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Public Procurement Interaction Model for IT Services

Mémoire

Pascal Beaudoin

Maîtrise en sciences de l'administration - avec mémoire

Maître ès sciences (M. Sc.)

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Public Procurement Interaction Model for IT Services

Mémoire

Pascal Beaudoin

Sous la direction de:

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Résumé

Cette recherche est une étude de cas qui examine la relation et les attributs entre les différentes entités impliquées dans le processus d’appel d’offre publique au gouvernement du Québec. Il se concentre spécifiquement sur les services professionnels informatiques qui constituent une catégorie de dépenses élevées dans les marchés publics. En utilisant le résultat de plusieurs entretiens avec des société informatique, notre recherche nous a permis de proposer un modèle d'interaction entre les différentes entités de l'écosystème d’appel d'offres publique qui peut être utilisé pour avoir une vue holistique de l'environnement et également comme un tremplin pour des études plus approfondie de la discipline.

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Abstract

This paper is a case study that examines the relationship and attributes between the different entities involved in Québec’s Government public procurement process. It is focused specifically on the IT professional services which is a high spending category in public procurement. Using result from multiple interview with IT firm, our finding allowed us to propose an entity interaction model for the call for tender ecosystem that can be used to have an holistic view of the environment and also as a stepping stone for further study of the field.

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Table of contents

Résumé ... ii

Abstract ... iii

Table of contents ... iv

List of table and figure ... v

List of abbreviations and acronyms ... vi

Acknowledgments ... viii

Foreword ... ix

Introduction ... 1

Chapter 1 Public Procurement Interaction Model for IT Services ... 3

Résumé ... 3

Abstract ... 3

Introduction ... 3

IS Government Procurement ... 5

A- Public procurement definition ... 5

B- IS services procurement ... 8

Case Study ... 10

A- Case Study Context ... 10

B- Government of Quebec Public Procurement Process ... 11

Research design ... 12 A- Methodology ... 12 B- Data Collection ... 13 C- Data Saturation ... 14 D- Data Analysis ... 15 Research findings ... 16

A- The public procurement process ... 16

B- Impacts of the procurement process ... 20

C- Contributions of the study ... 21

Conclusion ... 22

Conclusion ... 23

Bibliography ... 24

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List of table and figure

Table 1 - Monetary value of awarded IT contract by the federal government of Canada for

2017-2018 fiscal year ... 4

Table 2 - Public procurement definitions ... 6

Table 3 - Attribut of interviewee ... 14

Table 4 - Frequency of the code per interview ... 15

Table 5 - Number of codes per categories ... 16

Figure 1 - Entity interaction model... 17

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List of abbreviations and acronyms

GA Governmental Agencies GDP Gross domestic product

GSIN Goods and Services Identification Number IT Information Technology

OECD Organisation for Economic Co-operation and Development RFP Request for Proposals

RPGTI Regroupement des partenaires du gouvernement en technologie de l'information

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À ma femme Sabine et mon fils, Zackary pour leur patience et leur soutien

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Acknowledgments

First, I would like to thank my research director Sehl Mellouli for all the guidance and insight provided at every phase of this master thesis and that were instrumental in my success. Thank you for your time, your patience, and your encouragement.

Thank you to all my family, especially to my wife and my son for their unconditional support despite having had to endure my many hours of work in the evening and weekends. Also, my parents and sisters who always believed in me.

Thank you to my friends, Pier-Luc, Louis, André and Kate. Your encouragements helped my push forward to complete this project.

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Foreword

The article included has been submitted for publication to the Communications of the Association for Information Systems (CAIS) on May 12th 2020. This paper is included in Chapter 1.

I am the main author and was responsible for the research and writing of the article. Sehl Mellouli is the coauthor of the article.

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Introduction

In order to fulfil their missions, governments and state-owned enterprises (referred to as Governmental Agencies (GA)) purchase goods and services from private businesses. This process is called public procurement. Governments spend huge amount of money via public procurement processes that make them a high-risk area for corruption (Detkova, Podkolzina & Tkachenko, (2018); Bandiera, Prat & Valletti, (2009)). To reduce those risks, governments regulate procurement processes by implementing a public procurement process.

In a public procurement process, there are GAs on one side and private companies on the other side. The Government defines the rules that will govern the process. But with the high economic impact of public procurements in the economy, it becomes important to see how the private sector perceives it. In fact, if the process is not adequate or not well-defined, then private companies may be less encouraged to take part; this situation may lead to less competitiveness and consequently may raise the prices and ultimately have a negative impact on the amount of money spent by GAs in these processes and on the quality of received services due to a lack of competition. To this end, knowing what the perceptions of the bidders in a public procurement process is of high interest.

