Determine Use of Account Manager and Vendor Procurement Strategy (35)

Description:

During the setup of a RUC program, the state formally determines whether and how account management vendors will be used and how the state will procure them for that use. The state may elect for a fully state-run RUC program, opt to fully contract services out, or settle on a hybrid approach.

In a fully state-run program, the state formally decides what mileage reporting methods the account manager(s) will support, and how many there will be. In a fully contracted program, the state determines whether it will use in-house procurement using traditional requests for proposals (RFPs); direct payment to vendor(s); or a market-type competition among multiple vendors, such as a managed market (subsidized competition among vendors) or an open market (open competition, but vendors have the right to decline enrollees if they do not meet certain qualifications).

After the market structure has been decided, the state determines its precise approach to vendor procurement. The strategy must comply with the new RUC-enabling legislation and all relevant existing laws. The strategy includes the plans to advertise the RFP; the approximate vendor budget; the expected duration of the contract, including any possible renewals; the terms and conditions of the contract; and the schedule of procurement.

Details:

Manual methods, such as safety inspection–based reporting or odometer image capture, lend themselves to in-house procurement. More sophisticated technology methods, like the use of On-Board Diagnostic II plug-in devices, have proven to be better supported by private vendors. For smaller systems with fewer than 100,000 vehicles, having a single vendor may make sense. Larger systems involving hundreds of thousands of vehicles may allow competition among vendors. Competition should encourage better service and lower costs, and prevent any vendor from being locked in. A state procurement officer should assist the project team in setting up the procurement. Performing a standard procurement of one vendor may involve a relatively standard state procurement process. Performing a market procurement will require much more work, including setting up a certification methodology (see Initiate Certification Structure building block).

Primary Uses:

Plan to use account managers in the state’s RUC market and prepare a strategy for system procurement.

Best Practices/Lessons Learned:

  • The use of account managers can evolve as the program expands. The program can use traditional procurement at the start and evolve to market procurement when the program exceeds some number of participants.
  • Holding a request for information (RFI) on the planned procurement document and on the system specification documents is a good way to get industry feedback and buy-in before releasing the official procurement. However, time must be allowed in the schedule for such an RFI—at least 6 weeks from issuing the RFI to issuing the follow-on RFP.
  • Ensuring the RFP is well-advertised to the market and announced at least a few weeks in advance of issuance encourages more and better bids.
  • Ensuring that an adequate budget is available that establishes adequate profits for account management vendors (say, at least 5% of their investments) in the long run. However, the available budget need not be advertised to vendors.
  • Holding a demonstration, or demo, as part of the procurement for all or select vendors can provide the evaluation team with important additional context for making procurement decisions.
  • Including a realistic timeline for implementation, depending on the amount of custom development necessary, can help provide enough time for the vendor’s readiness. Six months is generally the fastest feasible timeline from contract signing to going live with an experienced vendor. Nine months or more may be needed if much custom development is required or if the vendor has limited RUC experience.
  • Using a market-based procurement may take more effort to set up, but it may be beneficial in the long run. The heavy-duty vehicle RUC market in New Zealand is a good example of an open market in this space.
  • Ensuring contract terms are relatively short in sole-source procurements helps the state to provide data to support requirements.

State Government Context and Assumptions:

This task is completed by the implementing RUC agency, in close coordination with a state procurement officer and with the fiscal impacts analysis (see Fiscal Impact Analysis building block).