Category

1
Category 2 Bundling and Unbundling Workgroup

• September 24, 2007

2
Agenda

• Objectives
• Definitions
• Bundled
• Unbundled
• Issues
• Recommendations
• Appendix
• Commercial-Off-The-Shelf (COTS) Definition

3
Objectives

• What are the industry issues related to supplying
  software separately or as part of the systems
  integration procurement?

4
Definitions

• Bundled Solicitation and Contract The solution
  to the States information technology (IT) public
  policy and business needs are provided by one
  primary party, the system integrator, who has
  contracted with the State for completion of the
  contract. The system integrator or prime
  contractor also may have contracted with one or
  more third-party provider(s) to supply an array
  of IT goods and/or services necessary to the
  prime contractor solving the States business
  and/or policy requirements.
• Unbundled Solicitation and Contract The
  solution to the States IT public policy and/or
  business needs is provided by multiple IT
  suppliers who have each individually contracted
  with the State for completion of their contracts.

5
Issues

• There is a lack of understanding as to the
  implications of bundling and unbundling hardware
  and software (COTS) products during the
  development of the RFP, which can result in
  increased costs to both the State and Vendor.
• Once RFP responses have been received, there is a
  lack of flexibility to negotiate bundling and
  unbundling of hardware and software (COTS)
  products, which can result in decreased
  competition and increased costs to both the State
  and Vendor.
• Current contract requirements for bundled
  software (e.g. terms and conditions for
  licensing, indemnity and warranty requirements)
  creates a liability for Vendors that can result
  in either a no bid decision or increased costs
  that are passed on to the State.

6
Recommendations

• There is a lack of understanding as to the
  implications of bundling and unbundling software
  during the development of the RFP, which can
  result in increased costs to both the State and
  Vendor.
• The ITPP (Information Technology Procurement
  Plan) is a DGS mandated document that describes
  the strategy the project will use in procuring
  goods and services from a Vendor. The ITPP is
  prepared in conjunction with the FSR (Feasibility
  Study Report). The ITPP process should be
  modified to require market analysis be performed
  twice once in support of the FSR development and
  then again prior to the development of the RFP.
  Discussions with Vendors during the RFP
  development process should specifically explore
  the implications of bundling and unbundling
  requirements. It is not reasonable to have this
  complete of an understanding during the FSR
  process.
• To better align with the market and best
  practices, stronger consideration should be given
  to allow the Vendor to propose a contracting
  approach whereby the State would contract
  separately with the hardware/software (COTS)
  providers. This would circumvent the current
  contracting issues (see 3rd issue below) and
  allow a direct relationship between the State
  and Vendors.

7
Recommendations

• Once RFP responses have been received, there is a
  lack of flexibility to negotiate bundling and
  unbundling of hardware and software (COTS)
  products, which can result in decreased
  competition and increased costs to both the State
  and Vendor.
• Modify RFP and General Provisions contract
  language in order to allow the Vendor to propose,
  and the State to consider, an unbundled
  contracting approach. This would give the State
  the flexibility to determine what is in its best
  interest (at the time of contracting) in regards
  to bundling and unbundling of hardware and
  software (COTS) products. Under the current
  process if the State selects a Vendor on a large
  complex project it may be years between the
  original bundling/unbundling decision and system
  implementation. If at the time of design and
  implementation the market dictates a different
  software solution, there is no flexibility to
  make those changes often resulting in increased
  costs.

8
Recommendations

• Current contract requirements for bundled
  software (e.g. terms and conditions for
  licensing, indemnity and warranty requirements)
  creates a liability for Vendors that can result
  in either a no bid decision or increased costs
  that are passed on to the State.
• Modify General Provisions that limit/eliminate
  liability for standard items out of control of
  the Vendor.  For example hardware being bid by a
  SI, when it is the manufacturing vendor that
  should and often times does, provide warranty
  services and COTS software (source code) that
  has standard license agreements warranties.
• This recommendation should be referred to the
  General Provisions workgroup.
• Contract separately with the hardware/software
  (COTS) provider and systems integrator whenever
  possible, thus eliminating the liability and
  contracting issues for a system integrator and
  increased costs for the State.

9
Appendix
10
Commercial-Off-The-Shelf (COTS) Definition

• COTS (commercial off-the-shelf) product is one
  that is used "as-is." COTS products are designed
  to be easily installed and to interoperate with
  existing system components. Almost all software
  bought by the average computer user fits into the
  COTS category operating systems, office product
  suites, word processing, and e-mail programs are
  among the myriad examples. Specific to the State,
  COTS have taken on several levels of complexity
  
• Simple COTS implementation (no customization, few
  or no interfaces)
• State needs to ensure that the solution can be
  successfully installed, users are trained, and
  ongoing updates or issues are resolved.
• Medium complex COTS implementation (some
  combination of minor customization, minor
  interfaces, multiple geographic locations, some
  configuration, training, ongoing maintenance)
• State needs to ensure that the solution is
  installed correctly.  The work could be
  implemented by the State, the COTS supplier, or a
  third party.  The State needs to be comfortable
  with the risk of the implementation strategy
  selected.
• Complex project involving one or more COTS
  solutions (includes a combination of COTS
  customization, multiple COTS or customer software
  solutions, multiple interfaces, multiple
  geographic locations, training, ongoing
  maintenance)
• State needs a third party to manage the project,
  multiple Vendors/suppliers, and project risk.