This research is also aligned with what the Moe (2104) identified as a potential research to fill the gap in public procurement of information systems. There is a need of “Opening the black box” of what goes on at the vendor side” at the tendering phase of the process.

The main objective of this master thesis is to propose a high-level interaction model of entities and relations of the internal environment of the public procurement system for IT purchase as defined by Thai (2001). A high-level model will provide an overview of how entities, the GAs and the IT firms, interact together. By encompassing the whole environment in a single view and having key attributes defined, the procurement process can be more easily understood.

In order to achieve this goal, we conducted a case study related to the IT services public procurement process in the province of Quebec in Canada. We conducted a set of interviews

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with IT firms who are bidding for the Quebec government contracts. The aim of the interviews was to understand how a major stakeholder in the public procurement process, the IT firms, perceive the government’s process global environment.

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Chapter 1 Public Procurement Interaction Model for IT

Services

Résumé

Les Systèmes d'Information (SI) représentent l'une des clés de voûte du développement des organisations publiques. À cette fin, les organismes publics demandent, par le biais des processus d’appel d’offres publics, aux entreprises SI de contribuer au développement des services informatiques. Ces processus sont complexes et doivent être analysés. L’analyse de ces processus peut être effectuée soit du point de vue gouvernemental, soit du point de vue des firmes de SI. Cette étude apporte le point de vue des firmes de SI. Les résultats sont basés sur un ensemble d'entretiens qualitatifs menés auprès de huit sociétés SI privées. Les résultats montrent que, contrairement aux agences gouvernementales qui perçoivent ce processus comme systématique, les entreprises privées du SI le perçoivent davantage comme un processus holistique. Cette perception peut influer sur la manière dont les gouvernements construisent leurs processus d'approvisionnement pour les services SI.

Abstract

Information Systems (IS) represent one of the keystones for the development of public organizations. To this end, public organizations ask, through public procurements processes, IS companies to contribute to the development of IT services. These processes are complex and need to be analyzed. The analysis of these processes can be made from either a governmental perspective or IS companies’ perspective. This study brings the IS companies’ perspective. The results are based on a set of qualitative interviews conducted with eight private IS companies. The results show that contrary to government agencies who perceive this process as systematic, IS private companies perceive it more as a holistic process. This perception may impact the ways governments build their procurement processes for IS services.

Introduction

In order to fulfil their missions, governments and state-owned enterprise (referred to as Governmental Agencies (GAs)) purchase goods and services from private businesses. This

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process is called public procurement. Public procurement is used for the acquisition of any type of goods by GAs (Thai, 2001). It is a process started by GAs that send a call for tenders who answer to this call by sending proposals. GAs study the proposals and choose the winner(s) based on well-established criteria. The public procurement has an important impact on the economic activity of a country. For example, in Canada, in 2015, 32.7% of all federal government expenditures was done by public procurement (OECD, 2017). In the global Canadian economy, the size of public procurement represents 13.4% of GDP, slightly higher than the 11.9% average of the OECD countries (OECD, 2017). Needless to say, that the sheer size of public procurement makes it a major economic activity.

The Information Technology (IT) sector is part of the goods and services to which governments perform a procurement process. In the case of the Government of Canada, IT professional services contracts awarded by public procurements were of 723M$ in 2017-2018 as depicted in Table 1. This is not all of the IT expenditure, it is only the IT professional services contracts excluding hardware and software licenses awarded by public procurements. Public procurement for IT professional services represents 2.49% of all procurement contracts in Canada and for 6.26% of all contracts monetary value which makes it the highest spending category.

Table 1 - Monetary value of awarded IT contract by the federal government of Canada for 2017-2018 fiscal year

However, in a procurement process, there are GAs on one side and private companies on the other side. In this process, the Government defines the rules that will govern such a process.

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But with the high impact of procurements in the economy, it becomes important to see how the private sector perceives the process. Understanding the process in IS industry is one of the key research areas that need more investigation as depicted in the literature (Moe, 2014). In addition, if the process is not adequate or not well-defined, then private companies may be less encouraged to take part in such process. This situation may lead to less competitiveness and consequently may raise the prices and reduce the quality of delivered services due to a lack of competition. To this end, it becomes important, as a first step, to understand how private bidders perceive the procurement process. Knowing this perception, governments can identify the steps that need to be improved in the process itself in order to make it more attractive for private bidders. Hence, the research question of this paper is: How do IT professional services firms describe the Government’s procurement process? Does the process impact their decisions to apply for Government contracts?

The main objective of this paper is to propose a high-level interaction model of the public procurement system for IT professional services purchase as defined by Thai, K. V. (2001). A high-level model will provide an overview of how the entities interact together. By encompassing the whole environment in a single view, it can be more easily understood. In order to achieve this goal, we conducted a set of interviews with IT firms working for the Quebec government to understand how they describe the government call for tenders’ global environment.

