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The improvement plan to enable HHSC Procurement and Contracting to take off Phase III 31 October 2018 This work product has been prepared for The Texas Health and Human Services Commission for its use and purposes only. It is not intended to be relied upon as professional advice for other Texas agencies or their affiliates, other Health and Human Services agencies outside Texas or their affiliates, or any other organizations or persons. Neither Ernst & Young LLP nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this document.

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Page 1: The improvement plan to enable HHSC Procurement …...The improvement plan to enable HHSC Procurement and Contracting to take off Phase III 31 October 2018 This work product has been

The improvement plan to enable HHSC Procurement and Contracting to take off

Phase III

31 October 2018

This work product has been prepared for The Texas Health and Human Services Commission for its use and purposes only. It is not intended

to be relied upon as professional advice for other Texas agencies or their affiliates, other Health and Human Services agencies outside Texas

or their affiliates, or any other organizations or persons. Neither Ernst & Young LLP nor any other member of the global Ernst & Young

organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this

document.

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Page 1Proprietary and confidential. Reliance restricted. Does not constitute assurance or legal advice. Please refer

to limitations and restrictions on page 2.

Executive letter from the EY Engagement Partner (1 of 2)

Ms. Jordan Dixon

Deputy Executive Commissioner

Office of Transformation and Innovation

Texas Health and Human Services

4900 North Lamar BoulevardAustin, Texas 78751

Dear Ms. Dixon,

Ernst & Young LLP (EY US) was engaged in July 2018 to perform a comprehensive analysis of the Texas Health and Human Services Commission’s (HHSC, the

Commission or the Agency) procurement and contracting functions with the aim of understanding current state application, root cause analysis, and creation of a fit-for-purpose improvement road map to alleviate the true cause of issues that are impacting HHSC’s procurement and contracting performance.

EY US applied our Procurement Maturity Model Assessment Methodology across the breadth of the Agency and observed variations in process, speed, accuracy,

information flow, and governance. Our most critical observation is that, while its name implies that it is primarily a service delivery agency, HHSC actually depends

upon the compliance, efficiency and effectiveness of its procurement and contracting function to drive many of its critical business outcomes. HHSC is a

procurement agency at its core with the vast majority of the HHSC services being provided in an outsourced third party contracted configuration. The Commission’s procurement and contracting function is regulated within a state government framework; yet at the same time, HHSC is presented with procurement

challenges akin to a large private corporation as HHSC’s spending levels and demands rival those of several Fortune 50 compan ies. The mechanism used in

private business when entering into an outsourced condition is to intentionally modify its operating model to help enable success. It cannot be overstated the extent

to which the success of HHSC hinges on the success of its procurement and contracting capability and teams. Those teams are still operating within a traditional

structure and now must have access to modern procurement processes, training, technology, leading practices and visionary supply chain leadership in order for Texas HHSC – one of the largest state agencies in the nation – to deliver quality third party services and solutions at the right terms and conditions that the

Legislature envisions and that Texans deserve.

We see that the necessary improvement is within the Commission’s reach and thus we have developed a customized improvement road map to guide the

necessary changes. The road map is customized to your particular pain points and condition yet built upon procurement process improvement experience and

leading practices. The road map is comprehensive at the top level; however, there are many decisions to be made within the course of executing each of the projects. This format is found to be constructive by other clients and your projects are designed with what works for state governments coupled with appropriate

measures necessary to support the spending volume of a Fortune 50 equivalent company.

This report (the Report) has been prepared by EY, from information and material supplied by Texas Health and Human Services for the sole purpose of assisting

the Agency in assessing its procurement process.

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Page 2Proprietary and confidential. Reliance restricted. Does not constitute assurance or legal advice. Please refer

to limitations and restrictions on page 2.

Executive letter from the EY Engagement Partner (2 of 2)

The nature and scope of our services was determined solely by the Agreement between EY and HHSC dated 15 July 2018 (the Agreement). Our procedures were

limited to those described in that Agreement. Our work was performed only for the use and benefit of HHSC and should not be used or relied on by anyone else.

Other persons who read this Report who are not a party to the Agreement do so at their own risk and are not entitled to rely on it for any purpose. We assume no

duty, obligation or responsibility whatsoever to any other parties that may obtain access to the Report.

The services we performed were advisory in nature. While EY’s work in connection with this Report was performed under the consulting standards of the American Institute of Certified Public Accountants (the AICPA), EY did not render an assurance report or opinion under the Agreement, nor did our services constitute an

audit, examination, review, agreed upon procedures or any other form of attestation as those terms are defined by the AICPA. None of the services we provided

constituted any legal opinion or advice. This Report is not being issued in connection with any issuance of debt or other financing transaction.

In the preparation of this Report, EY relied on information provided by HHSC or publicly available resources, and such information was presumed to be current,

accurate and complete. EY has not conducted an independent assessment or verification of the completeness, accuracy or validity of the information obtained. Any assumptions, forecasts or projections contained in this Report are solely those of HHSC and any underlying data were produced solely by HHSC.

Management of HHSC has the knowledge, experience and ability to form its own conclusions.

I extend my personal thanks to HHSC’s leadership team for encouraging the assessment work. During the course of our work, it became abundantly clear to the

EY US team that the public servants at HHSC are deeply committed to its success. HHSC team members were forthcoming about their needs and hopes, and it is

evident to us that those team members are hopeful for the success of the Agency they serve. You are now at a key inflection point, and the Improvement plan enclosed if implemented can deliver desired improvements. It is incumbent on the State of Texas and its stakeholders to make investments in HHSC with leading

tools, bolstered Agency processes and infrastructure and next-generation talent management strategies. With the unwavering support of Texas leadership, HHSC

can resolve the issues identified in this document. We appreciate the opportunity to continue to serve HHSC and Texas, we are excited about your journey ahead.

Best Regards,

Beth GutweilerPrincipal, EY Supply Chain, Procurement and Operations

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Page 3Proprietary and confidential. Reliance restricted. Does not constitute assurance or legal advice. Please refer

to limitations and restrictions on page 2.

Contents

A call to action 4–9

Improvement plan 10–26

Project charters 27–66

Insights and additional projects 67–116

Appendix 117–279

Phases I and II summary 119–129

Current state maturity assessment 130–172

Root cause analysis 173–178

Next steps 179–181

Detailed analysis 182–272

Operating model and strategy considerations 273–279

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Page 4Proprietary and confidential. Reliance restricted. Does not constitute assurance or legal advice. Please refer

to limitations and restrictions on page 2.

A call to action

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Call to action

► The Agency has repeatedly faced public scrutiny surrounding procurement

and contracting concerns that has pressed the Agency into a reactive mode

► This assessment is intended to help the commission:

► Harmonize the audit reports and analysis on how procurement is performed

► Seek the root causes driving the issues

► Identify a series of projects that can be undertaken as an improvement plan/road

map to go from reactive to proactive

► Create a baseline that can be retested over time

“We made it crystal clear that HHSC has become to some extent a

contracting agency and must be structured and staffed with the right people

to reflect this responsibility. And in my opinion, these recent problems have

nothing to do with the size of this agency or boxes on an organizational

chart, but rather a failure to elevate the importance of contracting at an

agency that contracts out a very high percentage of its services. This has to

change.”

Committee Chair Senator Jane Nelson speaking to the HHSC Transition Legislative Oversight Committee (29 May 2018).

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1) The operating model,

strategy and investment

of HHSC, has not

evolved to meet the

needs of an outsourced

service delivery

solution, which depends

upon Procurement for

its success.

2) Volume of transactions

amplified the effect,

quadrupling the impact

on an unfit model.

3) The communication

plan is built for a

smaller organization.

The Agency has suffered from a lack of investment in enterprise capable skills, process, systems, governance and communications to help enable the procurement and contracting function.

Partnership, accountability and interdependency from PCS, Program and Legal need improvement to achieve the value proposition.

Data, reporting and visibility are inadequate to run the procurement and contracting function.

The traditional and heavily restricted approach for developing and maintaining suppliers, vendors and providers is holding back the Agency.

Overarching

root causeImprovement opportunities

Efficiency and effectiveness from the procurement and contracting function need improvement to become high performing.

Critical realities observed in HHSC’s translation of strategy to operations

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Page 7Proprietary and confidential. Reliance restricted. Does not constitute assurance or legal advice. Please refer

to limitations and restrictions on page 2.

Procurement maturity assessment methodology

EY maturity model Assessment

Stage 1: Informal

Stage 2: Functional

Rating

Stage 3: Standardized

Stage 4: Collaborative

Stage 5: Leading

Po

rtfo

lio

an

d

► The methodology measures an organization’s procurement practices along eight dimensions.

► Each dimension is rated based on a five-level rating that takes into consideration leading practices.

► From the assessment, a spider diagram is produced showing the current state. Based on this, the gap analysis is produced and

initiatives are identified to bridge the gap between the current state and the targeted state.

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“Hero-based” environments rely on staff to go the extra mile to complete work to compensate for a lack

of supportive and systematic technology features. System-based environments utilize technology for

reliable process completion. The findings of the assessment are consistent with the general sentiment of

the PCS team as well as their leadership.

Weak

Str

on

gIm

pact

Reactive ProactiveMaturity levels

Leading

Tactical fixes/backlog cleanupTechnology not optimized;

strategy not recognized

Agency standards and

governance established and enforced

Integrated technologies;

automation, transparency

Proactive aged

with decision analytics

Capabilities in place; inconsistent

processes

E2E process design formally

documented and published

Performance driven;

improvement program chartered

Processes integrated across

Agency boundaries

Standardized processes/defined

strategyOptimized and efficient

Executive leadership directly

drives improvement strategies

Integration of leading practice

and standardized processes

Supply chain as a competitive

advantage

Recognized in the industry as

best in classEfficiency/

effectiveness

Span of control

The greatest inflection point for effectiveness

and efficiency occurs between levels 3 and 4

Informal

Functional

Standardized

Collaborative

“Hero-based” environment System-based environment

Maturity models provide analysis to align performance, cost and risk across a number of criteria

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Page 9Proprietary and confidential. Reliance restricted. Does not constitute assurance or legal advice. Please refer

to limitations and restrictions on page 2.

During weeks 1–6, a maturity model was used to understand the current state of HHSC. The maturity model broke down procurement

and contracting into eight pillars to assist in the identification of root cause. Based on this assessment, the Commission has

opportunities to improve across all eight dimensions. Such results should be expected and in line with the recent audit reports. New

management has begun enhancements to improve scores, but needs additional support and improved processes and systems.

Strategic

Direction

Performance

Management

Technology

Internal

Stakeholder

Management

Governance

and

Risk Management

Procure to

Pay Process

and Complex

Services

People and

Organization

Portfolio

and Supplier

Relationship

Management

*Represents the average rating of the included subsections.

HHSC Procurement and Contracting Current state capabilities summary

Internal Stakeholder Management

Average: 1.6

Governance and Risk Management

Average: 1.4

Performance Management

Average: 1.3

Technology

Average: 1.7

Procure to Pay Process and Complex

Services

Average: 1.7*

Portfolio and Supplier Relationship Management

Average: 1.6*

People and Organization

Average: 1.5

Strategic Direction

Average: 1.3

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Page 10Proprietary and confidential. Reliance restricted. Does not constitute assurance or legal advice. Please refer

to limitations and restrictions on page 2.

Improvement plan

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Improvement plan project approach

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Project timelineOverview

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Improvement plan

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Approach to project creation

► Developed initial database of 113 potential projects and activities, which

address the closure of all critical and noncritical gaps

► Met individuals with key stakeholders for rounds of vetting and refining. Met

multiple times with transformation team and key PCS staff to further refine

► Tested, prioritized and rationalized project listing to a tailored set of 29 critical

“must address” projects

► Defined key activities that support transformation team chartering and

tracking of projects

► Where flexibility on project sequencing was possible, EY US prioritized that

characteristic so that HHSC has flexibility for realistic scheduling of resources

involved in multiple projects

► Ultimately change management and executive support is critical to the

success of all projects

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Page 15Proprietary and confidential. Reliance restricted. Does not constitute assurance or legal advice. Please refer

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Future state road map/improvement plan

Wave 1 Wave 2 Wave 3 Future state and beyond

Po

rtfo

lio

Mg

tP

rocu

re to

Pa

yG

overn

an

ce a

nd

Ris

k

Technology People and Organization

26PM: Procurement

spend analysis

17PM: Standardize contract management and

monitoring27PM: Vendor outreach

program

Strategic DirectionInternal Stakeholder

12PP: PCS forms, contract

tools, contract templates

23PP: Complex

services process

Performance Management

18SD: Enhance

policies

21TE: Fit-gap

analysis

4IM: Program

liaison process

1SD: Operating model

creation

5IM: Lessons

learned touch

point

29TE: Remaining

procurement

technology

16GR: Procurement and

contract risk assessment

2SD: Data cleansing

25GR: Control effectiveness testing program

13GR: Compliance monitoring

14GR: Align processes for managing

external stakeholder governance

15GR: Lines of defense

11PP: Procurement and contract

management manuals

24GR: Review and approval workflow

8TE: CAPPS and SCOR

training

22PP: Procurement

end to end process

3IM: Dashboard

automation

10TE: eSignature tools

28PO: Employee

engagement plan

9TE: Immediate CAPPS19PO:

Communication

framework

20PO: Training

programs

7PE: Performance

management

practice

6PO: PCS Organization

re-design

For more information, please see EY Insights on Procurement Transformation

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Areas of focus within the improvement plan

Strategic Direction► PCS mission is widely known

► Cross-functional procurement planning

People and Organization

► People are empowered

► Cultural survey scores improve dramatically

► HHSC/PCS is an employer of choice in Austin

Portfolio Management► Items are strategically sourced for economies of scale

► PCS has proficiency in sourcing in all categories

Procure to Pay► Complex procurements are completed in a timely fashion

► Procurement function is fully automated

Governance and Risk ► Full compliance with legislative mandates

► Full adherence to internal policies and processes

Internal Stakeholders ► Collaborative work environment across appropriate stakeholders

Technology► Integrated Procure to Pay system

► Integration across all Agency systems

Performance

Management

► Balanced scorecards that are used to drive improvement

► KPIs integrated with performance

For more information, please see EY Insights on the Future of Procurement.

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Page 17Proprietary and confidential. Reliance restricted. Does not constitute assurance or legal advice. Please refer

to limitations and restrictions on page 2.

Path to future state

# Project name Ease Impact

Str

ate

gic

Dir

ectio

n

1SDDevelop sufficient operating model for the Agency’s dependency

on contracting as a critical success factor4 5

2SD Conduct data cleansing 3 5

18SD Enhance policies governing key business components 2 3

Pe

ople

6PO Create a fit-for-purpose organization design for PCS 4 4

19PO Establish a comprehensive communication framework 2 4

20PO Develop comprehensive training programs 5 3

28PO Create an employee engagement plan 3 3

Po

rtfo

lio

Ma

na

ge

me

nt 17PM

Standardize contract management and monitoring practices

across HHSC4 2

26PM Develop procurement spend analysis practice 3 4

27PM Establish a vendor outreach program 4 3

Pro

cure

to

Pa

y

11PPUpdate and refine procurement and contract management

manuals4 4

12PPEnhance PCS forms, contract tools and contract templates

related to procure to pay process4 4

22PP Redesign procurement end-to-end process 4 4

23PP Enhance complex services process 3 5

Ease of implementation ranking legend:

► 1 = No external support required to implement and drive adoption (1–3 months)

► 2 = Little to no external support required to implement; minimal integration and adoption complexity (1–3 months)

► 3 = External support required to manage, configure/integrate, test, deploy

and enable adoption (1–6 months)

► 4 = External support required to manage, configure/integrate, test, deploy

and enable adoption (3–12 months)

► 5 = External support required to manage, configure/integrate, test, deploy

and enable adoption (9+ months)

ROI impact ($, efficiencies and improved end-user experience):

► 1/2 = Low business case impact

► 3/4 = Moderate business case impact

► 5 = High business case impact

Ease of implementationLow = 1 High = 5

Imp

ac

tL

ow

= 1

Hig

h =

5

The upper-left quadrant represents high-impact, low ease of implementation projects that HHSC can action.

1SD2SD

18SD

6PO19PO

20PO28PO

17PM

26PM

27PM

11PP

12PP22PP

23PP

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Path to future state

The upper-left quadrant represents high-impact, low ease of implementation projects that HHSC can action.

Ease of implementationLow = 1 High = 5

Imp

ac

tL

ow

= 1

Hig

h =

5# Project name Ease Impact

Go

ve

rna

nce

13GR Strengthen compliance monitoring processes and controls 4 2

14GRAlign processes for managing reports to governing entities

outside of HHSC2 4

15GR Risk management – lines of defense (LOD) alignment 2 3

16GR Perform procurement and contract risk assessment 2 4

24GR Develop review and approval workflow 3 4

25GR Implement a continuous control effectiveness testing program 3 3

ISM

3IMEnable dashboard automation for business administrative

functions1 4

4IM Expand upon the program liaison process 3 4

5IM Establish a lessons learned touch point 2 3

Te

chno

logy

8TE Conduct comprehensive CAPPS and SCOR training 5 5

9TE Resolve immediate CAPPS configuration needs 5 5

10TE Align eSignature tools 4 4

21TE Perform full fit-gap analysis 5 5

29TE Streamline remaining procurement-related technology 4 4

Pe

rfo

rma

nce

7PE Performance management practice 3 5

13GR

14GR

15GR

16GR

24GR

25GR

3IM

4IM

5IM

8TE9TE

10TE

21TE

29TE

7PE

Ease of implementation ranking legend:

► 1 = No external support required to implement and drive adoption (1–3 months)

► 2 = Little to no external support required to implement; minimal integration and adoption complexity (1–3 months)

► 3 = External support required to manage, configure/integrate, test, deploy

and enable adoption (1–6 months)

► 4 = External support required to manage, configure/integrate, test, deploy

and enable adoption (3–12 months)

► 5 = External support required to manage, configure/integrate, test, deploy

and enable adoption (9+ months)

ROI impact ($, efficiencies and improved end-user experience):

► 1/2 = Low business case impact

► 3/4 = Moderate business case impact

► 5 = High business case impact

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Wave 1 project summaries

Dimension Project name Project situation

Strategic

Direction

1SD: Develop sufficient operating model for the

Agency’s dependency on contracting as a

critical success factor

► PCS vision, mission and purpose are not fully aligned with the Agency’s vision/mission

and not openly confirmed and communicated to all stakeholders. Misalignment drives

inconsistent priorities in people, process, technology and governance within the

function.

2SD: Conduct data cleansing ► Historical data within CAPPS, SCOR, Budget/Finance does not appear to be aligned

with correct dollar amounts or other specific areas of data capture.

People and

Organization

6PO: Create a fit-for-purpose organization

design for PCS

► Unclear roles and responsibilities coupled with undefined KPIs and job openings keep

the organization from being structured appropriately. Workload inconsistent; staff doing

tasks for which they don’t have the competencies; oversight of contract quality is

inconsistent, inhibiting effectiveness, compliance and efficiency.

Portfolio

Management

17PM: Standardize contract management and

monitoring practices across HHSC

► As a consequence of transformation, the approach to contract management and

monitoring at HHSC has not been unified into a standardized set of policy, practice and

process guidance for programs to utilize. More recently, HHSC policy and guidance on

contract management and monitoring practices and processes have not been updated

or aligned to the state guidance on contract management. As such, contract management and monitoring practices vary dramatically by program.

Procure to Pay 11PP: Update and refine procurement and

contract management manuals

► Processes are often inconsistent across similar requisitions, causing inefficiencies and

increasing errors and noncompliance; workarounds are prevalent in part because of

lack of knowledge. Current manuals are more than two years old and have not been

updated with current information, including no specificity to HHSC procedures which

drives audit exposure.

12PP: Enhance PCS forms, contract tools and

contract templates related to procure to pay

process

► Processes are often not written to support a large organization, limiting opportunities

for economies of scale and optimization improvements. PCS and Program have

different templates that are created outside of CAPPS that are then imported into

CAPPS. Some forms may have the ability to be created inside CAPPS.

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Wave 1 project summaries

Dimension Project name Project situation

Governance and

Risk

Management

13GR: Strengthen compliance monitoring

processes and controls

► Inconsistencies in compliance processes were noted both during the current state

assessment and identified in previously issued audit reports. A methodical approach to

addressing these issues will increase confidence in the integrity of the process and

reduce the risk of control failures and repeated audit findings.

14GR: Align processes for managing reports to

governing entities outside of HHSC

► Processes and controls for identifying and coordinating reporting to third-party

governance entities are not defined and may lead to inaccurate or noncompliant

external reporting, resulting in unnecessary rework and loss of confidence in reports

provided to third parties to HHSC.

15GR: Risk management – lines of defense

(LOD) alignment

► Roles and responsibilities for risk ownership and oversight across PCS, Compliance

and Quality Control (CQC), Programs, Legal and Budget/Finance are not clearly

defined, and may result in inefficiencies, gaps in monitoring responsibilities and

objectivity concerns of CQC auditing its own work. Without clearly delineated roles, the

risk of control failures or management override is increased.

16GR: Perform procurement and contract risk

assessment

► Generally, review and approval follow the same process and rigor regardless of the

risk level of the procurement or contract, creating gaps in efficiencies, overengineering

and a false sense that risk is covered.

Internal

Stakeholder

Management

3IM: Enable dashboard automation for business

administrative functions

► Program/Agency is unable to run reporting dashboard to determine where in the life

cycle inputted requisitions reside within CAPPS.

4IM: Expand upon the program liaison process ► The root cause that says HHSC operates in a “hero” environment – reliant on

extraordinary individuals’ efforts to compensate for inadequate technology and

processes. Without a formal process in place, both PCS and program have noted that

whether certain tasks were completed correctly and efficiently depended on whom

from PCS or which program you were dealing with. For instance, programs noted that direction over process, next steps and status were difficult to consistently obtain from

PCS and frequently rely on a few individuals to find the information they need.

Similarly, PCS has noted problems in obtaining necessary forecasting plans from

varying programs.

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Wave 1 project summaries

Dimension Project name Project situation

Technology 8TE: Conduct comprehensive CAPPS and

SCOR training

► Training programs are insufficient in content and frequency, and there are limited

designated support resources to provide compliance and technical guidance. The

existing training programs (onboarding and ongoing) do not provide employees with

the knowledge and tools needed to be successful in their roles. The lack of training,

coupled with excessive workloads and nonstandard processes, has contributed to staff often feeling overwhelmed and frustrated.

► The train-the-trainer model used previously was not successful. Adequate budget must

be allocated to support a robust training program to educate users on the system in its

current state and provide ongoing training as system changes are implemented in the

future.

9TE: Resolve immediate CAPPS needs ► Business needs and volume are not sufficiently synchronized to process/technology.

CAPPS has been heavily modified to accommodate State of Texas statutory

contracting requirements, as well as HHSC-specific contracting needs; however, the

system is not designed to support a specific set of agency or program purchasing

processes and procedures.

10TE: Align eSignature tools ► The lack of visibility within, and integration among, procurement-related systems (e.g.,

CAPPS and the digital signature tool) in so far as how it is configured and applied

creates risk for policy compliance issues and undermines statewide transparency

efforts.

Performance

Management

7PE: Establish a performance management

practice

► Current systems do not facilitate visibility and extraction of data to support

procurement-related business decisions.

► HHSC program areas are performing ad hoc and manual reporting to track and

manage the status of their procurement requests.

► The lack of integration among procurement-related systems combined with the lack of properly configured reporting functionality in CAPPS frustrates users, precludes data-

driven procurement practices and hampers statewide transparency efforts.

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Wave 2 project summaries

Dimension Project name Project situation

Strategic

Direction

18SD: Enhance policies governing key business

components

► Constant change in management priorities drove suboptimal policies with frequent

revision. HHSC needs clarity.

People and

Organization

19PO: Establish a comprehensive

communication framework

► Currently, procurement-related communications are not actively and comprehensively

planned and managed. Communication is unstructured, inconsistent and not properly

cascaded. This has led to knowledge gaps for key roles, a systematic lack of end-user

engagement and the inability to create a culture of cooperation and collaboration. For

instance, one program noted having discontinued the use of the digital signature tool for certain processes where it was no longer required because notice was given in a

meeting, but not documented or cascaded.

20PO: Develop comprehensive training

programs

► Although limited training has been provided to PCS employees, a formal training

strategy, plan and program have not been developed or provided to procurement staff.

Training programs are generally insufficient and there are limited designated support

resources to provide compliance and technical guidance.

Portfolio

Management

26PM: Develop procurement spend analysis

practice

► PCS does not currently utilize data to help it to identify and execute strategic

contracting opportunities for the Agency. This coupled with the current limitations in

data integrity, accuracy and access leads to a need to establish a consistent

methodology and practice for spend analysis at the Agency to support improved data-

driven decision-making regarding procurement activities.

27PM: Establish a vendor outreach program ► Hindering communication and engagement throughout procurement planning and

contracting hampers meaningful outcomes for complex, high-risk contracts; limiting

vendor input provides an inherent advantage to incumbent vendors because a new

vendor is more challenged in its ability to communicate emerging practices or unique

products or services that the vendor may be able to offer the state agency.

► Agency vendor management policies and practices reflect unnecessarily limited vendor

interaction that is not aligned with statewide guidance that creates collaboration

opportunities. For example, TGC 2155.081 directs the CPA to establish a vendor

advisory community to provide input into state procurement practices and serve as a

channel of communication among the vendor community.

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Wave 2 project summaries

Dimension Project name Project situation

Procure to Pay 22PP: Redesign procurement end-to-end

process

► Due to significant changes in procurement-related organization, roles, responsibilities,

policies and processes that will be put in place in light of this report, it will be necessary

for PCS to establish a consistent procure to pay process so that current SOPs are

tailored to align with changes as they are implemented.

23PP: Enhance complex services process ► Lack of documentation standardization, evaluation process that does not meet the

needs of the Agency.

Governance and

Risk

24GR: Develop review and approval workflow ► After the risk assessment process is complete, the approval workflow will need to be

updated to align with the new process of approving contracts differently based on the

assigned risk.

25GR: Implement a continuous control

effectiveness testing program

► While the CQC function has recently been established, a process has not been

consistently implemented to assess compliance with processes and procedures across

the Agency. Without a rigorous quality control testing program, the ability of the Agency

to consistently execute new and redesigned controls will be limited, increasing the risk

of process and policy noncompliance.

Internal

Stakeholder

5IM: Establish a lessons learned touch point ► This project seeks to address the root causes: processes are often not written to

support a large organization, limiting opportunities for economies of scale and

optimization improvements. For instance, there is currently minimal process in place to

help prevent problems from repeating themselves, such as the repeated evaluation

mistakes. By establishing a lessons learned touch point, PCS can seek to address this issue by having a published repository for new staff to refer to as well as the ability for

PCS staff, PCS leadership and program staff to have an effective feedback loop.

Technology 21TE: Perform full fit-gap analysis ► CAPPS was not configured/implemented to serve HHSC fit-for-purpose procurement-

related purposes (i.e., complex contract proposal evaluation, vendor performance

tracking, document management, spend analysis and public data transparency) in

function or in HHSC-level volume.

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Dimension Project name Project situation

People and

Organization

28PO: Create an employee engagement plan ► Good performance and success are rewarded much less frequently than bad behavior

or failure is punished. This significantly impacts morale and prevents employees from

feeling empowered and engaged. Given the preexisting fear culture in PCS, action is

warranted.

Procure to Pay 29TE: Streamline remaining procurement-

related technology

► The lack of integration among all of the procurement-related systems combined with

the lack of properly configured reporting functionality in CAPPS creates difficulty for

users, precludes data-driven procurement practices and undermines statewide

transparency efforts.

Wave 3 project summaries

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Subsequently, supply chains are no longer linear but complex ecosystems, requiring a fundamental reinvention of Supply Chain and

Operations.

Degree of Taylorism/distribution of value creating processes on multiple entities within partner ecosystem

Le

ve

l o

f s

ys

tem

an

d d

ata

in

teg

rati

on

/us

ag

e o

f c

lou

d-b

as

ed

IT

sys

tem

s

Cloud-based

SW platforms

External

systems integration

On-premise

IT systems

Internal

business functions

Collaboration

with partners

Service and

platform-based businesses

The old world: value creation

within entities, on-premise ITTraditionally, creators have been selling products and

services through linear value chains. Companies were

owning a dedicated part of the value chain, competing

with competitors.

The new world: ecosystems

on cloud-enabled platformsDigital ecosystems do not work linearly; they are

shaping market networks and enable hybrid forms

of cooperation and competition: coopetition.

Ecosystems create and serve communities, and

harness their creativity and intelligence. Entities

may play multiple roles in an ecosystem.

CustomersSuppliers

Innovation & Product Lifecycle

Management

Manufacturer

OEM

Finance & Controlling

Sales &

Marketing

Service &

Spare Parts Management

Supply Chain & Operations

Pro-

duction

Ware-

housing

Logis-

tics

Distri-

bution

Order

Mgmt

Plan-

ning

Quality

Mgmt

Mainte-

nance

Sourcing &

Purchasing

Supplier

Customer

Customer

Retail/

consumer

Customer

Con-

nector

SC as

a service

For-

warder

Eng.

contractor

Logistics

contractor

Supplier

Platform-based

business model

SC planning

Supplier mgmt.Risk management

Coopetition

Retail/

consumer

OEM

Contract

manufact.

Engineering

collaborationPLM in the cloud

Co-creation

Com-

petitor

Supply chain of the future

BeyondProcurement leading practices continue to evolve

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Taking flight

► This 10-week rapid assessment has

covered much ground in an

extremely limited amount of time with

106 interviews, 301 ThinkTank

participants and countless reviews.

► This project has been an exercise of

trust from all parties to be both

comprehensive and timely.

► You are now at a key inflection point

with a viable improvement plan, as

well as momentum to take flight.

► We are here to support you in this

journey however you determine

yields the best result.

► Thank you for the opportunity to be

involved in this work.

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Project charters

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Flight plan details: project charters

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Project charter details

► To accelerate HHSC’s future improvement road map plan, we have initiated the

creation of a project charter for each of the 29 recommended Procurement and

Contracting improvement projects.

► Charter legend may be found on the following page.

► Some charters extend over two pages, indicated by (1 of 2) and (2 of 2).

► Each charter is meant to frame the mid-level details for the project but not meant to cover

information such as resourcing, specific time scheduling, precise project targets, project

sponsor, project owner, etc.

► Detailed project plans and Gantt charts will need to be created for each of the project charters.

► HHSC will need to determine a long-term owner for each project in advance of the

project initiation to drive and maintain progress; this is a lesson learned from HHSC.

► A detailed PMO (Project Management Office) will need to be active to keep all

projects in flight and to manage dependencies in the same way an airport control

tower passes information across all active flight plans.

► A governance board has been defined by HHSC and will need to be active and meet

regularly to facilitate decisions.

► Change management and communication are critical to the success of all projects.

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Estimated costs beyond HHSC existing resources:

$: Less than $10,000

$$: Between $10,000 and $100,000

$$$: Between $100,000 and $1,000,000

$$$$: Over $1,000,000

Project duration

Short term: 0–3 months; medium term: 3–9 months

long term: 9 months or greater

Estimated number of project resources: assumes full-time resources who are skilled in the necessary areas needed to complete the project

► FTE = One Full-Time Equivalent who works at least 40 hours per week is dedicated to the particular project.

► FTE resource assumes that individual has key skills and thought leadership to complete projects.

► FTE does not include Subject-Matter Resource (SMR) – subject-matter resources will need to be consulted for every project but are not deemed full time.

Project charter legend

Project overview

Situation: The project is created in response to this finding in the current state/root cause analysis.

Project # XXX Project name This is where the project name will be found.

Project description A short description defining the project is listed here.

Areas of impact 1. Top project impacts are listed here.

2. Top project impacts are listed here.

Project start time Waves 1, 2 or 3

Project duration Short, medium term Ease of implementation (1–5) 3

Estimated costs $$$ Estimated number of project resources 2–4

Affected groups PCS, Program, Legal, Budget/Finance

Project activities

1. Key steps necessary to execute this project, to be used to develop the task level; Gantt charts required for initiation of each project.

2. Key steps necessary to execute this project, to be used to develop the task level; Gantt charts required for initiation of each project.

3. Key steps necessary to execute this project, to be used to develop the task level; Gantt charts required for initiation of each project.

Dependencies: Other road map project dependencies as well as known Agency efforts are listed here if they create dependencies on or to this project.

Ease of implementation ranking legend:

1 = No external support required to implement and drive adoption (1–3 months)

2 = Little external support required to implement; minimal integration and adoption complexity (1–3 months)

3 = External support required to manage, configure/integrate, test, deploy and enable adoption (1–6 months)

4 = External support required to manage, configure/integrate, test, deploy and enable adoption (3–12 months)

5 = External support required to manage, configure/integrate, test, deploy and enable adoption (9+ months)

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Strategic directionDevelop sufficient operating model for the Agency’s dependency on contracting as a critical success factor (1 of 2)

Project overview

Situation: PCS and the Agencies are not aligned with the procurement operating model and existing operating model is not openly confirmed and communicated to all

stakeholders. Misalignment drives inconsistent priorities in people, process, technology and governance within the function.

Project # 1SD Project name Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor

Project description Incorporate PCS into the HHSC strategic plan in a more formal manner that allows it to document and communicate its vision, mission

and purpose. Develop the requisite operating model framework to support the above.

Areas of impact 1. Common alignment of PCS priorities across the Agency’s people, process, technology, governance

2. Balancing of contract load throughout the year

3. Smoothing out impact to all Agency resources

Project state time Wave 1

Project duration Short term Ease of implementation (1–5) 4

Estimated costs $$$ Estimated number of project resources 3–6

Affected groups PCS, Program, Legal, Budget/Finance and indirectly all elements of HHSC

For more information, please see EY Insights on Procurement Operating Model and EY Insights on Procurement Transformation

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Strategic directionDevelop sufficient operating model for the Agency’s dependency on contracting as a critical success factor (2 of 2)

Project overview

Project # 1SD Project name Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor

Project activities

1. Establish an HHSC-wide strategic direction that articulates integrated responsibilities of PCS in the HHSC system.

2. Establish PCS strategic goals as well as a timeline for executing projects toward those goals given all known constraints (people, budget, technical capabilities and workload).

Projects to support strategic contracting include, but are not limited to, spend analysis, contract portfolio review, staff t raining, stakeholder meetings, RFIs, market analyses and

benchmarking.

3. Establish an HHSC procurement planning practice that focuses on identifying major procurement projects from programs during the upcoming fiscal year. The planning process

should engage HHSC management and leadership to approve and accept priorities, goals, projects and approach for alignment prior to execution.

4. Review and update Executive Commissioner vision and goals that span five years and are incorporated in a procurement plan schedule.

5. Establish an operating model that fits both business and finance functions.

► (a) Review current state operating model design future state operating structure and implement road map for transition; (b) define role descriptions and identify potential

resources who will sit in those positions; (c) assess internal resource skill set and align with HR on talent recruitment strategy; (d) clearly define triggers for the creation,

revision and decommissioning of policies vs. procedures, work methods, checklists and quick reference cards (QRC); (e) develop and finalize transition strategy for FTEs;

(f) finalize and announce vision, mission and operating guidelines; (g) develop change management strategy to effectively communicate to stakeholders and transition from

current to future state; (h) create central Shared Services business case and develop Shared Services strategy across the HHSC system; (i) design Shared Services

management, pricing, service level agreements/support service agreements, governance and organization; (j) design, develop and conduct training; (k) transition from

current state to interim state; (l) transition from interim state to future state; and (m) standardize procurement policy definitions and socialize across PCS and

Program/Agencies.

6. Enable review of key functional areas of operating model not captured throughout other project areas.

► Functional areas of review: (a) information management, (b) commercial excellence, (c) supplier portal gateway, (d) buying channels, (e) buying assistance, (f) invoice and

payment.

► Review existing projects areas and determine whether the timing of project start and end will meet the operating model needs. If needs are not meet, reexamine whether

project area start and end time adjustments can take place: (a) governance, (b) people, (c) supplier relationship management, (d) source to contract, (e) strategy.

7. Review strategic plan, operating model, vision and mission with the Governor’s office, Legislative Budget Board (LBB) and legislature.

Dependencies: 6PO: Create a fit-for-purpose organization design for PCS, 19PO: Establish a comprehensive communication framework

For more information, please see EY Insights on Procurement Operating Model and EY Insights on Procurement Transformation.

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Strategic directionConduct data cleansing

Project overview

Situation: Historical data within CAPPS, SCOR, Budget/Finance is not standardized or consistently populated.

Project # 2SD Project name Conduct data cleansing

Project description Conduct data cleansing exercise across the organization to improve data integrity and accuracy.

Areas of impact

1. Improved data integrity and transparency

2. Improved data accuracy will make leadership more informed and enable better decision-making

3. Increased visibility into the Agency’s performance

Project start time Waves 1–2

Project duration Medium term Ease of implementation (1–5) 3

Estimated costs $$$ Estimated number of project resources 2–4

Affected groups PCS, Program, Legal, Budget/Finance

Project activities

1. Perform data profiling and identify gaps in required fields.

2. Define approach to address gaps.

3. Work with cross-functional teams to collect data and address gaps.

4. Develop data cleansing road map.

5. Conduct comprehensive data cleanup to improve data integrity in CAPPS and SCOR. This should include correction of legacy data and known data entry errors for all records

created in SCOR and CAPPS.

6. Establish a program for ongoing monitoring of data quality.

7. Utilize data to drive Agency procurement, contract management, contract monitoring and executive leadership decision-making.

Dependencies: 9TE: Resolve immediate CAPPS needs

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Procurement operating model

Proprietary and confidential

► The procurement vision, objectives,

strategies and performance scorecard is documented, communicated and understood across the business

► A procurement policy is documented and communicated An organisation wide

procurement plan is in place which covers spend, project, performance targets and people, process and technology initiatives

Quarterly and annual procurement reports inform strategy and drive continuous

improvement

Strategy

► Portal as a single point of entry into the

source to Pay landscape► Customer satisfaction with buying channels

Customer Portal Gateway

► Demand is profited and optimised

► Market analysis provides insight for strategy► Sourcing considerations define ‘go to

market’

► Contract models are aligned with category► Tendering and evaluation are streamlined

► Best case scenario led negotiations deliver greater value

► Contract management plans are in place

prior to contract award► Contracts meet all legal and statutory

requirements

Source to Contract

► Service model for procurement provides

sourcing & admin support to allow focus on strategic category & supplier management

Buying Assistance

► Central and operational bodies

► Delegations reflect value, risk and capability

► Performance management regularly

reviewed► Risk and compliance monitored

Governance

► A clear link between strategy and operations

exists► Structures reflect categories and markets► Roles and responsibilities are defined

► Capability and capacity known► Recruitment and retention aligned

People and Organization

► Spend map in place on customer, spend,

categories and suppliers by Pareto► Information is captured, analysed,

shared, reported and reviewed

► Performance KPIs are SMART and ► Information is real time and informs

management decision making

Information management

► Portal as a single point of entry for P2P

landscape► Supplier satisfaction with portal

Supplier Portal Gateway

► Suppliers are segmented based on

impact and complexity► Relationships are established based on

strategic, management and operational

requirements► SRM aligns with the procurement

governance model► Contract performance management is

standardised by supplier segment and

used to drive value► Governance and financial stability health

checks are performed for high risk high value suppliers

► Recognition and reward mechanisms in

place to drive additional value► Collaboration valued and planned

Supplier Relationship Management

► Paperless invoicing and payment

► Balance between world class efficiency and effectiveness giving best value for money

► Optimised invoice solutions additional methods

including (PO-flip and Self-Bill)

Invoice and Payment

► Categories are aligned to buying channel

► Buying channels align to category managers and governance model

► Goods, services and assets are visible for

both type and price► Information management requirements are

embedded

Buying Channels

Commercial Excellence

► Strategic Sourcing

► Negotiation tools and templates► Market Indexes

eProcurement systems

Information management & reporting

Strategy

Governance & Risk Management

People and Organization

Procure to pay processes

Governance. Process model Technology model

Supplier website

eRequisition

ERP

Managed service provider

Category specific solution

Purchase card

Travel & expense

Recurring payment

Cu

sto

me

r p

ort

al

Ca

teg

ory

Ma

na

ge

me

nt

&

So

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ing

Su

pp

lier p

orta

l

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e p

roc

es

sin

g &

pa

ym

en

t

Buying channels

Cu

sto

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lier

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ive

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“H

UB

” &

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t

Supplier MgmtSourcing Enablement

Co

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ac

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cle

Ma

na

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me

nt

People

Procurement Operating Model

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Strategic directionEnhance policies governing key business components

Project overview

Situation: Constant change in management priorities drove suboptimal policies with frequent revision. HHSC needs clarity.

