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2014-09-10 post date.

Creating a fair, open and competitiv purchasing process

PRACTICAL  ADVICE FOR NAVIGATING THE EDUCATIONAL PROCUREMENT SYSTEM

Having been both a buyer and a seller gives one a unique perspective of the purchasing process in educational institutions, in particular, how and what must be done to ensure that a school system or state department of education gets what it needs at a fair and reasonable price. It’s also important to ensure that the prospective vendors feel that a transparent, fair and truly open process exists in pursuing opportunities with these institutions.

As a vendor it would be ideal if a customer bought our product directly without examining the competition. However, it would be shortsighted for a school district or state department to make a purchase without analyzing other available options. After all, while one product may look good by itself, it may be found to not be the best product or the best price out there.
There are a number of useful suggestions to help both buyers and sellers, based on smart purchasing processes effectively utilized by some states and school districts, as well as some lessons learned from unsuccessful actions taken by others.

RFP, Price Quote, or RFI?

All three of these procurement processes have value, but each has advantages and disadvantages.

Request for Proposal (RFP)

RFPs enable the school system to get the most information, including price, without awarding merely based on the lowest bidder. Often pricing is requested in a separate envelope so reviewers can evaluate the “fit gap” without being influenced by price. RFPs can be canceled if things change in the process, and the school district generally will provide for a “Best and Final Offer” (BAFO) so that they get the best price from the leading bidder.
Although you will want to encourage the vendor to issue the best price the first time, you always have the opportunity to check pricing again. Sometimes they can further discount their price or include additional features to increase the value of the quoted price. To make the project more attractive to vendors, and to possibly encourage better pricing, include an intergovernmental purchasing — or “piggybacking”— clause to the RFP that will allow other governmental agencies and school districts to benefit from your diligence and hard work while still enabling them to issue their own RFP.

You never want to use a specific vendor to prepare an RFP due to the numerous ethical questions it raises. Instead, issue a Request for Information so that all vendors can contribute to your specifications. Finally, advertise it as widely as possible to the vendor community and provide for purchasing self-registration in areas of interest on the district’s website.

Advantages of RFPs:

Vendors provide the schools with a self-assessment of their ability to meet predetermined specifications.
Pricing can be considered separately from product functionality and quality.
Schools are not compelled to award.
Any business or even another governmental agency can submit a proposal.
With the right language, other agencies can benefit from your work and review so that they can purchase this product faster and with more ease.

Disadvantages of RFPs:

Preparing a quality RFP takes time to issue and award.
Responding to questions regarding the RFP takes more time — but helps improve the quality of the proposals.
More proposals will be received via this method than most purchasing approaches, thereby requiring more review time.
Your initial inclinations may be affected, a good thing as you may be more enlightened after the process.

Price Quote

Typically a school system will seek three price quotes for purchases of commodities, or commonly purchased and understood products, with a total cost under the state’s bid limit threshold. This enables the school district to do some comparison shopping, but is a speedier process than an RFP. Unless there are significant differences in the products being proposed, however, school systems will generally award to the lowest priced vendor. This is generally a three- to four-day process rather than the 14- to 30-day RFP process.

Advantages of price quotes:

Purchase period is much shorter than other processes.
There is a comparison between other vendors.
Pricing is usually the focus so vendors know that they have “one shot” at getting it right.
There are limited specifications so preparation is minimized.

Disadvantages of price quotes:

No clear and precise set of specifications.
Often limited to a few “choice” vendors potentially creating serious conflicts of interest.
Limits the district’s exposure to a wider variety of products and services.
Puts price above other criteria.
Often does not define the actual services and product functions and features in detail as would be described in an RFP.
Request for Information/Request for Qualifications(RFI/RFQ)
An RFI/RFQ is typically requested when a school system wants to prepare an RFP and wants to get the lay of the land for what is new on the horizon and which firms might demonstrate interest. It is more like a dress rehearsal for the RFP and also provides a chance for the school system to test their budget assumptions as vendors provide a projected (non-binding) price proposal.

Advantages of RFI/RFQs:

Provides a broad review of products and services to the district without charge rather than hiring a consulting firm to do the research.
The schools can glean proposal requirements from the RFI and begin to compare vendors.