This paper is structured as follows. In section 2, we present a literature review on public procurement in general. Section 3 describes our case study. Then, we present in Section 4 the research design and implementation. Section 5 presents our findings. Finally, Section 6 concludes the paper.

IS Government Procurement

A- Public procurement definition

There is no universally accepted definition of public procurement. Is public procurement a profession, a field of expertise, a process or is it limited to the action of government buying goods and services? The confusion of what really is a public procurement has numerous implications such as “hampered attempts to define the field and unify its focus” as well as “uncertainty about the proper role of public procurement practitioner” (Prier & McCue

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2009). We present hereafter some definitions found in the scientific literature. We voluntary limited ourselves to public procurement definitions and did not include public purchasing which is an activity within public purchasing (Murray, 2008) or public commissioning which encompasses procurement (Murray, 2008).

Authors Proposed definition of public procurement Hommen, L., &

Rolfstam, M. (2009)

“Acquisition (through buying or purchasing) of goods and services by government or public sector organizations.”

Moe (2014) “Public procurement includes formulating business requirements, developing requirements specification, and purchasing, which possibly includes tendering and contract signing, receiving and inspecting the product, and dealing with organizational issues such as stakeholder involvement.”

Thai (2001) “Buying, purchasing, renting, leasing or otherwise acquiring any supplies, services or construction.”

Prier and McCue (2009)

“Public procurement is the designated legal authority to advise, plan, obtain, deliver, and evaluate a government’s expenditures on goods and services that are used to fulfill stated objectives, obligations, and activities in pursuant of desired policy outcomes.”

Table 2 - Public procurement definitions

Hommen, L., & Rolfstam, M. (2009) and Thai (2001) propose basics and very similar definitions. Thai (2001) being a little bit more precise including in the definition an enumeration of methods that can be used to proceed to the acquisition of goods or services. In his definition, Moe (2014) included more activities that happen before and after the purchasing process, activities such as defining the business requirements and developing requirements. The definition also includes stakeholders management which is performed throughout the procurement process

Prier and McCue (2009) brings a broader definition. As Moe (2014), they include activities prior to the purchasing process. But they go further than the procurement process by

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including that the acquired goods and services are “used to fulfill stated objectives, obligations, and activities in pursuant of desired policy outcomes” (Prier and McCue, 2009). For this paper we choose to use Moe’s definition of public procurement process. First because it included more activities than merely the purchasing part that we think are essential for the right execution of a procurement process and second because working from the point of view of the IT firm, we found very interesting to have stakeholder management included, the bidder being an important stakeholder in the process.

Besides the scientific definitions of public procurement, there are also several other practical definitions of public procurement that we present hereafter. We observe that these practical definitions are aligned with Moe’s definition that we chose in this paper.

In Canada, the federal government through the Public Works and Government Services Canada Supply Manual defines public procurement as “The process of obtaining goods and services that includes the determination of requirements and acquisition from a supply system or by purchase from the trade. In the United States of America, the FAR (Federal Acquisition Regulation) defines public procurement as: “the acquiring by contract with appropriated funds of supplies or services (including construction) by and for the use of the Federal Government through purchase or lease, whether the supplies or services are already in existence or must be created, developed, demonstrated, and evaluated. Acquisition begins at the point when agency needs are established and includes the description of requirements to satisfy agency needs, solicitation and selection of sources, award of contracts, contract financing, contract performance, contract administration, and those technical and management functions directly related to the process of fulfilling agency needs by contract.” Even in a same country, definitions of public procurement will differ from one government level to another. In the Quebec province in Canada, public procurement is defined as:” To fulfil their respective mandates, public and municipal bodies and government corporations procure goods from businesses or call on them to perform services or construction work”. In the province of Ontario in Canada, public procurement is defined as:” Procurement means the acquisition by any means, including by purchase, rental, lease or conditional sale, of goods, services or construction”. Finally, in the province of British Columbia in Canada,

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public procurement is defined as: ”All phases of the process to engage external entities in the exchange of funding for goods and services through a contractual arrangement”.

In addition to this diversity in public procurement definitions from government bodies, there is also a disparity in the definitions that we can find in the scientific literature. For example, we found the definition of (Hommen & Rolfstam, 2009) where public procurement refers to the acquisition (through buying or purchasing) of goods and services by government or public sector organizations. In (Prier & McCue, 2009), public procurement is the designated legal authority to advise, plan, obtain, deliver, and evaluate a government’s expenditures on goods and services that are used to fulfill stated objectives, obligations, and activities in pursuant of desired policy outcomes.

B- IS services procurement

This literature review provides an overview on research about public procurement for IT services. We mention that this review is not intended to be exhaustive.

