Senate committee passes amended purchasing rule

photo of sarah hilderbrand and valerie bollinger
Sarah Hilderbrand, left, and Valerie Bollinger, of Idaho’s purchasing department, are working to improve IT procurement. Photo by Sharon Fisher.

A rule that could give the Idaho state purchasing department more latitude to negotiate bids with vendors, particularly in computer services, has passed a Senate committee after having one component removed due to complaints from vendors.

Rule 38-0501-1801 passed Senate State Affairs on Jan. 25, after losing in House State Affairs on Jan. 7. Because it is a rule, as opposed to a bill, it needs to pass only one body to take effect.

“There are a number of good provisions that I hope will ultimately move forward,” said administrator Sarah Hilderbrand.

In addition to housekeeping items, the rule added an “invitation to negotiate” contract, which would be more solution-driven and iterative, and allow the state to negotiate with multiple bidders during the process. The department will create a working group with representatives from state agencies and the vendor community to define the process, though no more rules are likely, Hilderbrand told the House committee.

The House State Affairs committee rejected the rule after the Information Technology Alliance for the Public Sector (ITAPS) sent a letter criticizing one provision of the rule, section 114, which said that the state would not comply with so-called “clickwrap” agreements. Clickwrap agreements are invoked through “I agree” click boxes and comparable mechanisms by users. The federal government imposed a similar rule against clickwrap agreements in 2013. The purchasing department wants to forbid such agreements because Idaho code requires contracts to be in writing and signed by both parties, Hilderbrand explained to the committee.

The House State Affairs committee also heard testimony from Kate Haas, a partner of Boise-based lobbying firm Kestrel West, which represents some ITAPS members. ITAPS objected to the rule because the state has not yet come up with a cloud services purchasing agreement, which ITAPS thought should happen first, she said. Representatives from ITAPS were not available by press time.

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Brent Crane

The committee could have chosen to reject just that single section, but Rep. Brent Crane, R-Nampa, moved to reject the entire rule.

“While we anticipated, based on testimony related only to section 114, that the committee would move the amendments forward, perhaps excluding that section, Rep. Crane made a motion to reject the entire docket, which passed,” said Hilderbrand, who serves on the board of directors for the National Organization of State Procurement Officials.

Consequently, when the rule was heard by the Senate State Affairs, the department decided to pull that section and work on it some more, Keith Reynolds, deputy director of the department of administration, told the committee. The committee then passed the rule.

Committee members from both bodies also criticized the purchasing department for not having gone to more effort to get comments from vendors, particularly major ones like Google and Microsoft. In the past few years, the Legislature has said that agencies should work more closely with industry on creating rules, a process called negotiated rulemaking.

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Mary Souza

In particular, Sen. Mary Souza, R-Coeur d’Alene, said the purchasing department should have sent postcards to all of its vendors. That would have amounted to thousands of postcards, so electronic notifications were more efficient, Hilderbrand responded to the committee.

“We published notices of all four of our scheduled negotiated rulemaking hearings on our website (all summer long), discussed the proposed rules with various vendors at other meetings we had with individual vendors on other topics, alerted vendors to the proposed rules at our annual Vendor Outreach Day in November, and certainly would have arranged for special meetings with any vendors (or any other interested party) that contacted us,” Hilderbrand said in an email. “The Rules were also published in the Bulletin (online on the State’s Rules page) beginning in June, for anyone to review and provide comments to me, as the listed contact.”

Hilderbrand also expressed willingness to the committee to meet with anyone. “My door is always open,” she told Senate State Affairs. “In fact, I don’t have a door.”

Idaho to update IT procurement processes

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Jeff Weak, in his office next to the governor, is working with the purchasing office to improve IT procurement. Photo by Sharon Fisher.

In response to issues with computer services contracts, Gov. Brad Little is working with Jeff Weak, administrator of information technology services, and the purchasing department to improve procurement.

As part of this, Little named Bryan Mooney — formerly vice president of operations for MWI Animal Health, a Boise-based supplier of animal health products for veterinarians — to head the Department of Administration, which includes purchasing. The previous director was former legislator Bob Geddes, who has retired.

Most recently, citizens have complained about outages at the Department of Motor Vehicles, but past years also saw contract issues with Molina Medicaid Solutions and the Idaho Education Network, intended to provide broadband internet to schools.

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Monte Brookshier

Vendors aren’t always happy either, with some reporting that Idaho is more difficult and less transparent to do business with than other states.

“Other states and federal agencies provide a formal debrief with every procurement that allows industry bidders to gain feedback on shortfalls of their proposals,” said Monte Brookshier, CEO of CRI Advantage Inc., headquartered in Boise, which has been responsible for 100 to 200 projects with Idaho, as well as with Nevada, California, and federal agencies. “Over time, this allows industry to be more competitive.”

With Idaho, vendors need to submit a Freedom of Information Act request.

Little said on Jan. 7 during his first State of the State message that he was frustrated with the DMV issues and that he had called for Mooney to review state purchasing and contract administration processes.

Part of the new process involves aggregating purchases statewide to save money, said Weak, whom Little retained from predecessor Gov. C.L. “Butch” Otter’s administration.

“Instead of doing siloed purchases 60 to 70 different ways, we will harness the state’s purchasing power and have statewide solutions for specific products,” such as Microsoft software, Weak said. “Software licenses are like buying bulk at Costco – the more you buy, the more the per unit cost goes down.”

In addition, they want to make it easier for agencies to use the cloud, or third-party storage and IT services — typically cheaper than an organization managing its own. “We are anticipating having a cloud solution for agencies this coming year,” he said.

photo of sarah hilderbrand and valerie bollinger
Sarah Hilderbrand, left, and Valerie Bollinger. Photo by Sharon Fisher.

The purchasing department is also working to make the bid process more collaborative, while at the same time ensuring vendors have a level playing field, said administrator Sarah Hilderbrand, who serves on the board of directors for the National Organization of State Procurement Officials.

“Not being able to openly negotiate terms and conditions after an [request for proposal] process is surprising to some vendors,” said Valerie Bollinger, state purchasing manager. “In the private sector, it’s very normal. In some states, they’re able to negotiate more.”

Vendors also have misperceptions about Idaho’s terms and conditions. “For example, there is the perception that Idaho does not allow vendors to limit liability,” she said. “We actually do that on a regular basis.”

Idaho could do more to engage vendors before procurements, Brookshier said. “The earlier industry can be aware of the requirement and provide feedback, generally the higher quality the proposal responses would be.”

The purchasing office is doing more Requests for Information, Hilderbrand said, which Brookshier acknowledged. In addition, the department is proposing a rule this legislative session for a new type of contract called “invitation to negotiate,” which would be more solution-driven and iterative, and would allow the state to negotiate with multiple bidders during the process. “It’s going to save money because we can fine-tune solutions during the process,” she said.

For its part, the purchasing office wishes vendors would ask more questions in advance and would like to see more agencies using independent validation for high-value contracts. This could add $300,000 to $400,000 to multimillion-dollar IT contracts but would help agencies better manage the development process. “That investment upfront is going to ensure the success of that contract,” Hilderbrand said.