Project # 18SD Project name Enhance policies governing key business components

Project description Align capacities to manage policies governing key components of the business (to support efforts of Chief Policy Officer).

Areas of impact1. Engagement with programs and other non-PCS stakeholders around process changes and the impacts of those changes across

HHSC

2. Elimination of workarounds used due to misinformation

Project start time Wave 2

Project duration Medium term Ease of implementation (1–5) 2

Estimated costs $$$ Estimated number of project resources 2–3

Affected groups PCS, Program, Legal, Budget/Finance

Project activities

1. Establish policy governance framework.

► Create a centralized policy owner/group: (a) identify policy owner/group; (b) define roles and responsibilities; (c) clearly define triggers for the creation, revision and

decommissioning of policies vs. procedures, work methods, checklists and quick reference cards (QRC); (d) establish standardized policy creation/review process; (e)

define ownership of policies, including key stakeholders and end users; (f) determine appropriate levels of review and approval of policy documents; and (g) develop and

outline mandated review periods.

2. Align policy library.

► Create inventory of policies needed and revise/create policies as needed for all relevant areas. Key work steps include (a) prioritize policies to be created; (b) identify key

stakeholders and form working groups; (c) draft policy; (d) circulate policy among stakeholders and end users for feedback; and (e) finalize and approve policy.

3. Create a formalized policy numbering system.

► Identify a numbering structure organized by compliance topic or other logical structure.

4. Develop how to educate and communicate policies.

► Create a formal policy deployment mechanism and governance process. Key work steps include (a) create intranet site or other policy platform that is accessible to all

users; (b) develop standard communication for new policies issued or revised policies; and (c) hold education/training session (as needed).

5. Update policies to safeguard compliance with state requirements or administrative rules.

► (a) Identify technical guidance and references; (b) prepare examples; and (c) identify policy owner/contact.

6. Conduct federal and state laws, rules and regulations and HHSC policies compliance assessment.

► Examine risk-based sample or population to identify potential issues or trends in areas, including, but not limited to, timing requirements, contractor screening and

compensation, cost estimate preparation, vendor performance tracking, signature authority and required disclosures.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 19PO: Establ ish a comprehensive communication

framework, 28PO: Create an employee engagement plan, 11PP: Update and refine procurement and contract management manuals, 22PP: Redesign procurement end-to-end

process, 13GR: Strengthen compliance monitoring processes and controls

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People and organization Create a fit-for-purpose organization design for PCS (1 of 2)

Project overview

Situation: Unclear roles and responsibilities coupled with undefined KPIs and job openings keep the organization from being structured appropriately. Workload inconsistent; staff

doing tasks for which they don’t have the competencies; oversight of contract quality inconsistent inhabiting effectiveness, compliance and efficiency.

Project # 6PO Project name: Create a fit-for-purpose organization design for PCS

Project descriptionDevelop an improved organization design for PCS by helping to define roles and responsibilities, balance workloads and staffing, create a function to

oversee contract compliance and create a formal liaison process.

Areas of impact

1. Employees will gain clarity to responsibilities and clear accountability. This will help identify job/role gaps and eliminate redundancies. It will also be

a key component of a communication plan.

2. Clarity of roles and responsibilities will strengthen job descriptions, which would help with recruiting.

3. Finally, clear roles and responsibilities will allow those responsible for training to determine – by newly defined roles – which skills will need to be

strengthened or remediated.

4. PCS will have clear communication channels, reducing inefficiencies and enabling leadership to better manage resources and workloads.

5. Reduced span of control leading to greater supervisor support; workloads will be right-sized, which will help with employee retention.

Project start time Waves 1–2

Project duration Medium term Ease of implementation (1–5) 4

Estimated costs $$$ Estimated number of project resources 6–8

Affected groups: All of PCS

For more information, please see EY Insights on People & Organization.

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People and organization Create a fit-for-purpose organization design for PCS (2 of 2)

Project overview

Project # 6PO Project name: Create a fit-for-purpose organization design for PCS

Project activities

1. Compare current organizational chart to function realignment model and operating model project decisions.

► Review the functional realignment model (following) as compared with the current organizational model of PCS to finalize target future state and identify short-term

realignment opportunities.

2. Create a detailed, task-level RACI for major work streams/tasks within PCS and their association through the Agency.

► The RACI will clarify who is Responsible, Accountable, Consulted and Informed related to key work streams and tasks within PCS. The RACI will include key PCS work

streams. While many of those responsible are located within PCS, there will be instances where those who are consulted or informed are within HR, Programs,

Budget/Finance or Legal.

3. Perform a work inventory of PCS individuals. Use the results of this inventory to reorganize the function based on core tasks .

► Given turnover and change, many individuals indicated that the guidance on position responsibilities is loose, and given overtasking there were multiple instances of

individuals taking on tasks because there were not enough individuals to complete work. A work inventory should be completed to determine workload, core competencies

and tasks for work reallocation.

4. Demand forecasting (people)

► Conduct forecasting exercise to compare anticipated workloads with staffing plan. Focus on creating balanced workloads.

5. Redefine roles and responsibilities in individual position descriptions.

► Clarify responsibility and level of authority for all procurement-related staff. These should both comply with statute and enable staff to execute their duties efficiently.

Establish performance measures (KPIs) for staff within position descriptions.

6. Refine PCS organizational chart.

► Based on redefined roles and responsibilities, an updated RACI, the work inventory, skill realignment, span of control and demand forecasting, refine and tailor the PCS

organization structure.

7. Skill realignment.

► Once the organizational model is redesigned, align employees against skills needed for current and future roles.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 19PO: Establish a comprehensive communication

framework

For more information, please see EY Insights on People & Organization.

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People and organizationEstablish a comprehensive communication framework

Project overview

Situation: Currently, procurement-related communications are not actively and comprehensively planned and managed. Communication is unstructured, inconsistent and not

properly cascaded. This has led to knowledge gaps for key roles, a systematic lack of end-user engagement, and the inability to create a culture of cooperation and collaboration.

For instance, one program noted having discontinued the use of the digital signature tool for certain processes where it was no longer required because notice was given in a

meeting, but not documented or cascaded.

Project # 19PO Project name Establish a comprehensive communication framework

Project description Create a comprehensive and sustainable communication framework and plan for PCS to disseminate information both internally and externally.

Areas of impact

1. Clear communications allow for all updates to policies and procedures to be properly disseminated throughout the organization.

2. Version control is actively managed to instill clarity and compliance.

3. Clearly identified point of contact for managing content to help employees stay informed, reduce confusion and Align compliance.

Project start time Wave 2

Project duration Short term Ease of implementation (1–5) 2

Estimated costs $$$ Estimated number of project resources 2–3

Affected groups: Primarily PCS, but all groups within HHSC could be recipients of communications or invited to key meetings (Agency-wide)

Project activities

1. Develop comprehensive PCS communication framework and plan to include the following:

► Define and establish a plan and framework by identifying the best methods (email, CAPPS, SharePoint, newsletters, social media, etc.) to deliver timely and useful

information such as policy/procedure changes, procurement planning efforts and sharing of ideas.

► Communication plan categories would include audience, message, delivery vehicle, frequency, timing, responsibility, feedback mechanism and repository.

► Ensure status reports through CAPPS are accessible to all necessary stakeholders or establish a forum to share these reports on a recurring basis (i.e., exported Excel

report for requisition status published to SharePoint every two weeks).

► Create a process to monitor statewide contract changes via available communication tools through CPA/DIR (GovDelivery, TxSmartBuy home page, CPA purchasing web

page, DIR contracts web page), identify an owner of this responsibility and choose a forum to disseminate the information to programs (email, SharePoint, newsletter).

2. Create meeting schedule to include the following:

► Creation of meeting schedule so that all needed meetings are on the calendar of events (weekly, monthly, quarterly).

► Create a process to take, synthesize, and distribute notes and outcomes from the meeting to the appropriate distribution list as determined by the RACI development in

project 2PO.

► The meeting schedule and outputs would be included in the comprehensive communication plan.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 6PO: Create a fit-for-purpose organization design

for PCS, 28PO: Create an employee engagement plan

For more information, please see EY Insights on People & Organization.

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People and organizationDevelop comprehensive training programs

Project overview

Situation: Although limited training has been provided to PCS employees, a formal training strategy, plan and program have not been deve loped or provided to procurement staff.

Training programs are generally insufficient, and there is limited designated support resources to provide compliance and technical guidance.

Project # 20PO Project name: Develop comprehensive training programs

Project description Develop a formal training strategy and robust onboarding and ongoing development programs to support PCS staff.

Areas of impact

1. Employees will feel less frustrated and complete their tasks more efficiently and with higher accuracy.

2. Standardization and efficiencies across processes and procedures can be achieved.

3. The organization will be able to maintain compliance consistently.

4. This will help drive retention.

Project start time Wave 2

Project duration Medium term Ease of implementation (1–5) 5

Estimated costs $$$ Estimated number of project resources 3–5

Affected groups: PCS or any Agency roles that will require training on new governance, tools or process (e.g., contract management).

Project activities

1. Develop a training model that identifies critical procurement and contract management training course needs.

2. Develop a training program to establish critical procurement and contract management capabilities.

► The program would leverage leading practices and use of technology tools. A formal technical training program is particularly important when there is no backup for key

roles and/or there is high turnover or heavy hiring cycles. Without consistent curriculum updates and predictable training delivery schedules, it is not possible to achieve skill

standardization.

3. Develop an HHSC training program that is aligned with new policies, procedures and processes. The program should be developed to provide staff involved in the procurement

and contract management processes with the competencies necessary to complete their respective role/function in the process. Key items include:

► (a) Develop the high learning objectives for personnel and getting clarity of the scope of the training required; (b) understand the detailed training needs (competencies) of

all personnel; (c) develop content with an HHSC wrapper, training schedule creation and business engagement to book people into training; (d) develop a training delivery

model consistent to competency mapping; (e) report the number of people who have been trained and what they have been trainedon; and (f) tie competency development

back to role KPIs.

4. Staff performing contracting duties are properly certified according to state requirements:

► Confirm HHSC is compliant with state requirements for performing procurement and contracting functions. HHSC should perform a review of all program staff identified as

performing said functions so that they are all properly trained and certified according to state requirements, and if not, help ensure they have proper supervision to perform

said tasks. Also, review system access and capabilities to help ensure they are aligned properly to certifications.

5. Onboarding:

► Create formal onboarding process for new hires that will help ensure a buddy system and proper role training specific to PCS.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 6PO: Create a fit-for-purpose organization design

for PCS, 19PO: Establish a comprehensive communication framework, 11PP: Update and refine procurement and contract management manuals, 22PP: Redesign procurement

end-to-end process, 4IM: Expand upon the program liaison process, 8TE: Conduct comprehensive CAPPS and SCOR training

For more information, please see EY Insights on People & Organization.

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People and organization Create an employee engagement plan

Project overview

Situation: Good performance and success are rewarded much less frequently than bad behavior and failure are punished. This significantly impacts morale and prevents

employees from feeling empowered and engaged. Given the preexisting fear culture in PCS, action is warranted.

Project # 28PO Project name Create an employee engagement plan

Project description Develop an employee engagement plan to improve trust and develop a continuous learning culture within PCS.

Areas of impact1. Reduce fear, cultivate talent, reward good work, build trust between PCS and Program, clarity on responsibility

2. Addressing engagement and other culture-related issues will be key to improving morale, productivity, and talent retention

Project start time Wave 3

Project duration Short term Ease of implementation (1–5) 3

Estimated costs $$$ Estimated number of project resources 2–3

Affected groups: All of PCS

Project activities

1. Create continuous development culture.

► Develop and deliver a purpose-led leadership course and high performing teams course for the PCS leadership team. These two courses are designed to create alignment

on what a positive work culture should look like and how to best achieve one.

2. Culture change, employee engagement program.

► Analyze the PCS results from the HHSC SEE report. Develop a step-by-step plan to address the lowest scoring factors with the largest impact. Track improvements on

those factors on the next HHSC SEE report.

► Create team-building and/or workshop activities for groups for which it would be beneficial. This could include (but is not limited to) workshops that allow all parties a

statement in the development of a new operating model; bringing in a third-party team-building facilitator; and taking “field trips” to operating facilities, program areas, PCS,

etc., to align the groups around the true purpose of each other’s responsibility and mission.

3. Develop employee incentive program.

► Develop an employee engagement program that offers incentives for high performers. The incentives should be a combination of financial and nonfinancial benefits (time

off, preferred parking, flexible schedules, etc.).

4. Connect to purpose.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor , 19PO: Establish a comprehensive communication

framework, 20PO Develop comprehensive training programs

For more information, please see EY Insights on People & Organization.

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Portfolio managementStandardize contract management and monitoring practices across HHSC

Project overview

Situation: As a consequence of transformation, the approach to contract management and monitoring at HHSC has not been unified into a standardized set of policy, practice and

process guidance for programs to utilize. More recently, HHSC policy and guidance on contract management and monitoring pract ices and processes have not been updated and

aligned to the state guidance on contract management. As such, contract management and monitoring practices vary dramatically by program.

Project # 17PM Project name: Standardize contract management and monitoring practices across HHSC

Project description

Identify, develop and document fit-for-purpose business processes for contract administration and oversight in order to develop contract management

best practices guidance that provides a framework to standardize contract management and monitoring processes and practices for the enterprise.

The guidance should provide practical suggestions as well as best practices to improve Agency contracting practices; assist contract managers in

leveraging technology, metrics, training and lessons learned for the purpose of minimizing project risks; and clearly define roles and responsibilities of

all players in the process.

Areas of impact

1. Creates standardized practices for contract management and monitoring for consistent practices enterprise-wide.

2. Establishes clear guidance regarding roles and responsibilities in managing contract relationships to successful outcomes.

3. Establishes and enforces process that drives consistency, controls and quality.

4. Provides guidance on best practices for management of contracts and vendor relationships.

5. Establishes consistent, risk-based reviews and controls.

6. Improves professionalism of contract and vendor management.

7. Identifies and unifies disparate policies into a cohesive process “how to” document.

8. Ensures adherence to state and federal requirements.

Project start time Waves 1–2

Project duration Medium term Ease of implementation (1–5) 4

Estimated costs $$$ Estimated number of project resources 2–3

Affected groups All

Project activities

1. Work with stakeholders to map current contract management life cycle and processes.

2. Work with stakeholders to tailor processes and develop future state process maps.

3. Identify and document roles, responsibilities and expectations for all actors in the contract management life cycle processes .

4. Develop content to update and tailor the procurement and contract management manual.

5. Review and tailor Agency administrative rule for consistency and compliance.

6. Develop a training model based on the manual that identifies contract management training course needs. Ensure training addresses the need to improve Agency contract

manager/developer SOW creation competencies.

7. Develop training course content based on model that is aligned to manual content.

8. Deliver training to staff responsible for contract management processes to improve competencies.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 19PO: Establ ish a comprehensive communication

framework, 17PM: Standardize contract management and monitoring practices across HHS, 11PP: Update and refine procurement and contract management manuals, 13GR:

Strengthen compliance monitoring processes and controls, 16GR: Perform procurement and contract risk assessment, 7PE: Performance management practice

For more information, please see EY Insights on Procurement Transformation.

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Portfolio managementDevelop procurement spend analysis practice (1 of 2)

Project overview

Situation: PCS does not currently utilize data to help it to identify and execute strategic contracting opportunities for the Agency. This coupled with the current limitations in data

integrity, accuracy and access lead to a need to establish a consistent methodology and practice for spend analysis at the Agency to support improved data-driven decision-making

regarding procurement activities.

Project # 26PM Project name: Develop procurement spend analysis practice

Project description

PCS should establish a strategy and associated practices related to employing portfolio and spend management practices appropriate for a large

agency operating within state-level master contracts and individual agency purchases to help ensure the Commission is receiving maximum

economies of scale.

Areas of impact

1. Develops the capacity and capabilities of key staff in topics necessary for PCS to begin turning toward a more strategic, data-driven approach to

contracting.

2. Ability to identify broader enterprise needs that can help to reduce workload on PCS over time.

3. Improves quality of system data to improve overall ability to perform spend analyses.

4. Establishes a standardized practice for strategic contracting, including supporting tools and templates.

5. Identifies hard-dollar savings opportunities to inform future sourcing and budgeting decisions.

Project start time Wave 2

Project duration Medium term Ease of implementation (1–5) 3

Estimated costs $$$ Estimated number of project resources 3–4

Affected groups PCS, Program, IT, Budget/Finance, Data Projects

For more information, please see EY Insights on Procurement Transformation.

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Project overview

Project # 26PM Project name: Develop procurement spend analysis practice

Project activities

1. Establish a standard commodity code category taxonomy for use in performing spend analyses.

2. Run a report of spend for a past FY from the system and perform a baseline spend analysis .

► Cleanse and streamline data files.

► Validate applicable data files for completeness and accuracy (match against taxonomy).

► Identify key data elements that inform spend analysis and develop and deliver guidance and training to procurement and program staff to improve data accuracy and the

ability to perform spend analysis.

3. Seek to identify a means to capture the required data elements (such as inclusion of contract ID) either as a system improvement or through other means.

4. Research topics and develop training for PCS staff on spend analysis that includes active participation to practice topics di scussed.

5. Conduct training with chosen staff.

6. Establish processes for reviewing, reporting and acting upon strategic sourcing activities.

7. Develop templates for category reports and opportunity assessments and other tools and templates as identified to support strategic sourcing practices.

8. Work with trained staff to identify tangible project opportunities that can be worked using the topics learned.

9. Work identified opportunities through the process, supported by PCS management.

10. Execute projects through development of category reports and opportunity assessments and, if possible, solicitations and establishment of enterprise strategic contracts.

Dependencies: 1SD: Performance management practice, 2SD: Conduct data cleansing

Portfolio managementDevelop procurement spend analysis practice (2 of 2)

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Portfolio managementEstablish a vendor outreach program (1 of 2)

Project overview

Situation:

► Hindering communication and engagement throughout procurement planning and contracting hampers meaningful outcomes for complex, high-risk contracts. This limits vendor

input because a new vendor is more challenged in its ability to communicate emerging practices or unique products or services that the vendor may be able to offer the state

agency.

► Agency vendor management policies and practices reflect unnecessarily limited vendor interaction that is not aligned with sta tewide guidance that creates collaboration

opportunities. For example, TGC 2155.081 directs the CPA to establish a vendor advisory community to provide input into state procurement practices and serve as a channel

of communication among the vendor community.

Project # 27PM Project name: Establish a vendor outreach program

Project description

The vendor outreach program will create a framework for structured engagement between HHSC system procurement and program personnel and the

vendor community. The project establishes policies and implements practices that strengthen accountability, transparency and uniformity in vendor

interaction, communication, collaboration and management. This project comprises two phases, with the development of a preliminary schedule for

outreach events based on review of the HHSC System Strategic Procurement Plan.

Areas of impact

Through structured outreach, HHSC procurement and program staff and vendor community collaboration will:

1. Provide a forum for education and insight into emerging technologies and practices for HHSC program and procurement staff.

2. Support HHSC procurement professionals in their market research and analysis.

3. Update the vendor community on future program developments and procurements.

4. Enable a consistent and transparent approach to sharing HHSC program requirements, schedule and other procurement planning considerations.

5. Provide a forum for potential contractors to network with potential subcontractors, subconsultants and the small business community for upcoming

procurements.

Project start time Waves 2–3

Project duration Long term Ease of implementation (1–5) 4

Estimated costs $$$ Estimated number of project resources 3–4

Affected groups PCS, HHSC Policy Office, HHSC Program and Contract Managers

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Portfolio managementEstablish a vendor outreach program (2 of 2)

Project overview

Project # 27PM Project name: Establish a vendor outreach program

Project activities

Identify and assign a resource responsible for implementing and administering the vendor outreach program.

1. Create a project plan, identifying resources, responsibilities, schedule, tasks and deliverables to complete development of the program.

2. Conduct policy reviews to identify opportunities to establish a constructive vendor engagement framework:

► Review and revise Agency policy regarding interaction with vendors, including vendors under current contracts. (Complete, HHSC Vendor Interaction Policy, effective 1

September 2018.)

► Review and revise Agency policy regarding vendor notification within a procurement event (Policy 571).

► Review and refresh HHSC guidelines for engaging vendors prior to a formal solicitation process for alignment with other vendor policies (Policy 793).

► Review other applicable policy.

► Incorporate all policy guidance regarding vendor relationship management by reference into the consolidated contract and procurement manual (refer to update/refine

procurement and contract management manuals project).

3. Develop and publish parameters of the program and procedures for vendor engagement, tailored to the nature of the procurement , and communicate procedures to program

staff and the vendor community.

4. Plan and incorporate procurement or category-specific webinars, video conferences, telephone conferences or other methods in ongoing market research activities

(short/medium term).

5. Review HHSC system strategic procurement plan to preplan industry days for vendors to showcase skills and strengths regarding specific planned procurements (medium/long

term).

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 19PO: Establ ish a comprehensive communication

framework, 17PM: Standardize contract management and monitoring practices across HHS, 13GR: Strengthen compliance monitoring processes and controls, 16GR: Perform

procurement and contract risk assessment, 4IM: Expand upon the program liaison process

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Procure to payUpdate and refine procurement and contract management manuals

Project overview

Situation: Processes are often inconsistent across similar requisitions, causing inefficiencies and increasing errors and noncompliance; workarounds are prevalent in part because

of lack of knowledge. Current manuals are more than two years old and have not been updated with current information, including no specificity to HHSC procedures which drives

audit exposure

Project # 11PP Project name Update and refine procurement and contract management manuals

Project description

Update and refine procurement and contract management manuals and identify administrative rule requirements for a consistent and

compliant practice. Short-term requirement is to bring manuals to current state to achieve audit requirements. Long term, project will

include an updated manual based upon new procurement processes.

Areas of impact1. Increase compliance during the process of creating requisitions.

2. Team members are following the same process to reduce process variations and workarounds.

Project start time Waves 1–2

Project duration Medium term Ease of implementation (1–5) 4

Estimated costs $$$ Estimated number of project resources 2–4

Affected groups All/Agency-wide

Project activities

Short term

1. Review current procurement and contract manuals, process maps and supporting documentation, including checklists, work methods and quick reference cards (QRCs)

designed for PCS and Program, excluding comprehensive policy review referenced in a separate project charter.

2. Confirm compliance of federal and state laws/regulations are met within the procedures of the manual.

3. Update and validate process maps (Level 5 detailed Visio mapping, with interaction between all functions and technology) for all procurement processes at HHSC.

4. Create compliant manual, develop communication strategy for planned manual releases and communicate plan to affected PCS and Program business areas.

5. Remove existing manual.

Long term

1. Repeat steps 1–5 from short term in parallel with project 17PM, “Standardize contract management and monitoring practices across HHSC” so that the manual can be updated

and unified, along with 19PO, “Establish a comprehensive communication framework.”

2. Organize content to create best practice in procurement life cycle approach.

3. Consolidate procurement and contract management manuals into one.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 6PO: Create a fit-for-purpose organization design

for PCS, 19PO: Establish a comprehensive communication framework, 17PM: Standardize contract management and monitoring practi ces across HHS, 22PP: Redesign

procurement end-to-end process, 13GR: Strengthen compliance monitoring processes and controls

For more information, please see EY Insights on Policies.

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Procure to payEnhance PCS forms, contract tools and contract templates related to procure to pay process

Project overview

Situation: Processes are often not written to support a large organization, limiting opportunities for economies of scale and optimization improvements. PCS and program have

different templates that are created outside of CAPPS that are then imported into CAPPS. Some forms may have the ability to be created inside CAPPS.

Project # 12PP Project name Enhance PCS forms, contract tools and contract templates related to procure to pay process

Project descriptionDevelop and/or refine PCS forms, contract tools and contract templates that are aligned with the revised manual to facilitate efficient and

effective procurement life cycle processes and compliance with state-required processes.

Areas of impact1. Compliance with state-required processes.

2. Increase efficiency with which a requisition completes the procure to pay process.

Project start time Waves 1–2

Project duration Medium term Ease of implementation (1–5) 4

Estimated costs $$$ Estimated number of project resources 2–4

Affected groups All/Agency-wide

Project activities

1. Survey program and PCS staff to identify and catalog existing procurement and contract management and monitoring-related templates, forms, checklists or other supporting

tools used to expedite procurement processes.

2. Review revised HHSC procurement and contract management manual to identify and catalog additional new tools and templates necessary to support efficient procurement

and contract management processes.

3. Assess catalogued tools and templates to determine need for development or revision.

4. Develop a responsibility matrix assigning appropriate staff to complete development/revisions.

5. Develop new and update existing tools and templates as identified. Consider ability to develop and/or implement the tools/templates in technology systems where possible.

6. Determine necessary changes to the technology system; delete the bad templates by working with the CAPPS PCS team and interviewing PCS and program on the business

and function needs.

7. Implement new/updated tools and templates upon approval.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 6PO: Create a fit-for-purpose organization design

for PCS, 19PO: Establish a comprehensive communication framework, 17PM: Standardize contract management and monitoring practi ces across HHS, 11PP: Update and refine

procurement and contract management manuals, 22PP: Redesign procurement end-to-end process, 13GR: Strengthen compliance monitoring processes and controls, 9TE:

Resolve immediate CAPPS needs

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Procure to payRedesign procurement end-to-end process (1 of 2)

Project overview

Situation: Due to significant changes in procurement-related organization, roles, responsibilities, policies and processes that will be put in place in light of this report, it will be

necessary for PCS to establish a consistent procure to pay process so that current SOPs are tailored to align with changes as they are implemented.

Project # 22PP Project name Redesign procurement end-to-end process

Project descriptionBuild a standard, repeatable process for identification, review and optimization of PCS as procurement-related changes are implemented

at HHSC to remain aligned to implemented policies, processes, technology and organization.

Areas of impact

1. A document that includes end-to-end process flows and interactions, including planning and forecasting, along with the business

needs and the functions within PCS and program/Agencies.

2. Procurement transactions would be processed uniformly across the Agency.

3. Facilitate onboarding of new hires to provide material for them to follow to execute their new duties.

4. Increased compliance with laws and regulations.

Project start time Wave 2

Project duration Medium term Ease of implementation (1–5) 4

Estimated costs $$$ Estimated number of project resources 3–5

Affected groups PCS, Program, Legal, Budget/Finance

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Procure to payRedesign procurement end-to-end process (2 of 2)

Project overview

Project # 22PP Project name Review and tailor PCS internal SOPs

Project activities

Build a robust process and control framework through documentation of SOPs and drive implementation through training for PCS and the program. SOPs should include:

1. Catalog all existing internal PCS SOPs for easy identification.

2. Compile all SOPs into a PCS desk guide folder available to staff to improve standardization and work quality.

3. Identify and review impacted SOPs.

4. Design detailed to-be processes, including templates, to address areas of improvement identified – including streamlined governance and control.

5. Define interventions required for improved utilization along with incremental HHSC development.

6. Define KPIs for subprocesses; define baseline for KPIs identified.

7. Develop implementation plan for process improvement, including change management initiatives.

8. Develop business case for implementation, including targeted improvement on process KPIs and monitoring mechanism.

9. Obtain sign-off on to-be design, business case and implementation plan.

10. Identify pilot projects for implementation.

11. Conduct process improvement workshops to communicate to-be design to designated role holders.

12. Roll out to-be design to pilot projects; monitor development of improvements.

13. Monitor progression in KPIs, highlight risks/issues; obtain approval on resolution/mitigation; conduct change management workshops.

14. Identify and document an agreed-upon review schedule.

15. Consider more frequent reviews during project implementation (recommend including as a key component of all implementation project plans).

16. Consider a less frequent, but consistent review period following project implementation that is aligned with state policy development processes.

17. Perform reviews in accordance with agreed-upon schedule.

18. Collate learnings from pilot implementation; discuss and obtain approval from Steering Committee on proposed design changes.

19. Incorporate change in to-be design post-approval; roll out updated to-be design across all HHSC.

20. Monitor benefits realization.

21. Help ensure SOPs are updated and maintained in the PCS desk guide folder upon revision.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 6PO: Create a fit-for-purpose organization design

for PCS, 19PO: Establish a comprehensive communication framework, 11PP: Update and refine procurement and contract management manuals, 9TE: Resolve immediate CAPPS

needs, 7PE: Performance management practice

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Complex servicesEnhance complex services process

Project overview

Situation: Lack of documentation standardization, evaluation process that does not meet the needs of the Agency.

Project # 23PP Project name Enhance complex services process

Project description Establish and document policies, processes and templates for the development and documentation of a complex solicitation.

Areas of impact

1. Standardized approach to complex procurements and contracts.

2. Speed with which a procurement is completed as templates are based off frequently used procurement types.

3. Increased confidence that procurements are being completed in compliance with state and Agency policies.

Project start time Waves 2–3

Project duration Medium term Ease of implementation (1–5) 3

Estimated costs $$$ Estimated number of project resources 4–6

Affected groups Program, PCS

Project activities

1. Establish and document policies, processes and templates for the development and documentation of an evaluation plan for all complex solicitations detailing the processes

and other relevant aspects of the evaluation that must be drafted prior to posting of the solicitation and finalized and approved prior to receipt of supplier responses.

2. Establish and document policies, processes and templates for the development and documentation of a strategy plan for all complex solicitations that captures all planning

documentation and decisions made, including the specifications/SOW, in preparation for solicitation development activities.

3. Leverage the procure to pay process to create a standardized process for creation and life cycle management of complex procurements.

4. Determine and adhere to standard skill set and competencies determined for complex services buyers and contract managers.

5. Develop modular solicitation templates that include improved contractual performance language, monitoring and compliance with contract execution.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 19PO: Establish a comprehensive communication

framework.

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Governance and risk managementStrengthen compliance monitoring processes and controls

Project overview

Situation: Inconsistencies in compliance processes were noted both during the current state assessment and identified in previously issued audit reports. A methodical approach to

addressing these issues will increase confidence in the integrity of the process and reduce the risk of control failures and repeated audit findings.

Project # 13GR Project name Strengthen compliance monitoring processes and controls

Project description Incorporate additional rigor into review and audit processes to improve enforcement and consistency of compliance.

Areas of impact

1. Greater consistency and alignment of organizational structure, authorities and responsibilities with business goals.

2. Reduced risk of conflicts of interest and potential impropriety.

3. Fewer audit findings and reduced scrutiny by third parties.

Project start time Waves 1–2

Project duration Medium term Ease of implementation (1–5) 4

Estimated costs $$$$ Estimated number of project resources 8–12

Affected groups CQC and PCS

Project activities

1. Review current standard operating procedures for RFAs and establish policies, procedures and controls so that they are only used when allowed by law.

2. Improve process for identifying and evaluating potential conflicts of interest and establish mitigation policies, procedures and controls.

3. Complete policy updates related to SB 20 and related legislation (e.g., cost estimates, best value determination, enhanced co ntract monitoring, posting of solicitations,

American Steel rule, and collection and reporting requirements).

4. Ensure that Texas Administrative Code related to HHSC Procurement and Contracting is updated and aligned with policies and procedures.

5. Identify and document reporting needs that support improved tracking of data related to HUB participation and monitoring of contract compliance items related to the use of

HUB vendors.

6. Review and update purchasing procedures, checklists and file management to improve document retention and accountability.

7. Perform a segregation of duties analysis regarding roles and duties and establish an aligned policy.

8. Assess adherence to data use agreements on contracts and revise procedures as needed.

9. Review contractor screening and onboarding processes for improvement opportunities.

10. Complete updates as needed for compliance on all task and activities related to audit compliance.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 6PO: PCS organization redesign, 11PP:

Procurement and contract management manuals

For more information, please see EY Insights on Risk Management and EY Insights on Policies.

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Governance and risk managementAlign processes for managing reports to governing entities outside of HHSC

Project overview

Situation: Processes and controls for identifying and coordinating reporting to third-party governance entities is not defined and may lead to inaccurate or

noncompliant external reporting, resulting in unnecessary rework and loss of confidence in reports provided to third parties to HHSC.

Project # 14GR Project name Align processes for managing reports to governing entities outside of HHSC

Project description

Identify, develop and document tailored business and governance review processes related to the function of external reporting

requirements related to procurement, contract management and vendor performance for the Agency. Establish a role responsible for

identifying and managing governance processes helping ensure all external reporting requirements of the Agency are being met.

Areas of impact

1. A formal review and approval process for better reporting delivered to governing agencies outside of HHSC (QAT, HUB, CPA, LBB,

DIR, federal counterparts, etc.).

2. A coordinated response to required external reporting, resulting in better compliance and accuracy, less rework and improved

confidence in HHSC’s reporting process by third-party governance entities.

Project start time Waves 1–2

Project duration Medium term Ease of implementation (1–5) 2

Estimated costs $$ Estimated number of project resources 2–6

Affected groups All

Project activities

1. Identify a role at the Agency to manage the function of tracking and monitoring Agency compliance with external reporting related to procurement, contract management and

vendor performance.

2. Perform a survey of all programs at HHSC to identify and document key data elements related to all external reporting requirements related to procurement, contract

management and vendor performance. Examples include reporting requirement(s), reporting purpose, reporting data elements, reporting cycle, report recipient, etc.

3. Formalize and document external reporting policies and practices. Reporting processes should include:

► Governance over the external reporting process.

► Forecasting, planning and scheduling the external reports.

► Establishing the approval process for each report based on identified risk factors.

► Tracking and monitoring of compliance to deadlines.

► Monitoring of accuracy of reporting (auditing on a sample basis).

4. Establish practices for the ongoing identification, cataloging and management of future reporting requirements.

Dependencies: 13GR: Strengthen compliance monitoring processes and controls

For more information, please see EY Insights on Risk Management.

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Governance and risk managementRisk management – lines of defense (LOD) alignment

Project overview

Situation: Roles and responsibilities for risk ownership and oversight across PCS, CQC, Programs, Legal and Budget/Finance are not clearly defined, and may result in

inefficiencies, gaps in monitoring responsibilities and objectivity concerns of CQC auditing its own work. Without clearly de lineated roles, the risk of control failures or management

override are increased.

Project # 15GR Project name Risk management – lines of defense (LOD) alignment

Project description

Clarify the roles and accountabilities for risk ownership and risk oversight. Strengthen PCS’s accountability to own risks, c larify CQC’s

mandate to oversee and monitor risks, and clarify roles of a management level oversight committee for key decisions and governance

activities over procurement and contracting.

Areas of impactAchieving clarity on division of accountability and responsibility, reducing the risk of conflicts or overrides, and creating the right balance

between risk taking and risk oversight roles.

Project start time Waves 1–2

Project duration Medium term Ease of implementation (1–5) 2

Estimated costs $$ Estimated number of project resources 3–5

Affected groups PCS, CQC, Programs, Budget/Finance and Legal

Project activities

1. Perform an assessment of the mandates, activities, controls and risks assigned to PCS management (first LOD), CQC management (second LOD), HHSC Internal Audit (third

LOD) and a steering committee and/or HHSC Executive Council (Oversight).

2. Align the mandates and activities with three lines of defense risk management operating model. The lines of defense structure , responsibilities and accountabilities are

explained below and further explained in the three lines of defense model in Appendix A:

► First line of defense (PCS Management, Budget/Finance, Legal & Programs) – Full ownership and responsibility for day-to-day management of all business and compliance

risks. Develops policies and procedures.

► Second line of defense (Compliance and Quality Control) – Provides independent oversight of first line of defense. Monitors all frontline activities to gain an aggregate view

of procurement and contracting risks (financial and nonfinancial) relative to risk appetite and to escalate any excessive risk-taking.

► Third line of defense – HHSC Internal Audit – Independently assesses procurement and contracting processes, controls and policy compliance procedures.

► Oversight – Establishes roles within a risk management oversight committee, designated by the Executive Steering Committee and/or chaired by the Chief Operating

Officer for oversight activities such as delegation of authority approval, policy approvals, organizational and process improvements, and risk appetite definition.

Dependencies: Adequate staffing aligned with updated mandates; ability to establish a risk management oversight committee

For more information, please see EY Insights on Risk Management.

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Governance and risk managementPerform procurement and contract risk assessment

Project overview

Situation: Generally, review and approval follow the same process and rigor regardless of the risk level of the procurement or contract, creating gaps in efficiencies,

overengineering and a false sense that risk is covered.

Project # 16GR Project name Develop a procurement and contract risk assessment

Project description

Establish a methodology for assessing procurement and contracting activities that is risk-based incorporating statutory requirements of

the state, cost estimates and contract types. Leverage the existing contract risk assessment process, updating for new polici es and

approval thresholds, and develop a procurement risk assessment process.

Areas of impactContract review and approval process is aligned with the risk of each procurement, increasing precision of review and efficiency of the

procurement process.

Project start time Waves 1–2

Project duration Medium term Ease of implementation (1–5) 2

Estimated costs $$$ Estimated number of project resources 6–8

Affected groups PCS, CQC, Budget/Finance, Legal and Programs

Project activities

Perform risk assessment across all types of procurements to develop a procurement risk assessment, categorizing procurements based on state laws, risks, Agency procedures,

policies, etc. Key steps include:

1. Identify classification process for segmenting contracts based on level of risk.

2. Develop qualitative and quantitative criteria to assign a risk rating to each contract.

3. Perform data analysis, interviews and surveys to complete the criteria and risk rating.

4. Align review and approval process to contract risk levels (see separate review and approval workflow charter).

5. Develop and implement a repeatable process to classify risks of new contracts.

6. Develop process to review and update, as needed, risk ratings of existing contracts annually.

7. Update any IT infrastructure (SCOR, CAPPS, etc.) to align with new processes as necessary.

Dependencies: 1SD: Establish a comprehensive communication framework

For more information, please see EY Insights on Risk Management.

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Governance and risk managementDevelop review and approval workflow

Project overview

Situation: After the risk assessment process is complete, the approval workflow will need to be updated to align with the new process of approving contracts differently based on

the assigned risk.

Project # 24GR Project name Develop review and approval workflow

Project description Establish a delegation of authority and a risk-based approval workflow for HHSC for all procurement activities.

Areas of impact

1. Procurement approval activities would be more efficient as contracts that are deemed to be lower risk would not need similarly

substantial approval activities as higher risk procurement transactions.

2. Organizational structure, authorities and responsibilities are consistent with the goals of the business and are assigned to

appropriate personnel.