For an overall overview of the process, a research study conducted in Norway demonstrated that the public procurement for information systems brings several challenges divided into 13 categories (Moe et al., 2011). One of these categories is related to the procurement process itself. The main challenge related to the process is the lack of coordination and standardization of the process. The study focused mainly on the challenges related to IS procurement, but it has not focused on how the IT professional services firms understand the process. We assume that it is important to see how IT firms understand the process so that governments can address for example the issues related to coordination and standardization as raised in the study.

In another study, authors looked at the procurement process from governments’ perspectives (Moe et al., 2006). It deals with the problems and tensions that government entities may face when trying to solve the trade-off between the acquisition of the best information system and the adherence to public procurement regulations. However, these regulations apply for both government agencies and IT professional services firms. So, this leads us to question how

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these firms understand the process since they are the second main stakeholder in the procurement process.

A literature review on public procurement of information systems has been conducted by Moe. (2014). This literature review identified several research gaps that need to be investigated in these kinds of procurement. One of these gaps is the process of public procurement itself. So, this research is aligned with what the literature identified as a potential research. One of the first studies in this context looked at the process from municipalities point of view (Moe et al., 2014). However, the process has two stakeholders: governments from one side and IT services providers from the other side. This research brings the point of view of the providers.

To show also the complexity of the process, several studies looked for new adjudication criteria in order to ensure that the best vendors are selected. The adjudication is the phase in the procurement process where the GAs chooses the winning bids of the call for tenders. Several studies showed that governments are more and more looking for other criteria than price for adjudication phase of the processes. In Bernal et al. (2019), a study that has been conducted in Spain, shows that government entities asked to include social considerations along with price in adjudication phase of the processes. These social considerations may include sustainable development, degree of innovation, or social impact of a project. Other studies also proposed other criteria to deal with social sustainability (Montalbán-Domingo et al., 2018) or green procurement (Neto, B. & Gama Caldas, 2017) (Bratt et al., 2013). In other works, the reputation of a bidder can also be considered as one of these new criteria (Sporrong., 2011). In fact, Spagnolo, G. (2012) found that “in the absence of a reputation mechanism, quality provided was low [..], prices were higher[..]. When a reputation mechanism is introduced [..], provided quality was high, prices were not much higher than in the no reputation treatment”. In this context, Klabi et al. (2018) proposed a model so that the bidders with the best reputation will win the procurement.

As depicted from this literature review, there are many research studies that have been conducted on public procurement and some of them are related to IS services. We observe that these studies focus mainly on the procurement process itself and try to find solutions to make the process more efficient. However, the procurement processes are still proven to be

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ineffective (Outi Keränen, 2017) and complex. Even if government agencies may state that their requirements are well defined, it doesn’t mean that the final result will be a success (Alanne et al., 2015). Consequently, studies are still required to better understand the procurement process. The main focus of this paper is on the IT professional services procurement process.

Case Study

This research is a case study research. It is based on the context of IT professional services procurement in Quebec Government. The case study approach is well recommended to understand and provide an in-depth exploration of complex issues in their real-life settings (Crowe et al., 2011). As mentioned in Yin (2003), a case study approach can be considered when the study answers “how” and “why” questions. Our research answers the “how” question with the following research question:” How IT professional services firms describe the procurement process of the Government? Does the process impact their decisions to apply for Government contracts?”.

A- Case Study Context

On November 27th, 2015, the General Auditor of the Government of Quebec published a special audit on information technology contracts at the Government of Quebec in 2013. This audit evaluated that the cost for information resources to GAs was of 2.6 billion dollars annually (Auditor General of Québec, 2015). The main objective of this audit was to ensure that “the audited entities manage with a concern of integrity some of the main risks associated with each phase of the process to acquire information technology goods and professional services, while respecting the rules in place” (Auditor General of Québec, 2015). The audit examined 27 contracts in 8 different government entities. This audit found several deficiencies in these contracts and many of them were related to the public procurement process. These deficiencies added uncertainties on the integrity of the process and opened the way for corruption. They are in contrast with the core of the basic principles for good governance that are transparency, accountability and integrity (Costa & Tavares, 2013).

