**Low**

**Low**

**Traditional Practice OK**

**Compromises In Effective Practice, Carefully Selected May Work**

**NOTE:**
**METHODS ARE ARRAYED IN A COMPARATIVE SENSE**

**Apply Effective Practices**

**Get Help! Perhaps**** Use**** I,V &V, ****or Think ****about ****DBOM**

**Rethink Your Overall Approach**

**5**

**5**

**1**

**Need For Flexibility**
**(Project Characteristics****)**

**Need For Support **
**(Agency Characteristics)**

**1**

**Notes:**
Delivery:

The scores you develop will be used to help determine the contracting practices you should use. This nomograph will be explained in detail a bit later. We just wanted you to know why you are developing these scores.

## Effective Practices Include...

**Notes:**
Delivery:
This is the conceptual procurement “model”.
It identifies the key factors and choices in procurement, as defined in this course.
We will now go over these items one at a time. To help in your understanding of these concepts, we have developed some “mini cases” that we will refer to during the presentations, and use to to apply the concepts. 

## The Matrix

** **

- Contractor specifies materials

- purchased by Client Agency.

- Restrictions on

- combining goods and

- services.

- Cost Reimbursement

- Fixed Price (unless it

- is

- a fixed outcome or

- product)

**Least **

**Effective **

**(Traditional **

**Practices)**

** **

- ITS combined with other

- installation disciplines.

- Traditional approach where

- “design” and “construct”

- phases are separated.

- A contractor must accept the

- risk of other contractors or

- other

-  parties.

- Services and goods

- completely

- separated.

- Low Bid selection

- required.

- None used.

- Cost

- –

-  Do not use low

- bid for ITS unless you

- are purchasing a

- fixed outcome job

**Notes:**
This shows the most effective practice - the one most likely to work all of the time.
If a procurement practice had been designed for ITS the way practices were designed for traditional transportation work, the items in the most effective practice line is what would have been developed.
You can still use other methods, but be careful!!!!

## Applying the Tools

- - Work Structure
- - Assess Project and Agency	Characteristics
-  - Use the Diagram To Determine if	Your Conditions Allow Compromises	To Most Effective Practices
- - Apply Most Effective Practices Unless	You Cannot Or Unless You Are	Certain They Do Not Apply

## Key Points

- Other procurement options exist that are more suited to ITS
- ITS requires new procurement practices
- _ITS requires a change in management approach_

## Key Points

- Fixed outcomes = Fixed Costs = Cost-Based Selection
- Uncertain outcome = Flexible Costs = Qualifications Based Selection
- Most ITS is somewhere between these two