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To Get State IT Right, Terms and Conditions Are in Need of a Reboot

Today the IT Alliance for Public Sector (ITAPS), a division of ITI, presented its State IT Terms and Conditions Best Practices before a hearing of the Idaho State Procurement Laws Committee. I know procurement contract terms and conditions may not grab headlines, but I will tell lawmakers that if states can bring them up to date, taxpayers will be the ultimate winner through increased competition to provide the most innovative IT solutions at the best value.

From K-12 education to healthcare to secure voting systems, we rely on our state governments to procure innovative information technology (IT) products and solutions offered by companies to address our most pressing needs as constituents. Too often, though, states employ procurement practices that threaten to slow the acquisition of technology solutions that provide these enhanced constituent services because they disproportionally shift risk onto the vendor.

Slower acquisition of technology can result in delayed delivery of these critical services that constituents rely on regularly, such electronic benefit transfers for food assistance programs, or being able to skip the never-ending line at a local DMV by using online services to renew a vehicle registration. An outdated approach to IT acquisition can also deter the most innovative companies from bidding on the project at all, leaving a state with limited competition and an increased probability that the solutions being offered may not reflect the best value option for its taxpayers.

Instead, ITAPS encourages states to align IT contract terms and conditions as closely as possible to commercial contracting practices. In our experience, this leads to more robust competition among capable IT providers and enables states to fully realize the benefits of innovative IT products.

To narrow the difference between commercial contracting practices and a state’s required terms and conditions—and deliver the best value for taxpayers--ITAPS recommends states focus on building a procurement process that embodies the following principles:

  • Open, fair, competitive bidding processes: An open bidding process focused on obtaining the highest quality products and solutions will generate robust competition among the most capable IT providers and ultimately lead to the best value for the taxpayer.
  • Proportionately allocate risk: Inflexible terms and conditions that disproportionately shift risk onto the vendor hinder competition among top technology providers and ultimately lead to higher costs for the state and its taxpayers.
  • Flexibility and efficiency: To keep pace with technology and acquire innovative solutions to pressing constituent problems, a state’s IT terms and conditions must streamline the procurement of IT goods and services and accommodate new technologies such as cloud services.

Our specific recommendations offer a menu of commercial best practices aligned to state IT terms and conditions, including minimizing the use of liability carve-outs, protecting commercial providers’ intellectual property (IP) and reserving ownership rights for the state for deliverables created specifically for the solution.

By narrowing the difference between commercial contracting practices and a state’s required terms and conditions, states will not only improve competition among vendors, but also build a procurement process which operates more efficiently with fewer issues to negotiate.