Project start time Waves 2–3

Project duration Medium term Ease of implementation (1–5) 3

Estimated costs $$$ Estimated number of project resources 6–8

Affected groups PCS, CQC, Budget/Finance, Legal and Programs

Project activities

1. Establish (or leverage) a representative workgroup involving PCS, Legal, Finance, IT and Program.

2. Categorize typical transactions that require review in order to normalize requests to be reviewed (renewals, non-task order-based master contract use, task

order-based contract use, hinged (set of co-dependent) procurements, RFPs, etc.), Categorize current reviewers and roles and objectives for review.

3. Perform a segregation of duties analysis for roles/duties across the organization to identify and remediate conflicting duties between employees such as authorizing bid

evaluation criteria and evaluating RFx responses.

4. Leverage the risk-weighted set of criteria for transactions that was created as part of the risk assessment (refer to the “Perform procurement and contract risk assessment”

charter) to determine necessary reviews per transaction type.

5. Establish a procedure for requiring higher level of review regardless of new procedure if directed by HHSC executives.

6. Align documented delegation of authority to include risk-based approval thresholds and designed to meet Agency procedures and state law.

7. Validate and update as necessary process maps and standard operating procedures that comprehensively capture current review and approval flows for both initial requisitions

and contract approvals.

Dependencies: 16GR: Perform procurement and contract risk assessment

For more information, please see EY Insights on Risk Management.

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Governance and risk managementImplement a continuous control effectiveness testing program

Project overview

Situation: While the CQC function has recently been established, a process has not been consistently implemented to assess compliance wi th processes and procedures across

the Agency. Without a rigorous quality control testing program, the ability of the Agency to consistently execute new and redesigned controls consistently will be limited, increasing

the risk of process and policy noncompliance.

Project # 25GR Project name Implement a continuous control effectiveness testing program

Project description Perform continuous testing of procurement and contracting compliance with established policies and procedures.

Areas of impactProvide management with periodic reporting of the status of the compliance with current processes and procedures as well as adoption

of new controls and risk mitigation strategies.

Project start time Waves 2–3

Project duration Medium term Ease of implementation (1–5) 3

Estimated costs $$$$ Estimated number of project resources 10–15

Affected groups CQC, PCS, Program

Project activities

Establish a testing program to assess new controls implemented in the procurement and contracting processes. Include the following key activities:

1. Align the organizational structure and tasks to future state (see “Risk management – line of defense charter”: Transition first line of defense activities to PCS, allowing CQC to

function as a second line of defense).

2. Develop testing programs to assess whether key controls are operating effectively.

3. Perform testing on key controls and assess whether the control is operating as intended to mitigate the associated risks.

4. Confirm design and operating effectiveness issues as well as improvement opportunities with control owners.

5. Provide training to control owners related to execution of control activity and how their actions are mitigating key risks in the organization.

6. Assist with development of any remediation plans and identify remediation dates to address any control operating deficiencies identified.

7. Perform additional testing after remediation to assess control operating effectiveness.

8. Report testing results and remediation progress periodically to leadership of impacted organizations and to the risk manageme nt oversight committee.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 11PP: Update and refine procurement and

contract management manuals, 19PO: Establish a comprehensive communication framework, 16GR: Perform procurement and contract risk assessment

For more information, please see EY Insights on Risk Management.

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Internal stakeholder managementEnable dashboard automation for business administrative functions

Project overview

Situation: Program/Agency is unable to run reporting dashboard to determine where in the life cycle inputted requisitions reside within CAPPS; extreme lack of visibility leads to

delays and stakeholder frustration.

Project # 3IM Project name: Enable dashboard automation for business administrative functions

Project description

Enable organization to automate existing high-volume and complex, multi-step data handling actions as if business users were doing the work.

Capture and interpret existing applications, manipulate data, trigger responses and communicate with other systems. Primary focus is to allow

Program/Agency access to see where requisitions are during the life cycle of the requisition within CAPPS.

Areas of impact

1. Enhanced timeliness and visibility into procurement processing and stages for IT spend.

2. Opportunity to repurpose human time saved for other high value-add activities.

3. Improved quality and accuracy of IT procurement reporting.

4. Automation could eventually be leveraged within the procurement function and other business functional areas.

Project start time Wave 1

Project duration Short term Ease of implementation (1–5) 1

Estimated costs $$ Estimated number of project resources 2–3

Affected groups PCS, Programs

Project activities

1. Confirm setup of the technical environment.

2. Complete process walk-through and recording of RPA scenario.

3. Document the scope automation for the as-is process.

4. Design and validate the future state process for automation.

5. Collaborate with HHSC IT stakeholders to identify test data.

6. Build the RPA POC scenario.

7. Finalize RPA output in test environment and create demo of the automated processes.

8. Perform user acceptance testing with identified process stakeholders.

9. Support transition of the completed bot into production.

10. Identify future RPA opportunities within procurement and contracting.

11. Provide monitoring support in the production environment.

Dependencies: Access to CAPPS system

For more information, please see EY Insights on Automation.

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Internal stakeholder managementExpand upon the program liaison process

Project overview

Situation: The root cause that says HHSC operates in a “hero” environment – reliant on extraordinary individuals’ efforts to compensate for inadequate technology and processes.

Without a formal process in place, both PCS and Program have noted that whether certain tasks were completed correctly and ef ficiently depended on whom from PCS or which

program you were dealing with. For instance, programs noted that direction over process, next steps and status were difficult to consistently obtain from PCS and frequently rely on

a few individuals to find the information they need. Similarly, PCS has noted problems in obtaining necessary forecasting plans from varying programs.

Project # 4IM Project name: Expand upon the program liaison process

Project description

A new process has been instituted under new management; it should be extended to include regular embedded (on-site) support, better case

management tools regarding status and a de-emphasis on call the top to move a procurement. Areas without enough liaisons need to review to right

size.

Areas of impact1. All programs and end users will be on a level playing field, and there will be fewer opportunities for customers to feel disregarded or less important.

2. Lessens the burden on “extraordinary” individuals to be the known “go-to” person within PCS for outside customers.

Project start time Waves 1–2

Project duration Medium term Ease of implementation (1–5) 3

Estimated costs $$ Estimated number of project resources 2–3

Affected groups PCS, Programs

Project activities

1. Define the objectives and desired outcomes for the liaison role to help formulate the responsibilities and processes for the role.

2. Determine the responsibilities and competency qualifications for the liaison role that align with the objectives and desired outcomes. Factors to include:

a. How often the liaison will be on-site at the Program.

b. Types of information to be shared between Program and liaisons (process changes, requisition status, next steps, templates to use, forecast planning, etc.) and at which

intervals and via which communication channels.

3. Determine how and by whom the liaison role will be filled. Factors to consider should include division of responsibilities (procurement vs. contract administration) and

procurement type (goods, services, complex).

4. Help ensure all program areas are adequately supported. Consider size and scope of program areas in determining whether multiple liaisons should be assigned.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 4IM: Expand upon the program liaison process,

6PO: Create a fit-for-purpose organization design for PCS, 19PO: Establish a comprehensive communication framework

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Internal stakeholder managementEstablish a lessons learned touch point

Project overview

Situation: This project seeks to address the root causes; processes are often not written to support a large organization, limiting opportunities for economies of scale and

optimization improvements. For instance, there is currently minimal process in place to help prevent problems from repeating themselves, such as the repeated evaluation

mistakes. By establishing a lessons learned touch point, PCS can seek to address this issue by having a published repository for new staff to refer to as well as the ability for PCS

staff, PCS leadership and program staff to have an effective feedback loop.

Project # 5IM Project name: Establish a lessons learned touch point to enable continuous improvement

Project description

At the end of each complex solicitation, both PCS and Program should have the opportunity to provide feedback regarding what went well and what

didn’t go well at key phases in the contract development process. Responses should be recorded for reference for future solic itations of the good or

service. Any opportunities for learning regarding general process improvements should also be documented and shared for future reference.

Areas of impact1. Ability to tailor historical information to help reduce opportunities for repeat mistakes to occur.

2. Opportunity to further develop customer relationship between PCS and Program.

Project start time Waves 1–2

Project duration Medium term Ease of implementation (1–5) 2

Estimated costs $$ Estimated number of project resources 3–4

Affected groups PCS, Programs, Legal, Budget/Finance

Project activities

1. Determine for which solicitations this lessons learned touch point will be completed. Consider dollar thresholds and level of complexity to create a more balanced workload.

2. Create a lessons learned form for both PCS, Program, and Legal to complete at the end of each solicitation that meets the criteria of step 1 (as well as whether the solicitation

resulted in a contract or was canceled). The form should have sections to indicate what went well and what didn’t go well for key phases in the process –initiation/planning,

SOW development, evaluation, award, etc. Determine whether a meeting should take place to discuss the lessons learned as a pa rt of this process.

3. Establish a process for the documents to be reviewed by PCS leadership and a process for aggregating comments related to the general process (vs. specific to the good or

service being procured).

4. Establish a process for publishing the final documents to a shared repository viewable by PCS and Program to be able to learn from for future solicitations.

Dependencies: Processes will be updated to reflect a lessons learned touch point (assumption)

For more information, please see EY Insights on Procurement Transformation.

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TechnologyConduct comprehensive CAPPS and SCOR training

Project overview

Situation: Training programs are insufficient in content and frequency, and there are limited designated support resources to provide compliance and technical guidance. The

existing training programs (onboarding and ongoing) do not provide employees with the knowledge and tools needed to be successful in their roles. The lack of training, coupled

with excessive workloads and nonstandard processes, has contributed to staff often feeling overwhelmed and frustrated.

The train-the-trainer model used previously was not successful. Adequate budget must be allocated to support a robust training program to educate users on the system in its

current state and provide ongoing training as system changes are implemented in the future.

Project # 8TE Project name Conduct comprehensive CAPPS and SCOR training

Project descriptionProvide additional, immediate training in the use of CAPPS and SCOR in their current states to increase awareness and intended

capacity.

Areas of impact

1. Greater system proficiency among user groups resulting in increased productivity.

2. Increased compliance with system-related policies and procedures facilitated by enhanced awareness.

3. Improved morale and job satisfaction through reduced system-related frustrations. Improved morale is correlated with less turnover

and increased productivity.

Project start time Wave 1

Project duration Short term Ease of implementation (1–5) 5

Estimated costs $$$ Estimated number of project resources 8–10

Affected groups All CAPPS user groups in all agencies

Project activities

1. Establish a training workgroup responsible for delivering CAPPS procurement functionality and SCOR training, comprising subject-matter resources skilled in training delivery.

2. In addition to standardized basic data-entry procedures and using available reports, determine topic areas for immediate training needs in the current CAPPS and SCOR

systems.

3. Develop curriculum to effectively address the organization’s immediate training needs (e.g., “first bite of the system training apple”).

4. Publish written training materials to be disseminated to all user groups and made available for download from a central HHSC website.

5. Offer training to all CAPPS and SCOR users by topic area in person and online via live and/or recorded webinars.

6. Address immediate needs for system assistance with CAPPS and SCOR by identifying subject-matter resources to be available to provide hands-on assistance in the program

area. The issues reported to these subject matter resources should be tracked and used to inform future training efforts.

Dependencies: Working with CAPPS and SCOR systems staff, Agency training staff and all procurement user groups

For more information, please see EY Insights on Technology.

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TechnologyResolve immediate CAPPS needs

Project overview

Situation: Business needs and volume are not sufficiently synchronized to process/technology. CAPPS has been heavily modified to accommodate State of Texas statutory

contracting requirements, as well as HHSC-specific contracting needs; however, the system is not configured to support a specific set of Agency or program purchasing processes

and procedures.

Project # 9TE Project name Resolve immediate CAPPS needs

Project descriptionComplete a rapid analysis to determine how the CAPPS Phase II release can be influenced to address immediate system functiona lity

priorities.

Areas of impact

1. Mitigate the risk of wasted resources to solve low-priority issues.

2. Ensure effective use of existing resources to address priority issues.

3. Improve data integrity and transparency.

4. Achieve short-term system improvements (wins).

5. Create positive momentum for CAPPS improvement projects to build the stakeholder confidence required to garner support for future

enhancement initiatives and a process to facilitate future system enhancements.

Project start time Waves 1–2

Project duration Long term Ease of implementation (1–5) 5

Estimated costs $$$ Estimated number of project resources 8–10

Affected groups IT, PCS, Executive Leadership, Budget/Finance, CAPPS Users

Project activities

1. Pause CAPPS Phase II development/implementation in order to critically analyze planned and potential changes.

2. Determine priority needs based on input from user groups and redirect IT resources and efforts to address higher-priority procurement functionality. Develop a plan to design

solutions for the remaining, lower-priority issues to be addressed in Project 21TE: “Perform Full Fit Gap Analysis.”

3. Compare planned scope to high-priority (as determined by HHSC leadership and programs) system issues requiring immediate resolution.

4. Examine system and user controls, approvals and access levels and adjust to align with appropriate user roles.

5. Place special emphasis on developing tools that support dashboarding and more robust access to information for end users. At a minimum, this should include the ability to see

which individuals have reviewed each step.

6. Analyze the fit and purpose of the “Collaboration” tool within CAPPS to determine whether it can be improved through system changes or should be eliminated from the process.

7. Additional short-term improvements for system response time.

8. Develop a plan to dedicate adequate resources and implement the high-priority changes within 12 to 18 months.

9. Develop and deliver in-person and online training on proper use of altered functionality before, during and after implementation (e.g., “second bite of the system training apple”).

Dependencies: Working with CAPPS system staff and procurement stakeholders, as well as obtaining executive support to obtain any necessary additional budget allocations

For more information, please see EY Insights on Technology.

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TechnologyAlign eSignature tools

Project overview

Situation: The lack of visibility within, and integration among, procurement-related systems (e.g., CAPPS and digital signature tool) creates risk for policy compliance issues and

undermines statewide transparency efforts.

Project # 10TE Project name Align eSignature tools

Project descriptionSolution digital signature tools for integration or end of life. Assess digital signature tools that have similar functionali ty and potentially

superior integration/costs, and determine a plan going forward.

Areas of impact

1. Enhanced federal audit compliance through the use of additional security measures (levels of authentication) built into the Agency’s

digital signature tool.

2. Reduced costs associated with duplicative functionality.

3. Increased integration with the CAPPS system (Agency’s current digital signature tool was designed to work within the Agency’s

current ERP environment).

4. Eliminate the need for PCS to “own” a digital signature software contract that is a better fit for IT.

Project start time Waves 1–2

Project duration Medium term Ease of implementation (1–5) 4

Estimated costs $$$ Estimated number of project resources 8–10

Affected groups IT, PCS, all users of the Agency’s digital signature tool

Project activities

1. Transfer the “ownership” of the Agency’s digital signature tool to IT to remain consistent with the ownership model for other Agency software.

2. Catalog the digital signature tool functionality currently in use by HHSC.

3. Compare this functionality to the tools available in the Agency’s current digital signature solution.

4. Determine which solution offers the most relevant functionality and build comprehensive policies and procedures for use of the selected solution.

5. Develop a plan to deliver any training required for compliance with policy and to increase user satisfaction with the solution.

6. Communicate the policies and procedures to all user groups.

7. Provide training opportunities/online guidance and resources for proper use of the signature tool.

Dependencies: Working with CAPPS system staff, digital signature tools owners (IT), legal and procurement stakeholders

For more information, please see EY Insights on Technology.

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TechnologyPerform full fit-gap analysis

Project overview

Situation: CAPPS has not been configured to serve many important procurement-related purposes (i.e., complex contract proposal evaluation, vendor performance tracking,

document management, spend analysis and public data transparency) in function or in HHSC-level volume.

Project # 21TE Project name Perform full fit-gap analysis

Project description Perform a comprehensive fit-gap analysis to align CAPPS and SCOR system functionality with fit-for-purpose processes.

Areas of impact

1. Identify systems gaps to be addressed through configuration or customization of functionality.

2. Inform analysis to determine options available in the current system, as well as those requiring a third-party solution (via integration

or interface with CAPPS and/or SCOR).

3. Enable system improvement solutioning by providing essential information.

Project start time Wave 2

Project duration Long term Ease of implementation (1–5) 5

Estimated costs $$$$ Estimated number of project resources 10–12

Affected groups PCS, IT, CAPPS and SCOR Users

Project activities

1. Work with procurement stakeholders to review and revise procurement system-related policies and procedures to align them with purchasing staff performance and with

procurement automation best practices.

2. Determine system functionality needs based on the tailored system-related policies and procedures (to facilitate full procurement automation) and convert them to system

business requirements. Project leaders should help ensure that the requirements include tools to mitigate the risk for data -entry errors as well as tracking contract amendments.

3. Coordinate with IT and procurement stakeholders to compile a detailed list of all known gaps in CAPPS and SCOR system functionality (e.g., adequate reporting and evaluation

tools) as compared to the Agency’s automated procurement functionality needs (in support of fit-for-purpose policies and procedures).

4. Conduct an in-depth fit-gap analysis to determine fit within the CAPPS and SCOR systems in current and/or approved future state (including all necessary and feasible

configuration and customization changes). This analysis should also consider deployment of additional modules of the Agency’s ERP platform.

5. Use the results of the fit-gap analysis to determine the potential need for a third-party solution. If substantial business requirements cannot be met through configuration or

customization of the existing systems, then third-party solutions should be evaluated for a potential acquisition.

6. Work with executive leadership to determine the best approach to meet the organization’s needs given priorities and resource constraints.

7. Develop and deliver in-person and online training on proper use of new functionality before, during and after implementation of the enhancements (e.g., “third bite of the system

training apple”).

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 12PP: Enhance PCS forms, contract tools and

contract templates related to procure to pay process, 22PP: Redesign procurement end-to-end process

For more information, please see EY Insights on Technology.

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TechnologyStreamline remaining procurement-related technology

Project overview

Situation: The lack of integration among procurement-related systems combined with the lack of properly configured reporting functionality in CAPPS frustrates users, precludes

data-driven procurement practices and undermines statewide transparency efforts.

Project # 29TE Project name Streamline remaining procurement-related technology

Project descriptionReview other procurement-related technology solutions (i.e., digital signature tool and Excel spreadsheets) outside of the CAPPS system

to verify fit and identify potential alternative solutions.

Areas of impact

1. Identify opportunities for enhanced system alignment with fit-for-purpose procurement processes and procedures.

2. Reduced costs associated with duplicative functionality.

3. Potential increased integration with the CAPPS system.

4. Streamlined automated processes.

Project start time Wave 3

Project duration Medium term Ease of implementation (1–5) 4

Estimated costs $$$ Estimated number of project resources 8–10

Affected groups IT, PCS, all procurement-related system users

Project activities

1. Catalog functionality of all non-CAPPS and non-SCOR procurement-related systems remaining in use by HHSC.

2. Work with procurement stakeholders to conduct a fit-gap analysis to compare this functionality with the Agency’s procurement bus iness requirements (established during the fit-

gap analysis in Project 21TE.

3. Determine which solution(s) should remain in use and which should be integrated or replaced by a module in CAPPS or a third-party solution available on the market. This will

require executive buy-in for adequate resource allocation to support the decision.

4. Develop comprehensive policies and procedures (with input from stakeholders) for use of the selected solutions and communicate them to affected groups.

5. Develop a plan to deliver in-person and online training for compliance with policy and increase user satisfaction with the exist ing systems, as well as any new solution.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor, 9TE: Resolve immediate CAPPS needs, 10TE:

Align eSignature tools, 21TE: Perform full fit-gap analysis

For more information, please see EY Insights on Technology.

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Project overview

Situation:

► Current systems do not facilitate visibility and extraction of data to support procurement-related business decisions.

► HHSC program areas are performing ad hoc and manual reporting to track and manage the status of their procurement requests.

► The lack of integration among procurement-related systems combined with the lack of properly configured reporting functionality in CAPPS frustrates users, precludes data-

driven procurement practices and hampers statewide transparency efforts.

Project # 7PE Project name Establish a performance management practice

Project description

Coordinating with the Office of Performance Management (OPM) of the Chief Policy Office, the project will establish a continuous

improvement initiative to identify, measure and act on performance data across the procurement life cycle. Using a data -driven approach,

PCS and OPM will work with stakeholders to identify key performance indicators (KPIs) and establish methods to track and report on

process and subprocess cycle times, among other measures relevant to the procurement function.

PCS will work with project stakeholders to establish standards for the type of performance information that will be collected and

published, and will coordinate with OPM to establish publishing frequency, format and platform.

Areas of impact

A formal performance management practice with PCS, consistent with Agency standards for performance management, will provide a

consistent method to track, measure and demonstrate value to internal and external stakeholders. Establishing a

data-driven approach to measuring performance through KPIs supported by system data will:

► Eliminate current ad hoc and manual reporting practices borne by HHSC program areas.

► Align individual staff performance expectations with operational goals and objectives.

► Provide visibility into and ability to act on functional activities affected by resources, cycle fluctuations and other facto rs.

► Improve predictability in scheduling and developing procurement.

► Enable comprehensive contract reporting at the enterprise level to drive data-driven business decisions and identification of

opportunities for improvement.

Project start time Waves 1–2

Project duration Long term Ease of implementation (1–5) 3

Estimated costs $$$ Estimated number of project resources 5–7

Affected groupsExecutive Leadership, Human Resources, Office of Performance Management, PCS, Program and Contract Managers, Program

Stakeholders

Performance managementEstablish a performance management practice (1 of 2)

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Project overview

Project # 7PE Project name Establish a performance management practice

Project activities

1. Work with PCS stakeholders to review existing policies and procedures related to Support Service Agreements (SSAs) and other performance criteria related to

procurement activities to refine Program and PCS SSAs.

2. Review peer and best practice performance management and measurement frameworks focused on efficiency, quality and stewardship, for example:

► Efficiency measures: Year-over-year number of POs/contracts; staff load vs. number of contracts/bids/POs; time from requisition to PO

► Quality measures: Cost of procurement operations as a % of spend/cost avoidance; customer service survey results

► Stewardship measures: % of solicitations without protests upheld; % of special vs. overall spend; % change in volume of vendor responses to solic itations

3. Evaluate applicability of identified KPIs and determine and prioritize initial KPIs for performance management.

4. Develop and document methodology for measuring each KPI identified and determine ability to measure using current and future systems.

5. Develop standard reports and other tools that enable consistent ability to report performance using system data (staff reports, internal division reports, external

management reports, dashboards, among others).

6. Incorporate relevant KPIs into staff performance appraisal system.

Dependencies: 1SD: Develop sufficient operating model for the Agency’s dependency on contracting as a critical success factor 2SD: Conduct data cleansing, 9TE:

Resolve immediate CAPPS needs, 21TE: Perform full fit-gap analysis, 19PO: Establish a comprehensive communication framework, 3IM: Enable dashboard automation

for business administrative functions

Performance managementEstablish a performance management practice (2 of 2)

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Insights and additional projects

1. EY Insights on Procurement Transformation

2. EY Insights on Procurement Operating Model

3. EY Insights on People and Organization

4. EY Insights on Technology

5. EY Insights on Automation

6. EY Insights on Risk Management

7. EY Insights on Policies

8. EY Insights on the Future of Procurement

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EY Insights on Procurement Transformation

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Procurement maturity model

Our maturity model articulates the main domains of procurement transformation in eight dimensions, each of which needs

to be considered independently to reposition an effective procurement and contracting function.

► Review current state Procurement and

Contract Services (PCS) capability

► Review existing sourcing and procurement

process documentation, including policies and

procedures and existing ERP system

documentation

► Review organizational structure

► Conduct key stakeholder interviews

► Identify critical procure to pay (P2P) process

benchmarks currently managed by PCS and

compare current P2P capabilities to leading

practices

Every dimension is divided into five maturity stages:

Stage 1: Informal/no process

Stage 2: Functional

Stage 3: Standardized

Stage 4: Collaborative

Stage 5: Leading

Po

rtfo

lio

an

d S

up

pli

er

Rela

tio

nsh

ip

Man

ag

em

en

t

established and is supported by

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Procurement maturity modelEight facets defined

The maturity model breaks down procurement and contracting to drive at the root cause of any procurement and contracting issue:

► Strategic Direction: course of action that leads to the achievement of the goals of an organization’s strategy

► People and Organizations: how the people in the organization engage to accomplish the goals of an organization

► Portfolio and Supplier Relationship Management: how an organization interacts with its suppliers from a mutually beneficial

relationship and legal (contract) perspective

► Complex Contracts: contracts that are of high dollar value and require RFx to procure goods and services

► Contract Management: an essential function that helps support the needs of the Agency as reflected in a supplier contract are

met in order to deliver critical services to our constituents and that taxpayer dollars are being used efficiently and appropriately.

► Supplier Relationship Management: provides a framework for interacting with the vendor community across the contract

management life cycle to advance innovative solutions for the organization and equip the procurement organization with

knowledge and expertise in solicitation planning.

► Category Management: by analyzing detailed spend, transactional and pricing data, and continuously monitoring the pricing

markets, the category management team can routinely identify and implement solutions that drive incremental unit cost

reductions through additional sourcing, substitutions and better demand management.

► Procure to Pay Process: the process of obtaining and managing the materials needed for a product or service.

► Governance and Risk Management: an organization’s coordinated strategy for managing the broad issues of corporate

governance, enterprise risk management and corporate compliance with regard to regulatory requirements. A comprehensive risk

program in the opinion of EY involves the effective identification and avoidance of fraud, waste and abuse.

► Internal Stakeholder Management: an organization’s management of the people who may be affected by the decisions it makes

or can influence the implementation of its decisions.

► Technology: an enabler that allows organizations to process actions and extract materials.

► Performance Management: an ongoing process of communication between a supervisor and an employee that occurs

throughout the year, in support of accomplishing the strategic objectives of the organization.

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Procurement maturity model rating and definitions(part 1 of 2)

Topic Informal/no process Functional Standardized Collaborative Leading

Strategic

Direction

No procurement strategy

is in place

Procurement strategy is

not defined in a number of

areas and there is no

visibility on key future

initiatives

Procurement strategy and

formal idea of future

initiatives exist in most

areas, but procurement

strategies are not always executed

Full understanding of the

transformational journey

that must be followed and

a demonstrated history of

success

Detailed plans updated on

a regular basis with cross-

functional executive

support on the journey to

procurement excellence

People and

Organization

Procurement department

is seen as a second tier

function and focuses on

administrative activities

Procurement employees

exhibit transactional skill-

sets but the department is

not recognized as a value-

adding function

Procurement employees

demonstrate strategic

thinking and focus more on

category management than

administrative tasks

Procurement employees

exercise strategic thinking

and category management

and attract internal and

external talent

Procurement has a global

network of high-quality

people who make the

department a desirable

place within the company

Portfolio and

Supplier

Relationship

Management

Day-to-day pressure

dictates the activity of the

department, there is

limited leverage of

strategic sourcing opportunities and no

contracts are in place

The procurement

department is driven by

contract end dates, does

not have strategic

procurement plans, leverages regional

sourcing on an adhoc

basis and has few

contracts

Formal strategic sourcing

process, leverage global

sourcing on most

categories with mid-term

plans for key categories and contracts are in place

but are managed by BUs

Comprehensive strategic

sourcing process, mid- to

long-term category plans

with a global focus on key

categories, and contracts are managed by category

managers

Sourcing approach is

recognized as one of the

best in the market,

preferred vendors are

established and contracts are reviewed with

suppliers at least annually

Technology There is no P2P system in

place

Basic P2P systems exist in

most business units but

systems are not linked

together, few eCatalogs

exist and many transactions are still

processed manually

P2P systems are in place

in all BUs and functional

procurement areas but are

not integrated, eCatalogs

are in place and maverick buying still occurs

Harmonized P2P systems

exist and are widely used,

manual processes have

been eliminated and there

is moderate adoption of eCatalogs with key

suppliers

One integrated P2P

system across the

organization that links all

POs and suppliers

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Procurement maturity model rating and definitions(part 2 of 2)

Topic Informal/no process Functional Standardized Collaborative Leading

Governance

and Risk

Management

No governance body in

place to support overall

purchasing strategy,

noncompliance is high and

organization is reactive to risk

Governance exists for a

few key purchases, low

compliance and risk

management is

acknowledged within other functions

Processes and systems

are formally documented

and published but are not

always enforced,

inconsistent compliance and siloed risk

management capabilities

Governance model has

been established and is

supported by executives

and there are

multifunctional integrated risk assessment, planning

and response capabilities

in place

Governance body is in

place, documented

processes and controls

are in place, the

organization is nearly always compliant and

predictive supplier risk

management exists

Internal

Stakeholder

Management

Procurement works in its

silo and internal customers

do not think it adds value

to the organization

Some areas of

collaboration with other

departments but is not

uniformly seen as high

value

Procurement is regularly

consulted but not fully

integrated with other

processes in other

departments

Procurement is engaged

early in the process and

manages cross-functional

streams

Procurement proactively

manages all categories in

close collaboration with

relevant departments

Procure to Pay

Process

No standard P2P

processes in place and

existing processes require

manual paperwork

Basic P2P process without

guidelines and a mix of

paper-based and

electronic processes

End-to-end P2P processes

in place but low levels of

compliance

Fully integrated and

automated P2P processes

are in place and

compliance is high

Lean and highly integrated

P2P processes, eCatalogs

and a robust order

tracking process

Performance

Management

No monitoring of the

performance of the

procurement department

Basic metrics are in place

but provide limited insight

and may not be linked to

business performance

Formal metrics exist but

are not consistently used

and are not closely linked

to performance

Savings targets are in

place to monitor

department performance

and KPIs link to

performance

Sophisticated balanced

scorecards are in place

and KPIs are integrated

with performance

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Root cause analysis

Overarching

Root Cause

Manifestations Impacts

People

Process

Technology

Success is often not rewarded; there is largely only punishment, which can significantly

impact morale and prevents employees from feeling empowered

Processes are often not written to support a large organization, limiting opportunities for

economies of scale and optimization improvements

Processes are often inconsistent across similar requisitions, causing inefficiencies and

increasing errors and noncompliance

Policies and procedures are not effectively maintained in many cases and changes often are

not effectively communicated to guarantee compliance

Legacy system errors have been transitioned over to CAPPS, negatively impacting

system performance and data integrity

Business needs and volume are not sufficiently synchronized to process/technology

causing risk of system overload and downtime

“Hero” environment – reliant on extraordinary individuals, efforts to compensate for

inadequate technology and processes

Systems do not always enable visibility and extraction of data to support business

decisions

Training programs are generally insufficient and there is limited designated support

resources to provide compliance and technical guidance

1. The operating model,

strategy and

investment of HHSC,

has not evolved to

meet the needs of an

outsourced service

delivery solution,

which depends upon

Procurement for its

success.

2. Volume of transactions

amplified the effect,

quadrupling the impact

on an unfit model.

3. The communication

plan is built for a

smaller organization

The approval process does not always sufficiently consider factors outside of the dollar

value of the contract for establishing the extent of review and approval procedures

Controls activities are not always appropriately aligned to the risk

Oversight of procurement processes is often not performed to test whether all necessary

control activities occur in a timely manner

Governance

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EY Insights on Procurement Operating Model

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As companies seek to optimize their operating models, we believe they must consider each of the following questions

1. 2. 3.

4. 5. 6.

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EY Insights on People & Organization

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Role and function comparison example

► Review and assess routed purchasing requests

► Interact with end users as needed to clarify

requirements and identify best approach to

fulfillment

► Place orders against existing master contracts

and track receipt and closure

► Perform informal quote procedures according to

state and HHSC required practices

► Perform Invitation to Bids procedures according

to state and HHSC required practices

► Confirm proper and complete documentation

exists regarding transactions in designated

systems

► Identify procurement needs that cannot be

fulfilled adequately via master contract, informal

quote and Invitation to Bid and coordinate with

procurement services leadership to route the

need to the appropriate analyst

Procurement Analyst

Intake Management/Service Desk

► Review (and assess for completeness)

procurement transactions routed for contract

initiation processes and the originating

procurement materials

► Confirm proper exhibits and artifacts exist as

required for contract initiation (e.g., certificate of

insurance)

► With designated SMEs, including staff attorneys,

complete contract documentation for contract

initiation

► Review and assess requests for contract

amendments for appropriateness

► Assemble necessary parties in order to address

deficiencies and prepare amendments

► Support portfolio success efforts to interact with

programs systematically and proactively

► Track assigned contracts to proactively request

procurement actions prior to expiration

Contract Analyst

Contract Initiation and Facilitation

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Establish an improved communication plan

1) Develop comprehensive PCS communication framework and plan

► Define and establish a plan and framework by identifying the best methods to deliver timely and useful

information.

► Communication plan categories would include audience, message, delivery vehicle, frequency, timing,

responsibility, feedback mechanism and repository.

2) Create meeting schedule

► Creation of meeting schedule so that all needed meetings are on the calendar of events (weekly,

monthly, quarterly).

► Create a process to take, synthesize and distribute notes and outcomes from the meeting to the appropriate

distribution list as determined by the RACI.

► The meeting schedule and outputs would be included in the comprehensive communication plan.

A large portion of our interviews and a clear majority of our ThinkTank observations pointed to communications as an

area of opportunity for PCS. In particular, it was noted that PCS should undertake a review of critical communication

types and vehicles; a look at accountability structures related to a RACI; and a process to more efficiently, effectively

and consistently cascade communications within and without PCS.

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Create an employee engagement plan

1) Create continuous development culture

► Develop a leadership point of view (PoV) that can be easily adopted and cascaded. This PoV should encourage

PCS staff to strive for development and skill growth in a culture of continuous improvement in order to increase

productivity and reduce errors.

2) Culture change, employee engagement program

► Prioritize PCS engagement issues that arose from the PCS engagement survey. Develop a step-by-step plan to

address those issues.

3) Develop employee incentive program

► Develop an employee engagement program that offers valuable incentives for high performers. The incentives

should be a combination of financial and nonfinancial benefits (time off, preferred parking, flexible

schedules, etc.).

ThinkTank sessions conducted by EY, as well as the PCS engagement survey, clearly indicate a need for improving the

level of engagement and culture within the Agency. Given the historical cultural challenges, harsh previous leadership

team and high turnover, addressing employee engagement and other culture-related issues will be key to improving

morale, productivity, compliance and talent retention.

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Develop comprehensive training programs

1) Develop training program to establish critical procurement and contract management capabilities

► The program would leverage leading practices and use of technology tools. A formal technical training program is

particularly important when there is no backup for key roles and/or there is high turnover or heavy hiring cycles.

Without consistent curriculum updates and predictable training delivery schedules, it is not possible to achieve skill

standardization.

2) Develop an HHSC training program that is aligned with new policies, procedures and processes. The program

should be developed to provide staff involved in the procurement and contract management processes with the

competencies necessary to complete their respective role/function in the process. Key items include:

► Develop the high learning objectives for personnel and getting clarity of the scope of the training required.

► Understand the detailed training needs (competencies) of all personnel.

► Content development, training schedule creation and business engagement to book people into training.

► Develop a training delivery model.

► Report number of people who have been trained and what they have been trained on.

► Tie competency development back to role KPI.

Through the interviews and ThinkTank sessions, it became very apparent that significant training gaps exist in the

Agency. Onboarding training is often inadequate and opportunities for ongoing development are not readily available for

employees. Over the last few years, training programs that were scheduled for a week have been condensed to a day.

Policies and procedures are not always followed, and many processes are not standardized or documented, which

jeopardizes compliance and results in widespread inefficiencies. A comprehensive procurement manual is lacking and

members often feel as though they don’t have anywhere to turn with questions. Training on systems, tools and processes

has been insufficient to build baseline proficiency.

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Develop comprehensive training programs

3) Staff performing contracting duties are properly certified according to state requirements

► Confirm HHSC is compliant with state requirements for performing procurement and contracting functions. HHSC

should perform a review of all program staff identified as performing said functions so that they are all properly

trained and certified according to state requirements, and if not, confirm they have proper supervision to perform

said tasks. Also review system access and capabilities so that they are aligned properly to certifications.

4) Onboarding

► Create formal onboarding process for new hires with a buddy system and proper role training.

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Functional realignment model for end-to-end accountability

Key characteristics of functional

realignment

► Clearer lines of responsibility for intake

management, which addresses the program

liaison function and management of requisitions

and standard procurements

► Master data management enabling strategic

sourcing capability to establish spend analysis

of savings opportunities

► Alignment of multiple disparate contract

management elements

► “Portfolio success” engagement center with

programs regarding contract health, tracking for

risk and triage of poor performance

► Contract initiation function under contracts and

out of procurement as a new capacity

► Vendor management capacity to establish

supplier programs and oversee HUB

► Operations responsibility of policy planning and

research, external reporting and system support,

all underresourced in current models

► Proactive risk management by having QA/QC

report to the COO and has oversight

responsibility over all of PCS. Absorbs the

contract monitoring function

Procurement

Services

(Front Office)

Intake Management

Category Management

Strategic Sourcing

Vendor Management

Portfolio Success

Contract Initiation and Facilitation

Audit and Compliance

Performance Reporting

Policy Planning and

Research

System Support and

Planning

Logistics

Chief Procurement

Officer

QA/QC PCS Monitoring and Review

Accountability

Services

(Middle Office)

Operations

Services

(Back Office)

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EY Insights on Technology

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Technology deliverables truncated

Deliverable not completed Reason team was unable to complete deliverable

Identify adoption, configuration and customization

of existing technology

► Leading practice indicates that business processes are to be finalized

before additional customizations should be considered confirming that

business processes align with business goals is part of the project road map

Identify quick wins related to adoption and simple

configuration changes and estimated level of effort

Identify customization requirements and estimated

level of effort (leading practice technology

requirements)

Identify new solution capabilities

Identify capability gap and shortlist portfolio of

potential marketplace solutions

Leading technology practice is to perform business requirements prior to technical requirements as well as prior to enhancements. Business requirements need to come first.

The list below reflects deliverables truncated due to insufficient information related to the items below:

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Procurement technology implementation leading practices

Key steps to a technology implementation:

1. Develop desired procurement automation outcomes based on the enterprise’s strategic plan.

2. Consult with subject-matter resources to tailor procurement-related policies and procedures to

facilitate automation.

3. Coordinate with purchasing stakeholders to develop business (functional) requirements.

4. Engage IT experts to develop technical requirements based on business requirements and address

data architecture documentation exists for all existing systems.

5. If applicable, conduct an in-depth fit-gap analysis of existing system against the newly developed

requirements.

6. If an existing system cannot meet the enterprise’s procurement automation needs or does not exist,

explore solution options on the open market.

7. Execute the approach that best supports the enterprise’s procurement automation needs and fits

within the available budget (including customization, implementation and ongoing maintenance).

8. Confirm the implementation plan includes details on required customizations and configurations,

testing plan, rollout strategy and timeline, training delivery and ongoing support.

To help implement technology implementations, HHSC can consider using the following implementation framework life cycle below:

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Technology tool gap identification

Below are a few gaps in configuration of the tools that were identified during the course of the

assessment:

► Legacy system errors have been transitioned to CAPPS, negatively impacting system performance

and data integrity.

► Data from legacy systems was loaded into the CAPPS system without a complete master data cleanup to

correct errors and without a comprehensive data conversion plan to address the upload of complete and

accurate historical information.

► Business needs and volume are not sufficiently synchronized to process/technology causing risk of

system overload and downtime .

► CAPPS was not configured to serve many important procurement-related purposes (i.e., complex contract

proposal evaluation, vendor performance tracking, document management, spend analysis and public data

transparency) in function or in HHSC-level volume.

