The Dialogue RFP in Action City of Lethbridge & The Road to - PowerPoint PPT Presentation

The “ Dialogue RFP ” in Action City of Lethbridge & The Road to Procurement Change

Overview Part I ► Lethbridge Story Part II ► Overview of Dialogue RFP ► Understanding of Methodology ► Results/Outcomes ► Lessons Learned ► Questions

Common Problems? ► Non- Compliant bids ► Over-budget bids ► “ If I knew that before I put my bid in ” ► Scope creep ► Constant Change Orders/Amendments ► Poor performing contractors ► Payment/Performance disputes

Opportunity

Lethbridge Story

Lethbridge Story

Lethbridge Story

Roles of Procurement Dept. ► Corporate Role  Manage Competitive Bidding Process  Guide Approval Process  Communicate with Vendors  Document & Report to Council ► Advisory Role  Market Conditions, Procurement Strategy, Potential Sources, Interpretation of rules, Risk Analysis ► Operational Role  Inventory, Warehousing, Courier & Mail

Lethbridge Story ► Role of City Manager  Council-Manager Bylaw #2915  Designates City Manager as “ Chief Purchasing Agent ” ► City Council authorizes all procurements over $500,000

Lethbridge Story

Opportunity

Lethbridge Story June 2010 ► Sought Advice from Paul Emanuelli  City of Calgary in the news  New Trade Agreement July 2010 ► Review of Sole Source provisions in our policy October 2010 ► Webinar with Financial Services Team  Included Controller and Internal Audit  Legal Considerations in Public Procurement

Lethbridge Story May 2011 ► Corporate -wide Training with Paul Emanuelli  Senior Management Team – Institutional Governance & Procurement  Business Units – The Foundations of Public Procurement  Business Units – Contract Management June 2011 ► Retained Procurement Law Office  Institutional Procurement Review ► Stage 1 – Snapshot Review ► Stage 2 – Field Study ► Stage 3 – Final RADAR Report (Risk Assessment, Diagnosis & Recommendations)

Lethbridge Story Snapshot Review Methodology ► Applicable Policies & Bylaws ► Tender, Quotation, RFP Templates. ► Sample Tenders, Quotations and RFPs ► Resulting contracts ► Examples of approval process ► Historical spending data

Summary – Snapshot Total ¡ % ¡Of ¡ Score Description # Total A Exceptional ¡ 0 0% B Excellent 14 4% C Good 47 13% D Marginal 72 20% E Inadequate 211 60% F Potential ¡Rules ¡Breach 6 2% X Apparent ¡Rules ¡Breach 0 0% TBD No ¡Score ¡Yet 3 1% 353 100%

Lethbridge Story Common Theme “ … as a whole the policy and procedure framework is insufficiently detailed ” . Snapshot Review Summary, July 19, 2011; Procurement Law Office

Opportunity

Path to Today ► Policy Development: Aug. – Dec. 2011 ► Policy Implementation: Jan. – April 2012 ► New Bid Documents – Flexible Formats ► Developed Procurement Planning Process ► Revamped Drafting Process ► Protocols, Tools & Training

Summary of Snapshot II % ¡Of ¡ Total ¡ Score ¡ Descrip+on ¡ Total ¡# ¡ A ¡ Excep+onal ¡ ¡ 17 ¡ 15% ¡ B ¡ Excellent ¡ 34 ¡ 29% ¡ C ¡ Good ¡ 47 ¡ 41% ¡ D ¡ Marginal ¡ 11 ¡ 9% ¡ E ¡ Inadequate ¡ 7 ¡ 6% ¡ F ¡ Poten+al ¡Rules ¡Breach ¡ 0 ¡ 0% ¡ X ¡ Apparent ¡Rules ¡Breach ¡ 0 ¡ 0% ¡ TBD ¡ No ¡Score ¡Yet ¡ 0 ¡ 0% ¡ ¡ ¡ ¡ ¡ 116 ¡ 100% ¡

Lethbridge Story Use of Flexible Formats

Dialogue RFP Project #1 ► $40M Community center  twin ice hockey arenas +  10 sheet curling facility ► $35M Funding from Feds & Prov.  Must be designed, built, paid by Mar. 2017 ► $1.2M already spent on design for twin ice arena

Opportunity

Procurement Strategy ► April 16 - Steering Committee Meeting  Discussed options for retaining design team ► April 17-30 - Research & Consultation  Peers/contacts in other organizations  Searched electronic tendering sites  Discussed options with Paul Emanuelli ► May 1- Recommendation to Steer. Comm.

