Consortium buying: best practices for local government implementations.

• Author: Mercer, Monte

Consortium buying has been a hot topic among local governments of all sizes for more than a decade, but few have implemented successfully the concept beyond group purchasing initiatives. Yet, when faced with limited budgets and a costly upgrade for their existing business systems, three Texas cities--Arlington, Carrolton and Grand Prairie--decided to address their common technology needs with a consortium strategy By agreeing to buy and share the same business software, the cities determined they could purchase and operate technology collectively that they could not afford on their own.

The three cities approached the North Central Texas Council of Governments (NCTCOG) to buy and host the software on their behalf to help minimize the costs and risks associated with a major software implementation. By adopting this shared services model, the cities have saved taxpayer dollars by procuring and operating their business software, hardware, and professional services jointly

In 2003, the cities of Arlington, Carrolton, and Grand Prairie independently operated aging business software to support their human resources, payroll, finance, and purchasing operations. The cities realized they needed to upgrade or replace this existing software because it offered limited functionality, lacked current features that could improve both operational and user experience, and had grown expensive to maintain and upgrade. In addition, all three cities lacked adequate back-up and disaster recovery capabilities for these core business systems. When the cities analyzed the upgrade costs it caused "sticker shock" and created an incentive to consider replacement as a viable option. Subsequently, the cities faced overall budget constraints, motivating them to reconsider all options for system replacement. As a result, the cities decided to collaborate in the replacement of their business software.

The cities turned to the NCTCOG for assistance because the organization already provides shared services to member cities in the region for a variety of governmental services, including technology support. The NCTCOG is a voluntary association of, by, and for local governments established to assist members in planning for common needs, cooperating for mutual benefit, and coordinating for sound regional development in the Dallas/Ft.Worth area. The cities approached the NCTCOG with the concept of both coordinating the procurement of the new software on their behalf and operating a shared services center for them post-implementation. The NCTCOG service center would provide the cities with a hosting service that included redundant, high-availability systems, network and systems administration, and support for each city's information technology department.

In assessing their technology replacement needs, the cities first considered carefully the reasons for a consortium approach, including:

* The complex nature of the procurement process

* The difficulty of the implementation

* The costs of ongoing operational support

The cities viewed the procurement of new business software as a complex, specialized, and expensive undertaking. However, due to the underlying commonality of the functional and technical requirements among the cities, they determined that a collaborative procurement would optimize their collective investments in the procurement process for the best outcome.

As a result, the cities and the NCTCOG hired a consultant to ensure identification of all key functional and technical requirements and drive effective management of the procurement. The cities followed a standard RFP process, resulting in 20 vendor proposals. This approach ensured effective due diligence and that the cities selected the best system in terms of solution fit and cost.

The cities determined that by combining forces they could take advantage of economies of scale in the implementation phase as well. By having one project/implementation team work with all three cities at once, they avoided the costs of three separate implementations. At the same time, the cities also leveraged their collective knowledge of city operations to configure and implement a better system than each could do individually. Finally, sharing operational costs for infrastructure, backup and disaster recovery, help desk, and systems administration on a common software and hardware platform after the implementation would be cheaper than maintaining them separately at each city. The cities also hoped that this common platform could serve as a foundation for other cities to join the consortium in the future at a very cost-effective price. The benefits of joining forces to procure, implement, and operate the new hardware and business software were such that all three cities and the NCTCOG concluded that a consortium model offered the best solution--both individually and as a...