► CAPPS has been heavily modified to accommodate State of Texas statutory contracting requirements, as well

as HHSC-specific contracting needs; however, the system is not designed to support a specific set of Agency or

program purchasing policies and/or processes. There is no baseline set of procurement processes and

procedures that can be applied across HHSC.

► HHSC does not have a complete application portfolio detailing the data architecture, relationship diagrams and

user models for all purchasing-related systems. This results in inconsistent processes, data entry redundancy,

inefficient system administration and unnecessary technology costs associated with duplicative functionality.

► Systems do not always enable visibility and extraction of data to support business decisions.

► The lack of integration among procurement-related systems combined with the lack of properly configured

reporting functionality in CAPPS frustrates users, precludes data-driven procurement practices and undermines

statewide transparency efforts.

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System Configuration gaps Industry insights and recommendations

Procurement tools

in CAPPS – The

state’s ERP system

CAPPS was intended to automate 80% of HHSC’s procurement and

contracting processes. The CAPPS system has been heavily modified

for HHSC, but the scope of these modifications is limited by a variety of

factors, including, but not limited to, hard-coding of the software,

licensing restrictions, CPA-mandated functionality, statutory

requirements, limited budget, a desire for process consistency and a

complete lack of input from user groups. There was no data

architecture planning or consideration for HHSC’s transaction volume

included in the implementation process. While some performance

issues still remain, the debilitating latency in system processing time

has recently been addressed by PCS.

As currently deployed, the CAPPS system:

► Is not user-friendly

► Has functionality that does not support Agency business processes

(i.e., proposal evaluations, contract management, adequate

approval workflow, strategic sourcing, complex contracting or

reporting)

► Does not allow for flexibility where certain steps add no value (i.e.,

“Collaboration” process outside of contract development)

► Does not offer dashboard reporting/status updates

► Has preloaded templates that are outdated and/or have limited utility

► Has minimal data visibility

eProcurement functionality in a modern ERP

system must facilitate automation of Agency

business processes and enforce all necessary

controls. In order to tailor system functionality,

customization should seek to address the needs

of all stakeholders in accordance with Agency

priorities. This effort should include

standardization and optimization of business

processes to operate in an automated

environment.

Effective system customization must be preceded

by an Agency-level needs assessment to inform

system architecture design (including any

integration requirements) as well as

comprehensive implementation planning.

It is key to purchase a system that provides the

majority of the organization’s required

functionality without customization. The right

system solution should be able to meet the

majority of the organization’s requirements

through a combination of process optimization

and functionality configuration.

Below are a few gaps in configuration of the tools that were identified during the course of the assessment:

Technology tool gap identification

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System Configuration gaps Industry insights and recommendations

SCOR – HHSC’s

contract management

system

SCOR was developed specifically to meet the contract management

needs of HHSC, so it offers functionality that is more intuitive and more

closely aligns with Agency business processes. However, there are

data integrity issues in SCOR due to undertrained and overworked staff

inputting incorrect information and errors in the legacy data conversion

from other systems.

As currently deployed, the SCOR system:

► Lacks complete data from legacy systems

► Has some inaccurate data for current and expired contracts due to

coding and filing errors

► Lacks modern contract management automation tools (i.e.,

dashboard reports, automated reminders and supplier enablement)

► Requires updates in multiple function areas

As the official system of record, it is essential that

the contract management component of an

eProcurement system contain complete and

accurate procurement documentation. Validating

the integrity of the data loaded into the system is

the key to its utility.

If contract management functions are performed

outside of the ERP, the tool should be fully

integrated with the ERP’s procurement module.

Technology tool gap identification

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EY Insights on Automation

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Digital solutions are a journey

► Process automation is the

application of software that

can mimic human action and

perform many manual,

repetitive, rules-based tasks at a much greater speed and

accuracy. This technology is

rapidly gaining adoption in

back-office functions such as

finance, supply chain, tax and HR, as well as many

customer-facing departments.

Characteristics:

► Focus is on eliminating

manual, repetitive, rules-driven activity that can be

anticipated and programmed.

► Can work nonstop, with

consistency and accuracy,

and at a speed much faster than manual processing.

► Net benefit is more time

available for existing teams to

focus on value-added

activities that require judgment and

decision-making.

Robotic

process

automation

(RPA)

Perform

► Machine learning

combined with robotics

to form cognitive

automation

► Nonroutine tasks

requiring judgment

(cognitive capabilities,

dynamic rules or artificial

learning)

► Value- and impact-driven

implementations

Machine

learning RPA

cognitive

► Personalized tasks

requiring judgment and

conversation via chat,

messaging and/or

voice (cognitive

capabilities, dynamic

rules or artificial

learning)

► Allowing human-like

reasoning to be applied

in larger volumes

► For increasing value

rather than reducing

cost

Conversational

intelligence

► Data analytics,

insights, decision-

making

► Enhanced and

automated data

analytics

► Allowing human-like

reasoning to be

applied in insights

► Replacing human

need for decision-

making

Artificial

intelligence

Incre

men

tal

valu

e

Digital solutions consist of more than just robotics, and include automation as a large contributing factor. There are

multiple levels to automation.

Learn

Interact

Think

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Digital solutions must be focused on more than achieving efficiency targets in order to realize the full value equation

Characteristics of high potential

digital solution opportunities within business

process hierarchy

► Automation helps address areas of high frequency of

effort reduction from automation of high-frequency,

manual, repetitive tasks and reduced exception

costs.

► Automation helps to address elimination of routine

tasks, resulting in increased value-add of talent as

workforce can be dynamically deployed to address

fluctuating demand while maintaining optimal

productivity, ultimately leading to reduced attrition.

► Automation helps to address improved

consistency, control and traceability of manual

activity prone to errors, as well as reduced critical

path time during peak load periods when service

levels or key deadlines are at risk.

People

Efficiency

Outcomes

► Need for change driven by larger business

need; automation viewed as a lever for

improvement

► Business process executed frequently, in large

volumes, with common components present

across functions

► Easily recognizable business process and

stakeholder engagement complexity

► Structured (unstructured) data required can be

identified and accessed

► Business process, once started, requires

limited human intervention and/or

unambiguous rules can be applied

Digital solutions have the potential to lead to

specific, quantifiable benefits

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Examples of process automation opportunities across organizational functions

IT services

• Installation

• FTP download, upload

and backup

• Server application and monitoring

• Synchronizing, deleting and emptying

folders

• File management, batch processing

• Email processing

HR services

• Payroll

• Benefits administration

• Payslip management

• Time and attendance

management

• Recruiting process

• Onboarding

• Education and training

F&A

Risk and control

• Quality audit

• Compliance audit

• Internal audit enablement

• Security tracking and monitoring

• Technical threat and vulnerability management

• Comparisons against role-based access control

rules and segregation of duties matrices

Procurement

• Create requisition

• Category analysis

• Budget approval

• Issue payment

Operations

• Claims

administration –claims adjudication

and processing, payment integrity,

appeals and grievances

• Member – account setup, eligibility and

enrollment, billing benefit

• Provider data

• Record to report

• Order to cash

• Procure to pay

• Financial planning

and analysis (FP&A)

• Incentives claims

processing

• Order

processing

• Vendor setup

• Trend tracking

• Finance operations

Note: The potential opportunities will depend upon how these processes are implemented in the company, the level of existing automation and number of FTEs used.

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Procurement automation segmentation*

Automation of need,

review, sourcing from

catalogs, approval, order,

receipt, payment and

verification

Need to Pay

Automation of establishing

price lists and online

shopping capabilities

Catalog Establishment

Automation of the

development, presentation,

evaluation and award of

solicitation events

Sourcing Management

Automation of active

contract management in a

full and integrated life cycle

Contract Management

Automation of data

collection, organization and

analysis necessary to a

strategic procurement

practice

Data Management

Automation of relationships

with suppliers and creation

of self-service tools

Vendor Enablement

*Leveraged in multiple current leading practice public sector solicitations.

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Procurement

Manage categories

Manage strategic sourcing

Manage contracts

Manage commodity risk

Manage operational procurementManage supplier relationship and

performance

Manage and report

procurement performance

Define category strategy

Develop category profiles

Create contract terms and conditions

Manage demand planning

Create and approve purchase requisition

Complete order receipt

Manage supplier segmentation and strategy

Manage supplier risk

Identify and develop core performance KPIs

Manage category governance

Manage future sourcing/ procurement requirements

Manage contract creation according to negotiatedT&C

Manage coverage reporting

Determine source of supply

Resolve order discrepancies

Manage supplier integration

Manage supplier remediation

Prepare and report performance against KPIs

Manage demand and spend compliance

Analyze supply market

Execute penalties and rebates

Manage price risk Generate purchase order and transmit

Process invoices Collaborate with suppliers

Develop and agree sourcing strategy

Execute supplier reconciliation accruals

Manage supply risk Maintain order Develop supplier capabilities

Execute sourcing strategy

Resolve supplier payment issues

Manage hedging Receive goods Manage supplier information (vendor masterdata)

Implement sourcing strategy

Process returns/claims

Monitor supplier performance

Monitor and sustain strategic sourcing

Sample areas of procurement automation

6

6

6

6

6 6

6

Robotics

OCR/structured forms

Rules engines

Digital/workflow

6

Desktop acceleration

RPA – high potential of automation

RPA – low potential of automation

Note: Processes will need to be agreed on and modified as leading practices before automation efforts are started.

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People and organizationHow automation technologies create value

Eliminate material human effort

Reduce costly errors and improve quality

Speed time-critical process

Refocus knowledge workers for greater value

Potential scope for RPA

Assessment of RPA applicability needed

Note: Processes will need to be agreed on and modified as leading practices before automation efforts are started.

Resourcing and

Onboarding

Learning and

Development

Talent and

PerformanceMgmt

Rewards and

Benefits

HR Information

and SystemsManagement

Query and Case

Management

Role and

Time and

Diversity and Payroll reporting

and administration

Search and

(e.g., Vendor)

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EY Insights on Risk Management

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Three lines of defense – risk management operating model

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Risk accountability: first lineFront line needs clear risk responsibilities and support tools

► Individuals who engage in activities that generate revenue and enable or support risk-

taking (e.g., frontline business units, operations, IT)

► These individuals accept full ownership and responsibility for day-to-day management

of risks inherent in their activities (including nonfinancial risks)

► Identify, assess, measure, control, monitor and report all risks related to the front

line or risk-taking activities against the board-approved risk appetite

► Engage second line to gain risk-based perspective in establishing limits and policies,

controls, risk indicators and interpretation of legal and regulatory requirements for

ownership and management of risks

► Establish sound risk taxonomies and assess adequacy of controls in place to manage

risks

► Identify, remediate and report risk limit breaches or excessive risk-taking to senior

management and board; collaborate with second line to remediate breaches or

issues identified

What firms are doing:

► Better aligning frontline

compensation structures

with risk-taking and

compliance

responsibilities and

results

► Documenting detailed

responsibilities matrices

for risk management roles

and responsibilities

► Developing detailed job

descriptions and role

profiles for key frontline

roles

► Developing and assessing

competency maps in

collaboration with HR

► Mapping regulations and

related controls to

detailed procedures

► Conducting training on

frontline roles and

expectations, as well as

the importance of risk

management

► Clarity as to whether activities fall into the front or second line (e.g., the development

of controls related to new products) to enable risk ownership where appropriate and

across second-line functions

► Structural implications for certain functions (compliance, legal, HR, IT, risk

management) to distinguish between activities that support risk-taking vs. risk

measurement, required for independent view of aggregate exposure

of these risks

► Employee life cycle changes, including required talent (recruitment), and how talent is

trained (learning and development) and compensated (balanced risk-taking via

incentive compensation processes that are better aligned with risk management goals

and responsibilities); this may result in an increase in the number and qualifications of

resources (e.g., risk and control functions within the front line)

Principle and

definitions

Responsibilities

Implications of

the activities-

based model

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Risk accountability: second lineIndependent risk management has to expand its reach

► Provide independent oversight of risk-takers and enablers – oversee all frontline

activities to gain aggregate view of firm’s risks (financial and nonfinancial) relative to

risk appetite and escalate excessive risk-taking

► Able to provide a risk-based viewpoint where appropriate (e.g., strategic planning) and

guide senior management in risk management responsibilities (e.g., by discussing

risk-based implications of new products and providing counsel to the front line)

► Independently identify, assess, measure, control, monitor and report on aggregate

risks against the board-approved risk profile and appetite

► Establish enterprise risk management framework (including risk thresholds, policies

and concentration limits) commensurate with the size, profile and complexity of the

business’s operations

► Make certain the firm’s risk levels and business processes are consistent with

appetite, policy and regulatory requirements

► Provide independent, risk-based view of key processes owned by the front line, such

as strategic planning, limit setting and policy development

► Proper governance required to enable risk ownership remains in the front line

What firms are doing:

► Increasing resources,

stature and authority of

the second line;

enhancing available tools

to more efficiently/

effectively execute

expanded role

► Increasing coordination

within the second line to

eliminate role overlap and

coverage gaps

► Improving consistency in

risk management

processes/procedures

► Centralizing any testing

activities that exist in front

or second lines

► Upgrading talent and

competencies to address

added scope

► As needed, using external

service providers to assist

with addressing emerging

risks or new regulatory

focus areas; oftentimes to

help build in-house

capabilities in the long

term

► As the three lines model is improved, some of the second-line resources may move to

the first line. However, increased second-line resourcing and competencies may be

needed to address areas that traditionally had a gap in coverage, were inappropriately

addressed or are an emerging risk area (e.g., legal, IT, cybersecurity, people,

independent view of compliance)

► Enhanced firmwide risk and control processes well integrated and provide increased

effectiveness with coverage of financial and nonfinancial risks

► Understanding of current organizational mechanisms that provide independent client

assurance or validation of key risk-taking activities (for future leverage by the second

line in meeting its responsibilities and impact on third line)

Principle and

definitions

Responsibilities

Implications of

the activities-

based model

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Risk accountability: third lineInternal audit as independent verification

► Internal audit should verify that the firm’s risk governance framework complies with guidelines

and is appropriate for the firm’s size, complexity and risk profile

► Audit staff should have capacity, required skills and expertise to conduct an effective assessment of the risk governance framework

► Internal audit should prioritize emerging risks and material issues to formulate corrective action

plans to report to the audit committee

► Maintains complete and current inventory of material processes, product lines, services and

functions and assesses risks associated with each, including emerging risks

► Establishes and adheres to an audit plan that is periodically reviewed and updated to take into account risk profile, emerging risks, issues and the frequency with which activities should

be audited

► Audits risk framework and risk management activities (e.g., anti-money laundering (AML), model risk) and the second-line functions

► Reports audit conclusions, material issues and recommendations carried out under required

audit plan, with reports identifying root causes of material issues

► Internal audit is functionally accountable to the Audit Committee, while reporting to a Senior

Executive Manager on administrative matters. Internal audit reports administratively to the CEO

► The results of the internal audit do not affect management’s compensation

► Provides independent view of subjective or judgmental matters, including an assessment of risk

culture, adequacy of model assumptions, etc.

► Additional competencies (beyond technical areas) and techniques (e.g., data analytics, structured interviews) to support a broader understanding of governance, soundness and

sustainability

► Focus on maintaining balance between independence and collaboration with the front and second lines

► Audit plan establishes scope in the front and second lines to include an evaluation of risk

management framework (including whether it addresses financial, nonfinancial and emerging

risks), as well as the adequacy of compliance with policies, procedures and processes established by front and second lines

Principle and

definitions

Responsibilities

Implications of

the activities-

based model

What firms are doing:

► New skills and capabilities

such as risk management

and financial modeling

► Forward-looking approach

to assessing risk and

“cultural risk assessment”

on all audits

► Interlinkages with second-

line coverage to minimize

duplication of what is

necessary, and to enable

consistency of risk

assessments

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EY Insights on Policies

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What is a policy?

Policies establish standards of conduct and promote compliance with applicable laws and

regulations.

Policy considerations

Related to the objectives of the

organization

A statement that guides

decision-making and actions

Fact-based and objective

Clear, concise, simple and direct

Stable (changing infrequently so it can set a

course for the foreseeable future), yet

flexible (capable of adapting to change)

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Catalog of policies

We recommend conducting a full inventory of policies needed based on statute, regulatory

requirements or business processes.

We reviewed the following policies and noted they were incomplete; not up to date; do not

safeguard compliance with state requirements or administrative rules; do not clearly define

roles, responsibilities and approval limits; and have not been communicated to all impacted

employees. We recommend that the following policies at a minimum be reviewed and

updated as necessary in addition to the policies identified in the aforementioned analysis:

► Texas Health and Human Services – Contract Management Handbook

► Texas Health and Human Services – Procurement Manual

► Texas Health and Human Services – Form PCS 160 – Solicitation checklist

► Texas Health and Human Services – Form PCS 138 – Electronic State Business Daily

(ESBD) – Solicitation Approval Form

► Procurement and Contracting Services Policy – Policy 400 Emergency Procurements

► Procurement and Contracting Services Policy – Policy 401 Proprietary and Sole Source

Procurements

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Procurement policy library (1/4)Governance and control framework

The following core management policies are the foundation for leading practices governing procurement:

Procurement policies Purpose Audience Scope

Policy and procedure

developmentTo establish and promote the

creation and maintenance of the

procurement policies and

procedures

► Procurement staff

► All employees with

procurement-related

responsibilities

► Policy attributes/elements/definitions

► Policy development and review

P2P code of

conduct

To establish and promote

operating and behavioral

standards for the Procurement

function based on honesty,

integrity, fairness and

compliance with the letter and

spirit of the law

► Conflict of interest

► Perceived impropriety

► Confidentiality

► Responsibilities to employer

► Issues of influence

► Gifts and gratuities

► Supplier relationships reciprocity

► Reporting misconduct, business

► Relationships with former employees

Procurement

governance

(C-level mandate)

To establish the protocol for

managing the governance

structure for procurement

► Commercial due diligence

► Fact-based decisions

► Issue escalation

► Identification of decisions and

opportunities

► Enforce consequences

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Procurement policy library (2/4)Governance and control framework

The following core management policies are the foundation for governing procurement:

Procurement policies Purpose Audience Scope

P2P delegation of

authorityTo determine who in the Agency

should approve different types of

transactions dependent upon the

procurement risk levels

► Procurement staff

► All employees with

procurement-related

responsibilities

► Requisition and solicitation

► Evaluation

► Contract

Source to pay (S2P)

generalTo establish the basic

purchasing rules of engagement

and business terms for acquiring

goods and services

► Category management

► Strategic sourcing process

► Signature authority

► Purchase to pay channels

► Contract terms

► Non-disclosure agreement

► Accounts payable

► Benefits realization

Knowledge

management

To establish the protocol for

managing the knowledge content

for procurement

► Record-keeping

► Knowledge sharing

► New hire training and development

Performance

measurement

To establish and enforce

operating standards for

procurement functions across

internal and external clients, and

enable effective benchmarking

► Key performance metrics

► Benchmarking

► Performance feedback

► Compliance

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The following core management policies are the foundation for governing procurement:

Procurement policies Purpose Audience Scope

Strategic category

planning

To establish the manner in which

the long-term category plan

should be developed, including

aligning with business demand

forecasts and risks and engaging

with stakeholders

► Procurement staff

► All employees with

procurement-related

responsibilities

► Demand analysis

► Supply market assessment

► Commodity inflation management

► Category strategy development

► Category strategy implementation

Supplier relationship

management

To establish the manner in which

procurement employees are to

engage and manage suppliers

► Supplier relationship management

► Bidding and solicitation

► Supplier selection

► Performance management

► Supplier diversity

Business partnering To establish and promote the

collaboration and common

needs of procurement policies

and procedures

► Stakeholder engagement

► New product development/demand

management

► Business planning and target setting

► Requirements and specifications

gathering

► Strategy execution/category integration

Procurement policy library (3/4)Governance and control framework

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The following core management policies are the foundation for governing procurement:

Procurement policies Purpose Audience Scope

Strategic sourcing To establish the manner in which

procurement employees are to

engage and manage sourcing

► Procurement staff

► All employees with

procurement-related

responsibilities

► Execute sourcing project

► Execute value engineering project

► Provide e-sourcing services

Contract

management

To establish the basic rules of

engagement for establishing

procurement contracts

► General contract administration

► Amendments to approved contracts

► Nonstandard contracts

Requisition to pay To establish the basic payment

rules of engagement and

business terms for acquiring

goods and services

► Execute spot buys

► Perform customer services (helpdesk)

► Perform procure to pay

► Perform supplier e-enablement services

► Perform master data management

► Perform operational reporting

Travel and

entertainmentTo establish the basic

purchasing rules of engagement

and business terms for acquiring

travel and entertainment

► Air travel

► Hotel

► Rental car

► Meals

► Entertainment

Procurement policy library (4/4)Governance and control framework

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Additional policies (1 of 3)

Procurement policies Purpose

Financial services This policy encompasses all third-party fees and expenses for audit,

banking or insurance services.

Professional services This policy encompasses all third-party fees related to professional

services and outsourced services performed on an ongoing basis that do

not relate to a facility.

Outsourced business

support

This policy includes outsourced services that are performed on an ongoing

basis (excluding third-party sales and marketing, technology and non-

administrative outsourced services that relate to a facility).

Legal services This policy encompasses all fees and expenses paid to law firms,

independent lawyers, legal experts or notary practices for legal advice and

procedures.

Events and sponsorships This policy encompasses all expenses associated with internal events,

subscriptions, and donations, sponsorships and memberships intended to

promote the company’s reputation and image.

Company vehicles This policy encompasses all expenses associated to the leasing and rental

of vehicles or airplanes and fuel for vehicles owned by the company.

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Additional policies (2 of 3)

Procurement policies Purpose

Facilities and related

services

This policy manages expenses associated with the rent and use of office

space and equipment, including lease expenses, site services, facility-

related benefits, and security; office supplies; and office parcel couriers. It

also includes all expenses related to commodities or services such as

water, electricity, gas and fuel.

Technology This policy encompasses all technology spend, including, but not limited to,

software as a service, application and IT support outsourcing, data center,

technology equipment and maintenance, communication services, software

maintenance and fees, and application development.

HR benefits This policy encompasses all company expenses related to hourly or

salaried employees and executives. It includes all taxes and social security

contributions related to the remuneration.

People recruitment and

development

This policy includes the end-to-end HR cycle from sourcing, selection and

deployment of talent, training and development.

Sales support and

resources

This policy encompasses all commercial costs related to the selling of the

products posted below marginal contribution (booked as SG&A).

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Additional policies (3 of 3)

Procurement policies Purpose

Marketing support and

resources

This policy encompasses all expenses related to the promotion and

support of Client products and brands that are performed either internally

or by a third party.

Maintenance This policy encompasses all expenses and provisions associated to

maintenance of company facilities and equipment, excluding vehicle

maintenance, IT maintenance and transportation fleet maintenance.

Logistic support This policy encompasses all expenses associated with all third-party

logistics (3PL) expenses and certain other expenses that support logistics

operations in the warehouses. It also includes warehouse-related costs.

Transportation This policy encompasses all transportation costs associated with freight

distribution (both third party and own fleet), as well as some cost elements

for in-house transport of finished goods, mainly the fleet fuel and

maintenance.

Contingent staffing This policy addresses the proper execution of the contingent staffing

process and the criteria for approval, including, but not exclusive to, the

provisional group of workers who work as a non-permanent basis,

temporary contract workers, independent contractors or consultants.

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EY Insights on the Future of Procurement

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Other procurement organizations have successfully matured into leading organizations

Governance and Risk

Management

Performance

Management

Procure-to-Pay Process

Internal Stakeholder

Management

People and Organization

Technology

Strategic Direction

Category Management

and SRM

► Most own full decision rights on majority of categories (all direct and key indirect categories)

► Most have developed a risk scoring and segmentation model to manage supplier (third party)

risk

► Most expand definition of savings to include cost avoidance and innovation to drive behaviors

► All place significant emphasis on standardized processes and training to deploy

► Most retain some degree of in-region capability to execute activity and maintain connectivity with

the business

► Most have established one or more global operating hubs

► Most weigh soft skills (influencer, global mindset) equal to technical skills in selecting

resources

► Most have deployed enabling technologies globally

► All have support from executive leadership to manage the P2P process

► All operate as a single global sourcing organization

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Additional EY Insights

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Additional EY Insights

The following documents are being provided under separate cover to

HHSC. They provide context and thought leadership that may be useful

to HHSC as reference material.

► Five things – Getting the basics right in procurement

► Can you transform your third parties’ risk into a competitive

advantage?

► Infinite possibilities – Procurement in 2025

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EY additional projects removed

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Sample project removed

► Increase commercial effectiveness

► Create a spend analysis and repeatable funnel management process

► Redefine the demand signal which initiates activity

► Establish a formal Strategic Sourcing program

► Establish/refresh modular solicitation templates

► Conduct annual or semi-annual anonymous surveys regarding Procurement function

performance

► Establish performance measures for staff in position descriptions

► Develop and strengthen communication conduit to Comptroller’s office

► Utilize a legislative champion to assist in getting updates to procurement and related

statutes that eliminate identified process inefficiencies

► Establish Supplier Summits and deeper supplier collaboration opportunities

► Create and publish vendor/provider scorecards on supplier portal

► Ensure origins codes are enabling requisitions to follow the appropriate routing flows

► Align systems to force the collection of contract IDs to enable you to tie contracts to

financial spend

Below are a list of additional projects for HHSC to consider at a later time to continue their evolution

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Appendix

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State of Texas

Health and Human Services

Commission Procurement and

Contracting Review

Phase I and Phase II

Maturity Assessment Report

27 September 2018

This work product has been prepared for The Texas Health and Human Services Commission for their use and purposes only. It is not intended to be relied upon as professional advice for other Texas agencies, affiliates or other Health and Human Servicesagencies, affiliates outside Texas. Neither Ernst & Young LLP nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this document.

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Phases I and II summary

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The HHSC Procurement and Contracting department has made several enhancements to the procurement process and tools

Topic Updates

Governance and Risk

Management

► Created policy to address effective procurement planning, scoring and execution.

► The evaluation tool and calculations have been updated to remove errors noted in previous audit reports. A team has

been formed for continual creation and monitoring of the tool.

► Quality control began to provide more fair and accurate solicitation evaluations with a goal of having all required

documentation be consistently maintained (April 2018).

► Checklists are being structured to guide the compliance of procurements to stay within state requirements.

► The creation of a legal compliance checklist, PCS 160: HHSC Sollicitation Checklist, has been implemented (June

2018).

Procure to Pay

Process

► PCS has created an initial workflow of the procurement process for Requests for Proposals (RFPs), Requests for

Applications (RFAs) and Requests for Quotes (RFQs), showing the interaction points between PCS, program, legal

and budget; also inclusive of consultant solicitation.

Complex Services ► The Compliance and Quality Control department was created to provide quality control on complex solicitations.

Supplier Relationship

Management► PCS has recently implemented a new policy that allows for initial guidance for vendor interaction.

Internal Stakeholder

Management

► PCS has assigned liaisons to some program areas and established a forum to engage HHSC programs, DSHS and

DFPS to collaborate and prioritize business needs.

► PCS has adopted more proactive customer engagement regarding program support, providing more flexibility with

program areas and business requirements.

People ► Strong performance and going “above and beyond” have begun to be recognized by leadership.

► PCS has begun to provide subject-matter resources to answer questions regarding CAPPS.

► PCS has begun to fill vacant positions to work toward appropriate staffing levels.

The EY US team has noticed the beginning of a change to the procurement and contracting function with the new

management team. The initial steps below are a start in the right direction. We cannot yet assert the long-term impact and

sustainability of these improvements though we wish to acknowledge that the below collection of activities help to address

these areas.

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► The priorities of HHSC are to serve Texans by improving health outcomes and well-

being, supporting independence for people and families, and driving efficiency and

accountability.

► The primary objective of the Procurement and Contracting Review is to develop, vet

and produce a detailed improvement plan to make the Agency better. All contracted

members of the Agency have expressed throughout the process that improvement is

paramount and all parties are aligned.

► The improvement plan will be illustrated using a road map, which requires the

completion of the current state and root cause analysis.

Begin with the end in mind

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Approach

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Project timelineOverview

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Project approachOverview

Background: Drawing from our experience in performing 110 domestic and 460 global procurement

transformation projects and civic initiatives’ experience working exclusively with public sector clients

on procurement assessment and transformation, the following methodology and approach were

applied to this project:

► Face-to-face interviews: 106 face-to-face interviews with approximately 135 people were

completed. Interviews covered the senior HHSC leadership, as well as middle management and

staff. Members of DSHS and DFPS were also interviewed.

► Crowdsourcing: Conducted 9 anonymous ThinkTank™ sessions to allow more than 300 PCS

and non-PCS personnel to have their voice heard.

► Data: Requested nearly 70 different data sets, closing ~83% of the total data sets requested and

performed fundamental analytics. In some cases, valid system reasons inhibited ability to provide

certain data requests. A listing of data and document requests is located in the Appendix.

► Hypothesis: Compared 37 pre-identified hypotheses with 8 procurement maturity dimensions.

► Experience: Utilized our procurement professional experience and engaged multiple subject-

matter resources, including EY US’s Procurement Lead for the Americas.

► Review of prior audits: The following audit reports were assessed to support the project review:

► OIG Review of the HHS Procurement Process: 2013–2018, July 2018 (OIG Report)

► Audit of PCS Procurement Processes, Office of Internal Audit Report 18-01-023, 5 July 2018 (OIA Report)

► An Audit Report on Scoring and Evaluation of Selected Procurements at the Health and Human Services

Commission SAO Report No. 18-038, July 2018 (SAO Report)

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► The methodology measures an organization’s procurement practices along eight dimensions.

► Each dimension is rated based on a five-level rating that takes into consideration leading practices.

► From the assessment, a spider diagram is produced showing the current state. Based on this, the gap analysis is

produced and initiatives are identified to bridge the gap between the current state and the targeted state.

EY maturity model Assessment

Stage 1: Informal

Stage 2: Functional

Rating

Stage 3: Standardized

Stage 4: Collaborative

Stage 5: Leading

Po

rtfo

lio

an

d

Procurement maturity assessment methodology

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Maturity models provide analysis to enhance performance, cost and risk across a number of criteria

“Hero-based” environments rely on staff to go the extra mile to complete work to compensate for a lack of supportive and

systematic technology features. System-based environments utilize technology for reliable process completion. The

scoring is consistent with the general sentiment of the PCS team as well as their leadership.

Weak

Str

on

gIm

pact

Reactive ProactiveMaturity levels

Leading

Tactical fixes/backlog cleanupTechnology not optimized;

strategy not recognized

Agency standards and

governance established and enforced

Integrated technologies;

automation, transparency

Proactive aged

with decision analytics

Capabilities in place; inconsistent

processes

E2E process design formally

documented and published

Performance driven;

improvement program chartered

Processes integrated across

Agency boundaries

Standardized processes/defined

strategyOptimized and efficient

Executive leadership directly

drive improvement strategies

Integration of leading practice

and standardized processes

Supply chain as a competitive

advantage

Recognized in the industry as

best in classEfficiency/

effectiveness

Span of control

The greatest inflection point for effectiveness

and efficiency occurs between levels 3 and 4

Informal1

Functional2

Standardized3

Collaborative4

5

“Hero-based” environment System-based environment

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HHSC Procurement and Contracting Current state capabilities summary

Procure to Pay Process and Complex

Services

Average: 1.7*

Portfolio and Supplier Relationship Management

Average: 1.6*

People and Organization

Average: 1.5

Internal Stakeholder Management

Average: 1.6

Governance and Risk Management

Average: 1.4

Performance Management

Average: 1.3

Strategic Direction

Average: 1.3

Technology

Average: 1.7

Note: Captures status quo baseline.

Pillars are defined in detailed analysis section pg 66–69.

Strategic

Direction

Performance

Management

Technology

Internal

Stakeholder

Management

Governance

and

Risk Management

Procure to

Pay Process

and Complex

Services

People and

Organization

Portfolio

and Supplier

Relationship

Management

*Represents the average rating of the included subsections.

The maturity model breaks down procurement and contracting into eight pillars to assist in the identification of root cause. Based on this

assessment, the Commission has opportunities to improve across all eight dimensions. Such results should be expected and are in line with the

recent audit reports. New management has begun enhancements to improve scores, but needs additional support and improved processes and

systems.

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1. The operating model,

strategy and investment

of HHSC, has not

evolved to meet the

needs of an outsourced

service delivery

solution, which depends

upon Procurement for

its success.

2. Volume of transactions

amplified the effect,

quadrupling the impact

on an unfit model.

3. The communication

plan is built for a

smaller organization.

The Agency has suffered from a lack of investment in people, alignment of skills, processes, systems, governance and communications to support the

procurement and contracting function.

Partnership, accountability and interdependency from PCS, Program and Legal need improvement to achieve the value proposition.

Data, reporting and visibility are inadequate to run the procurement and contracting function.

The traditional and heavily restricted approach for developing and

maintaining suppliers, vendors and providers is holding back the Agency.

Overarching

root cause

Efficiency and effectiveness of the procurement and contracting function need improvement to become high performing.

Critical realities observed in HHSC’s translation of strategy to operations

Improvement opportunities

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HHSC spend tree

Other

~ $0.001

Inspector

General

~ $0.01

Regulatory

Services

~ $0.01

Executive

Commissioner ~ $0.01

Texas Office

of Civil Committee ~

$0.01

Chief

Information Officer

~ $0.2

Medicaid

and CHIP Services ~$38.1

State

Facilities Division

~ $0.3

Financial

Services

~ $0.4

Access and

Eligibility Service

~ $0.4

IDD and

Behavioral Health Svcs

~ $0.9

Health

Develop-mental and Indep ~ $0.9

System

Support Services

~ $0.6

HHSC ~$42b

212,149,818

695,288,574

1,395,088,720

2,454,064,210

37,088,843,058

$- $10,000,000,000 $20,000,000,000 $30,000,000,000 $40,000,000,000

Rent and Utilities; Utilities; Rent - Machine and Other; Consumable supplies; Foodfor Persons - Wards of Stat; Capital Expenditures; Fuels & Lubricants

Professional Fees & Services

Grants

Other Operating Expense

Client Services

LBB Spend

The figure below represents the procurement spend breakdown across HHSC’s largest programs. As a procurement analysis, this

reflects total spend data, including pass-through spend, which flows through the Agency.

The bar chart below represents the LBB spend breakdown: Client services make up 89% of the total spend based on LBB classification.

*Data source: HHSC budget.

*All categories include some client services spend.

*

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Current state maturity assessment

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Strategic direction

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Strategic directionMaturity assessment

HHSC recent audits

► “Given the magnitude of the HHSC

mission and the complexity and

volume of procurements and

contracts it is imperative that HHSC

support the integrity of the

procurement process.” (OIG Report)

► With $42b in associated spending,

the supply chain is fundamental to

the success of the Commission.

Hypothesis testing

► Operational strategy of the business,

including planning, goals and vision

of success, could be missing.

► There is misalignment of strategy,

business objectives and operational

plans.

► Organization and overall operating

model of the business may be

insufficient.

► Leading practices are not integrated

into the operating model, leading to

inefficiencies and rework.

A clear and detailed procurement and

contracting strategy that is aligned to top-level

strategy; is easily implementable; and includes

financial, environmental and ethical aspects

Leading practice companies have alignment from their corporate strategy down through the procurement operating model to guide the expectations on the

procurement and contracting systems design and execution. In HHSC, the PCS function impacts the totality of the commission’s ability to execute its

priorities, and thus the PCS function is fundamental to the Agency’s success.

Review considerations within this dimension

Operational

strategy of the

business,

including

planning, goals

and vision of

success

► The organization’s vision for success supported by its strategic goals and objectives

► The strategic planning process, frequency of review and proactive response to

changing conditions

► Stakeholder roles/involvement in planning and setting the strategic direction

► Key risks and assumptions associated with the organization’s strategy and the

organization’s competitive advantage

► Consideration of external forces

► Alignment of the organization’s strategy with those the entity serves

Alignment of

strategy,

business

objectives and

operational

plans

► How effectively the organization’s strategic goals are defined and communicated at

the business unit level

► How strategic goals are aligned to business unit objectives and operational plans

► Organization of customer-facing and support functions, business units and

departments

► Mechanisms in place to monitor and report the achievement of business plans and

objectives

► The organization’s current performance as related to business plans and objectives

► Linkages between the strategy and the current capabilities and strengths of the

organization

Operating

model

effectiveness

► Organization and overall operating model of the business

► Location of operations

► Sourcing strategy

► Industry risk profile and risk management activities

► Communication and dissemination of information

► Change management

► Governance structure and associated functions

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Strategic

Direction

A clear and detailed procurement and contracting strategy that is aligned to top-level strategy; is easily

implementable; and includes financial, environmental and ethical aspects.

1. Informal/

no process2. Functional 3. Standardized 4. Collaborative 5. Leading

Limited procurement

strategy is in place.

Procurement strategy is not

defined in a number of

areas and there is no

visibility on key future

initiatives.

Procurement strategy and

formal idea of future

initiatives exist in most

areas, but procurement

strategies are not always

executed.

Full understanding of the

transformational journey

that must be followed and a

demonstrated history of

success.

Detailed plans updated on

a regular basis with cross-

functional executive

support on the journey to

procurement excellence.

1.3

Current state findings

Strategic vision:

► PCS vision, mission and purpose are not fully aligned with the Agency’s vision/mission and not openly confirmed and communicated to all

stakeholders.

► PCS annual priorities and goals are not widely shared across the Agency.

► Each time upper management changes, new priorities start the change management cycle all over again.

Partnership and strategic planning:

► Common alignment of PCS priorities across HHSC is lacking, there is little comprehensive planning, and programs’ goals and strategy are not

coordinated with PCS.

► Engagement with programs and other non-PCS stakeholders is minimal regarding process changes and the impacts of those changes across

HHSC.

Strategic directionMaturity assessment

Current state

“We don’t have much of a strategic direction,

but we need one.”

– HHSC employee, July 2018

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Strategic directionMaturity assessment

Typical operating model architecture

During the interviews, it was noted that:

► Previous leadership had not developed or

communicated a strategy alignment to procurement

across the Agency.

► An end-to-end “systems thinking” approach is

required.

In practice, we saw:

► HHSC submits a biannual strategic plan to the

state, though we would want to see language

whereby the strategy is specifically tied to a

procurement operating model.

► We are not aware of an associated procurement

operating model defined for HHSC.

In other benchmarks and/or using our experience,

we note:

► Large (similarly sized) organizations heavily

dependent on third-party suppliers for the bulk of

their service delivery depend on a more defined

and deliberate procurement system solution.

Supply chain networkC

Supply chain processes

R&D

D

Plan

Make Move (inl return & customer service)Source

Supply chain

Design DeployDiscover

Product lifecycle management

Governance and performance management

FunctionalCostsAssets

FulfilmentManagement cost FlexibilitySG&A

COGS

CCC

ROA

ROWC

Supplier

Performance

Management

Customer

Perform-ance

Manage-ment

B

Promo effectivenessCycle time Penetration

Brand awarenessTime to market Customer sat

Strategy, design principles and business case

Supplier

alignment and

partnerships

Alignment

and partner-

ships

A

People, organization and geographic locationE

Location

assessment

Resources

Capability

Structure

Roles

► Shareholder expectations► Geo political environment

► Economic environment

► Competition► Consumer & customer trends & insight

► Regulatory

Global

Region / Clusters

Mature

Developing

Functional

category

Segmentation

Common

vs vs

vs vs

Network design Customs & excise VAT

Transactional

Record to report Order to cashPurchase to pay

Corporate tax and legal entity structureG

Transactional model

Legal title flows

Factories

CustomersSuppliersSC Hubs

DCs

Marketing & brand

mgt

HQR&D

Opcos

Financial flowsSupplier

interface

Customer

interface

F

Physical flows

Qualitative – by multiple observations

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Governance and risk management

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Governance and risk managementMaturity assessment

Governance and risk refers to the

overall governance model and also

includes policies, procedures,

compliance and risk management.

