Landing the best price and the right deal for IT products and services is especially important for government agencies and departments. Just ask Catherine Maras O’Leary, CIO of Cook County, Ill., the second largest county by population in the United States. Unlike corporate IT, “Whatever’s in our budget is all we’re able to spend,” O’Leary says. “We have to have a balanced budget.” (See “Getting the Most IT From Taxpayer Dollars ” on page 46.)
It doesn’t matter whether the contract is for desktop PCs and consumables or a major IT deployment. Through shrewd negotiating — including research, competitive bidding and using tools like the FedBid online marketplace for government (www.fedbid.com) — CIOs and other technology procurers at the state, county and city levels get more IT products and services for taxpayer dollars.
“Good negotiating can make a huge financial difference,” says Alisoun Moore, CIO of the Department of Technology Services for Maryland’s Montgomery County. “I’ve heard of a contract for tens of millions of dollars being bid with little competition and ending up with hourly rates more than double a similar, more competitively bid contract. It was for the same quality of work.”
“A lot of government people don’t realize that there is a huge difference between a bid process and a negotiation process,” says Joe Auer, president and owner of International Computer Negotiations, a Winter Park, Fla., consulting organization that helps technology professionals get the best deals possible when negotiating with suppliers. “You never get the best price in a bid process. You get the highest price that vendors feel will still beat their competition.”
On the other hand, experts agree that if you do your homework, think total cost and not just price, and show patience and persistence, you can come away with a better deal. Here’s how to garner the best prices, according to leading government CIOs and industry consultants:
1. Start by finding the lowest available schedule prices. “Our first question is, Where can we get the highest discount?” says Cook County’s O’Leary. “Do we have to buy through the state, can we go direct or do we have other choices?”
“We do countywide purchasing or use the state discounts, which are often even deeper,” says Montgomery County’s Moore. “We work with the GSA [General Services Administration] schedules sometimes. And we may say, ‘We’d like GSA prices or better.’”
“The federal government has done the state and city governments a great benefit by negotiating good pricing for products and services, including IT, for significantly priced line items,” states Ray Bjorklund, senior vice president and chief knowledge officer at FedSources, a McLean, Va.-based firm that supplies government market intelligence. “It has also negotiated some good terms and conditions that are useful for public service contracting. Cities and counties can take advantage of these discounts.”
2. Research whether others have paid less for IT. Check market intelligence to determine what other organizations have paid. Some information is in the public domain; for further benchmarking, you can go to Gartner, Forrester Research and other IT research firms.
Don’t hesitate to ask your fellow government CIOs for advice, suggests Cook County’s O’Leary. “We typically send out e-mails to each other, asking if anyone has worked with the vendor and were there any issues,” she says. “That’s part of the work you do before going into negotiations.”
3. Get a number of bidders. The key to getting the best price is keeping the maximum number of vendors in play. They will often do the negotiating for you.
To bid, potential vendors may need to register on bidder lists. They should browse agency Web sites for strategic planning documents and solicitation information.
“Potential vendors need to be familiar with the various contracting mechanisms available and get on bidder lists so they have the opportunity to respond to solicitations,” says Ron Bergmann, acting commissioner of New York City’s Department of Information Technology & Telecommunications. “They need to go to city, state and federal procurement Web sites to register and receive solicitations.”
4. Ask for even lower prices. “Canny buyers will look for ways to use GSA as the starting point,” says FedSources’ Bjorklund, “but don’t stop there. You can beat the GSA schedules. I have seen contracting officers who have sought to purchase large components of mainframe computing systems, storage, memory and so forth, and have seen them get as deep as 60 percent discounts through additional negotiations.”
5. Use automated online bidding tools. “It’s becoming more important for government customers to use tools that can help them in the negotiating process, like FedBid,” advises Neal Fox, former assistant commissioner for commercial acquisition at the GSA and now principal at Neal Fox Consulting in Manassas, Va., which provides government procurement consulting. “These tools take a lot of the work out of the process. And they can be very effective for commodity products and commoditized simple services.”
6. Buy in bulk. “Many public sector governments are operating at a scale that lets them negotiate enterprisewide licenses,” says FedSources’ Bjorklund.
“We [the Department of Information Technology & Telecommunications] are the central IT provider for the city of New York,” says Bergmann, “and if the city were a company, we’d be in the Fortune 500. We’ve done a lot over the last several years to leverage our aggregated volume for enterprise deals and create contracts on behalf of the city that agencies can take advantage of.”
7. Look for “just-in-time” purchasing. “RFPs [requests for proposals] can take a long time to build and go to contract,” notes Cook County’s O’Leary. “It’s not like a bid for commodity supplies. Because of the timeframe, you might have to upgrade the PCs, and, at the same time, servers have gotten faster since you started specifying. Just-in-time purchasing of equipment can help you keep from buying too soon.”
8. If you can’t negotiate price, ask for more scope. “In the RFP process, not much is negotiable in terms of the price being bid once you have selected a winner,” says Montgomery County’s Moore. “But you can negotiate additional work up or down, based on the level of effort.”
Keep in mind that in addition to saving money by negotiating a lower price, you can also get contract concessions.
Although price matters, it’s not the only consideration in negotiating IT contracts. “The toughest parts are the terms and conditions, like liability, termination clauses, source-code ownership and escrow,” says Moore. “These are where the big risks are.”
According to FedSources’ Bjorklund, “During the past decade, the federal government has been moving to Best Value Procurements. Best Value is supposed to take into account not only the schedule, price and technical requirements of the offering, but also the quality and company qualifications. For services, you want to make sure the bidder has the right qualifications and experience.”
If you lack the necessary skills, consider bringing in an expert or bolstering your own skill set. “Otherwise, you’re setting yourself up for a poor negotiation,” says Montgomery County’s Moore.
Moore recommends reading about contracting and outsourcing as much as possible. Doing so, she says, “provides a good framework for analyzing what contractors look for.” Also, she says, “You must read the procurement laws that govern what you can negotiate and how.”