States set battle plans in computer procurement war

'If you set a long-term contract for a desktop, laptop or palmtop, you will probably start out with a very good price and end up with a really bad price,' he said. 'We've established multiple vendors as contractors and asked them to reprice every quarter. It gives us flexibility on price, and they can introduce new equipment.'Tennessee also runs what Dugger called blue-light specials in its contracts, which let vendors offer discount prices at the end of a quarter. 'That only works with multivendor contracts,' he said.Tennessee doesn't require PC vendors to use the state's licenses for applications software, Dugger said. 'That's something we may look at.'Dugger acknowledged that procurement rules tie his hands. 'I think where we have trouble in our state is that we have no opportunity to conduct effective negotiations,' he said. 'If we had the opportunity to get into competitive negotiations, we probably would come out with better prices.'As in most states, Tennessee's procurement laws are based on protecting the state from unethical practices, he said. 'The laws are written to prevent that, and as a result we probably lose,' Dugger said.Because state and local governments operate in the glare of public disclosure, procurement scandals are a special political problem. Erbschloe observed that 'in the private sector, there are a lot of disasters nobody hears about.'Bill Vetter, Illinois' state technology officer, agreed that state procurement procedures slow the process, but he emphasized that the state's Central Management Services Department pools the buying power of all state agencies to get the best prices.'We have a lot of master contracts,' he said. 'We'll bid for PCs, and there will be an award that will provide all PCs for three months because that's how long you can go before the technology changes.'When an individual agency seeks to buy several thousand PCs, Vetter added, Illinois has the flexibility to seek a special contract. 'Setting that up can lead to a lot of sales, so vendors tend to step up to the plate and offer good prices,' he said.The Land of Lincoln, however, lacks the flexibility to respond to special deals that vendors often offer at the end of the month, Vetter said. Vendors build shipping costs into the delivered price for those end-of-month specials, so Illinois hasn't sought to take advantage of the deals, he said.Missouri CIO Gerry Wethington tackles the PC buying task with a series of prime contractors, through which multiple subcontractors compete for business. The prime vendors acquire products at wholesale prices, 'so when the prices go down, we benefit,' he said.Missouri hasn't attempted to capture the benefits of doing its own shipping, he said; the state receives PCs on its freight docks. But it does cut it costs by installing its own Microsoft Corp. and Lotus Development Corp. software on PCs. 'We qualify for Microsoft volume discounts and Lotus volume discounts,' Wethington said.Missouri now is looking to reduce its equipment costs with multistate buying through the Western States Contracting Alliance, he said.Terry Davenport, information system procurement specialist for the New Mexico State Purchasing Division, spearheads the alliance. Fifteen state purchasing directors formed the alliance in 1993, and since September last year it has provided computers, peripherals, software and related services under volume-discounted contracts.The core members are Alaska, Arizona, California, Colorado, Hawaii, Idaho, Minnesota, Montana, Nevada, New Mexico, Oregon, South Dakota, Utah, Washington and Wyoming. Agencies in 18 other states have bought products and services through the master contracts, according to the alliance's site, at .States bought about $225 million worth of products and services through alliance contracts in the program's first year, which ended Oct. 1.Davenport said the alliance contracts benefit states in three ways: initial volume purchase discounts, additional per-transaction volume discounts and cumulative volume discounts that kicked in as purchases snowballed.'We earned five cumulative permanent volume discounts,' Davenport said. 'As the volume continues to grow we negotiate more discounts.''The alliance program benefits the vendors, too, he said, because a company has to negotiate only one price rather than hundreds of contracts.The U.S. Conference of Mayors, the National Association of Counties and the National Institute for Governmental Purchasing, acting through the U.S. Communities General Purchasing Alliance, launched a similar joint buying program in late August.Through this alliance, cities and counties have access to discounted products through contracts negotiated by Fairfax County, Va. The sponsor organizations expect the alliance by next August to funnel as much as $100 million in sales through the discounted contracts. Information about the program is posted at .To short-circuit the state procurement process, some states'such as Virginia []'are forging relationships with systems integrators. The hope is that the integrators will get better prices and be able to buy products more efficiently than the states can.'An Electronic Data Systems Corp. or Computer Sciences Corp. or Science Applications International Corp. [of San Diego] can get better prices when buying products than the government can directly,' GartnerGroup's Scardino said.