An adequately designed governance model is critical to support team members to perform duties as intended and to provide management with the

information it needs to verify that procurement activities are conducted in compliance with regulations and good business practices.

Review considerations within this dimension

Policies and

procedures and

documentation

► Do policies and procedures adequately

govern the source to contract process?

► Is there a process for updating policies

related to changes in legislation?

► Is relevant documentation appropriately

maintained?

Tools ► Are prequalified contract templates

effectively used across the Agency?

► Is there a reliable standard scoring and

evaluation tool that is used consistently?

Quality assurance ► What is the goal of the Internal quality

assurance function?

► How effective is the Internal quality

assurance process?

Governance ► Are conflicts of interest and nepotism

verifications consistently performed and

documented?

Training ► Are PCS employees adequately trained

on policies and procedures?

► Are PCS employees adequately trained

on HHSC tools?

HHSC recent internal audits

► Policies and procedures are incomplete and are not updated to reflect

current processes and statutory requirements. (OIG Report)

► None of the applicable procurements tested had all the documentation

needed to help support the procurement process was followed as

intended. (OIA Report)

► PCS has neither consistently nor adequately identified and

documented potential conflicts of interest. (OIA Report)

► Each purchaser appeared to have the latitude to use the evaluation

and scoring tool with which it was most comfortable. (OIG Report)

► The lack of necessary procurement policies and procedures, including

quality assurance and training, as well as the lack of oversight,

consistency and transparency in evaluation and scoring process have

been repeated issues for HHSC. (OIG Report)

Hypothesis testing

► Lack of active governance of the procurement process

► Limited to no auditing or follow-up after noncompliance is discovered

► Lack of data to effectively manage procurement activities

► Policies present excessive hurdles that do not support operations and

end up being ignored

► Approval thresholds for requisitions and contracts are not aligned with

risk and operational requirements

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► Policies – Many procurement policies and procedures are incomplete; are not up to date; do not safeguard compliance with state requirements or

administrative rules; do not clearly define roles, responsibilities and approval limits; and have not been communicated to al l impacted employees.

► Procedures and documentation – Several procedures and documentation requirements have not been consistently documented, resulting in inconsistent

implementation approaches related to procedures and retention of key documentation.

► Fit for purpose approval process – Although a risk rating is assigned to individual procurements, the approval process is not consistently aligned to the

level of risk of the procurement.

► Risk management – While a Compliance and Quality Control (CQC) function has recently been established, the function’s primary mandate should be

strengthened to have it operate as a pseudo-independent risk monitoring function. PCS management should own risk (identify, assess and manage the risks

in its business), and the CQC function should provide oversight of management’s effectiveness in identifying and managing those risks.

► Tools and templates – Standardized tools and templates to facilitate the accuracy, efficiency and effectiveness of controls within the procurement process

have not been designed and/or provided to staff for all procurements.

► Training – Although limited training has been provided to PCS and program employees, a formal training strategy, plan and program have not been

developed and provided to procurement staff.

Governance and

Risk ManagementGovernance and risk refers to the overall governance model and also includes policies, procedures, compliance and risk management.

1. Informal/no process 2. Functional 3. Standardized 4. Collaborative 5. Leading

No governance body in place

to support overall purchasing

strategy, policies and

procedures are not developed

and communicated, and organization does not

adequately consider risk

throughout its processes.

Governance exists for a few

key purchases, low process

compliance and risk

management is acknowledged

within other functions.

Processes and systems are

formally documented and

published but are not always

enforced, inconsistent

compliance with process and siloed risk management

capabilities.

Governance model has been

established and is supported

by executives, and there are

multifunctional integrated risk

assessment, planning and response capabilities in place.

Governance body is in place,

documented processes and

controls are in place, the

organization is nearly always

compliant with policies and procedures, and predictive

supplier risk management

exists.

Current state findings

1.4

Current state

*See details in slides 190-202

Governance and risk managementMaturity assessment

“Clear roles and responsibilities do

not exist within PCS.”

– HHSC employee, July 2018

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Quantitative – by the numbers

A review of documentation found a 56% failure rate or lack of evidence to

determine compliance with key attributes tested by the HHSC Internal Audit

department across 10 phases of the procurement life cycle. The chart below

depicts the number of attributes that passed or failed, as presented in the

Audit of PCS Procurement Processes Report (18-01-023) developed by HHSC Internal Audit in July 2018.

Governance and risk managementMaturity assessment

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

De

term

inatio

n o

f n

eed

Pro

cu

rem

en

t pla

nn

ing

Do

cu

me

nt d

eve

lop

me

nt

So

licitation p

rocess

HU

B c

om

pliance

Evalu

atio

n p

rep

ara

tion

,re

spo

nse

re

ceip

t a

nd b

idop

en

ing

Pro

cu

rem

en

t evalu

atio

ns

Co

ntr

act

ne

gotiatio

ns

Re

co

mm

end

ation f

or

aw

ard

s

Co

ntr

act

aw

ard

Evalu

atio

n t

ool te

sting

Pass Fail or lack of evidence

Consistent themes have been identified in recent internal and external audit reports.¹ The table below highlights the nature of observations and issues included in select audit reports presented to HHSC management from 2013 to 2018.

Observations or issues

related to: 20

13

20

14

20

15

20

16

20

17

20

18

Policies – –

Procedures

Documentation

Policy Compliance

Tools –

Quality control

Risk management and

monitoring –

Training

Issue was noted in audit report.

– Issue was not noted.

1 Audit Reports reviewed were SAO 14-013: An Audit Report on Information and Communications Technology Cooperative Contracts at the Health and Human Services Commission (2013); SAO 14-035: An

Audit Report on Selected Contracts at the Health and Human Services Commission (2014); Sunset Advisory Commission Staff Report: HHSC and System Issues (2014); SAO 15-019: A Report on Recent Contracting Audits (2015); SAO 15-030: An Audit Report on Procurement for Terrell State Hospital Operations at the Health and Human Services Commission and the Department of State Health Services (2015); SAO 15-031: An Investigative Report on The Health and Human Services Commission’s and the Office of Inspector General’s Procurement of Services and Commodities from 21CT, Inc. (2015); OIG

Audit: Brain Synergy Institute Contractor Performance and Billing, and HHSC Contract Procurement and Monitoring (2016); SAO-KPMG Independent Auditor’s Report 16-317 (2016); SAO-KPMG Independent Auditor’s Report 17-314 (2017); SAO-KPMG Independent Auditor’s Report 18-314 (2018); Texas HHSC Internal Audit – Audit of PCS Procurement Processes (2018), and SAO 18-038: An Audit Report on

Scoring and Evaluation of Selected Procurements at the Health and Human Services Commission (2018).

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Governance and risk managementMaturity assessment

Through interviews and inspection of PCS documentation, we noted the following:

► Policies: Policies and procedures for effective procurement planning, scoring and execution are not consistently defined and/or implemented.

► A formal process has not been fully established to update policies and procedures to reflect changes in current laws and regulations for all policies. Additionally, a formal

process to communicate changes or updates to policies has not been established.

► Roles and responsibilities, and associated delegations of authority, related to review and approval of requisitions and contracts are not consistently defined, resulting in

duplication and potential gaps.

► Procedures and documentation: Procedures and documentation requirements have not been consistently documented, resulting in inconsistent implementation methods

related to procedures and retention of key documentation. Examples include lack of signed nondisclosure forms, signed nepotism forms, completed scoring evaluation

documents and approvals of the final award recommendation.

► Tools:

► A defined evaluation tool with adequate document protection is not consistently used to increase accuracy of scoring calculations.

► Prequalified standard contract templates are not effectively used across the Agency.

► Risk management:

► While a CQC function has recently been established, a process has not been consistently implemented to verify the following:

► Solicitation evaluation criteria used are fair and accurate.

► All required documentation is being consistently maintained.

► Policies and procedures are being followed and procurements are in compliance with state requirements.

► Programs are complying with PCS policies and procedures.

► Oversight of processes is not performed to verify that all necessary governance controls are consistently performed, such as discovering and documenting conflicts of

interest and nepotism verifications.

► Fit for purpose approval process: The approval process does not adequately consider risk factors outside of the dollar value of the contract when determining appropriate

review procedures. Additionally, although risk ratings have been assigned for procurements the approval process is not fully aligned to the level of risk of the procurement. For

example, a renewal for standard services should not warrant the same approval process as a new contract.

► Training: Although limited training, with varying effectiveness, has been provided to PCS and program employees, a formal training st rategy, plan and program have not been

developed and provided to PCS and program staff.

► Staff members are often not appropriately trained on their expected job functions and all applicable state requirements necessary for purchasing.

► Training conducted related to use of CAPPS and System of Contract Operation and Reporting (SCOR) has not been consistent to support all impacted employees.

► Adequate training has not been performed to equip vendor evaluators with the proper skills and knowledge to properly perform evaluations, such as how to properly use

Microsoft Excel templates for evaluations.

Qualitative – by multiple observations

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Technology

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TechnologyMaturity assessment

An agency’s systems that aid in the procure to

pay process and can produce output reports,

preferably a single integrated system that is

fully automated and produces timely reports.

Technological infrastructure affects the culture, efficiency and effectiveness of government agencies. The health of any agency’s

technological infrastructure impacts not only its ability to efficiently execute each step of the procure to pay process, but also its ability to

effectively serve its customers.

Review considerations within this dimension

Technology

architecture,

including

applications,

platforms and

networking

► The information technology architecture/network supporting the Agency and how

it relates to key processes

► Key functionality to support operational and strategic procurement

► Enterprise resource planning (ERP) design and integration with other business,

operational and reporting systems

► Key limitations in terms of IT hardware or software capacity, functionality,

reliability or integration with other business systems that may restrict business

performance

► Known issues associated with the IT infrastructure, e.g., limitations of legacy

systems

► Workflow and integration of core applications

Instances of

technology

► Instance strategy of major technology components (HHSC-specific modifications)

► Use of globally consistent technology platforms and related processes (process

standardization, where feasible)

Data model, data

organization,

naming and data

governance

► Organization and consistency of global data

► Existence of clear data definitions

► Reporting capabilities to facilitate data-driven decisions and support

transparency efforts

► The organization’s data governance policy and procedures

► The database structure employed by the organization and links between

databases

► Data integrity policy and procedures governing access to view and/or manipulate

key data elements

HHSC recent audits

► Auditors identified errors in

the evaluations performed for

all 28 procurements that

were tested. (SAO Report)

► Data within the System of

Contract Operation and

Reporting (SCOR) is not

accurate or complete. (OIA

Report)

Hypothesis testing

► Automation and leading

practices are not integrated

into the operating model

allowing for inefficiencies and

rework.

► Common IT system gaps are

not addressed

systematically, but managed

individually.

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Policies and procedures

► Business processes and system functionality modifications (current customizations) are not fully enhanced to maximize use of automated tools.

► There is often an insufficient effort by IT and leadership to identify subject-matter resources in the program areas and engage them as system stakeholders.

Governance

► CAPPS has not been entirely configured and customized to meet the governance needs of all user groups.

► Workflows in relation to approvals established in the system are often insufficient to support Agency policies and overengineered to the point that they are not entirely effective.

Training

► Staff has not been adequately trained to use CAPPS and SCOR effectively.

► System changes and staff turnover have exacerbated the overall training deficiency.

Tools

► The CAPPS system is not properly sized for volume, and requisition approvals are not correctly synced.

► Not all contracts are included in SCOR, and some contract records contain inaccurate and/or incomplete data.

► Lack of visibility and tracking significantly hinders reporting capabilities.

► The Agency’s digital signature tool is not owned by IT and is disconnected from CAPPS and SCOR.

► Inconsistent and incorrect use of system tools often results in loss of transparency and reduced system efficiency.

► As presently configured, the system tools are limiting to support business processes and users are often unaware that system enhancements and canned report development

are still in progress (they have had little input and received minimal communication).

► Legacy data conversion was executed poorly and data entry errors occur regularly, resulting in the loading of inaccurate info rmation.

► A concerted effort across all stakeholder groups to address data integrity and lack of reporting capabilities is an urgent need.

► CAPPS appears to have been customized to attempt to meet business needs rather than fully exploring out-of-the-box ERP system capabilities.

TechnologyAn organization’s systems that aid in the Procure to Pay (P2P) Process and can produce output reports, preferably a single integrated

system that is fully automated and produces timely reports.

1. Informal/no process 2. Functional 3. Standardized 4. Collaborative 5. Leading

There is no P2P system in

place.

Basic P2P systems exist in

most business units (BUs) but

are not linked together, few e-

catalogs exist and many

transactions are still processed manually.

P2P systems are in place in

all BUs and functional

procurement areas but are not

integrated, e-catalogs are in

place and maverick buying still occurs.

Harmonized P2P systems

exist and are widely used,

manual processes have been

eliminated and there is

moderate adoption of e-catalogs with key suppliers.

One integrated P2P system

across the organization links

all purchase orders (POS) and

suppliers.

Current state findings

TechnologyMaturity assessment

1.7

Current state

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Quantitative – by the numbers Qualitative – by multiple observations

During the interviews, it was noted that:

► The CAPPS system was intended to automate 80% of

the procurement process; that has not been realized.

► The CAPPS system is not configured to be user

friendly (90+ comments).

► Agency business processes are not supported by

system functionality.

► There is limited visibility into requisition status.

► The information in SCOR is inaccurate.

In practice, we saw:

► Data flows one way from CAPPS to SCOR.

► The procurement process is still heavily manual.

► The CAPPS system had latency issues that were

recently improved

► The few available reports are formatted improperly,

requiring extensive manipulation to make the data

useful.

In our experience, basic functionality should include:

► Easy to navigate tools to support the procure to pay

process

► Standard reports and ad hoc reporting capabilities

Additional analysis on this topic is located on pages 207–227.

ERP system

► Originally sized for a $13b spend organization but is

now supporting a $42b spend organization

► Created roughly 24,000 custom tables, more than

double the number of out-of-the-box tables provided by

the Agency’s ERP system

► Observed by users to take approximately 10 minutes to

upload a single PDF when the system is performing

poorly

► More than 100 customizations (functional use cases or

EPICs) with no governance or approval process for

changes

CAPPS

► No detailed current state system architecture diagram

and lack of development documentation creating limited

to no visibility into CAPPS, reliant on individual rather

than institutional knowledge

► “Collaboration” function in CAPPS often an impediment

to progress

TechnologyMaturity assessment

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Procure to pay process

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Procure to pay processMaturity assessment

HHSC recent audits

► CHIP rural service area – Manual process

instead of automated data entry (OIG

Report)

► CHIP rural service area – Purchase

transactions where the procurement

process was not utilized and purchase

order was improperly changed (OIG

Report)

► Issue on transparency and objectivity of

the evaluation process (SAO Report)

Hypothesis testing

► Gaps in spend are caused through

sourcing.

► End users are not using or

discouraged from using existing tools.

► There is reliance on Excel without

using existing tools, leading to zero

visibility and poor performance.

► Policies present excessive hurdles

that do not support operations and

end up being ignored.

The complete P2P cycle, from the time a purchase

requisition is created to the time the invoice is paid.

A fully integrated process will provide end-to-end

coverage and tracking functionality.

A mature P2P process executes the transactional purchasing processes and requirements for release of purchase orders, expedit ing,

goods receipts process and exception resolution. Demonstrates awareness and adherence for internal purchasing control policies and

processes and impact on business processes.

Review considerations within this dimension

Process

► Standard procedures or guidelines in place for the P2P process

► List of current initiatives to automate the procurement process

► Detail flow of procedures to create a purchase requisition

► Detailed list of authorization process for purchase orders

► Key performance indicator (KPI) of percentage of purchase requisitions that do

not have a purchase order number or contract number

► KPI of receiving cycle time – from dock arrival to available in inventory/to

requisitioner (in business hours)

► Detailed flow of process in case of mismatch between purchase orders and

goods receipts and invoices receipts

► Number of people involved in each step of the process and a short description

of their role and department

► Description of technology that your department uses for each step of the

process

► Description of compliance level of the actual P2P processes with the

recommended P2P processes

► Estimate of the level of compliance for each stage of the process and the key

issues faced

► Procedure listing of how compliance is monitored with the recommended

processes

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Procure to

Pay Process

The complete P2P cycle, from the time a purchase requisition is created to the time the invoice is paid. A fully integrated

process will provide end-to-end coverage and tracking functionality.

1. Informal/

no process2. Functional 3. Standardized 4. Collaborative 5. Leading

Informal/no P2P processes

in place, and existing

processes require manual

paperwork.

Basic P2P process has no

guidelines and a mix of

paper-based and electronic

processes.

End-to-end P2P processes

are in place, but low levels

of compliance exist.

Fully integrated and

automated P2P processes

are in place, and

compliance is high.

There are lean and highly

integrated P2P processes,

e-catalogs and a robust

order tracking process.

Process

► Multiple system process variations exist, inclusive of workarounds. Design not entirely fit for purpose; workarounds appear to be used with high

frequency.

► Process is not formally documented with full process flow and interactions for PCS buyers and program contract managers. As o f 31 July 2018, a

Word document showing process flow and interaction was published for RFPs, RFAs and RFQs. Process flow start time is when PCS receives the

requisition and continues until the contract is placed into SCOR.

► HHSC moved to a state contract with the Texas’ online ordering portal for office supplies; outcome resulted in extended delivery time of goods,

higher price of goods, lack of transparency and additional processing time by the Agency and PCS. This situation needs improvement.

► Lack of a dashboard means the inability to confirm with significant detail where a requisition is within the process without going directly to a buyer.

PCS manuals are often not adequately updated in a timely manner and can be misleading.

► The business needs and the functions within procurement were not sufficiently involved in the development of the CAPPS and SCOR systems.

► Pre- and post-implementation of CAPPS and SCOR had limited input from PCS on both systems.

► HHSC needs a better linkage between the purchasing function and the financial function for reporting.

► HUB – Historically Underutilized Businesses operate in a similar process as seen in other state procurement processes.

1.7

Current state

Procure to pay processMaturity assessment

Current state findings

“Process drives everything, but process and

accountability can’t come at the expense of

everything else.”

– HHSC employee, July 2018

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PCS KPIs

Procure to pay process Maturity assessment

The average number of new vendors per

month is 360.

There are eight vendors in the masterfile

with more than $1b in purchases.

Sources: 1) HHSC file 20180824 Req information by Team FY18, 2) HHSC file 20180824 Vendor Created since 9-5-17 data, 3) HHSC file 20180824 Total Procard, 4) PCS document OP 571 RFP Contract Procedures_FI.NAL

07-30-218.doc published 31 July 2018 and interview with HHSC employees

0100200300400500600700800

Number of monthly new vendors

Requisitions and POs created

(1 September 2017–31 August 2018)

Qu

an

tita

tive

Qu

ali

tati

ve

Num

be

r o

f ve

ndo

rs

► Total spend is $41.8b

► Top 66 vendors are 80% of spend.

► For top 66 vendors, average spend is ~$504m and

average number of transactions year is ~225.*

► For vendors with spend in the bottom 20% average spend

is ~$27k and average number of transactions per year is ~

0.2%.*

► A disproportionate amount of energy is expended on the

bottom 20% of spend.

► There were 313,098 vendors.

► Limited supplier screening process exists for placement on

Centralized Master Bidders List (CMBL).

► Due to volume of new vendors, it is debatable who is the

proper administrator of the vendor checklist (PCS vs.

program).

► A more robust vendor checklist would benefit HHSC.

► More robust vendor master data collection would benefit

HHSC.

► No closed loop connects performance to eligibility.

► There are 4,585 requisitions and 85 POs that are

outside of these categories.

► Some portion of transactional work is pure

processing, while some is based on determination

(complex bidding).

► Total requisition value is ~10% of total yearly spend.

► Related benchmarks: 1) Number of purchase orders

processed per FTE that performs the process “order

materials and services,” 2) overhead cost to perform

the process “order materials and services,” 3)

percentage of purchase order line items transacted

using e-procurement enabled catalog suppliers and

4) percentage of purchase orders approved

electronically.

FY 2018 total FY 2018 total per week*

Category # of reqs # of POs # of reqs # of POs

Goods 22,945 17,905 459 358

Services 22,198 10,902 444 218

Complex

contracts231 75 5 2

Total (as of Aug 2018)

# of FTE Buyers

FTE buyer total per

week*

# of reqs # of POs

Goods 39 12 9

Services 27 16 8

Complex

contracts 250.2 0.1

$ in b

illio

ns

PCS KPIs show that PCS has room for improvement in areas of vendor spend management, vendor data management and requisition

forecasting.

*Based on 50 weeks

* Transaction calculation is based on spend 80/20 rule.

$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00

Vendors spend over $1b

Series 1

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Qualitative review

Procure to pay processMaturity assessment

Impediment findings► To combat the one-size-fits-all condition affiliated with PCS,

the Agency could benefit from a defined fit for purpose

buying channels and analysis to manage transaction flow.

► Approvals in some cases are overengineered and in some

cases underengineered. Fit for purpose is needed.

► Backlog builds in a cyclical manner influenced by the

Program and PCS’s inefficiencies of forecasting.

► Much of the process is represented by the statement “it

depends,” reducing clarity and imposing optionality.

Findings

► Over-/underengineered processes exist (see Appendix),

► Cycle time is not measured.

► >90% of spend has a requisition with no dollar amount.

► Requisitions of zero value allow for program to expedite

the process, but they hinder PCS and the activities that

need to be accomplished (see “Requisitions without PO

and without approvals” to the right).

► CAPPS configuration has allowed for a manual process

with multiple forms created out of the system and inserted

back into CAPPS; a large portion of the requisition process

is performed outside of the system.

► Formal buying channels are not defined sufficiently for an

organization of this size, where the method of purchase is

selected from e-catalogs, purchase cards, service

agreements and buyer-negotiated contracts.

► Scanning and comparing receipts is still a manual process.

► The routing process hinders success in limited

transparency, untracked changes and manual

determination.

► During the RFx process, sometimes the process in

programs has been to fix mistakes with an addendum as

opposed to putting the time in earlier to get it right the first

time.

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Complex services

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Complex servicesMaturity assessment

Contracts of high dollar value require RFx to

procure goods and services.

Complex contracts have been the source of many audits and inquiries. These types of procurements and subsequent contracts have

several intricate inputs that all need to be correctly done for the process to be a success. Leading companies leverage automation where

possible to minimize chances of error. Understanding the areas of improvement for complex contracts will help the Agency address many

audit findings.

Review considerations within this dimension

Plan

procurement

► Procurement templates are in place.

► Procurement policy and procedures are updated.

► Procurement/contract management roles and responsibilities are clearly

defined.

Solicitation

process

► Procurements are assigned to appropriate people based on skill.

► Procurements are provided with all appropriate inputs.

► Procurements are reviewed by skilled leadership prior to being released to the

public.

► Question-and-answer periods are handled appropriately.

► An appropriate evaluation tools template is used.

Solicitation

evaluation

► Appropriate scoring was done.

► Evaluation was validated to help support compliance with policies.

Contract

compliance

► Confirmation that all policy and procedural compliance activities have occurred

exists.

► Confirmation that correct information has been received from vendors exists.

► Confirmation that the correct contract template is being used exists.

HHSC recent audits

► There is a lack of necessary

procurement policies and procedures.

(OIG Report)

► Evaluations were not correctly scored

or calculated. (SAO Report)

► Incomplete records of the evaluator

score sheet exist. (OIA Report)

► There is a lack of validation of

accuracy of evaluation scores. (SAO

Report)

Hypothesis testing

► Gaps in category experience to handle

complex categories lead to errors.

► Organizational turnover occurs without

standard handover processes, leading

to skills mismatches.

► Poor tools lead to incorrect evaluation.

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Complex contracts Contracts of high dollar value require RFx to procure goods and services.

1. Informal/no process 2. Functional 3. Standardized 4. Collaborative 5. Leading

Day-to-day pressure dictates

the activity of the department,

there is limited leverage of

strategic sourcing

opportunities and no contracts are in place.

Procurement department is

driven by contract end dates,

does not have strategic

procurement plans, leverages

regional sourcing on an ad hoc basis and has few

contracts.

Formal strategic sourcing

process, leveraged global

sourcing on most categories

with mid-term plans for key

categories, and contracts are in place but are managed by

the business.

Comprehensive strategic

sourcing process, mid- to

long-term category plans with

a global focus on key

categories and contracts are managed by category

managers.

Sourcing approach is

recognized as one of the best

in the market, preferred

vendors are established and

contracts are reviewed with suppliers at least annually.

Current state findings

Complex servicesMaturity assessment

1.8

Current state

“During the RFP process, the process in programs has been to fix mistakes

with an addendum as opposed to putting the time in on the front end to get it

right the first time. Part of the issue is PCS not having the authority/influence

to require consistency from the programs.”

– HHSC employee, July 2018

All findings from P2P apply, in addition to the following:

► Workarounds: Template language in CAPPS may not be accurate based on the solicitation per program area; the correct template is sometimes stored outside of

CAPPS and/or incorrect within CAPPS. The evaluations of the complex contract occur mostly outside of the system, allowing for process errors and calculation errors,

largely and specifically detailed through the most recent audits (system issue, governance issue and training issues).

► Lack of documentation standardization: Programs have latitude to create scoring templates that work for them, but many have limited automation and are not

always aligned with best practices. SOWs and requisitions are developed/prepared differently by each program area prior to being sent to PCS.

► Evaluation processes do not serve the Agency: Stratification of winning vendors: there is no limit/guidance on the number of evaluation criteria that can be used

on an RFx. This results in a lack of stratification of the results (some evaluation tools have in excess of 500), often referred to as micropointing. Evaluation tool

selection criteria are not consistently adjusted based on criteria impact to the service or good. Recent safeguards have begun to improve the scoring portion of the

evaluation process.

► Competency: Staff do not routinely have the advanced expertise to fully perform complex contract procurements. Complex contracts skill attainment path within the

program is undefined. Procurement and contract staff are not consistently receiving needed training to be proficient in their roles. Job duties are blended between

buyer and purchaser (i.e., those buying off TxSmartBuy vs. sourcing through solicitation). Requisitions are being used as a triggering mechanism to start both a PO

and a solicitation.

► Teaming: As the program and others are directly impacted by changes, these stakeholders desire to be a part of designing and improving the PCS processes.

► Transparency: Visibility of complex contract requisition type appears not to be tracked through budgeting (i.e., budget cannot easily identify which contract is

complex). Requisition-to-PO cycle time appears not to be readily available or tracked.

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Quantitative – by the numbers

Transactional volume

► Complex procurement processed 231 requisitions in FY18, which represents 0.5% of PCS’s requisition volume.

► Complex contracts are the highest value, most visible and most scrutinized contracts for HHSC.

► Despite the volume being low in comparison to the total requisitions, the time to process RFAs and RFPs is 9 to 18 months (as seen below). This has resulted in a reverse pareto, where the bulk of the time is spent on an activity that has the least amount of volume.

► Streamlining the RFA/RFP process could provide additional resource time while maintaining compliance.

PCS’s processing times for requisitions and POs (Process flow start time is from PCS receiving the requisition until the contract is placed into SCOR)

Complex servicesMaturity assessment

Qualitative – by multiple observations

Through interviews, it was noted that:

► The HHSC procurement staff remarks indicate that

workarounds are needed to complete a complex contract.

► Changes in policies and procedures are not clearly

communicated.

► Governance over the evaluation process is lacking.

In practice, we saw:

► HHSC is working toward updating policies and procedures to

provide clarity.

► The CQC department has been created to provide compliance

and governance expertise.

Based on EY US’s past experience, the following leading

practices are generally found in government agencies:

► Exceptions are monitored and root cause analysis is

performed.

► Segregation of duties exists between vendor setup, voucher

processing and payment processing personnel.

► Formalized documentation outlines the optimal process flow

for requisitioning, and purchase order activities exist for each

of the Agency’s expenditure areas.

► Procurement procedures are clear, simple and detailed

accurately at the activity level.

► RFI – Request for Information: 1 month

► RFA – Request for Application: grants: State or Fed 9 to

18 months

► RFQ – Request for Qualification: 1 to 2 months

► RFP – Request for Proposal: 9 to 18 months depending

on complexity

► RFO – Request for Offer: 1 to 2 months

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People and organization

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People and organizationMaturity assessment

HHSC recent audits

► CHIP rural service area indicates

inadequate staffing. (OIG Report)

Hypothesis testing

► Organizational turnover may

lead to gaps in the transitioning

of roles, processes, etc.

► Roles and responsibilities may

not be well defined.

► Role overlap results in

undertrained resources

performing activities above their

skill set, while highly trained

resources are performing basic

tasks.

The right people, with the right

capabilities, are in the right place, for

the right cost, doing the right things.

People and Organization is a process that is impacted by a variety of programs within PCS and across HHSC: Human Resources (HR),

organization design, leadership strategies, learning and development, performance management, recruiting, staffing, retention strategies,

change management, and rewards and recognition.

Review considerations within this dimension

Organizational

structure, including

reporting lines and

spans of control

► How the organization is structured so as to support a strong governance

framework and, in particular, exert control over decentralized/outsourced

functions

► The establishment of clear reporting lines to support effective communication

and responsibility/accountability for operational performance and decision-

making

► Awareness of any gaps in reporting/management’s control coverage

► Appropriate spans of control to produce efficient management structures and fit

business strategies

Roles,

responsibilities and

authorization levels

► The extent to which roles, responsibilities and authorization levels are formally

defined, approved and maintained

► The existence of succession/contingency plans for key roles and responsibilities

Talent life cycle:

recruitment, training

and development

► Defined recruitment policy and procedures to include how candidates are

identified and evaluated

► Understanding of key roles and the vetting of appointments to key positions

► Established training strategy, including procedures to support how training and

development are initiated and training needs identified and addressed

► Recording and monitoring of staff training and development

Skill profiles and

performance

appraisal

► The extent to which skill/competency profiles have been developed and

maintained, especially for key roles

► The existence and frequency of performance appraisal and how the process is

linked to training and development

► Awareness of any skills gaps or resource needs arising from the organization’s

strategy or the underperformance of business functions

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People and

OrganizationThe right people, with the right capabilities, are in the right place, for the right cost, doing the right things.

1. Informal/

no process2. Functional 3. Standardized 4. Collaborative 5. Leading

Procurement department is

seen as a second-tier

function and focuses on

administrative activities.

Procurement employees

exhibit transactional skill

sets, but the department is

not recognized as a value-

adding function.

Procurement employees

demonstrate strategic

thinking and focus more on

category management than

administrative tasks.

Procurement employees

exercise strategic thinking

and category management

and attract internal and

external talent.

Procurement has a global

network of high-quality

people who make the

department a desirable

place within the company.

Current state findings

► Organization structure, roles and responsibilities: The PCS organization has been siloed from the programs — organizationally and physically. Roles and

responsibilities within PCS and across PCS, programs and Legal are often unclear. True capacity in PCS is unknown; however, employees seem

overworked, high employee turnover is an issue and while many vacancies have recently been filled, many roles continue to go unfilled in both PCS and non-

PCS legal support. Spans of control are appropriate.

► Talent, skills and performance: Talent processes (sourcing, onboarding, training and development, performance management, skills alignment, and succession planning) are generally reactive and tactical instead of strategic. Career paths are often not clearly defined. Because of the self-service HR

model, PCS managers are responsible for implementing all talent processes, with little HR oversight or assistance. Performance management processes are

conducted annually, but it is possible to stay in your role with poor performance ratings. Training is generally inconsistent and inadequate to build skills.

► Culture, leadership and compensation: Although employees are feeling more hopeful and supported with recent leadership changes, there is still a

significant culture of fear. The leadership team within PCS and across programs needs to be better aligned in relation to purpose and goals. Comptroller regulations regarding salary caps for promotion within a function result in people leaving the organization to get higher salaries. If they return, they are paid at

higher rates than their peers who stayed and were promoted from within.

1.5

Current state

People and organizationMaturity assessment

“PCS is understaffed and overwhelmed.”

– HHSC employee, July 2018

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► 271 ThinkTank participants voted on the following question:

“Of the seven options listed below, what are the top three people and organizational issues that you feel need to be prioritized?”

► We grouped “Ongoing training and development (31.0%),” “Subject matter expertise (29.5%),” and “Onboarding/training (26.6%)” into a larger issue bucket of “Competence.”

► When the three competence areas are combined, they rise to the top of the priority list as seen in the figure below.

Quantitative – by the numbers

Communications within and outside of PCS

► Communication has been repeatedly

flagged as a key issue for HHSC.

► PCS leadership has begun implementing

improvements (e.g., PCS Ambassadors

have been named to liaise with the

programs; Tuesday leadership meetings

are in place to provide key updates);

however, that information is not consistently

cascaded.

Staffing and workload levels► Despite the recent hiring efforts, ~23.5% of

PCS jobs are still vacant or filled with temps/interns.

Competence► Lack of new-hire competence, ongoing skill

development, and development and accessibility of advanced skills are repeatedly mentioned by PCS and program employees.

► Professional development has become a key reason employees seek and stay with an organization.

People and organizationMaturity assessment

17.0%

26.6%

29.5%

31.0%

44.6%

52.0%

57.6%

0% 20% 40% 60% 80% 100%

Goal setting and performance measurement

Onboarding / training

Subject matter expertise

Ongoing training and development

Role definition and clarity

Staffing and workload levels

Communications within and outside of PCS

Qualitative – key takeaways

17.0%

44.6%

52.0%

57.6%

87.1%

0% 20% 40% 60% 80% 100%

Goal setting and performance measurement

Role definition and clarity

Staffing and workload levels

Communications within and outside of PCS

Competence

Additional analysis is located on

Appendix pages 250 – 257.

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Portfolio management

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Looks across all spend and manages it as a portfolio

inclusive of strategy, creation, authorization,

execution, governance, compliance/performance,

analysis, closure and renewals.

Portfolio Management is an essential function that helps the needs of the Agency to be reflected in supplier contracts and utilizes data to identify and execute on

Agency-level procurement opportunities to drive consolidation of spend and avoid duplication of procurement efforts across programs.

Review considerations within this dimension

Monitoring and

compliance

► The extent to which mechanisms and processes are in place to understand the

requirements and terms and conditions of externally created contracts

► Defined mechanisms for determining a contract’s risk level

► Existence of standard monitoring procedures for every contract

► The extent to which contracts are monitored more closely due to higher risk levels

► Appropriate measures in place to monitor a contractor’s performance against the contract

► Established processes for the confirmation and acceptance of delivery of goods or

services

► The existence of mechanisms for resolving negative performance issues

► Implementation of remedies in the contract terms, including remuneration and contracting

penalties

► Availability and determination of circumstances under which a contractor could be

terminated early

Administration ► The establishment of clear, complete guidelines of what a procurement file should contain

and how and when it should be stored

► Established closeout procedures

► Whether contracts are tracked to know which renewals or re-solicitation needs are

upcoming

► Known processes in place for contract amendments or changes

Payment ► The existence and frequency of monitoring the availability of funds throughout the contract

► The extent to which invoices are verified for accuracy

► The determination of payments authorized so that they are consistent with the contract

terms

► Appropriate payment methods are being used

HHSC recent audits

► HHSC needs better

procedures regarding

contract documentation

and retention. (OIG

Report)

► Data reliability and

completeness revealed

inaccuracies in the data

provided and could not

verify whether all of the

Commission’s contracts

were included in the

SCOR database. (SAO

Report)

Hypothesis testing

► Lack of ongoing internal

supplier performance

monitoring data

► Lack of clear contract

terms to enforce

compliance

Portfolio managementMaturity assessment

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► Technology: Current portfolio management technologies are often not reviewed for completeness or accuracy of the required information. The CAPPS/SCOR system contains known

incomplete information and intervention is lacking accuracy before final contracting. The programs commonly rely on contract amendments to address inaccuracies. Current technologies do

not provide necessary reporting capabilities. Medicaid/CHIP uses spreadsheets to track its contracts instead of CAPPS or SCOR. In addition, the availability of historical vendor spend

information to assess contract performance is limited. Current data availability and access make data-driven procurement decisions difficult. The Agency utilizes state-wide contracts

available to it for much of its commodity purchasing needs. In some cases, state-wide contracts may hinder timely purchases for simple commodities such as office supplies. Where strategic

contracts are used, data entered in CAPPS often does not properly link the contract to the purchase, making it impossible to know the spend on a contract.

► Roles and responsibilities: Portfolio monitoring it appears to vary based on the HHSC program. Each program area appears to have autonomy to choose which contract(s) and the degree

to which it monitors those contracts, leaving potential gaps in the portfolio. The roles and responsibilities of 1) central contract oversight and support group and 2) a contract administration

group appear not to be consistently understood throughout HHSC. Post-contract monitoring is currently being performed within the program area and without formal procurement guidance.

The majority of procurement staff activity in PCS is focused on tactical, reactive work. No dedicated staff in PCS is assigned to data analysis and/or portfolio management for the Agency.

► Process: There are limited cross-program coordination processes that would support the identification of common procurements that could be strategically procured on behalf of the Agency.

Programs sometimes seek to establish their own strategic contracts but do not typically seek to coordinate with other programs. No procurement planning process is in place that could help to

identify strategic category procurements. Procurements are often not strategically planned and scheduled to balance workload throughout the year, leading to high-demand periods at the start

and end of the state and federal fiscal years. Lack of portfolio management is evident in that the contract cycle is not planned to spread the workload throughout the full year.

Portfolio

Management

Looks across all spend and manages it as a portfolio inclusive of strategy, creation, authorization, execution, governance,

compliance/performance, analysis, closure and renewals.

1. Informal/no process 2. Functional 3. Standardized 4. Collaborative 5. Leading

Day-to-day pressure dictates the

activity of the department; there is

limited leverage of strategic sourcing

opportunities and no tracking

mechanisms of contracts.

The procurement department is

driven by contract end dates, does

not have strategic procurement

plans, leverages regional sourcing

on an ad hoc basis and has few contracts, tracking ad hoc.

There are established portfolio

management procedures and

guidelines with a centralized tracking

mechanism in place.

Portfolio management activities are

done regularly across the

organization, and the tracking

mechanism is used consistently and

effectively.

Entire portfolio is actively monitored

for performance and compliance,

and enabling tools and technologies

support the tracking and

management of contracts for the organization. Preferred vendors are

established, and results are reviewed

with suppliers at least annually.

Current state findings

1.9

Current state

Portfolio managementMaturity assessment

“It’s likely different programs have

contracts with the same provider

with different terms and pricing.”

– HHSC employee, July 2018

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The table below demonstrates the readily stratified categories available in the spend data for FY18

LBB description Spend

% of total spend

Client Services $ 37,088,843,057.89 88.6%

Other Operating Expense $ 2,454,064,210.49 5.9%

Grants $ 1,395,088,720.15 3.3%

Professional Fees & Services $ 695,288,573.90 1.7%

Rent and Utilities $ 93,446,505.56 0.2%

Utilities $ 45,374,086.26 0.1%

Rent - Machine and Other $ 29,811,651.90 0.1%

Consumable supplies $ 18,104,314.56 0.0%

Food for Persons $ 17,110,017.61 0.0%

Capital Expenditures $ 6,467,089.60 0.0%

Fuels & Lubricants $ 1,836,152.85 0.0%

Through our interviews, it was noted that:

► SCOR appears to be the intended contract repository for HHSC

but is currently not being used by all programs.

