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The Decision Model The following considerations set the stage for applying the Decision Model, which is based on the characteristics of the project and capability level of the agency. More precise terminol- ogy will be defined later. The model has been developed with the following considerations in mind: The characteristics of the ITS project you are implementing has a major influence on the con- tracting approach. Your agency's experience/environment has a major influence on the contracting approach. The systems engineering process has major influence on contracting approach. Defining the project, agency experience with ITS, and systems engineering process will allow selection of the appropriate contracting approach. There are four basic contracting alternatives (procurement packages 1 through 4 identified in Table 1). The other contracting alternatives are adjustments to these packages. Contract terms and conditions are an important element of the contracting process. They are defined once a package has been selected. The Decision Model used in this guide represents the results of multiple reviews, as well as the testing of the process with five real-world systems. The four dimensions of procurement shown in Figure 4, along with the terms and conditions, provide a structured representation of the contracting process (procurement). The purpose of the procedure described in this section is to select the combination of procurement characteris- tics (one from each of the four dimensions) that are most appropriate for the project's charac- teristics and the agency's capabilities. Only a few combinations of procurement characteristics are practical. Contracting packages are unique combinations of procurement characteristics, selected from each of the dimensions of Figure 4. Contract terms and conditions are not included in the procurement packages but are selected as a separate step. These packages are based on the work distribution dimension of Fig- ure 4, which is the fundamental variable that drives the entire process. The characteristics contained in each of the seven procurement packages are shown in Table 1. The objective of the selection process is to identify the most appropriate procurement pack- age for a given project. The package numbers shown in the table are referenced in the initial steps of the decision process. Generally, packages 1 through 4 are used for traditional system imple- mentation, although they can obviously be used for other purposes. Package 5 is either a sup- porting function for the system implementation or may be used for numerous other consultant activities. Packages 6 and 7 are used for the provision of activities (i.e., an internal agency process such as inspection, maintenance, operations, mowing, or signal timing) and functions (i.e., an entire agency service such as traffic management, traveler information or toll collection) in a manner that reduces the agency's staffing requirements. 11

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12 Guide to Contracting ITS Projects The objective of the selection process is to choose the most appropriate procurement package. This process is presented as a sequence of steps that must be followed to arrive at a conclusion, which in turn leads to the identification of the terms and conditions to be used with the selected package. Procurement Work Method of Contract Contract Distribution Award Form Type Low-Bid Contractor Low Bid Phased Fixed Price Systems Manager Negotiated Task Order Cost Reimbursable Systems Integrator Sole Source Purchase Order Incentive DB (OM) Best Value Time and Materials Commodity (COTS) Consultant Services Services Terms and Conditions (payment, cancellation, disputes, etc.) Figure 4. Four dimensions of procurement.

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The Decision Model 13 Table 1. Procurement packages. Work Package Distribution Method of Contract Contract Type Comments No. (Package Award Form Name) 1 Commodity Low-bid Single phase Fixed Price Used for COTS Supplier selection of or purchase procurements prequalified order packages 2 Low-Bid Low-bid Phased / task Fixed price for Consultant Contractor with selection for order contractor; performs 100% of Design contractor incentives design. May Consultant optional provide additional services during implementation. 3 Systems Quality-based Phased Fixed price, Field equipment Manager selection cost procured by (negotiated reimbursable, agency using procurement) or time & low-bid process. materials; incentives optional 4 Design-Build Best-value Phased Usually fixed Consultant Contractor with selection (based price, cost provides 30% Design on consideration reimbursable, design. Consultant of price and or time & quality) materials; incentives optional 5 Consultant Negotiated Phased / Task Fixed price, Used for system Order cost design and many reimbursable, other consultant or time & services. materials incentives optional 6 Outsourcing Low-bid Usually single Fixed price or Typical activities Agency Activity selection may be phase time & include based on rates materials; maintenance, incentives operations, signal optional timing, etc. 7 Outsourcing Best-value or Single phase Fixed price, Typical functions Agency low-bid selection cost include traveler Function reimbursable, information and or time & toll collection. material; May be public- incentives private optional partnership.