the dialogue rfp in action - procurement...

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

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

Score Description

Total #

% Of 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

Score Descrip+on Total # % Of 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.


Types of RFPs   Negotiable vs. non-negotiable

Negotiable RFPs   Consecutive vs. concurrent


► Consecutive Negotiable RFP   “rank & run”   evaluate & negotiate only with highest ranked   If negotiations fail move to 2nd ranked….

► Concurrent Negotiable RFP   “dialogue”   evaluate & negotiate concurrently with up to (3)

highest ranked  maintains “competitive tension” w/ Top (3)


► 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

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

Previous Investment + Original Estimate

Average Initial Offer Average BAFO Offer Winning Bid Previous Investment + 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