Disadvantages of RFI/RFQs:

Extends the purchasing process because the district now needs to factor in the time for review of the RFI, writing of the RFP specifications, and then review of RFP proposals — plus an oral presentation if desired.
Unless the evaluation team is circumspect, there is a greater potential for inside information being leaked to “favorites.”
The school system may create more specifications for issues that are nice to have rather than need to have, distorting the proposed cost of the primary purchase — at least separate optional items from those required.

Dos and Don’ts

Once the process is underway, there are some key dos and don’ts that need to be considered for success. Some of these may not apply to your particular situation but they remain good guiding principles:
Do prepare precise and clear specifications for the purchase to be made.
Do answer questions regarding the RFP as soon as possible. Providing and posting answers to questions as they are received is better for vendors and easier in the long run for the agency.
Do have your favorite vendors compete with everyone else, and keep your mind open to a new vendor who has the better product and/or price.
Do make the selection based on quality and reasonable pricing for what you are getting including the experience, capabilities, reputation and services of the firms.
Do include adequate opportunities in the contract documents for resolution of disputes, disagreements and previously unknown issues before issuing penalties and/or damages.
Do invest in success. Regardless of what is being purchased, if it needs to have people trained to use the product or service, don’t skimp. The success and failure of projects often depends on its commitment to training and professional development.

Do provide as many responsible vendors who submitted a qualified proposal the opportunity for an oral presentation. The amount of time needs to be commensurate with the complexity of the proposal, so make it long enough for the vendor to explain the product or services and the school system to get all the questions answered and “perceived” objections addressed.
Do ask for the projected cost of the product or service over a reasonable period of time (five to 10 years) even if you are only asking the vendor to commit to pricing for a more limited period. Too often a vendor will price the first year low to be the presumed low bidder; only once you are deep into the project do you find out that the costs will be rise significantly in the future.
Do be sure to determine the cost of improvements, add-ons, maintenance charges and other costs that may not be visible until something goes wrong. If a state department of education selected a vendor for a software product that had a low initial cost but then everything that needed to be fixed or purchased was extremely expensive, was it really a bargain in the end?
Do advise all vendors who submitted a proposal which firm won, the pricing, and if possible the reasons why their proposal was not selected. After all, the vendor spent many hours and a lot of money preparing the proposals; the fair thing to do is to keep them informed and provide “lessons learned” where possible.

Don’t presume that vendors will know what you want because you have spoken about your ideas or plans for a long time.
Don’t expect vendors to sign on for “unlimited” liability. Too often, schools include an unlimited liability clause in their proposals. For a small start-up or mid-size firm this obligation has a different meaning than it does for the national and global firms. A small or mid-size company, if faced with liability beyond their means, will simply file Chapter 11, shed their obligation and move on. For a larger firm, this is a real requirement that cannot be avoided so limit liability to some reasonable level based on the value of the project.
Don’t point fingers. If you want to assess penalties and/or liquidated damages, you need to be sure that your own house is “pristine” because the penalties will be questionable if you contributed to the problems. Better still; create reasonable solutions to problems with the assumption that both parties want a successful outcome.
Don’t have a negative perspective about something the vendor wrote or said without asking them about it again to be sure that you have interpreted what they said correctly. It’s always better to double-check than to assume.

Don’t be unclear about pricing. Be completely candid and don’t recommend a purchase based on a one-year cost but rather the TCO (total cost of ownership) over a reasonable period of time.
Don’t shortchange oral presentations. Schedule meetings for a realistic time period, otherwise the entire process looks more like compliance with the required steps rather than a genuinely open process. Don’t waste your time or the vendor’s by allowing only a 20-minute conversation for an important purchase.
Don’t show favoritism. Perhaps one of the worst things possible from a vendor’s perspective is to get a copy of the scoring sheets completed by each committee member to see the obvious bias by a committee member by minimizing all of the vendors except the one that he favored. When the chair of the purchasing committee sees that scoring is biased, especially compared to the scoring of others, the entire set of scores should be eliminated. Just like in skating competition, the extreme highs and lows should often be discounted.

SOURCE: THE BUSINESS SIDE OF EDUCATION By Dr. Philip E. Geiger