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Following the audit report, the Government of Quebec issued a decree modifying the Act respecting contracting by public bodies. This decree introduced a new adjudication method in the procurement process as well as a new way to evaluate the total cost of ownership. This change brings a new trend for institutions, private and public, to modernize their evaluation methods for a more successful call for tenders (Dimitri, 2013). The total cost of ownership “is defined as the overall cost related to the purchase of a product, from supplier selection to its use and maintenance” (Costantino et Al. 2012). This decree is supposed to increase Quebec government IT public procurement integrity, but may increase its overall complexity

B- Government of Quebec Public Procurement Process

Public procurement is an extremely complicated function of a government (Thai, 2001). There are multiple laws, regulations, decrees, policies and guidelines regulating public contracting. For example, in Quebec, the main law for Government contracting is the An Act respecting contracting by public bodies: “The purpose of this Act is to determine the conditions applicable regarding public contracts between a public body and a contractor who is a legal person established for a private interest, a general, limited or undeclared partnership or a natural person who operates a sole proprietorship.” An Act respecting contracting by public bodies (2006). This law gives the power to the Treasury Board to define a normative framework that the government and other public entities must follow. To this end, the Treasury Board has defined multiple contract types, methods of solicitation as well as methods of adjudication for IT services contract after a public procurement process.

In compliance with this law, the Government of Quebec has defined three contract types: Supply contract, service contract and construction work contract. In this paper, we will only focus on service contract type which includes information technology professional services contracts. This type of contracts excludes hardware or software license procurement that are regulated by the supply contract type.

There are two methods of solicitation. Over-the-counter and call for tenders. Public bodies choose the methods of solicitation to use depending on the amount of money to be awarded by the contract. The maximum amount for the over-the-counter method of solicitation

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depends on the contract type. For example, for a service contract type, the maximum amount for over-the-counter method of solicitation is 99 999$. At 100 000$, public bodies have to use the call for tenders method of solicitation. In the case of a call for tenders, there are four main adjudication methods for IT contracts: 1- Contract awarded at lowest price, 2- contract awarded following a quality evaluation, 3- contract awarded following a call for tenders consisting of 2 stages, and 4- contract awarded following an invitation to tenders involving a competitive dialogue. The last method was introduced by decree (295-2016) in 2016 and is only for IT contracts.

Research design

A- Methodology

This research was conducted using a case study methodology and grounded theory approach to data analysis. A case study can be defined as “an intensive study about a person, a group of people or a unit” (Gustafsson, 2017). In our research, the unit is the Quebec’s Government public procurement process. A case study also enables us to use data from multiple sources such as interviews, documentation, archival records, or observation (Marrelli, 2007).

As in a case study “the resulting findings can be difficult to validate and the scientific thoroughness can be difficult to prove” (Gustafsson, 2017), we choose to join grounded theory approach to data analysis to the case study methodology. Lehmann (2001) found that “Applying Grounded Theory to Case Study was very successful. It produced a prolific amount and yielded a great richness of information […] Efficiency and abundance combined to make this method an exceedingly fruitful one”. Another reason that we wanted to use grounded theory data analysis methodology is that “the purpose of analyzing cases in GTM is not to provide rich descriptions but rather to generate theory that can transcend the cases from which it was originated grounded.” (Fernandez, W. D., & Lehmann, H., 2011).

This illustrative case study of the Quebec’s Government public procurement process aims to give procurement professional a common language and view of the actors in play.

The research question is: How IT professional services firms describe the public procurement process of the Government? Does the process impact their decisions to apply for Government contracts? We did not make any proposition before conducting the research.

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To this end, we used an open questions questionnaire in a series of semi-structured interviews with consulting IT firms active in the Quebec City public procurement market at the provincial level. The questionnaire had 8 questions and 2 sub questions and was divided into three sections. The first section was about the Request For Proposals (RFP) environment and process as a whole with questions about what they think about the process and its outcomes The second section was about the methods of adjudication, more specifically about the contract awarded at lowest price method, including the use or not of the total cost of ownership (TCO). The third section was oriented on the criteria used in the evaluation of the bids and their view on the use of qualitative criteria. All questions were open-ended to favor full and objective answers.

B- Data Collection

We conducted a series of eight semi-structured face to face interviews with IT consulting firms that operate in Quebec City. Romney, Batchelder, and Weller (1986) calculated that a sample as small as four participants can be enough for theoretical saturation as long as the participants have a high level of knowledge of the field studied. In that regard, we are confident that the participants were extremely knowledgeable in government contracting since they were all professionals or managers in charge for their firm bidding processes. All these firms have extensive experience dealing with the Government of Quebec call for tenders. The recruitment process started first by sending an invitation to all members of the RPGTI – Grouping of Government Partners in Information Technology (Regroupement des partenaires du gouvernement en technologie de l’information) and other firms that are not members of this group but that won a bid between January 2017 and September 2017 with the government. We were able to obtain this information through the electronic procurement system of the Government website (https://www.seao.ca/). This website is an online application that provides access to government contracting opportunities. Any supplier can buy tender documents from this website. It also gives access to the opening and award results. We interviewed all those who responded positively to our request. The firms that responded were very wide-ranging in profile, from a small local company of 100 employees to big

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multinational with thousands of employees. The people who participated to the interviews were RFP experts that had years or decades of experience dealing with the government public procurement process. One was a high-level manager, two middle level managers and 5 professionals. Seven of them, middle managers and professionals were writers or reviewers of RFP.

