States sometimes amend their processes for procuring information technology (IT) products and services in ways that translate into a better value for taxpayers and improved services for constituents. Other times, states regress with procurement rules that are out of step with today’s best practices. The state of Oregon is at this crossroads as it contemplates adopting a new standard template for contractual “terms” for IT services, and its public sector IT industry partners believe it’s the wrong approach.
Oregon’s willingness to hear from its public sector industry partners is very much appreciated. In a letter to state officials the IT Alliance for Public Sector (ITAPS) weighed in to express our concerns that the state’s proposed contract template will ultimately lead to longer negotiation cycles, fewer bidders, and higher prices for the state’s IT initiatives. These reservations stem from years of experience, which has shown that states benefit from robust competition among the most capable IT service and solution providers. Whether selling to government clients or private sector customers, leading IT vendors are careful to assess the risk of each engagement and will decline to participate in procurements that present excessive risk or put in jeopardy a company’s right to utilize its intellectual property.
For these reasons, ITAPS urges Oregon to adopt contract terms that are much more commercially acceptable than what is being proposed. This approach will give the state flexibility for more in-depth or special terms that could be proposed, negotiated, and agreed to, if warranted, to address special circumstances or extraordinary risks of a particular future IT project. But these situations should be treated as “exceptions” and not drive the norm of contract terms and conditions government-wide.
Oregon will benefit by using these commercial contracting best practices that are proving to encourage competition and improve the procurement process in other states adopting this approach. This is especially the case where states are taking a second look at maximizing their resources with restrained budgets and realizing greater value and efficiencies as a result. Another key to success is “mutuality” between the state and its public sector partners of opportunity, responsibility, and risk. It’s proving to be the secret sauce because when both the state and contractor have skin in the game, a positive project outcome is more likely. If IT vendors are asked to shoulder an unreasonable share of the project risk, the result will likely be fewer bidders, less robust competition, higher prices, further delays in the acquisition process, and more litigation.
The bottom line is that the state has an opportunity to adopt the right contracting approach to maximize resources, save taxpayer dollars, and deliver more efficient and effective constituent services for Oregonians.