Procurement Strategy Types of RFPs  Negotiable vs. non-negotiable Negotiable RFPs  Consecutive vs. concurrent

Procurement Strategy ► Consecutive Negotiable RFP  “ rank & run ”  evaluate & negotiate only with highest ranked  If negotiations fail move to 2 nd ranked…. ► Concurrent Negotiable RFP  “ dialogue ”  evaluate & negotiate concurrently with up to (3) highest ranked  maintains “ competitive tension ” w/ Top (3)

Procurement Strategy ► Why Concurrent Negotiable RFP? 1. Preserve $1.2M investment in existing design 2. Maximum flexibility 3. Political climate & culture 4. Keep “ competitive tension ” throughout 5. Use “ dialogue ” to mitigate risk $$$ 6. Legacy project - Get It Right

Methodology 1. Retained expertise - Procurement Office 2. Obtained & customized bid document template 3. Created small cross-functional drafting team Procurement “ held the pen ”  4. Identified & trained Evaluation & Negotiating Teams 5. Developed tools & protocols to support evaluators

Methodology Stage 1: Mandatory requirements check Stage 2: Technical Proposals scored Stage 3: Top (3) Financial proposals opened/scored  Stage 2 + 3 = Initial Scores Stage 4A: Negotiate Proposals (3) 4B: Best and Final Offer (BAFO)  Repeat Stage 2 & 3 = Final Scores > Frontrunner 4C: Finalize Contractual Terms w/Frontrunner  Award Contract

Outcomes  Risks/assumptions identified and treated  Competitive tension maintained  Preserved value from initial design  Confidentiality upheld  Increased understanding of Project

Outcome on Project #1 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 - Previous Investment + Average Initial Offer Average BAFO Offer Winning Bid Previous Investment + Original Estimate Winning Bid

Outcome on Project #1 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 - Previous Investment + Average Initial Offer Average BAFO Offer Winning Bid Previous Investment + Original Estimate Winning Bid

Outcome on Project #1 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 - Previous Investment + Average Initial Offer Average BAFO Offer Winning Bid Previous Investment + Original Estimate Winning Bid

Outcome on Project #1 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 - Previous Investment + Average Initial Offer Average BAFO Offer Winning Bid Previous Investment + Original Estimate Winning Bid

Outcome on Project #1 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 - Previous Investment + Average Initial Offer Average BAFO Offer Winning Bid Previous Investment + Original Estimate Winning Bid

Outcomes to date ► Used on 6 different types of procurement  Architectural Services  Construction Management Services  Technology - Software  Mobile Library Design/Build  Environmental Engineering Services ► Contract Values $220,000 - $2,162,000

Outcomes to date Reduction in “ risk premium ” (Average Initial Offer minus Average BAFO) ► $442,530 ► 7%

Outcomes to date Actual Savings Achieved (Winner ’ s Initial Offer minus Winner ’ s BAFO) ► $460,081 ► 8%

Timelines to date

Feedback  Client  Bidders  Senior Management

Negotiation Tips ► Keep the clock ticking ► Use the invitation to “ manage ” venue, attendees & agenda ► Procurement acts as Chair ► Small negotiating team with designated Spokesperson ► Note taker and digital recording of proceedings ► Agenda – Keep it simple  Chair Opening Statement – Ground Rules  City Lead Negotiator – Project Overview  Proponent Rep – Presentation  Formal questions and issue discussion

Lessons Learned 1. Retain expertise at the outset 2. Invest upfront to prevent/minimize downstream issues 3. Build the necessary infrastructure 4. Get support from senior management & key stakeholders 5. Focus on strategic objective(s) 6. Share the risks 7. Face-to-face works best 8. Don ’ t underestimate power of dialogue

Questions

Future Events May 1, Edmonton Canadian Institute ’ s Business & Operations Guide to Public Procurement http://www.canadianinstitute.com/westprocurement June 3, Regina June 9, Toronto June 12, Halifax Lexpert ‘ s New Procurement – Critical Developments from Process to Practice http://media.thomsonreuters.ca/Docs/Lex/Spring-2014/Procurement/NewProcurement-2014-Brochure.pdf