Interview number SME or large enterprise Position of the interviewee

1 SME Middle manager

2 SME Professional

3 Large enterprise Professional

4 Large enterprise High level manager

5 SME Professional

6 SME Professional

7 SME Professional

8 Large enterprise Middle manager

Table 3 - Attribut of interviewee

The interviews were very varied in length, from 13 minutes to 46 minutes with an average of 28 minutes and giving a total of 223 minutes. They were all recorded and transcribed. The interviews were held between September 2016 and November 2016 in Quebec City. We combined the interviews with some secondary data from the RPGTI, government websites and the Auditor General of Québec special audit - Contracts in Information Technology in order to have a complete view of the environment in which IT firms operate.

C- Data Saturation

Theoretical sampling requires that data is analyzed between the gathering sessions until a theoretical saturation point is reached (Lewis-Beck, 2004). There is no practical guideline to estimate sample size for saturation for interviews in non-probabilistic sample size (Guest et al., 2006). Saturation is reached when no new concept emerges from latest interviews and links between concepts have been defined. Urquhart (2013) defines saturation as: “the point

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in coding when you find that no new codes occur in the data. There are mounting instances of the same codes, but no new ones”. While conducting our first interviews, patterns emerged through data analysis. In the last two interviews, all discovered concepts could be included in already existing concepts. So, we decided not to conduct more interviews as the saturation point has been reached.

D- Data Analysis

After the second interview, we started an iterative analysis process using a line by line coding approach. To do that, we read through the transcripts in order to find themes and concepts (Strauss & Corbin, 1998) related to the procurement process. As required by the iterative analysis process, each transcript was read several times in order to identify tags to conceptualize the data. The first coding pass was performed after the third interview. Each time we conducted a new interview, we came back to earlier interviews to refine and validate the codes that we used. By the end of the last interview, we used 15 different codes.

In Table 3, we present the number of times each code was used in each interview. The call for tender process code was the most used with 122 times which represent 25.7% of all codes.

Table 4 - Frequency of the code per interview

After we finished the line-by-line coding on all 8 interviews, we grouped the codes into 6 categories, one being miscellaneous for things that were unique to one interview. Once combined, here are the repartition of the codes (Table 4):

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Categories Number of codes RFP process 186 Market 102 Bid 68 Firms 65 Miscellaneous 34 Government 19 Total 474

Table 5 - Number of codes per categories

Since we only interviewed firms, it is of no surprise that everything related to the government view of the process is not of high interest.

After the grouping, we proceeded with the axial coding phase of the analysis. Axial coding consists of identifying relationships between open codes (Gallicano, 2013). Multiples relations were found, and a general process began to arise from the data since our main question is to find how IT professional services firms describe the public procurement process? The next section describes our research findings.

Research findings

A- The public procurement process

The first question was about how the IT professional services firms perceived the process. To answer this, we developed at first general model based on the categories identified from the data analysis. The global model represents the main components that are the Government from one side and the firms from the other side. These two components interact with each other through the market. The Government goes to the market using its formal public call for

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tenders process and firms use bids to gain government contracts. This overview provides a general view of how the relationship between the Government and the firms is established. This global view is depicted in Figure 1.

Figure 1 - Entity interaction model

The model of Figure 2 is a more detailed view where each component of the model of Figure 1 is decomposed into different sub-components that were identified from the interviews. We still have the two sides: the firms and the government. From the firms’ side, the sub-components identify the most important elements to be considered in the process. From the government side, the sub-components express the elements that the firms understand from the process and that may be considered as important for governments.

We observe that the firms give a great importance to their past experiences (historic data in Figure 2). So, we observe that a firm uses its own constraints (budget and organization) and its historical data as part of its decision process to go or not for the market. Once firms decide to go to the market, they will need to construct their bids. The most important elements that

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they look at are the price of the bid and the qualitative criteria that can be used to evaluate the bids.

From the Government perspective, firms think that any governmental call for tenders is expressed in regard to the needs of a government agency and the constraints under which this agency is operating. These constraints are perceived as budgetary and organizational constraints. In addition, the firms are interested in three different elements in the call for tenders. They are interested in the process itself that is the different steps through which the call will undergo. They are interested on the weight (K-Facor in Figure 2) that will be given to a firm. The K-Factor gives more weight to the quality of a bid compared to the weight given to the price of a bid. Since the K-Factor is related to quality, other criteria can be used by a GA to evaluate the different bids. These criteria are of high importance to the bidding firms. If two companies A and B with different bidding prices, it doesn’t mean that the company with the lowest price will win the bid. This is stated by one of the interviewees who said:” assume that supplier A has tendered for $ 100,000; supplier B, for the same tender, presented a price of $ 110,000, but its quality presented in terms of resources is greater: its K factor will come to advantage it in terms of quality, which will cause its price to be readjusted, i.e. its price of $ 110,000, could possibly reach $ 98,000. It is not the price paid by the department and agency, but it is the price readjusted by weight to quality, which means that it favors higher quality service offers”. Using the K-Factor impacts the adjudication process where companies have to pay great attention to quality.