► Programs seem to have primary responsibility for contract

management through the procurement life cycle, which could

make segregation of duties difficult.

► PCS COS team has some contract management duties but is

currently diverted to support PCS internal activities.

► The contract management job function is shared across PCS

and programs, but clear distinction in the roles is lacking.

► Minimal data analysis is performed by PCS.

► There is little to no cross-examining of needs by different

programs to be considered for a single procurement.

► Need for better processes and communication among PCS,

CPA’s Statewide Procurement Division, and DIR to manage

who should perform sourcing events, when and for what.

In practice, we saw:

► Existing tools and storage of data are not configured to facilitate

meaningful data analysis or category management.

Using our vast experience, we see that:

► Organizations can more effectively manage categories when

they create their own spend taxonomy and build it into their

system.

Qualitative – by multiple observations Quantitative – by the numbers

Portfolio managementMaturity assessment

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Supplier relationship management

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Supplier Relationship Management (SRM) builds a trusting relationship with third parties (suppliers) that strengthens accountability,

transparency and performance. When such a relationship exists, the value proposition typically increases because the third party is able to

contribute solutions that benefit both parties in the relationship.

Review considerations within this dimension

Supplier collaboration:

Collaboration with an

organization’s supplier

community fosters an

integrated and constructive

engagement.

► Promoting communication and engagement throughout the

procurement planning and contracting phase produces meaningful

outcomes for complex, high-risk contracts.

► Limiting input provides an inherent advantage to incumbent suppliers

because it is hard for new vendors to communicate with state agencies

regarding the products and services that they may be able to offer.

Supplier development and

improvement: Due

diligence in market research

leverages supplier and

industry expertise and

knowledge base.

► Interaction between the vendor community and an organization’s

procurement and program staffs provides an opportunity to gain insight

into market forces, supplier segmentation and innovative practices that

can facilitate the organization’s ability to develop a robust solicitation.

Supplier performance

management: Performance

outcomes are managed and

improved through ongoing

interaction.

► A defined framework for managing vendor performance, including

service-level agreements, processes and documentation, before

contract execution.

HHSC recent audits

► Audits conducted on the HHSC

System over the past year did

not examine SRM as this was

outside the scope and audit

parameters.

Hypothesis testing

► The Agency may be missing out

on modern SRM principles due

to an abundance of concern of

showing favoritism. If so, this

would cause subpar commercial

arrangements with suppliers.

► Continuous improvement of

suppliers may be limited.

Existing suppliers do not have

continuous monitoring for

performance standards and

rework.

Supplier relationship managementMaturity assessment

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► Limited implementation: Supplier relationship management as a practice lacks definition and a framework to share information

and institutionalize leading practices across the Agency.

► Overly restrictive approach to interaction: Contract management and vendor management policy as historically implemented

unnecessarily limited vendor interaction and overinterpreted relevant state policy.

► Decentralized implementation: Program areas manage their supplier relationships through individual processes and controls

according to contract terms, state and federal laws and regulations, and Agency policies.

Supplier

Relationship

Management

SRM provides a framework for interacting with the vendor community across the contract management life cycle to advance innovative

solutions for the organization and equip the procurement organization with knowledge and expertise in solicitation planning.

1. Informal/no process 2. Functional 3. Standardized 4. Collaborative 5. Leading

There is no supplier

segmentation, internal

stakeholder community or

data to support SRM.

Some spend data gathered;

stakeholders identified and

may be surveyed. Key

performance indicators are

developed and supplier evaluation is performed, and

risk is identified and response

strategy is developed based

on risk level.

Knowledge-based spend and

performance management

supports supplier

segmentation and strategic

sourcing practice. Stakeholders and business

culture are aligned with

segmentation. Risk

management and contingency

planning is present.

SRM aligns with strategic

sourcing goals, supports

contract portfolio

rationalization and

procurement planning. Technology/innovation is

leveraged and scorecards and

metrics published. Detailed

risk management and

contingency plans are in place.

SRM aligns with

organizational strategy and

drives procurement

organization behavior.

Continuous improvement delivers benefits in areas

outside of traditional sourcing

arena. Risk status and

contingency plans are

continuously monitored.

Current state findings

“Should a vendor request to meet with HHSC

staff, the vendor must submit a request to

COS and must include the purpose of the

meeting and presentation materials.”

Section 1.4.1, HHSC ContractManagement Handbook

1.3

Current state

Supplier relationship managementMaturity assessment

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Supplier relationship components

There is a very limited concept of SRM as it relates to the concepts below in the HHSC practice today, so data related to the function will be not present.

Supplier relationship managementMaturity assessment

Through our interviews, it was noted that: ► HHSC processes for vendor interactions may hinder

innovation and effectiveness. The HHSC policy on

vendor interactions is not supported by state law or

practice.

► Refer to TGC 2155.081, which creates, as a leading

practice, a committee comprising representatives from

the vendor community to advise the CPA on matters

related to state procurement practices and serve as a

channel of communication among the vendor

community.

► New vendor interaction policy as of 1 September 2018

will assist in addressing supplier relationships.

► Guidance on contract management practices is provided

in the PCS Contract Management Handbook; however,

SRM is primarily driven within program areas. For

example:

► One program hosts monthly governance meetings

with all providers at the director level, and quarterly

governance meetings with the deputy executive

commissioner.

► Quantitative and qualitative metrics to gauge ongoing

performance are built into certain contracts but not

universally instituted.

Qualitative – by multiple observations

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Performance management

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Helps an organization measure the

performance of its P2P processes. Can use

various tools such as executive dashboards,

balanced scorecards, key performance

indicators and benchmarking.

To address timeliness, quality and transparency of P2P processes, an organization must identify and track key data that inform decision-

making and strengthen its processes and operations.

Review considerations within this dimension

Business objectives:

Aligned operational

and financial metrics to

monitor achievement of

business objectives

► The key operational and financial performance indicators and

associated objectives

► How performance indicators are used to monitor the organization’s

strategic objectives and the performance of key controls

► Management actions and initiatives that address issues identified by

key performance metrics

Monitoring and

analysis: Dynamic

business monitoring

and analysis, including

design and integration

of supporting

technology

► The responsiveness of metrics in light of changes/developments in the

organization (such as the design and implementation of performance

metrics central to any change management plan)

► The extent to which technology is used to monitor, analyze and report

key data, in particular, the use of automated process controls and

analysis tools

► Gaps in the monitoring framework (such as key areas/functions where

performance is not fully visible to management)

Performance

improvement:

Monitoring to support

sustainable

performance

improvement

► Gaps in the monitoring framework (such as key areas/functions where

performance is not fully visible to management)

► The indicators used to monitor the performance of implemented

improvements, and the extent of reporting to demonstrate the

realization of anticipated benefits

HHSC recent audits

► The procurement process relies heavily

on the integrity of each staff member

and does not have checks and

balances in place. (OIA Report)

► The Draft Request for Application (RFA)

Process Overview document does not

include statewide oversight review

requirements. (OIA Report)

Hypothesis testing

► Lack of mature governance of the

process

► Lack of data to effectively manage

activities

► Lack of mature reporting compliance

and no auditing or follow-up to

noncompliance

► Where KPIs are known, the systems

and/or processes in place do not collect

the relevant data to measure them

Performance managementMaturity assessment

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Performance management uses various tools such as dashboards and performance indicators to measure the

efficiency in completing the procurement processes:

► Business objectives – Extremely limited access to actionable tactical and operational data on how purchases

progress through the procurement life cycle to establish trackable quality measures. Process maps detail legacy

systems’ workflows and do not inform the development of KPIs.

► Monitoring and analysis – Programs and PCS appear to be unsupported by sustainable tools to meaningfully report

on the status of a purchase in CAPPS. Program areas have developed individual ad hoc reporting constructs.

► Performance improvement – To address the backlog and workflow challenges within PCS at year-end, some HHSC

program areas have implemented internal processes that initiate procurement actions much earlier in the fiscal year.

For example, one program area indicated it began submitting contract renewal and extension requests seven months

prior to term expiration dates under prior management.

Performance

Management

Helps an organization gauge the performance and alignment of its P2P processes with its organizational goals. Leverages various tools

such as executive dashboards, balanced scorecards, key performance indicators and benchmarking against peers.

1. Informal/no process 2. Functional 3. Standardized 4. Collaborative 5. Leading

No monitoring of the

performance of the

procurement department

exists.

Basic metrics are in place but

provide limited insight and

may not be linked to business

performance.

Formal metrics exist but are

not consistently used and are

not closely linked to

performance.

Savings targets are in place to

monitor department

performance and KPIs link to

performance.

Sophisticated balanced

scorecards are in place and

KPIs are integrated with

performance.

Current state findings

1.3

Current state

“In the name of efficiency, processes are being

standardized, which often slows the

completion of work and processes.”

– DSHS employee, August 2018

Performance managementMaturity assessment

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Performance managementMaturity assessment

Performance goals and measures | draft SSA

Goal 1: Help support timely and accurate processing of procurements and

contracts.

1.1 Assign a properly approved CAPPS Fin 9.2 requisition to a

procurement team within two business days of receipt of the

approved CAPPS requisition.

90%

1.2 Assign the approved requisition to a specific Purchaser within

one business day of the approved HHSAS requisition being assigned

to the procurement team.

90%

Goal 2: Help support timely and correct approvals and executions of

contracts, amendments, extensions and renewals.

2.1 Measure of the contract administration division routing for

execution, HHSC system contracts, amendments, renewals and

extensions that must be signed by the Executive Commissioner and

other system authorized signatory staff.

95%

Quantitative – by the numbers

Through interviews and a review of documentation provided, it was noted that: ► Support services agreements (SSAs) specify metrics for PCS functions

that have not been ratified and are in draft state. The framework is

meaningful; however, the measures are limited to intake and

assignment and not representative of P2P processes.

► Additionally, there is no evidence that the practice is implemented, so it should be revisited. For example:

► PCS purchasers will notify requestors within two days of

assignment – this was not demonstrated in interviews.

► Noncomplex procurements time frame is identified as a measure,

but the period is not specified.► Many program areas indicate use of spreadsheets to track

procurement activities because systems of record are regarded as

having low and practical usability.

► There is lack of visibility and relationship between departmental metrics

and ability to drill down to individual performance.

Qualitative – by multiple observations

A review of the HHSC system and Agency strategic plans provided a framework that includes administrative functions and an opportunity to

align operational performance tracking; however, the measures were not included in the plan submitted in May 2018 and the website does not

reflect an update as of 27 September 2018.

Linking performance to strategic plan goals

Agency goals (driving efficiency and accountability)

3.1: Promote and protect the financial integrity of HHSC programs.

3.2: Strengthen and sustain a high-functioning, efficient workforce.

3.3: Optimize technology to support business strategy and goals.

3.4: Promote a culture of data-driven decision-making for continuous improvement.

3.5: Improve business functions and processes.

Objectives: Define as outcome, output, efficiency measures

3.1.2: Review and improve procurement, contract oversight and grant management

processes.

3.1.4: Maintain and enhance timeliness, quality, and transparency of statewide

financial and programmatic reports. 3.4.1: Implement an HHSC performance management system for increased

effectiveness in governance and accountability for success.

3.5.3: Achieve efficiencies in administrative services, including procurement,

products, office space and licenses.

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Internal stakeholder management

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An organization’s management of

the people who may be affected by

the decisions it makes or who can

influence the implementation of its

decisions.

Internal Stakeholder Management provides a framework for engaging an organization’s workforce to help align operational strategies and

desired business outcomes.

Review considerations within this dimension

Stakeholder

engagement

► The extent to which the procurement department manages all the categories

in close collaboration with the other relevant departments

► Whether internal customers’ feedback is received and, if so, how it is

recorded and monitored

► The extent to which the procurement department works as a cross-functional

team

Integration ► Internal stakeholders understand the need to regularly communicate their

demand and forecast to the procurement department

► Existence of forecasts and use of advanced planning tools

► Established information/coordination meetings with internal stakeholders and

procurement

Demand

management

► The stage at which internal stakeholders enter the sourcing process with their

procurement department

► The existence of formal service-level agreements established for internal

customers of the procurement department

► Whether orders are set in collaboration with other departments

► The extent to which similar products/services are bought from different

suppliers

Compliance

management

► Existence of an established communication process when new contracts are

signed

► The extent to which controls are in place if an end user wants to buy outside

of contracts deliberately

HHSC recent audits

► PCS was not involved in key

procurement planning and

development processes. (OIA

Report)

► There needs to be better

collaboration regarding policies

and procedures. (OIG Report)

Hypothesis testing

► Typically, stakeholders within an

organization are siloed and only

work within their area without

collaborating across

departments.

► Processes are not in place to

facilitate communication.

Internal stakeholder managementMaturity assessment

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Stakeholder engagement

► Historically, clear communication channels and communication strategies have been lacking between PCS and HHSC programs. To improve stakeholder

relationships, PCS created a liaison role that established a forum to engage HHSC programs.

Integration

► HHSC program areas have inconsistent experiences with PCS across many functions, citing challenges in support, level of knowledge and direction.

► There is a lack of a mentality for customer service and collaboration, although there have been recent efforts made by management to shift this mentality (such as the creation of the liaison role). DSHS and DFPS particularly express sentiment of lacking a voice in process and system design and decision-

making. Perception is reality and the customers of PCS don’t feel treated as customers.

Demand management

► Historically, program areas have felt that PCS adopted a one-size-fits-all mentality regarding program support, with little flexibility or acknowledgment of program area or business requirements. With more touch points between PCS and the program recently established, customers hope their voices will be

heard.

Compliance management

► Program areas are creating and managing ad hoc reports based on status received through emails and manual touch points, and they pursue follow-up

actions on procurement events through a variety of communication channels.

Internal Stakeholder

Management

An organization’s management of the people who may be affected by the decisions it makes or who can influence the implementat ion of

its decisions.

1. Informal/no process 2. Functional 3. Standardized 4. Collaborative 5. Leading

Procurement works in its silo

and internal customers do not

think it adds value to the

organization.

Some areas of collaboration

exist with other departments

but is not uniformly seen as

having high procurement

value.

Procurement is regularly

consulted but not fully

integrated with other

processes in other

departments.

Procurement is engaged early

in the process and manages

cross-functional streams.

Procurement proactively

manages all categories in

close collaboration with

relevant departments.

Current state findings

1.6

Current state

“Success of PCS is dependent on

a functional ecosystem.”

- HHSC employee, July 2018

Internal stakeholder managementMaturity assessment

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Quantitative – by the numbers

► 58% of ThinkTank respondents identified communications within and outside of PCS as a top issue.

► Approximately 80 current PCS staff members manage the procurement needs for roughly 15 to 20 different

customers that are internal and external to HHSC — divisions, programs and agencies.

Internal stakeholder managementMaturity assessment

It was repeatedly noted in interviews that:

► There appears to be a lack of visibility once a requisition is submitted to PCS. Many identify or think of PCS as a “black hole” and

have to do many manual follow-ups to check on status.

► DFPS and DSHS generally do not feel that PCS knows enough about their needs and how they function. For example, some

terms have different meanings across programs.

► There appears to be an overall lack of voice of the customer when it comes to receiving and implementing feedback for process

changes.

In practice, we saw:

► Whether a forecasting timeline of procurement needs is created varies from program to program. If program areas do complete a

procurement forecasting timeline, it is typically done with little or infrequent collaboration with PCS.

► Changes to statewide contracts are not always communicated by PCS to programs and have caused service interruptions (e.g.,

shipping contract — Lonestar to FedEx). This suggests a breakdown in communication at one of two points — between CPA

and PCS or PCS and the end user. Either way, opportunities for improving these communication channels, to the extent

possible, should be considered.

► Programs and PCS often had differing views on roles and responsibilities.

Using our vast experience, we see that:

► Regular and frequent communication between stakeholders fosters and encourages a collaborative mentality to achieve goals.

► Clearly delineated roles and responsibilities for all parties reinforce accountability and reduce opportunities for unnecessary

delays due to stakeholders being unaware of their responsibilities

Qualitative – by multiple observations

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Root cause analysis

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Root cause analysis

Overarching root cause Manifestations Impacts

People

Process

Technology

Success is often not rewarded, while failure brings punishment, which can

significantly impact morale and prevents employees from feeling empowered.

Processes are often not written to support a large organization, limiting

opportunities for economies of scale and optimization improvements.

Processes are often inconsistent across similar requisitions, causing

inefficiencies and increasing errors and noncompliance.

Policies and procedures are not effectively maintained in many cases, and

changes often are not effectively communicated to guarantee compliance.

Legacy system errors have been transitioned over to CAPPS, negatively

impacting system performance and data integrity.

Business needs and volume are not sufficiently synchronized to

process/technology, causing risk of system overload and downtime.

The “hero” environment is reliant on extraordinary individuals’ efforts to

compensate for inadequate technology and processes.

Systems do not always support visibility and extraction of data to support

business decisions.

Training programs are generally insufficient, and there are limited designated

support resources to provide compliance and technical guidance.

1. The operating model,

strategy and investment

of HHSC, has not

evolved to meet the

needs of an outsourced

service delivery solution,

which depends upon

Procurement for its

success.

2. Volume of transactions

amplified the effect,

quadrupling the impact

on an unfit model.

3. The communication plan

is built for a smaller

organization.

The approval process does not always sufficiently consider factors outside of

the dollar value of the contract for establishing the extent of review and

approval procedures.

Control activities are not always appropriately aligned to the risk.

Oversight of procurement processes is often not performed to verify that all

necessary control activities occur in a timely manner.

Governance

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People root causes

► The “hero” environment is reliant on extraordinary individuals’ efforts to compensate for inadequate

technology and processes

► Without streamlined processes and user-friendly tools, individuals are forced to act as “heroes” for the

organization to complete basic tasks and meet deadlines. The extra efforts needed from these individuals

distract them from their core responsibilities and leave the organization’s timeliness and confidence to meet

deadlines in a state of uncertainty.

► Training programs are generally insufficient, and there are limited designated support resources to

provide compliance and technical guidance.

► The existing training programs (onboarding and ongoing) do not provide employees with the knowledge and

tools needed to be successful in their roles. The lack of training, coupled with excessive workloads and

nonstandard processes, has contributed to staff often feeling overwhelmed and frustrated, with nowhere to turn

with questions.

► Success is often not rewarded while failure brings only punishment, which can significantly impact

morale and prevents employees from feeling empowered.

► The historical culture of punishing employees for mistakes devastated morale and has created fear across

much of the organization. By contrast, strong performance and going “above and beyond” have not been

consistently recognized by leadership, and employees do not feel incentivized. The only reward for hard work is

more hard work, while low performers are punished but allowed to remain.

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Process root causes

► Processes are often not written to support a large organization, limiting opportunities for economies

of scale and optimization improvements.

► HHSC is currently operating as a small organization that delivers process updates via email, vs. routinely

posting to a SharePoint site or website. Without the proper written instruction for processes that can been seen

by all employees with a revision date and notification of update, many employees are relying on word of mouth

vs. checking a regulated source for updates, leaving a state of uncertainty.

► Processes are often inconsistent across similar requisitions, causing inefficiencies and increasing

errors and noncompliance.

► Legislation dictates how the requisitions should be processed and which forms are needed for a requisition

completion. Requisitions of the same type can vary depending on the Agency/program. With varying degrees of

change for the same type of process, a level of uncertainty and confusion remains for many purchasers. Since

June 2018, the PCS group has been working toward streamlined procedures for specific types of requisitions.

► Policies and procedures are not effectively maintained in many cases and changes often are not

effectively communicated to guarantee compliance.

► As updates are made to policies and procedures, there are few collaboration sessions between PCS and

internal customers to guarantee that all parties are updated. There is not a central repository where all

employees can see the latest updates to the policies and procedures that are affecting their specific type of

requisition.

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Technology root causes

► Legacy system errors have been transitioned over to CAPPS, negatively impacting system

performance and data integrity.

► Data from legacy systems was loaded into the CAPPS system without a complete master data cleanup to

correct errors and without a comprehensive data conversion plan to help support the upload of complete and

accurate historical information.

► Business needs and volume are not sufficiently synchronized to process/technology causing risk of

system overload and downtime.

► CAPPS was not configured to serve many important procurement-related purposes (e.g., complex contract

proposal evaluation, vendor performance tracking, document management, spend analysis and public data

transparency) in function or in HHSC-level volume.

► CAPPS has been heavily modified to accommodate State of Texas statutory contracting requirements, as well

as HHSC-specific contracting needs; however, the system has not been configured to support a specific set of

Agency or Program purchasing policies and/or processes. There is no baseline set of procurement processes

and procedures that can be applied across HHSC.

► HHSC does not have a complete application portfolio detailing the data architecture, relationship diagrams and

user models for all purchasing-related systems. This results in inconsistent processes, data entry redundancy,

inefficient system administration and unnecessary technology costs associated with duplicative functionality.

► Systems do not always support visibility and extraction of data to support business decisions.

► The lack of integration among procurement-related systems and the lack of properly configured reporting

functionality in CAPPS combine to frustrate users, preclude data-driven procurement practices and undermine

statewide transparency efforts.

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Governance root cause analysis

► Oversight of procurement processes is often not performed to verify that all necessary control

activities occur in a timely manner.

► All relevant documentation (both hard copy and electronic) is not sufficiently maintained by PCS staff members

to support verification that the procurement process was followed as intended.

► Prequalified standard contract templates are not consistently used across the Agency.

► Conflicts of interest and nepotism verifications are not consistently performed and documented.

► The approval process does not always sufficiently consider factors outside of the dollar value of the

contract for establishing the extent of review and approval procedures.

► A risk-based approach should be utilized pertaining to the review of solicitations and contracts and should

include factors other than just the dollar value of the contract. Applying the same amount of risk to every

solicitation/contract does not allow for the appropriate differentiation based on the specifications of the

contracts.

► Controls activities are not always appropriately aligned to the risk.

► Per inspection of the procurement process as documented in the HHSC process flow diagrams, the controls

appear to either over- or under control the process, resulting in gaps or redundancy in efforts and inefficient use

of resource time.

► Roles and responsibilities related to review of requisitions and contracts are not sufficiently defined, resulting in

duplication and potential gaps.

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Next steps

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Discussion and next steps

► This presentation encompasses the current state assessment and root cause

analysis (Phases I and II of the engagement).

► In Phase III, EY US will be focused on process redesign and will deliver

recommendations and an improvement plan by the end of September.

Upcoming phase of work

Detail of Phase III activities on next slide

Phases I and II Phases III Phases IV

Wk 0 Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Wk 8 Wk 9 Wk 10 Wk 11 Wk 12 Wk 13 Wk 14

Mobilization Phase I: Assessment

Phase II: Root Cause Analysis

Phase III: Process Redesign

Phase IV: Evaluation

Deliver

Assessment

Deliver Root

cause Analysis

Deliver

Improvement Plan

Deliver

Evaluation

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Phase IIIWk 7 Wk 8 Wk 9 Wk 10

Define actions and recommendations to improve process and address

failure pointsProcess

Technology

People

Governance

Identify digital solution/automation opportunities that support process,

technology and people initiatives

Identify key tools/templates and improvements

Identify adoption, configuration and customization of existing technology

Identify new solution capabilities

Define fundamental roles and reorganization recommendations

Define fundamental development/training needs and capabilities

Identify cultural improvement

opportunities and imperatives

Catalog policies requiring changes

Identify fundamental governance

structure for the future state

Define improvement initiatives,

including a high-level business

case with value impact

Draft prioritization of initiatives

Draft digital enablement vision

Socialize and prioritize

improvement plan

Finalize recommendation

Deliver plan

Key HHSC

stakeholder

activities

HHSC improvement plan

alignment and

prioritization session

Define improvement activities Draft improvement plan Deliver improvement plan

Phase III detailed activities

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Detailed analysis

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Detailed analysis contents

Maturity model definitions

Strategic Direction

Governance and Risk Management: governance process gaps, policy

assessment, forms and standards

Technology: technology spotlight, systems gap analysis

Procure to Pay Process: process stage views, approvals

Complex Contracts: evaluation tool review

People and Organization: ThinkTank analysis, organizational chart, job

descriptions, compensation benchmark

ThinkTank

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Procurement maturity model

Our maturity model articulates the main domains of procurement transformation in eight dimensions, each of which needs

to be considered independently to reposition an effective procurement and contracting function.

► Review current state of Procurement and

Contract Services (PCS) capability

► Review existing sourcing and procurement

process documentation, including policies

and procedures and existing ERP system

documentation

► Review organizational structure

► Conduct key stakeholder interviews

► Identify critical procure-to-pay (P2P)

process benchmarks currently managed

by PCS and compare current P2P

capabilities to leading practices

Every dimension is divided into

five maturity stages:

Stage 1: Informal/no process

Stage 2: Functional

Stage 3: Standardized

Stage 4: Collaborative

Stage 5: Leading

Po

rtfo

lio

an

d

A governance model has been

established and is supported by executives

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Procurement maturity modelEight facets defined

The maturity model breaks down procurement and contracting to drive at the root cause of any procurement and contracting issue:

► Strategic Direction: course of action that leads to the achievement of the goals of an organization’s strategy

► People and Organization: how the people in the organization engage to accomplish the goals of an organization

► Portfolio and Supplier Relationship Management: how an organization interacts with its suppliers from a mutually beneficial

relationship and legal (contract) perspective

► Complex Contracts: Contracts that are of high dollar value and require an RFx to procurement goods and services

► Contract Management: Contract management is an essential function that helps support that the needs of the Agency, as

reflected in a supplier contract, are met in order to deliver critical services to HHSC’s clients and that taxpayer dollars are being

used efficiently and appropriately

► Supplier Relationship Management: Supplier relationship management provides a framework for interacting with the vendor

community across the contract management life cycle to advance innovative solutions for the organization and equip the

procurement organization with knowledge and expertise in solicitation planning

► Category Management: By analyzing detailed spend, transactional and pricing data, and continuously monitoring the pricing

markets, the category management team can routinely identify and implement solutions that drive incremental unit cost

reductions through additional sourcing, substitutions and better demand management

► Procure to Pay Process: the process of obtaining and managing the materials needed for a product or service

► Governance and Risk Management: an organization’s coordinated strategy for managing the broad issues of corporate

governance, enterprise risk management and corporate compliance with regard to regulatory requirements. A comprehensive risk

program in the opinion of EY US involves the effective identification and avoidance of fraud, waste and abuse

► Internal Stakeholder Management: an organization’s management of the people who may be affected by the decisions it makes

or who can influence the implementation of its decisions

► Technology: tools that automate the organization’s process actions and extract data

► Performance Management: an ongoing process of communication between a supervisor and an employee that occurs

throughout the year, in support of accomplishing the strategic objectives of the organization

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Procurement maturity model rating and definitions(part 1 of 2)

Topic Informal/no process Functional Standardized Collaborative Leading

Strategic

Direction

No procurement strategy

is in place

Procurement strategy is

not defined in a number of

areas and there is no

visibility on key future

initiatives

Procurement strategy and

formal idea of future

initiatives exist in most

areas, but procurement

strategies are not always executed

Full understanding of the

transformational journey

that must be followed and

a demonstrated history of

success

Detailed plans updated on

a regular basis with cross-

functional executive

support on the journey to

procurement excellence

People and

Organization

The procurement

department is seen as a

second-tier function and

focuses on administrative

activities

Procurement employees

exhibit transactional skill

sets but the department is

not recognized as a value-

adding function

Procurement employees

demonstrate strategic

thinking and focus more on

category management than

administrative tasks

Procurement employees

exercise strategic thinking

and category management

and attract internal and

external talent

Procurement has a global

network of high-quality

people who make the

department a desirable

place within the company

Category,

Contract and

Supplier

Relationship

Management

Day-to-day pressure

dictates the activity of the

department, there is

limited leverage of

strategic sourcing opportunities and no

contracts are in place

The procurement

department is driven by

contract end dates, does

not have strategic

procurement plans, leverages regional

sourcing on an ad hoc

basis and has few

contracts

Formal strategic sourcing

process, leverage global

sourcing on most

categories with mid-term

plans for key categories and contracts are in place

but are managed by BUs

Comprehensive strategic

sourcing process, mid- to

long-term category plans

with a global focus on key

categories, and contracts are managed by category

managers

Sourcing approach is

recognized as one of the

best in the market,

preferred vendors are

established and contracts are reviewed with

suppliers at least annually

Technology There is no P2P system in

place

Basic P2P systems exists

in most business units

(BUs) but systems are not

linked together, few e-

catalogs exist and many transactions are still

processed manually

P2P systems are in place

in all BUs and functional

procurement areas but are

not integrated, e-catalogs

are in place and maverick buying still occurs

Harmonized P2P systems

exist and are widely used,

manual processes have

been eliminated and there

is moderate adoption of e-catalogs with key suppliers

One integrated P2P

system across the

organization that links all

POs and suppliers

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Procurement maturity model rating and definitions(part 2 of 2)

Topic Informal/no process Functional Standardized Collaborative Leading

Governance

and Risk

Management

No governance body in

place to support overall

purchasing strategy,

noncompliance is high and

organization is reactive to risk

Governance exists for a

few key purchases, low

compliance and risk

management is

acknowledged within other functions

Processes and systems

are formally documented

and published but are not

always enforced,

inconsistent compliance and siloed risk

management capabilities

Governance model has

been established and is

supported by executives

and there are

multifunctional integrated risk assessment, planning

and response capabilities

in place

Governance body is in

place, documented

processes and controls

are in place, the

organization is nearly always compliant and

predictive supplier risk

management exists

Internal

Stakeholder

Management

Procurement works in its

silo and internal customers

do not think it adds value

to the organization

Some areas of

collaboration with other

departments but is not

uniformly seen as high

value

Procurement is regularly

consulted but not fully

integrated with other

processes in other

departments

Procurement is engaged

early in the process and

manages cross-functional

streams

Procurement proactively

manages all categories in

close collaboration with

relevant departments

Procure to Pay

Process

No standard P2P

processes in place and

existing processes require

manual paperwork

Basic P2P process without

guidelines and a mix of

paper-based and

electronic processes

End-to-end P2P processes

in place but low levels of

compliance

Fully integrated and

automated P2P processes

are in place and

compliance is high

Lean and highly integrated

P2P processes, e-

catalogs and a robust

order tracking process

Performance

Management

No monitoring of the

performance of the

procurement department

Basic metrics are in place

but provide limited insight

and may not be linked to

business performance

Formal metrics exist but

are not consistently used

and are not closely linked

to performance

Savings targets are in

place to monitor

department performance

and KPIs link to

performance

Sophisticated balanced

scorecards are in place

and KPIs are integrated

with performance

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Critical issue: converting strategy into operating model

An operating model is the foundation for successful execution which, delivers on an

organization’s strategic intent.

What is our core mission?

► Service populations

► Equity, access, accountability

► Transparency, integrity and trust

Who are our customers/constituents?

► Citizens

► Medical providers and researchers

► State leadership

What is our service delivery strategy?

► Products and services

► Client and provider engagement

► Education and outreach

How do we operationalize our strategy?

► Business process structure

► Organizational structure

► Governance and decision-making

► Performance metrics and accountability

► Operating locations

► Technology enablement

How will we allocate resources and

measure results?

► Budget allocation

► Performance scorecard

► Service delivery vendor scorecards

Agency strategy Operating model

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Governance process gaps process flow(heat map)

Lack of key activities leaves HHSC open to various levels of risk. Levels of risk are identified by the

triangles in the key.

Process flow developed by EY US based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC team members.

Note: Process flow includes “persona-based.”

Extended process flow is available in Visio format. High risk Medium risk Low risk

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Governance process gaps

Highlighted risk areas from the governance process flow are listed below:

Procurement phase Process flow identifier Process gap

All phases Key documentation related to the procurement process is not consistently maintained

by PCS.

Document development/solicitation phase Programs do not consistently follow a formal process with the contract managers and

PCS to discuss future procurement objectives, resulting in a lack of planning and PCS

not being fully aware of the program's needs.

Conflict of interest checks between the employee/requestor and vendor are not being

consistently performed.

Standardized tools are not consistently utilized throughout the evaluation process.

Standard turnaround time for approval or rejection of purchase requisitions is not

sufficiently defined in the policies and procedures.

CAPPS has not been fully configured to route procurements for approval based on the

dollar amount of the transaction.

A Form 515 is completed to determine which approvals should be obtained. However,

the form is not being consistently completed accurately and/or entered accurately into

CAPPS.

If an approver supports multiple approval roles within the workflow, his or her initial

approval will count toward all approvals required by that individual. Once the approver

has approved the requisition at the first approval point, CAPPS will then auto-approve

him or her at later workflow approval points and the requisition will automatically move

to the next individual who needs to approve. Therefore, it is important that a reviewer

be aware of what his or her approval means when he or she initially approves a

requisition. However, reviewers expressed confusion related to what in the requisition

and/or contract they were responsible for reviewing.

1

2

3

4

5

6

7

8

High risk Medium risk Low risk

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Governance process gaps

Highlighted risk areas from the governance process flow are listed below:

Procurement phase Process flow identifier Process gap

Conflict of interest review Conflict of interest checks between the employee/requestor and vendor are not being

consistently performed.

Procurement evaluationsStandardized tools are not consistently utilized throughout the evaluation process.

Interview and selections Sufficient training is not performed to provide procurement evaluators with the skills

and knowledge to properly perform evaluations.

Processes do not sufficiently define which scoring criteria should be used to evaluate

procurements.

Procurements are not consistently being reviewed by the same team; therefore, not all

evaluators reviewed all proposals received.

Evaluators are not consistently scoring all respondents.

All relevant scoring documentation (both hard copy and electronic) is not consistently

maintained.

Standardized tools are not consistently utilized throughout the evaluation process.

Contract negotiations PCS does not have a sufficient formal appeal process for procurement protests,

including an appeal review panel or established process in handling and/or resolving

protests from bidding vendors.

Recommendation for awards Conflict of interest checks between the employee/requester and vendor are not

consistently performed.

High risk Medium risk Low risk

3

4

9

10

11

12

13

4

14

3

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Governance process gaps

Highlighted risk areas from the governance process flow are listed below:

Procurement phase Process flow identifier Process gap

After contract award phase CAPPS has not been fully configured to route procurements for approval based on

the dollar amount of the transaction.

A Form 515 is completed to determine which approvals should be obtained. However,

the form is not consistently being completed accurately and/or entered accurately into

CAPPS.

If an approver supports multiple approval roles within the workflow, his or her initial

approval will count toward all approvals required by that individual. Once the approver

has approved the requisition at the first approval point, CAPPS will then auto-approve

him or her at later workflow approval points, and the requisition will automatically

move to the next individual who needs to approve. Therefore, it is important that a

reviewer be aware of what his or her approval means when he or she initially

approves a requisition. However, reviewers expressed confusion related to what in

the requisition and/or contract they were responsible for reviewing.

Standard contract templates are not consistently utilized across the Agency.

6

7

8

15

High risk Medium risk Low risk

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Policy assessment

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Governance spotlight: policy assessment

Upon review of procurement and contract guides used by HHSC, particularly the Comptroller’s

Procurement and Contract Management Guide and HHSC’s Contract Management Handbook, some key

findings include:

► Policy at all levels (statute, rule, external guidance, internal policies) related to procurement, contract

management and reporting is not fully up to date, cohesive and consistent.

► The Agency lacks an updated procurement manual and is utilizing the Comptroller of Public Accounts

Procurement and Contract Management Guide (PCMG) as its manual in the interim.

► Requirements for engaging external governance are generally disparate and not automated.

► Reporting requirements in many cases could be consolidated or the frequency reduced to limit time

spent reporting.

► There are numerous non-value-added steps in the process that are not required by statute or rule.

► There is little to no support for procurement provided by the CPA Statewide Procurement Division

(SPD), and all procurements are considered delegated unless CPA SPD decides it wants to manage

them.

A detailed review of key policies is provided in the Appendix.

Governance spotlight: policy assessment

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Policy/rule assessment report

Policy/rule reviewed Key gaps Overengineered policies

TAC §391

(v. 6/2015)

► Rule was adopted prior to completed

transformation and may not reflect current

HHSC PCS policies or procedures.

► Rule permits correction of minor

irregularities in vendor responses but is not

currently being allowed.

► Streamlined purchasing methods are

permitted for purchases under $25k;

however, these methods are not used.

► The open enrollment process is identified

but utilizes an RFA process that is not

allowed for use in procurement.

TAC §391, Subchapter D

(v. 6/2015)

► The vendor protest procedures under these

rules align with the comptroller’s procedures

and are compliant with Texas Government Code §2155.076; however, the procedures

can outline more specific requirements:

► For example, HHSC can require that

relevant facts should include a

description of the adverse impact to the

state and a description of the adverse

impact to the protester.

► Additionally, HHSC can specify that it

may attempt to settle and resolve a

protest by mutual agreement before

issuing a written determination.

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Policy assessment report

Policy reviewed Key gaps Overengineered policies

CPA Procurement &

Contract Management

Guide (v. 8/2018)

► No service level agreements (SLAs)

provided for interactions with entities

involved in required-use programs (TCI,

TIBH, SPD, etc.).

► Requirements for delegation requests and

Agency review and approval are handled

outside of enterprise systems using

disparate processes (forms, portals,

reporting) and communication methods

(phone, fax, numerous email accounts, etc.).

► There are two distinct processes for SPD

review of goods and services.

► All communications with SPD are required to

be emailed.

► CPA SPD treats the process for non-

delegated procurements as a request for

delegation rather than meeting its

requirements to facilitate the procurement on

behalf of the Agency. Agencies, even if not

seeking delegation, are treated as such.

► Definitions of contract value between CPA

and DIR do not fully align.

► Requirement that a cost estimate be

developed for all procurements

► Requirement that agencies submit all non-

delegated goods and services procurements

to CPA

► Requirement for monthly reporting for

exceptions to state use programs

► Requirement that TCI be given a final

opportunity to provide a lower bid for print

services when already given an opportunity

to bid

► Requirement that the bid tab be sent to all

print shops upon award for print services

► Requirement to report for emergencies is not

based on delegated authority levels

► Emergency procurements over $25k are

required to be posted to the Electronic State

Business Daily (ESBD) and are subject to

CAT and QAT reviews

► Requirement that CPA SPD provide a

delegation letter for every delegation request

► Requirements that purchase of IT

commodities not on contract be certified by

DIR prior to purchase

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Policy assessment report

Policy reviewed Key gaps Overengineered policies

CPA Procurement &

Contract Management

Guide (v. 8/2018)

(In lieu of HHSC

Procurement Manual that

is outdated and not used

by the Agency)

► Delegation requests can take up to 30 days

to process, and the Agency is not allowed to

act until delegation has been granted even

after the 30-day SLA.

► DIR statement of work (SOW) reviews

require submission 30 days before the

anticipated procurement date.

► Delegation, review and approval

requirements between non-IT and IT

procurements are not aligned.

► Definition of major consulting services is

below the Agency-delegated authority for

services.

► No contact information provided for required

submission of forms to the Governor’s

Office.

► RFP and RFP processes are identical.

► RFA is not a procurement method; it is a

method to request grant applications only.

► Required documentation is not supported by

templates in many cases.

► There is the ability to address minor

irregularities or deficiencies in vendor

responses to help make their submission

responsive.

