Procurement Reform and MIS Project Success

INTRODUCTION In 1992, the United States General Accounting Office (GAO) reviewed Management Information Systems (MIS) projects and concluded: Developing and modernizing government information systems is a difficult and complex process. Again and again, projects have run into serious trouble, despite hard work by dedicated staff. They are developed late, fail to work as planned, and cost millions - even hundreds of millions - more than expected. The results, in missed benefits and misspent money, can be found throughout government.[1] Failure is not confined to government. In 1994, the Standish Group presented these alarming statistics: only 16.2 percent of all MIS projects (less than 9 percent of large-company projects) are completed on time and within budget, with all required functions and features. Over 52 percent of projects are over budget, late, and offer fewer features and functions than originally specified. Almost one-third of projects (31.1 percent) are canceled.[2] The cost of this failure is staggering. The Standish Group estimated that $81 billion would be spent in 1995 by American organizations for canceled projects, and that an additional $59 billion would be spent for late projects. Until recently, MIS project failures attracted little systematic attention. Now, however, attention is turning to the causes of failure and the steps that must be taken to improve opportunities for success. Several reports have indicated that failure cannot be attributed to a single factor, and that improving opportunities for success will require action on several fronts.[3] The purpose of this article is to: * examine the role of procurement as a contributor to the failure of MIS projects * provide an analysis of how procurement contributes to failure * describe the procurement reform required to improve opportunities for success It is not the contention of this article that procurement reform will, by itself, address all the issues that confront MIS projects. It is this author's contention, however, that procurement reform is vital, and unless it occurs, other necessary improvements will have limited impact on the overall success of MIS projects. PROCUREMENT'S ROLE AND CONTRIBUTION The procurement process has been consistently identified as a contributing factor to MIS project failures.[4] Knowing that the procurement process contributes to failure, however, is not useful enough. The reasons for the failure must also be known. Procurement's contribution to MIS project failure stems from several sources: * Current MIS procurement processes are based largely on tender-theory procurement (competitive bidding). Tender theory is well established, widely practiced in public and private sectors, and has served both well. However, its strengths are also it weaknesses, and they create resistance to change. It is difficult for managers to understand how a process that has worked well for other goods and services could prove dysfunctional for MIS projects. * Tender-theory procurement is specification oriented: a specification must be prepared before the procurement process can start, and this specification becomes an indispensable element in completing the process. Specifications, however, provide an objective basis for securing value only for some products. For others, such as MIS projects, specifications obstruct obtaining value. * Finally, procurement processes based on tender theory interact with dysfunctionalities in the environment that characterize MIS projects; this creates an ethical hazard for the purchasing managers involved. Succumbing to this hazard intensifies the problems faced by MIS projects, making it almost impossible for them to succeed. Each of these problems is examined in more detail below. Tender-Theory Procurement Under tender theory, the purchasing organization first develops a specification concerning its requirements. …