Finally, interviewed firms pointed to the market. They mainly pointed to the competitiveness aspects of the market. Several firms raised the fact that the IT players in the market knows each other. So, firms generally have a good idea about the IT firms that may bid to answer a specific call for tenders. The level of competitiveness of a market varies depending on the number of firms that are active on the said market and if those firms have the required personnel on hand to be able to bid on the contract. One of the interviewees said:” it doesn’t encourage competition; because at that time, it’s only firms that have the financial capacity

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to respond to this call for tenders, who will take the risk of delivering or not deliver those resources, and based on the price, and then of course the price will be based on the risk.”

Figure 2 - Entity and attribute model

As discussed in Moe. (2014), a procurement process has five phases: The procurement process can be divided into five phases: specifying the requirements, tendering, selecting the vendor, contracting, and implementing and completing the process. This process was built from a government’s perspective. However, the process, as described by the IT professional services firms, is not seen as phases. This brings a new view of the process that instead of being a systematic process as described by governments, it is more an interaction model with different elements to be considered as a whole. This view means that governments may have to revisit their regulations that implement their procurement processes as systematic processes to adapt them for a more holistic view as a set of interrelated elements. The IT firms don’t see the elements of the model of Figure 2 as steps or phases. They see them as a single set that form the whole process. Hence, it becomes important for governments to

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understand the firms view and change the regulations for a more agile process that allow a more comprehensive interactions and coordination between governments and vendors. This holistic view of the process may answer to one of the challenges identified in Moe et al. (2011) that is: the lack of coordination and standardization of the process.

B- Impacts of the procurement process

The interviewees have not only focused on the procurement process itself but also on the impacts of the process on their willingness to bid. They focused on the problems of the process and what could be improved. The firms raised two problems: the complexity of the process and the pricing structure.

The main problem reported by the firms was the complexity of the process that was raised in seven interviews out of eight. The sheer complexity of the process makes that in the majority of the times, a firm must be very experienced to be able to answer a call; it takes a lot of time to complete a proposal. In fact, the firms raised that it is common for them to have multiple employees dedicated to complete the required forms. This was stated by many interviewees: "It's very complex to answer, not everyone is able to answer this type of call for tender (interview n° 7)"

"The process is still heavy, prepare a call for tenders, set up a committee to evaluate ..." (Interview n° 6)

"Well it's very heavy, first of all, it's very heavy process [...] the answers are very long to come" (interview n° 8).

The second most raised concern by the firms is the pricing structure. In IT consultancy, there are two main methods to hire contracting firms through a call for tenders process. The first method is to ask for specific profiles of individuals (e.g. Project manager, analyst, architect, etc.). In this method, it is the hourly rate that defines the cost of the contract. This way is used when a Government agency wants to complete a team with a specific expertise while maintaining control over the project. The second method is to go to the market by project pricing. Instead of asking for an individual, the government outsources all the development of a project to an outside firm for a fixed price. Doing so, a GA doesn’t have to manage the project and the risk is divided between the government agency and the firm. Some firms

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expressed concerns that the government is using less and less the project pricing method and thus it is taking more risks than sharing this risk with the private sector:

"So that way of going to the market make that the risk is less and less transferred to the supplier who deliver a result based on a commitment" (Interview # 4)

Other firms said that the risks are too high to bid on a project pricing contract. IT firms and government both have budget constraints. Finding the right balance between risk and profit is not an easy task:

"Of course, it is necessary that the fixed price submitted to the organization fits in the budget of the organization, but also, it must also enter in the financial parameters of the firm which offers the services; and it's not all firms that want to go in lump-sum modes because of the associated risk "(Interview # 1).

Finally, some firms referred to the penalties that can be brought by GAs with regard to the suppliers. In this context, one interviewee said:” if we put the penalty clauses of a nature that I told you about earlier, the average firms will think twice even 3 times before filing the bid”.