► Requirement for DIR to review and sign

Agency SOWs for certain preestablished

contracts (Note: dollar threshold is also

below established delegated authority levels

for services)

► Requirement for DIR to review final agreed-

upon SOW (contract)

► Requirement that agencies report to LBB

within 10 days of award for certain

professional services and consulting

services contracts

► Requirement that notice be posted to the

Texas Register to advertise the procurement

within 20 days for consulting services

contracts (including new postings for

renewal or extension)

► Requirement that notification be given to

LBB and Governor’s Budget & Planning

Office, with receipt of a finding of fact, prior

to contracting for major consulting services

($15k+)

► Requirement that the entire evaluation be

performed again for all members following

oral presentations

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Policy assessment report

Policy reviewed Key gaps Overengineered policies

CPA Procurement &

Contract Management

Guide (v. 8/2018)

► There are conflicting reporting requirements

for Agency contracts (all or $100k+ only?).

► Requirement exists that the Agency provide

solicitation and contract information in

CAPPS according to CPA rule, but no

reference to the requirements or rules exists.

► There is a lack of a comprehensive set of

required documents that must be included in

all solicitations.

► HUB process and requirements, especially

the disqualification of a vendor for not

properly completing the HUB form, even

though it cannot be considered in

evaluation

► Requirement that QAT review and approve

major IT contracts exceeding $10m

► Requirement that agencies report award of

the contract to QAT after their review

► Requirement that all Agency contracts for

goods and services of more than $1m be

signed by the executive director

► Requirement that all Agency contracts for

goods and services of more than $5m be

verified in writing by the procurement officer

or contract management office

► Requirement that Agency purchasers

perform numerous checks of state and

federal systems to verify vendors prior to

award

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Policy assessment report

Policy reviewed Key gaps Overengineered issues

CPA Procurement &

Contract Management

Guide (v. 8/2018) (Cont.)

► LBB reporting requirements are not aligned

and not consolidated

► Requirement that the Agency post all

contracts and DIR SOWs not included in the

LBB contracts database on the Agency

website (redacted versions) upon award of

contract

► Requirement for vendor performance

reporting for all contracts of more than $25k

at end of contract life

► Requirement that employees who worked on

a procurement or contract in any way are not

allowed to accept employment from any

respondent to that procurement for two

years, regardless of whether the respondent

was given a contract

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Policy assessment report

Policy reviewed Key gaps Overengineered policies

HHSC Contract

Management Handbook

(v. 4/2018)

► Updates are communicated through

GovDelivery, which requires users to

subscribe.

► Outdated references exist in some places

with issuance of new guidance from CPA in

August 2018.

► There are likely outdated processes in some

places with issuance of new guidance from

CPA in August 2018.

► Dates on sections of the manual vary

dramatically, from April 2016 to March 2018.

► References in the manual to HHSC

agencies and system remain and need to be

updated to reflect transformation efforts.

► Vendor interaction policy does not align with

PCS policy.

► The handbook references the HHSC

Procurement Manual that is outdated and

not utilized by staff.

► Lack of clarity on whether a cost-benefit

analysis is a “should” or a “must” process.

► Rule requires that contractors meet or

exceed standards of conduct required of

HHSC contract managers (PCS.122 form,

recertified annually)

► Legal review of procurement documents for

purchases of more than $25k

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Key external process requirements with process/velocity impacts

► Requirements for delegation requests and Agency review and approval are handled outside of

enterprise systems using disparate processes (forms, portals, reporting) and communication methods

(phone, fax, numerous email accounts).

► There are distinct processes for the review of goods and services in the SPD.

► Delegation requests can take up to 30 days to process, and the Agency is not allowed to act until

delegation has been granted even after the 30-day SLA.

► DIR SOW reviews require submission 30 days before the anticipated procurement date.

► Definition of major consulting services is below the Agency-delegated authority for services.

► Requirement to report for emergencies is not based on delegated authority levels.

► There is a lack of a comprehensive set of required documents that must be included in all

solicitations.

► Required documentation is not supported by templates in many cases.

► Requirement exists that the Agency provide solicitation and contract information in CAPPS according

to CPA rule, but no reference to the requirements or rules exists.

► Requirement exists that notice be posted to the Texas Register to advertise the procurement within

20 days for consulting services contracts (including new postings for renewal or extension).

► Requirement exists that notification be given to LBB and Governor’s Budget & Planning Office, and

receipt of a finding of fact, prior to contracting for major consulting services ($15k+).

► The HUB process requires disqualification of a vendor for not properly completing the HUB form.

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Governance spotlight: forms and standards

► A review of forms and standards revealed that with the exception of a few areas of noncompliance or

risk noted below, forms were generally compliant; however, a comprehensive understanding of when

and how to use forms in the process is not generally shared.

► Forms, templates and internal process guides are updated ad hoc, with little to no communication to

program staff and no single repository available to all procurement stakeholders (PCS and programs).

► A rigorous document management process is lacking. During the review process, PCS forms

retrieved from the SharePoint directory reflected earlier dates than hard copies provided to the

interview team.

Identified areas of noncompliance or risk

Document Reviewed Observations

PCS.08: Justification Procurement Selection

(v. unknown)

► Issue regarding the required approval of division/program staff. It implies some level of

purchasing authority by the program that should not exist.

► Document may have been created with good intentions to seek approved input from the

program. However, this blurs the line of purchasing authority and PCS’s role in the

procurement process.

PCS 144: Waiver IT Purchases

(v. 2/2015)

PCS 701: Waiver of Notification to all DIR Vendors

(v. 3/2017)

► PCS 144 appears to have been replaced by PCS 701.

► Purpose of either of the forms is not clear. There is no current requirement that

deliverables-based IT services SOWs be sent to all DIR vendors. If either form is

intended to be a sole source approval, the section for proposed procurement method

seems contradictory.A detailed review of forms is provided in the Appendix.

General observations

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Forms and standards

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Forms and standards

Document reviewed Observations

PCS.07: Engaging Vendor Guidelines

(v. 9/2016)

► Overall, document is compliant with the Comptroller’s Procurement and

Contract Management Guide (CPA’s PCMG).

► However, the form only addresses one aspect of vendor communication

(presentation and demonstration). It should include a reference to CPA’s

PCMG for other types of vendor contact.

► Some key information, such as who/where to communicate the request and

expected turnaround time frame, is missing. Also, the policy number in the

document is a different number from the title of the file.

PCS.08: Justification Procurement Selection

(v. unknown)

► Issue regarding the required approval of division/program staff. It implies

some level of purchasing authority by the program that should not exist.

► Document may have been created with good intentions to seek approved

input from the program. However, this blurs the line of purchasing authority

and PCS’s role in the procurement process.

RCD-16: Enterprise Risk Assessment

Instrument

(v. 12/2016)

► Overall, document is compliant with CPA’s PCMG.

PCS 111: Terms and Conditions

(v. 7/2018)

► Overall, document is compliant with CPA’s PCMG and Texas Government

Code for required clauses.

Document review

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Forms and standards

Document reviewed Observations

PCS 117A: Nondisclosure and Conflicts of

Interest Certification

(v. 8/2017)

► Overall, document is compliant with CPA’s PCMG.

PCS 126: Centralized Master Bidders List

(CMBL) Supplementation Approval Request

(v. 11/2008)

► Overall, document is compliant with CPA’s PCMG.

► However, it needs a signature line for approval.

PCS 130: Conflict of Interest, under CPA

delegated authority

(v. 8/2017)

► Overall, document is compliant with CPA’s PCMG.

► It is out of date; it references an old CPA procurement manual.

PCS 138: ESBD Solicitation Approval

(v. 10/2016)

► Overall, document is compliant with CPA’s PCMG.

PCS 144: Waiver IT Purchases

(v. 2/2015)

PCS 701: Waiver of Notification to all DIR

vendors

(v. 3/2017)

► PCS 144 appears to have been replaced-by PCS 701.

► Purpose of either of the forms is not clear. There is no current requirement

that DBITS SOWs be sent to all DIR vendors. If form is intended to be a sole

source approval, the section for proposed procurement method seems

contradictory.

PCS 147: Vendor Performance Reporting

Form

(v. 5/2017)

► Overall, document is compliant with CPA’s PCMG.

PCS 160: HHSC Solicitation Checklist

(v. 6/2018)

► Overall, document is compliant with CPA’s PCMG.

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Forms and standards

Document reviewed Observations

PCS 160-G: Legal Entity Screening Guide

(v. unknown)

► Overall, document is compliant with CPA’s PCMG.

PCS 201: Contract Routing $1m and Over

(v. 3/2017)

► Overall, document is compliant with CPA’s PCMG.

PCS 406: HHSC HUB Subcontracting

Determination

(v. 3/2017)

► Overall, document is compliant with CPA’s PCMG.

PCS 415: HHSC HUB Subcontracting Plan

Review

(v. 10/2016)

► Overall, document is compliant with CPA’S PCMG but may want to consider

adding further sections that provide for comments of the review of the

method that was selected. For example, if the contractor does not intend to

subcontract, was its self-performing justification acceptable?

► For clarity, may consider revising Section II. Method 5 (no intention to

subcontract) is included with the options for intention to subcontract.

PCS 515: Routing Form

(v. 4/2018)

► No information on the form is given regarding how program is selecting its

approvers.

PCS 540 & PCS 541: Kick-off Meeting

Agenda & Sign-in

(v. unknown)

► Overall, document is compliant with CPA’s PCMG.

PCS 550: RFP Template

(v. 3/2017)

► While the basic recommended RFP elements are present, it is not best

practice to use an unlocked Word document as a template. This practice

requires management and Legal to review the entire document each time it

requires their approval. Modular templates with locked sections are far more

efficient.

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Technology spotlightCore technology (1 of 3)

System Assessment description Industry insights

Procurement Tools

in CAPPS – The

state’s ERP system

CAPPS was intended to automate 80% of HHSC’s procurement and

contracting processes. The CAPPS system has been heavily modified

for HHSC, but the scope of these modifications is limited by a variety

of factors, including, but not limited to, hard-coding of the software,

licensing restrictions, CPA-mandated functionality, statutory

requirements, limited budget, a desire for process consistency and a

complete lack of input from user groups. There was no data

architecture planning or consideration for HHSC’s transaction volume

included in the implementation process. While some performance

issues still remain, the debilitating latency in system processing time

has recently been addressed by PCS.

As currently configured, the CAPPS system:

► Is not user-friendly

► Has functionality that does not support Agency business processes

(e.g., proposal evaluations, contract management, adequate

approval workflow, strategic sourcing, complex contracting or

reporting)

► Does not allow for flexibility where certain steps add no value

(e.g., “Collaboration” process outside of contract development)

► Does not offer dashboard reporting/status updates

► Contains preloaded templates that are outdated and/or have

limited utility

► Has minimal data visibility

eProcurement functionality in a modern ERP

system must facilitate automation of Agency

business processes and enforce all necessary

controls. In order to enhance system

functionality, customization should seek to

address the needs of all stakeholders in

accordance with Agency priorities. This effort

should include standardization and optimization

of business processes to operate in an

automated environment.

Effective system customization must be

preceded by an Agency-level needs assessment

to inform system architecture design (including

any integration requirements) as well as

comprehensive implementation planning.

It is key to purchase a system that provides the

majority of the organization’s required

functionality without customization. The right

system solution should be able to meet the

majority of the organization’s requirements

through a combination of process optimization

and functionality configuration.

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System Assessment description Industry insights

SCOR – HHSC’s

contract

management system

SCOR was developed specifically to meet the contract management

needs of HHSC, so it offers functionality that is more intuitive and more

closely aligns with Agency business processes. However, there are

data integrity issues in SCOR due to undertrained and overworked

staff inputting incorrect information and errors in the legacy data

conversion from other systems.

As currently deployed, the SCOR system:

► Lacks complete data from legacy systems

► Contains inaccurate data for current and expired contracts due to

coding and filing errors

► Lacks modern contract management automation tools (e.g.,

dashboard reports, automated reminders and supplier enablement)

► Requires updates in multiple function areas.

As the official system of record, it is essential that

the contract management component of an

eProcurement system contain complete and

accurate procurement documentation. Validating

the integrity of the data loaded into the system is

the key to ensuring its utility.

If contract management functions are performed

outside of the ERP, the tool should be fully

integrated with the ERP’s procurement module.

Technology spotlightCore technology (2 of 3)

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System Assessment description Industry insights

Digital signature tool

– HHSC’s tool for

contract document

review and approval

Users are generally happy with the functionality of the digital signature

tool system was designed to provide. Issues arise when it is used

inconsistently (sometimes contract documents are routed through the

digital signature tool and sometimes not) or as an alternative to the

approval workflow facilitated by CAPPS. The inconsistent use of

various systems to perform procurement governance functions creates

significant risk for the Agency and may result in negative audit findings.

HHSC’s current licensed software products include a tool that is very

similar to the digital signature tool that integrates directly into the

software behind CAPPS. This tool can be configured to look and feel

just like the digital signature tool, and it has the added benefit of triple

authentication and compliance with Internal Revenue Service (IRS)

regulations.

As currently deployed, the digital signature tool:

► Only offers single authentication

► Is not integrated with CAPPS

► Creates risk through a lack of consistent use and tools for policy

enforcement

► Is a software tool not owned or managed by IT

The use of electronic signature and review

software can greatly enhance an organization’s

ability to route documents efficiently and

transparently. However, it is important to

safeguard that the use of this software is part of

the eProcurement system process, not used

instead of it. Where an integrated solution is

available, it is preferred, to reduce risk and

increase transparency.

Protocol should be established for the use of the

software and should be enforced via spot checks

and internal audits.

Technology spotlightCore technology (3 of 3)

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Current state Capability description

Capability 1: ERP system integration plan

Capability 2: The eProcurement system core process

Capability 3: User types and associated permissions

Capability 4: Configurable workflow/approvals

Capability 5: Agency-wide accounting code set

Capability 6: Resources dedicated to assist users

Capability 7: Solicitation and contract document templates

Capability 8: Centrally based contract milestones records

Capability 9: Audit trail for contract documents/actions

Capability 10: Agency procurement document management

Capability 11: Spend data leveraged for strategic contracting

Capability 12: Agency data transparency requirements

Capability 13: Supplier self-service capacities

Capability 14: Vendor performance tracking

Capability 15: Dashboard capacity

Technology spotlightCore technology | systems gap analysis

Legend:

Present

Partial

Not present or

inadequate

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Technology spotlightNoncore technology

Enabling technology Purpose Owner

Solicitation Evaluation Excel Sheet Capture solicitation responses and calculate rankings PCS

Excel Spreadsheet Comprehensive, offline contract tracking HHSC Programs

Outlook Communicate regarding contract status and set reminders

for upcoming required contract actions

HHSC-IT

CRM tool Manage document review requests from internal customers DFPS Legal

HEART Track data entry activities PCS

IMPACT Capture contract data and KPIs for service agreements DFPS

PEIR (Prevention and Early

Intervention Review)

Vendor monitoring by case managers DFPS

ABCS Conduct background checks on vendors DFPS

PMET Monitor and track vendor performance DFPS

DTS Delivery tracking system Medicaid Managed

Care

CMBHS e Health Record Processing claims CM

MCATS Contract administration tracking Medicaid

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Technology spotlightNoncore technology

Enabling technology Purpose Owner

Source Processing payments CM

CMBL Centralized master bidders’ list CPA

TxSmartBuy Purchasing items from statewide contracts CPA

VPTS Vendor performance tracking CPA

ESBD Electronic State Business Daily – solicitation posting

platform

CPA

Procurement Oversight and

Delegation Portal

Procurement authority delegation and review CPA

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Capability assessment

Current state description Mission-critical systems have been integrated or interfaced with CAPPS, as applicable, at

a basic level. However, there are issues with data integrity, duplicate entry of data across

systems and duplicate functionality across systems.

Root cause A comprehensive system integration plan is necessary for determining which existing

systems need to integrate or interface with the new procurement system, as well as which

legacy systems can be replaced by functionality in the new system. Prior to implementing

CAPPS, HHSC-IT made an effort to confirm all key purchasing-related systems were

integrated or interfaced with the system to avoid loss of data. However, HHSC does not

have a complete application portfolio detailing the data architecture, relationship diagrams

and user models for all purchasing-related systems.

Core technologySystems gap report

Capability 1: ERP system integration plan is fully executed and all data is accurate and readily

accessible.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description Rather than automating their purchasing processes to achieve efficiencies and

transparency, many user groups have added the CAPPS system process to their offline

processes. Users perceive CAPPS as an impediment to efficiency because its

configuration the ability to support their unique procurement needs.

Root cause CAPPS has been heavily modified to accommodate State of Texas statutory contracting

requirements as well as HHSC-specific contracting needs; however, the current system

configurations are not designed to support a specific set of Agency or Program

purchasing policies and/or processes.

Core technologySystems gap report

Capability 2: The eProcurement system supports documented purchasing processes, specifically

purchase request and purchase order development.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description CAPPS supports the establishment of a distinct framework of delegated procurement

authority that can be enforced by the system through the assignment of user roles and

privileges. Unfortunately, there is no user role that allows a person to pick up the workload

of another. This results in rework.

Root cause The authority is determined by HHSC policy restrictions, which do not necessarily

coincide with state procurement statutes and rules (HHSC policy is sometimes more

restrictive). System security risk aversion is manifested in overly restrictive role

assignments with no ability to override assignments to prevent inefficiencies.

Core technologySystems gap report

Capability 3: The eProcurement system supports defined user types and associated permissions.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description Workflow in CAPPS is restricted to six levels of approval that cannot be changed at the

division level. This can result in certain required approvers being excluded from the

process.

In the absence of a dynamic approval workflow and document management tools in

CAPPS, the digital signature tool has been used beyond its initial purpose to meet users’

needs. The inconsistent use of various systems to perform procurement governance

functions creates significant risk for the Agency and may result in negative audit findings.

Root cause During configuration, the established governance practices at HHSC were not reconciled

with the workflow functionality in the system.

Core technologySystems gap report

Capability 4: eProcurement system facilitates a configurable workflow and approval structure for various

users and purchase types.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description The accounting codes in CAPPS are derived from the statewide codes used in the legacy

financial system, USAS. While the code set is serving its intended purpose, there is a

need for user training to certify the correct codes are entered for each transaction. Coding

errors are common and have a significant downstream impact on the accuracy of state

records.

Root cause Training is not sufficiently comprehensive to individuals needing to use the system

with quality.

Core technologySystems gap report

Capability 5: Agency-wide accounting code set loaded in the ERP is sufficient to meet the state’s needs.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description There are user guides and a help desk (phone line and email box) dedicated to assisting

users with eProcurement functions in CAPPS. However, users report that the guides are

often outdated, help desk response rates vary and hands-on training is lacking entirely.

Some teams have developed their own internal training to try to address the most

pressing issues.

Root cause The transition to an automated procurement system can be especially burdensome to

smaller teams lacking dedicated procurement staff as well as those teams experiencing

high rates of staff turnover. Tools and guides can be incorporated into the system, but the

type and format can vary widely. Without consistent curriculum updates and predictable

training delivery schedules, it is not possible to achieve skill standardization.

Core technologySystems gap report

Capability 6: Resources dedicated to assist users with navigating the eProcurement system.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description CAPPS has the ability to support the use of contract instrument templates. Some

solicitation and contract documents have been developed in CAPPS; however, they are

perceived to have limited usefulness for the highly variable needs of the vast program

areas. When entering information according to system prompts, users often feel that the

options presented do not apply to their situation, which contributes to overall frustration

and loss of efficiency, and which encourages users to seek alternative methods to

process their procurements. Furthermore, many of the existing templates are in need of

updates, rendering them obsolete.

Root cause There is no baseline set of procurement processes and procedures that can be applied

across HHSC. Each area has unique needs, some of which can be standardized, some of

which cannot.

Core technologySystems gap report

Capability 7: The eProcurement system supports the use of established solicitation and contract

document templates.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description SCOR was developed by HHSC to facilitate uniform contract management practices;

however, contract management responsibilities are held by different staff members in

various roles across the agencies.

Root cause There is no central contract management office responsible for all HHSC contracts, and

there is no consistent reporting structure for sharing key contract information with PCS

such as whether the contract is in good status. This inconsistency of practice and lack of

visibility into contracts throughout their life cycles makes centralized tracking impossible.

Furthermore, transparency and strategic decision-making efforts are negatively impacted.

Core technologySystems gap report

Capability 8: Records in the contract management system are tracked centrally based on key

milestones.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description Audits are regularly performed by Agency internal auditors, the State Auditor’s Office and

the federal government to evaluate Agency compliance with procurement regulations and

policies. During these audits, staff members are not currently able to pull reports

demonstrating all actions associated with a particular contract or procurement event.

While time stamps are present for certain activities, they are difficult to pull in a

comprehensive manner, and most staff members lack the technical knowledge to find this

information. Staff members typically piece together records from CAPPS, SCOR, email

and Excel spreadsheets to build a complete contract/transaction record for audit review.

Root cause Audit requirements were not well defined during CAPPS implementation and

configuration efforts.

Core technologySystems gap report

Capability 9: The eProcurement system creates a clear audit trail for all contract documents and actions.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description CAPPS does not have document management capabilities. SCOR and the digital

signature tool offer some tools for storing and managing document versions, but neither

offer comprehensive document management capabilities at the Agency level. Presently,

contract documents are stored in various systems (CAPPS, SCOR, the digital signature

tool, email, shred file drives, etc.) and in paper form.

Root cause None of the procurement-related systems (CAPPS, SCOR or the digital signature tool)

were acquired to serve as a document management system. There has been no Agency-

level document management strategy that would drive development of requirements for a

document management system.

Core technologySystems gap report

Capability 10: The eProcurement system supports an Agency document management strategy (a

detailed plan for managing procurement-related documents in a procurement system).

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description Strategic contracting is encouraged by leadership, but there has been no comprehensive

effort to use Agency-wide spend data to define a methodology that prioritizes action and

identifies opportunities.

Root cause Rapidly changing policy, workload backlog, high staff vacancy rates and lack of data

analysis capabilities all contribute to this deficiency.

Core technologySystems gap report

Capability 11: eProcurement system helps enable the central procurement office to conduct strategic

contracting, and spend data is used to drive strategic procurement decisions.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description While reports are technically available for any data field populated in CAPPS, the spend

data reports currently available for HHSC lack detail and can be difficult to understand.

Reports have not been developed to display procurement data for ease of use by any

user group. “Dashboard” functionality (presenting user-specific statistics and info on a

homepage upon login) is not currently available in CAPPS.

Root cause CAPPS was not configured to facilitate public inquiry into contracting data. Specific report

development and/or interfacing with a public-facing site is necessary to support

transparency efforts.

Core technologySystems gap report

Capability 12: The eProcurement system fulfills Agency requirements for transparency of spend data.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description Presently, vendors are not able to perform self-service for contract administration (e.g.,

updating contract-specific signatories, submitting status reports, tracking invoices and

submitting advanced shipment notices) in CAPPS.

Root cause CAPPS was not configured to support these vendor self-service activities. Some vendor

profile management is available via the Centralized Master Bidder’s List, but it does not

carry over into contract/transaction records.

Core technologySystems gap report

Capability 13: The eProcurement system supports supplier self-service for profile management, contract

administration, invoicing and delivery management.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description CAPPS does not currently have functionality to facilitate vendor performance tracking.

Root cause CAPPS was not intended to serve as a vendor performance tracking system. The state

relies upon a stand-alone system administered by the Texas Comptroller of Public

Accounts.

Core technologySystems gap report

Capability 14: The eProcurement system supports vendor performance tracking.

Legend: Present Partial Not presentor inadequate

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Capability assessment

Current state description One of the most frequently reported issues with CAPPS is lack of transparency. Typical

users do not have access to a status report for their requisitions, so they have to call their

assigned purchaser in PCS to inquire about status. The few users with access to the

relevant requisition information have to run queries and manipulate the results to

determine where their requisitions are in the process. This lack of visibility results in

frustration among users submitting requisitions and adds to the workload of buyers in

PCS who spend excessive amounts of time responding to these inquiries.

Root cause CAPPS does not offer dashboard status reporting as currently configured. The

customizations made to the system for HHSC did not take into account the need for staff

to easily access requisition status reports, or the inefficiencies that would result from this

lack of functionality.

Core technologySystems gap report

Capability 15: The eProcurement system provides users with visibility into the status of their work

products in a dashboard-style presentation.

Legend: Present Partial Not presentor inadequate

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HHSC stage view Level 1–Level 3

Interviews and review of procedures showed how many process steps are needed for a requisition.

Process flow developed by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published

31 July 2018.

► Interviews with HHSC employees. Note: See Appendix for Level 4 details.

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HHSC stage view Level 1–Level 3 process flow

Interviews and review of procedures showed how many process steps and number of interactions are

needed for a requisition.

Process flow developed by EYUS is based on:

► PCS document OP 571 RFP Contract Procedures_FI.NAL 07-30-218.doc published 31 July 2018.

Note: Process flow includes

“persona-based”

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Process stage view

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Procurement and contract services process overview

HHSC Agency/Program

► Forecasting

► Initial procurement planning

► Request for PCS liaison

► Contract manager to take full ownership

Legislative session

► Session comes up with directive.

► Session comes up with directive.

► Program leadership adopts idea.

► Idea comes from program; contract manager is a part

of program.

PCS Liaison

The PCS Liaison will coordinate with the HHSC

Agency/Program to assist with its procurement planning.

Resources the PCS Liaison may be asked to provide may

include, among other things:

► Prior solicitation documents

► Procurement timelines

► Assistance with identifying NIGP class/item codes

► Guidance on procurement methods

► Checklists of required forms and documentation

► Updates on any changes to the procurement process

since the last procurement cycle

Forecasting:

HHSC Agency/Program should have a process in place to

manage upcoming procurement needs. Often, this may be

accomplished by tracking current procurements/contracts

and by being familiar with the life cycle and end dates of

procurements/contracts.

Initial procurement planning

When an HHSC Agency/Program identifies the need to

begin a new procurement cycle, the HHSC

Agency/Program may request assistance from PCS,

Financial Services, Legal Services and/or Information

Technology.

Requests for a PCS Liaison should be sent to the

Associate Commissioner for Procurement and the Deputy

Associate Commissioner of Complex Purchases.

PCS Management

► Request for PCS Liaison

PCS Liaison

► PCS Liaison

Request for PCS Liaison

Upon request from an HHSC Agency/Program, the

Associate Commissioner for Procurement and the Deputy

Associate Commissioner of Complex Purchases will

assign a PCS Liaison to assist the HHSC

Agency/Program with procurement planning.

Request for PCS Liaison

Upon request from an HHSC Agency/Program, the

Associate Commissioner for Procurement and the Deputy

Associate Commissioner of Complex Purchases will

assign a PCS Liaison to assist HHSC Agency/Program

with procurement planning.

PCS Liaison

The PCS Liaison will coordinate with the HHSC

Agency/Program to assist with its procurement planning.

Resources the PCS Liaison may be asked to provide may

include, among other things:

► Prior solicitation documents

► Procurement timelines

► Assistance with identifying NIGP class/item codes

► Guidance on procurement methods

► Checklists of required forms and documentation

► Updates on any changes to the procurement process

since the last procurement cycle

Step 1: Anticipating solicitation need + procurement planning Level 3–Level 4

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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Procurement and contract services process overview

HHSC Agency/Program

► Identification of need

► Initial forms and requisition

PCS Manager

► Verification of req and assignment

PCS Purchaser

► Updating the req

► Program notification

► Assignment of support staff

► Procurement file and checks

Identification of need

► Program must identify the need and follow approved Agency procedures and

complete the required procurement forms, as applicable, to obtain appropriate

internal program approvals for the procurement.

Initial forms and requisition

► Program requestor completes the following forms and attaches them to the

requisition:

► Helps support the PCS 552–RFP Statement of Work (SOW) Template, or a

SOW in a usable format, is completed with all pertinent information

► Helps support the PCS 438–Contractor or Subrecipient Determination has

been completed and signed by Contract Oversight and Support, which is

forwarded and approved prior to the entering of the requisition

► Helps support the PCS 505–Cost Benefit Analysis is complete with all

pertinent information

► Helps support Program has provided a timeline

► Enters the CAPPS Financial requisition

► If the budget amount is unknown, a $0.00 requisition is entered on the line

however, the estimated dollar amount of the requisition should include the

total estimated contract value including all potential renewals entered in the

requisition entry wizard

► If the requisition document does not include the total contract value including

renewals within the request document, Purchaser or PCS Manager will notify

the program area that the requisition needs to be cancelled and reentered for

the correct approvals

► Needs assessment, which is generated by the requisition entry wizard

Verification of req and assignment

► The PCS Manager verifies the

requisition and that all forms are

complete and assigns to Purchaser. If

the requisition is not complete or all of

the required forms are not attached, the

requisition will be rejected and sent back

to the Program to complete and/or

correct.

Updating the req

► When the requisition is assigned, Purchaser updates the requisition and supports the necessary

forms have been received and completed.

► The purchaser:

► Assigns the Purchaser’s name to requisition

► Adds the appropriate Action Code in the supplier item ID field

► Confirms the PCS 438–Contractor or Subrecipient Determination has been completed

► Reviews the PCS 438 to support the determination is vendor

► If the relationship is recipient/subrecipient, then a Request for Application (RFA) would be the

proper procurement method, not an RFP

► Confirms the PCS 552–RFP SOW Template is completed or that there is a SOW in usable format

► Completes the Risk Assessment in CAPPS Financial

► Confirms the PCS 505–Cost Benefit Analysis is completed

Program notification

► Purchaser notifies, via email, and requests a list of stakeholders for the kickoff meeting.

Assignment of support staff

► Purchaser must support assignment of a HUB Coordinator, an HHSC Contract Attorney and a CQC

Financial Analyst.

Procurement file and checks

► To support all applicable forms have been received for the procurement, the Purchaser shall track all

requirements for the solicitation on the PCS 160–HHSC Solicitation Checklist – RFPs, RFAs, RFQs

and RFOs, as well as all relevant internal correspondence, and save all required documents to the

procurement file in the designated network folder located under Procurement Resources.

Step 2: Determination of need process Level 3–Level 4

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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Procurement and contract services process overview

RFP template

Purchaser uses the PCS 552–RFP SOW Template or the submitted SOW, completed by the HHSC Agency/Program, and inserts the required sections into the PCS 550–RFP template.

PCS Purchaser

► RFP template

► Draft timeline

► Scheduling the kickoff meeting

► Kickoff meeting

► Nondisclosure and conflicts of Interests

Draft timeline

The Purchaser will complete a draft timeline of the procurement using PCS 542 or 543. Timeline template is based on the antic ipated contract start date and other information provided by the HHSC Agency/Program timeline. The timeline is used to support all procurement steps have been

identified and to confirm who is responsible for each step. The timeline also includes the maximum time for each step; it is essential to modify this document as the procurement progresses.

Scheduling the kickoff meeting

Purchaser sends an email meeting notification to the HHSC Agency/Program assigned Project Manager/Contract Manager and identi fied stakeholders as well as the assigned HUB Coordinator and the HHSC Contract Attorney to schedule a kickoff meeting.

Note: The draft RFP solicitation document may not be complete when the kickoff meeting is scheduled. If possible, the RFP template should be populated by the time the kickoff meeting takes place.

Kickoff meeting

Purchaser will use the PCS 540-Kickoff Meeting Agenda and PCS 541-Kickoff Meeting Sign-In sheet to support all necessary steps are discussed and all attendees are documented.

The kickoff meeting is used to discuss the following:

► Understanding the program need

► Identify and document roles associated with the RFP process

► Discuss the timeline to support a timely contract award

► Discuss the need for a prebid/offer/proposal conference with the HHSC Agency/Program and HHSC Contract Attorney and whether i t should be mandatory (for best practices regarding prebid/offer/proposal conference, see the SPD’s State of Texas Procurement and Contract

Management Guide)

► Discuss the evaluation process and request names of those who will be on the evaluation team

Note: Any external evaluators must be approved by PCS management .

Nondisclosure and conflicts of interest

The Purchaser must support all persons involved with the solicitation sign PCS 117A–Nondisclosure and Conflicts of Interest Certification.

Step 3: Procurement planning phase Level 3–Level 4

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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Procurement and contract services process overview

Step 4: Solicitation development/processing Level 3–Level 4

Program specific documentsHHSC

Agency/Program assign a staff/

program member to edit the program-specific documents

that should be included in the

solicitation, as well as the following:reviews the RFP

template in CAPPS Financial collaborated

by the PCS Purchaser and supports the SOW is

correct and makes changes as

necessary;provides/reviews the evaluation criteria and

subcriteria for the evaluation tool;

identifies the statutory or administrative rule requirements that are

applicable to the solicitation and

resulting contract;

provides a filled-out PCS 126–CMBL

Supplementation Approval Request;

and identifies and provides a list of the evaluation team

subject-matter experts which may

include technical, financial, cost and advisory teams.

Develop/finalize RFP

► Purchaser will coordinate with HHSC Agency/Program, HUB Coordinator, HHSC System Contracting or the appropriate

HHSC Agency/Program legal division and other identified stakeholders to develop/finalize the RFP document. This will

include:

► Updating the projected timeline to develop the solicitation, evaluate, and award the contract

► Providing guidance to the assigned HHS Agency/Program, HHSC System Contracting or appropriate HHSC

Agency/Program legal division, or other identified stakeholders in modifying the solicitation using the RFP template

and any other required forms or attachments

► Finalizing the SOW related to the RFP

► Ensuring solicitation contains requirement that the response be sent to the PCS Bid Room and to be identified on the

outside of the envelope/package with the following information:

► Event number

► Event due date and time

► Respondent’s name and

► Purchaser’s name

► Ensuring solicitation contains prohibition on sending response by facsimile (fax)

► Ensuring solicitation has defined timeline for questions to be submitted by respondents and the anticipated release

date of the Agency’s answers

► Ensuring HUB Coordinator provides feedback of subcontracting opportunities in the solicitation to Purchaser, using

the PCS 406–HUB Subcontracting Determination

► Finalizing evaluation criteria and subcriteria to be documented within the solicitation

► Purchaser will work with HHSC Agency/Program and HHSC System Contracting on scored criteria and subcriteria

that are prioritized and weighted according to their relative importance in delivering best value to the State; that the

number of criteria and subcriteria will be kept to the essential minimum and be clearly defined for the vendor

community; and that scored criteria and subcriteria will be designed to assess the extent to which the respondent is

able to meet and exceed the requirements to perform the contract

► Purchaser may use:

► An evaluation tool he/she developed and regularly uses which must be reviewed and approved by the CQC

Financial Analyst prior to use

► The PCS Standard Evaluation Tool (Standard Tool), which is recommended

► Purchaser sends the following to CQC Financial Analyst:

► Evaluation criteria

► Subcriteria

► Weights

► Incorporation of the security and privacy requirements (i.e., DUA and SPI), as necessary

► Notification of requirements in the RFP that are necessary prior to contract execution

► Other factors that should be considered

Note: HHSC System Contracting is the legal division that reviews/assists HHSC programs with legal review of solicitations

and contracts. DFPS has an independent legal division that reviews the solicitations and contracts for DFPS. Purchasers

need to support that the appropriate legal division is included on all correspondence and during collaboration.

Note: The RFP template may be modified to support the best practices for the RFP process are incorporated.

HHSC

Agency/Program

► Program specific

documents

PCS Purchaser

► Develop/finalize RFP

Compliance & Quality Control

Team

► Evaluation tool selection

► CQC Financial Analyst

Nondisclosure and Conflicts

of Interest

Evaluation tool selection

► Upon selection of the

appropriate evaluation tool,

CQC Financial Analyst will

unlock the Evaluator Score

Sheet within the posted

approved evaluation tool to

enter the information

provided by the Purchaser

and will:

► Update the Evaluation

Tool to include

procurement specific

criteria and relock it,

saving it as the specific

tool for the solicitation;

► Review the evaluation

tool to support that the

addition of the evaluation

criteria did not affect the

formulas or coding of the

tool; and

► Provide the evaluator

score sheet to the

Purchaser to add as an

attachment/exhibit to the

solicitation

Note: Adding the evaluator

score sheet to solicitations as an

attachment/exhibit is effective

for solicitations initiated on or

after 1 September 2018.

CQC Financial Analyst

Nondisclosure and Conflicts

of Interest

Purchaser supports that any

staff of CQC who review the

solicitation sign the PCS 117A–

Nondisclosure and Conflicts of

Interest Certification.

HUB Co-

ordinator

► HUB

review of

RFP

PCS Purchaser

► RFP final review

PCS Manager

► PCS 126, 138

review

► Manager final

review

RFP final review

► Once the solicitation document, has been reviewed

by all parties, the PCS Purchaser will:

► Coordinate the final review of the solicitation with

the HHSC Agency/Program, HHSC System

Contracting or appropriate HHSC

Agency/Program legal division or other identified

stakeholders to finalize the draft RFP document

► Submit the RFP solicitation for required external

reviews, as applicable, i.e., Contract Advisory

Team (CAT) or program external reviewers

► If one or more contract(s) awarded has an estimated

value of $5 million or more, the purchaser will upload

the solicitation document along with any

attachments/exhibits to CAT through the

Procurement Oversight & Delegation portal

maintained by SPD and located on the CPA website,

see “Gaining Access to Procurement Oversight &

Delegation” page on the CPA’s requests for

assistance relating to the Procurement Oversight &

Delegation web application may be submitted to

[email protected]

► CAT will review the solicitation document(s) from a

contract management and best practices

perspective;

► CAT will provide recommendations, identify risks

and offer risk mitigations within 30 days of receipt;

► Coordinate review of CAT's recommendations with

the HHSC Agency/Program and HHSC System

Contracting or appropriate HHSC Agency/Program

legal division:

► Each item will be reviewed and a response

documented

► Where applicable, the recommendation will be

incorporated into the solicitation

► The Purchaser supports appropriate responses,

whether they are accepted or rejected, are sent

back to CAT and supports all documentation is

kept in the official procurement file

► Review the PCS 126–CMBL Supplementation

Approval List and submit to their manager;

► support the PCS 138–Electronic State Business

Daily (ESBD) – Solicitation Approval has been

submitted to a PCS Manager for approval

HUB review of

RFP

HUB

Coordinator is

responsible for

the following:

coordinates

requests for

clarification

through the

sole point of

contact for the

RFP with

identified

respondents

and

provides

assistance as

needed in

development

of HUB

Subcontracting

Plans (HSPs)

prior to

contract

award.

Manager PCS 126

review

PCS Manager will

review/approve the

PCS 126–CMBL

Supplementation

Approval Request.

Manager PCS 138

review

PCS Manager

verifies the PCS

138–Electronic

State Business

Daily (ESBD) –

Solicitation

Approval form has

been completed

and returns the

form to the

Purchaser. By

signing the form,

PCS Manager

certifies that all

requirements have

been completed

prior to posting the

solicitation.

Manager final

review

The PCS Manager

reviews/approves

the final RFP

document before

sending to CQC.

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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Procurement and contract services process overview

Submit for CQC review

Purchaser forwards a copy of the final solicitation to be posted with all exhibits and attachments and the PCS 138–Electronic State Business Daily (ESBD) – Solicitation

Approval form to CQC for review and approval.

Note: Until CQC is included in the CAPPS system, Purchasers shall forward the documents listed above to the Associate Commiss ioner of CQC via email. Any other

documentation needed shall be provided at the request of the Associate Commissioner and/or Contract Specialist in CQC assigned to review the solicitation.

PCS Purchaser

► Submit for CQC review

► CQC nondisclosure and conflicts of interest

CQC nondisclosure and conflicts of interest

Purchaser supports that any staff of CQC who review the solicitation sign the PCS 117A–Nondisclosure and Conflicts of Interest Certification.

CQC RFP review for posting

CQC will review all documents for accuracy and compliance and will provide recommended changes

and/or approval to post the solicitation.