C- Contributions of the study

This study provides new results at both theoretical and practical levels. From the point of view of theory, this study led to new results to understand how IT professional services firms describe public procurement process. This study is one of the first studies that addressed governments public procurement processes in IT consultancy from IT firms point of view. This study also highlighted the most complex elements that IT firms perceive in these calls. So, this study brought new highlights on a public procurement process that still need more investigation from researchers to better understand it and to bring insights on the process. From a practical point of view, having this knowledge government agencies can understand the important elements that IT firms consider when participating on a call for tenders on IT consultancy. Governments can then identify clearly the elements that the firms want to look at when reading a call for tenders. In addition, governments will know the complex issues that IT firms are facing when participating to a call for tenders process. Consequently, governments can think on how to solve these complex issues and make the process easier for IT firms.

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Conclusion

This paper answered to a research gap identified in the literature and that was focusing on better understanding of the public procurement process. It studied this research gap through the IS public procurement process. This paper brought a novel view of this process by bringing IT firms understanding of the process. Results showed that contrary to governments agencies who perceive the process as systematic, IT firms perceive it as holistic. This perception demonstrates that IS vendors are impacted by the process and may be discouraged to take part to public procurement processes.

This research focused on IT consulting services acquired by a call for tender process. It would be interesting to see if it can also be applied to IT hardware or software licensing call for tender and, at a bigger scale, if it can cover all IT call for tender processes. In addition, we think that it will be interested to confront this perception with how GAs perceive the same process. Doing so, a two ways discussion can be opened between GAs and IS firms to redefine the regulations of the process to meet both GAs expectations and IT firms

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Conclusion

Interaction models provide a global view of the tendering ecosystem. Also, they can be used as a basis to better understand the interdependencies between the different entities involved in the public procurement process. Although this master thesis was limited to IT firm, It would be interesting to see if it also applies to tenders for computer hardware or software licenses and, on a larger scale, to know if it can cover all IT public procurement processes. We believe that interviews with government agencies could further refine the interaction model in Figure 2, as we would know more about their perception of the public procurement process.

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Annex

1. What do you think of the actual process? a. Could it be improved? How?

2. Are you satisfied with the result of the process? Why?

3. What is your opinion of the lowest bidder method of tendering?

4. What is your opinion of the possibility of the use of the total cost of ownership method of adjudication?

5. Do you think of any other criteria that could be useful for the call of tender process?? 6. Do you think of any qualitative criteria that could be useful for the call of tender

process?

7. Do you have any apprehension that the government uses of qualitative criteria? 8. How do you think these criteria could be integrated into the current process? Notable interview excerpt

“Generally speaking, at the level of the current contract awarding rules, the mechanics work well, there are improvements to be made, and this mechanism should always be concerned with ensuring a healthy competitive market.”

(interview n° 1)

“The important thing is to have good accountability within the organization and to ensure that the process is sound and that all employees are stakeholders in the process.”

(interview n° 1)

“Sometimes the customer does not realize what he is asking is really impossible to meet.” (interview n° 1)

“There's a new mechanic that has come into play at the price level, for about I would say 3-4 years - ah maybe 5 years - , which is the famous K factor.”

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“I sometimes find that the calls for tenders are tainted; tinted for a firm that must do an excellent job already on site. So that's… it's hard for other firms who want to […] take their place. So we call that a customer who works well for his supplier.”

(interview n° 2)

“It is certain that I find that having a K factor allows a better evaluation of the quality.” (interview n° 3)

“and I think that this is one of the problems with the Quebec government currently as a process of acquiring services: it is that we have completely abandoned this mode.” (Flat rate) (interview n° 4)

“So the process has becomes more important than the outcome, and that's how we see it in the market right now; probably for all kinds of reasons, which obviously come with the event [of the] Charbonneau Commission and all that, which had an impact on the contract management processes in government.”

(interview n° 4)

“I think what is missing from the Quebec government public tender process is the fact that we do not associate value with quality.”

(interview n° 4)

“We think that in the government, currently, what is lacking is not programmers, it is governance.”

(interview n° 4)

“Yes, the "total cost of ownership" is interesting, but to get there, important cultural changes will be needed, because it's been a while since we haven't done that.”

(interview n° 4)

“It's not perfect, you will never have a perfect process, and anyway, there is no system that is 10 years or older that is doing its job. We’re too good at bypassing it.”

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(interview n° 5)

"The process is still heavy, prepare a call for tenders, set up a committee to evaluate ..." (Interview n° 6)

“What we find now when we read the calls for tenders: well sometimes, the calls for tenders are so detailed and defined that we have the impression that there is just a social insurance number missing at the end to fill the whole thing. That it is already pre-targeted in fact.” (interview n° 8)

“It's the quality first, I know there was the K factor brought in, but it's all about the price, and that doesn't make any sense in my opinion. And we have a feeling that things are not going in the right direction either.”

Figure

Table 1 - Monetary value of awarded IT contract by the federal government of Canada for 2017-2018 fiscal year
Table 2 - Public procurement definitions
Table 3 - Attribut of interviewee
Table 5 - Number of codes per categories
+3

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