Compliance and Quality Control Team

► CQC RFP review for posting

► CQC change collaboration

CQC change collaboration

Any collaboration necessary to make changes to the solicitation will be coordinated by CQC in

conjunction with the Purchaser.

Step 5: Compliance and quality control review Level 3–Level 4

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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to limitations and restrictions on page 2.

Procurement and contract services process overview

Posting the RFP

► Purchaser shall be responsible for advertising the solicitation and will do the following:

► Post the solicitation on the ESBD, using Google Chrome, for a minimum of 21 days. The minimum of 21 days is recommended to support compliance with the HUB good-faith

effort requirements as well as the posting of the solicitation

► Provide notice of solicitation to all possible respondents on the approved supplemental listing

► Provide notice of solicitation to all possible respondents on the CMBL class and item identified on the solicitation document

► Send Project Manager/Contract Manager, PCS Bid Room (see Section VI below), HUB Coordinator and HHSC System Contracting Divis ion or appropriate HHSC

Agency/Program legal division the date and time the RFP responses will be due

PCS Purchaser

► Submit for CQC Review

► CQC Non-disclosure and Conflicts of interest

Update procurement file – record documents

► Purchaser will maintain the master version of the solicitation document at all times and support that all applicable requirements listed on the PCS 160–HHSC Solicitation

Checklist – RFPs, RFAs, RFQs and RFOs have been met and documented in the official procurement file.

Note: Purchaser is the sole point of contact. All communication between the respondents and the HHSC Agency/Program concerning the solicitation is strictly prohibited and must

be directed to Purchaser.

Prebid/offer/proposal conference

► Purchaser is responsible for coordinating a prebid/offer/proposal conference, if necessary, to highlight the requirements of the solicitation and the HSP requirements.

Note: Prebid/offer/proposal conferences are highly recommended for large procurements. In addition, for large, complex procurements, mandatory attendance of the

prebid/offer/proposal should be required.

Prebid/offer/proposal conference coordination

► If a prebid/offer/proposal conference is planned, the Purchaser coordinates with HHSC Agency/Program staff, HUB Coordinator and HHSC System Contracting or appropriate

HHSC Agency/Program legal division to:

► Locate a meeting room and any equipment needed

► Coordinate participants’ attendance

► Develop material for the conference using the following forms:

► PCS 132–Vendor Conference Agenda form

► PCS 133–Vendor Conference PowerPoint Template

► Work in conjunction with Project Manager/Contract Manager to:

► Lead the vendor conference

► Record all written questions received from participants and any tentative answers given in the conference (see PCS OP 574–Conducting Vendor Conferences); and

► support that all participants sign in on the sign-in sheet and names are recorded via e-mail for those who participated via conference call

► Facilitate questions/inquiries during the vendor conference

► Receive questions/inquiries related to the solicitation

► Develop or obtain answers for all purchasing process questions and coordinate with the Project Manager/Contract Manager and HHSC System Contracting or appropriate

HHSC Agency/Program legal division to obtain answers to program specific questions

► Compile the questions and answers into an addendum (PCS 121–Solicitation Addendum)

► Post the addendum on the ESBD, using Google Chrome

Note: The sign-in sheet of names of the vendors and other individuals who participated in the prebid/offer/proposal conference may also be included in an addendum posted on the

ESBD (optional, but recommended).

Prebid/offer/proposal conference – HUB

Attendance

► The HUB Coordinator will attend the

prebid/offer/proposal conference and

provide:

► An overview of HUB requirements for

the solicitation

► an explanation of the HUB

Subcontracting Plan (HSP) completion

and any applicable forms required for

submission

► Assistance to the respondent as

needed in development of HSPs prior

to the solicitation due date

Question and answer period

► Written questions must be received by

the deadline specified in the solicitation.

The PCS Purchaser will compile all

written questions received by the

deadline into a Q&A document.

Questions must be compiled verbatim

(with any spelling and grammatical

errors). Every question received, even

similar questions submitted by different

vendors, must be accounted for in the

Q&A document. The name of the entity

submitting the question and identifying

information should be omitted from the

published answers. Once the Q&A

document is compiled, the Purchaser will:

► Develop or obtain answers for all

purchasing process questions and

coordinate with the Project

Manager/Contract Manager and

HHSC System Contracting or

appropriate HHSC Agency/Program

legal division to obtain answers to

program-specific questions

► Compile the answers into the Q&A

document

► Insert the Q&A document into an

addendum (PCS 121–Solicitation

Addendum)

► Post the addendum on the ESBD,

using Google Chrome

PCS Purchaser

► Q&A period

HUB Coordinator

► Prebid/offer/proposal conference – HUB

Attendance

Step 6: Solicitation process/posting Level 3–Level 4

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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Procurement and contract services process overview

Bid Room notificationPurchaser must send the PCS Bid Room Coordinator

a bid opening notification via a calendar event sent to

[email protected].

The notice must state:► That an event has been publicly posted

► The due date and time of event

► The specified format for responses, such as mail,

hand delivery and courier

Response receiptAll responses are to be received by the PCS

Bid Room Coordinator. Responses will be

logged as received and secured in

accordance with the Bid Room procedures,

PCS OP 210–Response Handling for Formal and Informal Solicitations.

Providing the responsesAt the due date and time, the Bid Room

Coordinator will provide all the original

responses to the PCS Purchaser in

accordance with the Bid Room procedures,

PCS OP 210–Response Handling for Formal and Informal Solicitations.

PCS Purchaser

► Bid Room notification

PCS Bid Room Coordinator

► Response receipt

► Providing the responses

HUB Coordinator

► HUB review of HSP

HUB review of HSPThe HUB Coordinator is responsible

for the following:

► Coordinates review of respondent

HSPs to support compliance with

statute and the HUB rules► Sends the Purchaser a list of the

respondents with approved HSPs

► Hosts post-award meetings with

awarded contractors, if necessary

Evaluator score sheetFollowing review by HUB, the

Purchaser sends the following to the

CQC Financial Analyst to finalize the

evaluator score sheet:

► Evaluation tool attached to the solicitation

► Names of evaluation team

members

► Names of the qualified respondents

Finalizing evaluator score sheetUpon receipt of the evaluation tool,

weights, names of evaluation team

members and names of the qualified

respondents, the CQC Financial

Analyst will finalize the evaluator score sheet.

Once the evaluation tool is complete,

the CQC Financial Analyst will provide

it to the Purchaser to use for the evaluation team training.

PCS Purchaser

► Evaluator score sheet

CQC Financial Analyst

► Finalizing evaluator score sheet

OpeningPurchaser receives all electronic and

hard-copy proposals from the PCS Bid

Room Coordinator and:

► Conducts the solicitation opening

on the specified opening date and time with a witness

► Documents if there are responses

that do not meet the solicitation

requirements and possibly

disqualifies the respondent

Step 7: Evaluation preparation and response receipt Level 3–Level 4

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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to limitations and restrictions on page 2.

Procurement and contract services process overview

Evaluation training

► Purchaser coordinates and facilitates the evaluation

training with members of the evaluation team,

including external evaluators who have prior

approval by PCS Management

► Provides the evaluation team mandatory training on

how the evaluation process will be administered, how

the evaluator score sheet will be accessed and how

to facilitate requests for clarification

Note: When applicable, evaluators will be given access

to SharePoint to streamline completing the evaluation

process.

► Supports, when applicable, the State Agency

Nepotism Disclosure Form for purchases over $1m,

is signed by all personnel involved with the

solicitation evaluation at the evaluation training;

► Sends notification of any conflicts notated by the

evaluators in the disclosure form to the PCS

Deputy Associate Commissioner, or designee

and when applicable, contacts the HHSC Ethics

Officer for guidance and direction

► Uploads any documentation regarding potential

conflicts and how such potential conflicts were

resolved or not to the procurement file

Evaluation

► Evaluation Team

members

(contract

manager,

program

leadership, legal,

budget) perform

evaluations on

the responsive

proposals prior to

or by the

requested

deadline

► Send any

required

clarification

questions to the

Purchaser

► Support final

evaluator score

sheets are sent to

Purchaser or

properly saved on

SharePoint via

the established

portal when

instructed by

Purchaser

PCS Purchaser

► Evaluation training

► Evaluation

Evaluation Team

members

► Evaluation

CQC Financial Analyst

► Evaluator Score

Sheets/Evaluation

Completion

Evaluator score sheets

or notification the

evaluation has been

completed, the CQC

Financial Analyst:

► Re-reviews the

completed evaluation

tool to support that all

evaluators’ scores are

in the tool accurately

and certifies the

integrity of the tool

► Provides the final

evaluation tool, which

includes the final

respondent rankings, to

Purchaser

► Saves a copy of the

final evaluation tool

with aggregated scores

and a ranked list of

respondents in the

procurement file in the

designated network

folder located under

Procurement

Resources and notifies

the purchaser the tool

is complete

Final evaluation tool

► Upon receipt of the final

evaluation tool from CQC

Financial Analyst, the

Purchaser will:

► Facilitate approval of

the respondents and/or

the competitive range

in coordination with the

program–based on the

overall evaluation

criteria/score–for

further consideration

during the procurement

process

► Submit selected

respondents for

approval to the PCS

Manager

Briefing staff and

management

It is the responsibility of the

HHSC Agency/Program to

support Agency/program

staff and executive

management are apprised

of next steps related to the

procurement.

Interviews

If the winning

respondent(s) cannot be

selected based on the

initial evaluation, HHSC

Agency/Program will notify

the Purchaser to

coordinate respondent

interviews with the

selected respondents.

PCS Purchaser

► Final evaluation tool

Evaluation

► During the evaluation process, the Purchaser:

► Coordinates with the HHS Agency/Program

and/or HHSC System Contracting or the

appropriate HHS Agency/Program legal division

to obtain responses to clarification questions

asked by the evaluators

► Notifies CQC to aggregate score once the

Evaluator Score sheets are finalized by the

evaluation team

► Works with the HHSC Agency/Program and CQC

on the review of evaluator scores

► Assists with an outlier meeting, if necessary

Note: All persons identified to evaluate proposals must

score all respondents for their assigned criteria.

Legal

► Legal reviews

HHSC Agency/Program

► Briefing staff and

management

► Interviews

► PCS has templates

for contracts to be

shared with Legal:

► Legal reviews in

CAPPS, called

“collaboration”

Budget

► Budget

notification

► Budget is

notified

► Budget can

kill it if there’s

no money

► May change

award

amounts

Purchaser notification

of winning

respondents

► If respondent

interviews are not

necessary, the

HHSC

Agency/Program

notifies the

Purchaser of

approval of the

winning

respondent(s).

HHSC

Agency/Program

Purchaser notification of

winning respondents

Step 8: Procurement evaluations Level 3–Level 4

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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to limitations and restrictions on page 2.

Procurement and contract services process overview

PCS Purchaser

► Interviews/oral presentations

► CQC

Interviews/Oral Presentations

If notified that HHSC Agency/Program wants to conduct respondent

interviews/oral presentation, the Purchaser:

► Locates a meeting room and any equipment needed

► Coordinates participants’ attendance

► Coordinates the development of a list of questions to be asked of each

respondent during the interviews, or the appropriate format to be followed,

if necessary

► Coordinates the method for scoring of the interviews and determining the

winning respondent(s)

► Supports presentations, when applicable, adhere to criteria in the

solicitation and the interview questions

► Supports all participants sign in on the sign-in sheet

► Coordinates the rescoring of the respondents after the interviews

► Establishes time limits for the interviews/oral presentations

CQC

If the interviews are scored using the evaluation tool, Purchaser will need to

coordinate review of the new scores with the CQC.

Step 9: Interview and selection Level 3–Level 4

HHSC Agency/Program

► Conduct interviews/oral presentations

Conduct interviews/oral presentations

If HHSC Agency/Program wants to conduct respondent interviews/oral

presentation, program contacts the Purchaser to set up:

► A meeting room and any equipment needed

► Coordinate participants’ attendance

► Working with Purchaser during the development of a list of questions to be

asked of each respondent during the interviews, or the appropriate format

to be followed, if necessary

► Coordination of the method for scoring of the interviews and determining

the winning respondent(s)

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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Procurement and contract services process overview

Reference Checks

Once respondents have been selected for approval, the Purchaser:

► Sends an email to the listed vendors for reference checks using the PCS 145–Vendor Reference

Survey Form

► Follows up with a phone call to the listed vendors if no response is received within three days

Vendor checks

In concurrence with the negotiation phase, the Purchaser will be verifying PCS 160–HHSC

Solicitation Checklist – RFPs, RFAs, RFQs and RFOs vendor checks and reference checks.

.

Negotiation phase

Upon the selection of the winning respondent(s), the Purchaser facilitates the negotiation process, as

applicable, toward contract execution and award with the winning respondent(s) in negotiations and

documents the results and:

► Coordinates best and final offers (BAFOs) with respondents to finalize all negotiations

► Routes all BAFOs to the HHSC Agency/Program and HHSC System Contracting or appropriate

HHSC Agency/Program legal division for review and concurrence

► Coordinates collaboration of the contract document through CAPPS with the HHSC

Agency/Program and HHSC System Contracting or appropriate HHSC Agency/Program legal

division

► Supports all requirements of the solicitation, including the HSP requirements, when applicable, are

incorporated into the final contract and reporting requirements are included in the terms and

conditions of the final contract

► Supports all of the appropriate approvals of the contract document are sought and documented in

the procurement file

PCS Purchaser

► Negotiation phase

► Vendor checks

► Reference checks

Step 10: Contract negotiations Level 3–Level 4

Conduct negotiation phase

► Upon the selection of the winning respondent(s), assist in the coordination of best and final offers

(BAFOs) with respondents to finalize all negotiations

► Assist in the collaboration of the contract document through CAPPS

HHSC Agency/Program

► Conduct negotiation phase

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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Procurement and contract services process overview

PCS Purchaser

► Justification for award

Justification for award

Upon selection of the winning respondent(s), the Purchaser will:

► Initiate drafting of the proposed justification for award using the

PCS 08-Justification of Award

► Coordinate review by HHSC Agency/Program for approval and

HHC System Contracting or appropriate HHSC Agency/Program

legal division for concurrence

► If applicable, receive and review the action item memo from HHSC

Agency/Program

► Submit award recommendations to executive management for final

approval

Step 11: Recommendation for awards Level 3–Level 4

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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Procurement and contract services process overview

PCS Purchaser

► Finalized evaluation and reward

► Contract record

► Vendor notification

► Formal approval routing

► the digital signature tool

► Post-execution

Finalized evaluation and award

Purchaser enters the finalized evaluation into CAPPS and award to

the respective respondents.

Post-execution

After execution, the Purchaser posts the award notice on the ESBD

using Google Chrome.

Note: Approvals are needed for documents requiring external

reviews, such as QAT, CMS and OAG.

Contract record

The Purchaser will create a contract record in CAPPS and

collaborates the contract template to the HHSC Agency/Program

and HHSC system contracting.

Vendor notification

The Purchaser notifies vendor of potential award and requirement

to file Form 1295 as applicable, for contracts valued at $1m or

more.

Formal approval routing

The Purchaser will:

► Finalize the contract packet for all potential awardees;

► Receive the PCS 515–Routing Request Form from the HHSC

Agency/Program

► Send the final contract packet for formal approval routing in

CAPPS to PCS Procurement QA

► Support that contracts valued at $10m or more have an

attestation letter completed by the Agency/Program and are

included in the final contract packet for signature

the digital signature tool

Once fully approved, the Purchaser sends the contract packet, the

PCS 515, the request document and the requisition to Procurement

QA for execution through the digital signature tool.

Execution, SCOR and funding

Once the contract is fully executed, the assigned contract manager

will load the contract document into SCOR. If the awarded contract

is encumbered, the HHSC Agency/Program enters the CAPPS

funding requisition(s) with current fiscal year funding.

There are three points of entry before information is sent to SCOR

(follow up with Charles E.).

Purchase order

The Purchaser copies the requisition to a purchase order and

attaches it to the contract record in CAPPS Financial.

HHSC Agency/Program – Contract Manager

► Execution, SCOR and funding

PCS Purchaser

► Purchase order

► Completes procurement file

PCS Manager

► Final review

Completes procurement file

The Purchaser completes uploading all documents’

correspondence and other documentation to the procurement file

and signs the PCS 160–HHSC Solicitation Checklist – RFPs,

RFAs, RFQs and RFOs to certify that the file is complete.

Final review, PCS Manager

The PCS Manager reviews the procurement file and

the completed PCS 160–HHSC Solicitation Checklist

– RFPs, RFAs, RFQs and RFOs and signs to certify

that the file is complete.

Step 12: Contract award phase Level 3–Level 4

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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Procurement and contract services process overview

Agency/Program

► Change in ownership and final formalities

PCS Purchaser

► Debriefing request

Debriefing requestIf a respondent requests a debriefing, the Purchaser coordinates with

the Program Manager/Contract Manager and HHSC System

Contracting or the appropriate HHSC Agency/Program legal division in

accordance with PCS OP 578-Debriefings for Solicitations.

Now contract becomes contract manager’s responsibilityDo monitoring

► Monitor deliverables

► Review invoices

► Send to AP to cut the check

► Can send with cover sheet or AP voucher► Info with payment terms

► Assign account code

► Comptroller pays

► May amend/extend

► Contract ends► Contract manager closeout process

► Complete PCS closeout form

Step 13: After contract award phase Level 3–Level 4

Level 2

Level 3

Action owner

List of activities

Level 4

Process flow created by EY US is based on:

► PCS document OP 571 RFP Contract Procedures_FINAL 07-30-218.doc published 31 July 2018.

► Interview with HHSC employees.

► Purple text indicates areas of risk.

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PCS solicitation checklist

The solicitation process requires multiple different forms to be completed outside of CAPPS. The process involves

manually completing the form, emailing it and/or and uploading it back into CAPPS. Cycle time is not tracked. Below are

some examples of forms that may be completed outside of CAPPS.

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Historically underutilized business (HUB) checklist

All solicitations of more than $100k must be reviewed and submitted with a HUB checklist. There is a

minimum of three active HUB vendors per solicitation. The HUB program operates in a similar process

as other states.

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PCS approval process

Based on the dollar value of the requisitions, a certain number of approvals and level of approvals must

take place, regardless of the spend level, slowing down CAPPS and backlogging other requisitions.

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Evolution of the traditional supply chain to the supply chain of the future

Degree of Taylorism/distribution of value-creating processes on multiple entities within partner ecosystem

Le

ve

l of syste

m a

nd

data

inte

gra

tio

n/u

sag

e o

f clo

ud

-base

d IT

syste

ms

Cloud-based

SW platforms

External

systems

integration

On-premise

IT systems

Internal

business functionsCollaboration with

partners

Service and

platform-based

businesses

The old world: value creation within entities,

on-premise IT

Traditionally, creators have been selling products and

services through linear value chains. Companies

were owning a dedicated part of the value chain,

competing with competitors.

The new world: ecosystems on cloud-enabled

platforms

Digital ecosystems do not work linearly; they are

shaping market networks and support hybrid forms

of cooperation and competition: coopetition.

Ecosystems create and serve communities while

harnessing their creativity and intelligence. Entities

may play multiple roles in an ecosystem.

CustomersSuppliers

Innovation and Product Lifecycle Management

Manufacturer

OEM

Finance and Controlling

Sales and

Marketing

Service and

Spare Parts

Management

Supply Chain and Operations

Pro-duction

Ware-housing

Logis-tics

Distri-bution

OrderMgmt

Plan-ning

QualityMgmt

Mainte-nance

Sourcing and

Purchasing

Supplier

Customer

Customer

Retail/

consumer

Customer

Connector

SC as

a service

For-

warder

Eng.

contractor

Logistics

contractor

Supplier

Platform-based

business model

SC Planning

Supplier mgmt.

Risk management

Coopetition

Retail/

consumer

OEM

Contract

manufact.

Engineering

collaboration

PLM in the cloud

co-creation

Competitor

Supply chain of the future

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PCS evaluation tool review

Since June 2018, PCS has begun to address issues in the evaluation tool related to the evaluator, score

sheet migration and the aggregation of formulas. The weighting of the scores remains inconsistent as it

varies by RFx evaluation and by agency.

Source: 20180807 TTOR Score Sheet.xls.

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17.0%

26.6%

29.5%

31.0%

44.6% (121 votes)

52.0% (141 votes)

57.6% (156 votes)

0% 20% 40% 60% 80% 100%

Goal setting and performance measurement

Onboarding / training

Subject matter expertise

Ongoing training and development

Role definition and clarity

Staffing and workload levels

Communications within and outside of PCS

Results based on 271 total votes of 301 participants.

‘Of the seven options listed below, what are the top three people and organizational issues that you feel need to be prioritized?’(voting and free response ThinkTank activity)

As we analyzed the qualitative results of our interviews and ThinkTank sessions, the issue of competence rose as a

priority area for PCS. The three separate options in the red box below address competence in three different ways: new

hire competence, ongoing skill development, and development and accessibility of deep skills.

Co

mp

ete

nc

e

Subject-matter expertise

Onboarding/training

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When the three competence areas are combined, they rise to the top of the priority list

The new competence category combines: 1) Ongoing training development

2) Subject-matter expertise

3) Onboarding/training

Results based on 271 total votes of 301 participants.

17.0%

44.6%

52.0%

57.6%

87.1%

0% 20% 40% 60% 80% 100%

Goal setting and performance measurement

Role definition and clarity

Staffing and workload levels

Communications within and outside of PCS

Competence

“Develop standard training sessions for PCS job

duties required at hire and annually.

Supplement with monthly or quarterly refresher

training opportunities, or outside training”

“There should be training manuals that address

each functional area and should be updated as

needed! Management should be in charge of this

and actual on-going trainings”

“Put all new employees in a training room with

computers to learn and practice. Other

employees should not have to take time from their

work to train. It puts them behind in their own work”

“First, there needs to be standard procedures that

are followed by everyone and everyone has to

buy into learning and applying what is offered in

the training; then, management has to follow up to

be sure that their people are following those

procedures and becoming proficient in their job

duties”

What we heard

Learning has become a differentiator in an ongoing search to find

great talent. Organizations recognize that continuous development

drives employee engagement and is a reason employees seek and

stay with an organization.

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With the new groupings, communications becomes the second priority area for both PCS and non-PCS employees

17.0%

44.6%

52.0%

57.6%

87.1%

0% 20% 40% 60% 80% 100%

Goal setting and performance measurement

Role definition and clarity

Staffing and workload levels

Communications within and outside of PCS

Competence

“There needs to be open dialogue between

management and employees so trust can be

built”

“Create a communication board internally and

externally. There are policies and procedures

that do not get communicated clearly to

external customers that creates confusion as to

how a procurement needs to be initiated. Create

purchase liaisons throughout the divisions to

help communicate these policies and procedures

so there is not so much frustration at the end of the

procurement cycle”

“Provide HONEST and FREQUENT communication

to staff regarding what is happening and where

things are going. Don't keep the ‘plan’ only among

management. Provide org charts to see who is

doing what – positions and individuals”

Communication with and outside PCS

Results based on 271 total votes of 301 participants.

PCS leadership has already implemented some of these ideas. PCS

Ambassadors have been named to liaise with the programs. There

are regular Tuesday leadership meetings to share organization

changes and policy/procedure changes; however, that information is

not consistently cascaded.

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Both PCS and non-PCS employees identified staffing and workload levels as areas that need to be addressed

17.0%

44.6%

52.0%

57.6%

87.1%

0% 20% 40% 60% 80% 100%

Goal setting and performance measurement

Role definition and clarity

Staffing and workload levels

Communications within and outside of PCS

Competence Staffing and workload

Results based on 271 total votes of 301 participants.

Creating an effective organization to support the strategic, business

or cultural goals can improve efficiencies, drive desired behavior,

spark innovation and distribute responsibility

“Analyze current FTEs and realign staff to fit

workload and peak times”

“Align staff with their areas of expertise in which

they excel”

“Develop processes to assist in effectively defining

the role of the employee and hire the actual

number of staff needed to the do the work”

“Distribute workload to staff that have been hired to

fill vacancies. Unfortunately, the staff that have

been hired to fill vacancies do not have the

experience to do the work so existing staff

continue to be dumped on”

“We email our manager weekly our queue. Some

people’s queue never goes down. You might

have 500 and reduce it by 80, but the next day that

same person will get 120. Then there are some

employees that stay at 75 and the manager never

evenly distributes the work load. Nor does the

employee help the ones with a lot in their queue. I

think the work load should be distributed

evenly across the team”

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PCS organization chart findings

► Although PCS has made great strides in hiring recently, 23.5% of the jobs were still

vacant or filled with temps and interns as of September 2018, and several of the people

filling senior leadership positions are new.

► Interviews revealed that there was a lack of clarity regarding the responsibilities of the

Contract Administration and the Contract Oversight & Support (COS) groups.

► Additionally, due diligence indicated that COS is currently reporting to Contract

Administration, which can potentially blur the stated responsibilities of COS, as COS

reports to an area that COS would investigate.

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HHSC’s description of procurement and contracting functions

HHSC job descriptions provide some differentiation within the general description; however, the

examples of work performed do not differentiate as clearly.

Functions Description

PCS QA/QC –

Internal quality

assurance Specialist

III

Performs advanced (senior-level) Internal quality assurance work. Work involves coordinating the planning, development

and administration of internal quality assurance and compliance activities. May supervise the work of others. Works under

limited supervision, with considerable latitude for the use of initiative and independent judgment.

Contract

Administrator

Manager II

Performs highly advanced (senior-level) contract administration work. Work involves overseeing the execution and

administration of contracts for large scope or high-dollar contracts by defining requirements and negotiating, awarding,

developing and monitoring contracts. May plan, assign and/or supervise the work of others. Works under minimal

supervision, with extensive latitude for the use of initiative and independent judgment.

Legal – Attorney III Performs moderately complex (journey-level) attorney work. Work involves planning and organizing work, interpreting laws

and regulations, preparing legal documents, rendering legal advice and counsel, consulting with trial attorneys, conducting

hearings and assisting in preparing cases for Agency hearings and/or trials. May train others. Works under general

supervision, with moderate latitude for the use of initiative and independent judgment.

Budget Analyst III Performs highly complex (senior-level) budget preparation and analysis work. Work involves coordinating budgetary

activities, reviewing and analyzing budgets and performance measures, and providing technical advice and assistance on

budgetary matters. May supervise the work of others. Works under limited supervision, with considerable latitude for the

use of initiative and independent judgment.

PCS Purchaser III Performs complex (journey-level) purchasing and procurement work. Work involves purchasing and procuring

commodities, equipment and services using guidelines, rules, policies and laws. May train others. Works under general

supervision, with moderate latitude for the use of initiative and independent judgment.

Source: http://www.hr.sao.texas.gov/CompensationSystem/JobDescriptions/.

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Compensation benchmarkingHealth and Human Services published survey competitive market analysis –actual total compensation (dollars stated in 000s) (part 1 of 2)

HHSC provided competitive compensation for the financial analyst position; however, the other job

functions were not as competitive.

Salary for Administrative Assistant III

US

D

$46.50

$41.90

$39.20

$37.90

35

37

39

41

43

45

47

49

Top Median Bottom HHSC

US

D

US

D

US

D

US

D

Salary for Auditor IV Salary for Financial Analyst II

Salary for Manager V Salary for Director IV

$95.80

$86.50

$76.90

$63.60

60

65

70

75

80

85

90

95

100

Top Median Bottom HHSC

$77.00

$67.90

$60.80

$68.10

60

62

64

66

68

70

72

74

76

78

80

Top Median Bottom HHSC

$114.30

$100.20

$90.00

$93.40

90

95

100

105

110

115

Top Median Bottom HHSC

$219.70

$200.60

$173.30

$124.30120

130

140

150

160

170

180

190

200

210

220

Top Median Bottom HHSC

(1) Generally, a level of pay that is between 85% and

115% of the market consensus is considered

competitive. This assumes that the incumbent has a

moderate level of experience and is performing as

expected

(2) Total cash compensation = market consensus base

salary + market consensus annual incentive (actual).

(3) HHSC salary is based on salary range midpoint from

http://www.sao.texas.gov/reports/main/17-701.pdf.

Source: EY Internal Benchmark 2017 and 2018 (includes

public, not-for-profit and commercial companies).

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Compensation benchmarkingHealth and Human Services published survey competitive market analysis –actual total compensation (dollars stated in 000s) (part 2 of 2)

HHSC was benchmarked to a compilation of nonprofit, private and public companies, as attracting

procurement personnel has been challenging across the state of Texas.

Salary for Purchaser II

$55.70

$49.30

$41.90

$45.00

40

42

44

46

48

50

52

54

56

58

60

Top Median Bottom HHSC

Salary for Purchaser IV Salary for Purchaser VI

$64.20

$57.90

$49.70

$52.00

45

47

49

51

53

55

57

59

61

63

65

Top Median Bottom HHSC

$99.80

$87.80

$79.30

$68.00

65

70

75

80

85

90

95

100

Top Median Bottom HHSC

Salary for Contract Specialist IV

$85.60

$78.00

$68.20

$61.5060

65

70

75

80

85

90

Top Median Bottom HHSC

Salary for Contract Specialist IV is

based on Program Specialist IV.

US

D

US

D

US

D

US

D

(1) Generally, a level of pay that is between 85% and

115% of the market consensus is considered

competitive. This assumes that the incumbent has a

moderate level of experience and is performing as

expected

(2) Total cash compensation = market consensus base

salary + market consensus annual incentive (actual).

(3) HHSC salary is based on salary range midpoint from

http://www.sao.texas.gov/reports/main/17-701.pdf.

Source: EY Internal Benchmark 2017 and 2018 (includes

public, not-for-profit and commercial companies).

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ThinkTank

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Overview

► Nine ThinkTank sessions were held with 301 team members

from 7 August to 10 August.

► Four of the sessions included only PCS team members,

and five included individuals outside of PCS. This report

includes combined results from all nine sessions.

► Clear and consistent themes from the sessions include:

► Insufficient communication within the Agency

► Undocumented and inconsistent policies and

procedures

► Significant gaps across onboarding, training and

development

► Workload levels and fairness issues

► Insufficient technology and reporting capabilities

► The input we received helped identify quick win

opportunities.

► The comments in the ThinkTank section are the opinion of

anonymous HHSC participants and do not reflect opinions of

EY

58%

48%

56%

of participants identified

communications within

and outside of PCS as a

top issue.

of participants stated that they

“frequently” or “very frequently”

use workarounds to get

around processes or

inadequate technology.

of participants identified clarity

of roles and responsibilities

between Program and PCS as

a top issue.

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Recommended quick wins

► Middle-level PCS management should increase frequency of

communication to increase transparency and keep staff more

informed.

► Executive through middle-level PCS management could increase face

time and interaction with staff to help them feel more recognized and

heard.

► Improve the lighting in the PCS work areas, which is deemed to be

too dim; brighter working environment is needed.

► Increase cleaning of office bathrooms and break areas.

► Plan and execute a social event (e.g., quarterly) for all staff possibly

tied to the end of “crunch” period.

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“This is the first time anyone at any

job has asked my opinion. I really

liked having a voice”

“Would love to know the results of

this exercise and the

recommendations that are made

to management”

“The session was good, but

honestly it’s not going to matter;

management is going to do what

they want”

“This was a great way to

know others feel similarly to

what I experience at work”

“This was really interesting and

enjoyed doing it. Felt like I was

able to say whatever I wanted

without feeling hesitant”

“Leaving this with

hopes that we are

making progress and

heading in the right

direction”

“I think this is great and it

shows people do care and in

asking for our opinions. I

hope that this is truly taken

and heard. Looking forward

to more clarity, training and

streamlining the processes of

our jobs better”

“Looking forward to the report

and recommendations to

make our jobs better”

Session feedback from participants (free response anonymous comments from PCS participants)

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“Nice to know that agency

is wanting to know issues

we are experiencing and

looking forward to changes

that will make the

procurement process more

effective and efficient”

“Great opportunity to gather

feedback. And really gains

confidence that something will

be done to better this process”

“Enjoyed this! Go do great work

synthesizing and make results

happen!!!”

“I’m thankful that the agency decided to hold this

session. I hope someone uses the results. It

would be great if the agency publicizes HOW they

addressed the concerns mentioned and where

improvements will be made”

“Will the results be shared?

Who is responsible for

making actual changes?”

“Asking our input is great, but

executive management has done this

many times over the years. And to

what effect???”

“Loved it! It's the first

time that I’ve felt

completely free to

express my thoughts”

“We need

continuous

mechanisms

to SAFELY

offer input”

Session feedback from participants (free response anonymous comments from PCS participants)

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‘If you could improve only one thing about the environment/culture, what would it be?’ (free response ThinkTank question)

Improve salaries

Clearly defined roles

and responsibilities

Communication

Training

Increase telework

opportunities

Career track for

promotionIncreased

transparency

Increased automation

Physical work

environment

Morale

Improved

retention

Break down silos

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17.0%

26.6%

29.5%

31.0%

44.6% (121 votes)

52.0% (141 votes)

57.6% (156 votes)

0% 20% 40% 60% 80% 100%

Goal setting and performance measurement

Onboarding / training

Subject matter expertise

Ongoing training and development

Role definition and clarity

Staffing and workload levels

Communications within and outside of PCS

Results are based on 271 total votes.

‘Of the seven options listed below, what are the top people and organizational issues that you feel need to be prioritized?’ (voting and free response ThinkTank activity)

Subject-matter

Onboarding/training

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In total, HHSC participants made 1,215 freeform comments within this section of ThinkTank. Note: these do not reflect the opinions or statements of EY

‘Of the seven options listed below, what are the top people and organizational issues that you feel need to be prioritized?’(voting and free response ThinkTank activity)

► “It is unclear who staff should turn to

for assistance and who the decision

makers are. Clarifying roles and

responsibilities also assists with

accountability”

► “Figuring out who does what is always a

challenge”

► “Need RACI charts for PCS, Legal, and

Program”

► “Staffing in PCS are normally in the dark

on new processes ... It’s very sad”

► “There has been so much change, roles

remain unclear”

Role definition and clarity

► “Open communication needs to be established

within all levels of PCS, we can work together

if we all know what is expected”

► “Create a communication board internally and

externally”

► “Processes continually change but no one is made aware - it needs to be addressed and

documented”

► “PCS Management has to be serious about

creating an atmosphere where real dialogue can take place without retaliation and really

develop a strategy to address the real

issues”

► “Information doesn’t seem to flow at all”

► “It’s a challenge to actually speak with

someone in PCS”

► “From the outside, it seems like things go into

a ‘black hole,’ requiring extensive follow-up on

status of reqs”

► “Seem to get passed around a lot; when

people do not know the answer, they just pass

you to someone else”

► “There should be a published

process/manual/flow chart that describes who

is responsible for what and when”

Communications within and

outside of PCS

► “The ‘producers’ are awarded more work –

workload needs to be kept equal”

► “The experienced staff needs to mentor inexperienced staff”

► “Need more experienced team members;

promotions and merit raises would help retain experienced employees”

► “New hires come in with no experience but

at higher pay grades”

► “Managers should closely follow workloads to

identify who is assigned multiple tasks and

who has very little to do”

► “No secret that PCS is understaffed, and this

is creating delays and satisfaction issues

within an already stressed dept.”

► “Automation needs to be the priority”

► “PCS needs a recruitment and retention plan”

► “People are overwhelmed and not

appreciated”

► “Create an environment that makes people want to stay, not run”

► “Need for project management function within

HHSC”

Staffing and workload levels

► “Training is minimal at best; essentially you

get thrown into the deep end of the pool”

► “The train the trainer method for CAPPS and SCOR was lacking”

► “Designate 'Mentors' to provide individualized

guidance, to support that procedure is fully understood”

► “Overhaul entire onboarding process to also

include 6-8 weeks training. Stop relying on

PDF manuals for everything to address the issues”

Ongoing training and development

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‘Of the 11 options listed below, what are the top process issues that you feel need to be prioritized to address first?’(voting and free response ThinkTank activity)

9.9%

11.4%

15.0%

15.4%

15.8%

19.8%

28.9%

30.8%

37.0% (101 votes)

42.1% (115 votes)

55.7% (152 votes)

0% 20% 40% 60% 80% 100%

Dashboard summarizing overall activities and performance

Evaluation and scoring process

Controls to mitigate the risk of non-compliance

Automating certain workflows

Managing ‘work arounds’

Quality Assurance of processes

Visibility and transparency in the process (status)

Prioritization and funneling of procurements (one size fits all)

Review and approval process for procurements and contracts

Documented policies and procedures by role

Clarity of roles and responsibilities between program and PCSProgram

assurance

Managing workarounds

noncompliance

Results are based on 271 total votes.

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► “Too many approvals required. There

should be distinctions between types of

activities and associated risk”

► “Need to identify duplicate steps/approvals.

Identify who really needs to approve as part of

‘value-added’ reviews”

► “More transparency is needed and crucial”

Review and approval process for procurements

and contracts

► “PCS = Black hole”

► “Need reporting mechanism that does not

require staff to search individual contract actions”

► “ ‘The Abyss’ is the nickname for the PCS

funnel of work. We submit items and never know where it goes nor can we see what the

status is from either CAPPS financials, SCOR,

or any other avenue”

Visibility and transparency in the process

(status)

‘Of the 11 options listed below, what are the top process issues that you feel need to be prioritized to address first?’(voting and free response ThinkTank activity)

Clarity of roles and responsibilities between

Program and PCS

► “The job description I was hired for is 100%

not what I am doing today”

► “It seems processes are being made up as we go along”

► “I’m never sure if I’m doing something right

because things can change daily”

► “Executives and upper management should

consult the people who actually do the work

before revising policies”

► “Develop a policy handbook”

Documented policies and procedures

by role

► “This just needs to be revamped period”

► “We are forced to come up with

workarounds to make up for Program's errors. Enforcing accountability and

planning would drastically reduce non-

compliance issue”

► “Controls seem to be circumvented and there

does not appear to be a method to support the

system of records are maintained”

Controls to mitigate the risk of noncompliance

► “There is always some kind of confusion

between program and PCS”

► “Hold program responsible instead of changing our policies and procedures to

accommodate”

► “Provide additional training to the program to help them understand what their responsibility

is”

► “Need Liaisons for each Program and

assigned PCS team to effectively and efficiently procure for that Program”

► “It is never clear what area is supposed to do

what”

► “Never know who to contact when problems

arise”

► “Need clear processes and role definitions.

Publish processes. Be transparent and

accountable”

► “RACI would be super helpful to define roles

and responsibilities”

► “Provide training to all staff that touch the procurement process”

In total, HHSC participants made 1,057 freeform comments within this section of ThinkTank. Note: these do not reflect the opinions or statements of EY

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Strongly disagree

Disagree Neutral Agree Strongly agree

Average rating is based on 270 votes.

2.44

1 2 3 4 5

70 votes 73 votes

Rate your level of agreement from strongly disagree (1) to strongly agree (5):

Anonymous HHSC participant comments provided in ThinkTank sessions:

► “There are too many overly complex procedures. Things

need to be simplified”

► “P&Ps are out of date and not published anywhere

(anywhere easy to find, at least)”

► “Policies and especially procedures need input from

customers. Current P&Ps are unclear and complicated”

► “There are no policies and procedures that I have seen.

Ever since CAPPS went live, no one seems to know how

the process works like they did in HHSAS”

► “There are a lot of policies and procedures; however, they

need to be broken down per area, the PCS manuals are too

broad and at times unhelpful for specific needs for your

area”

► “No clue where to find anything other than asking co-

workers. You may get several answers depending on who

you ask”

► “It seems contracting and procurement staff are unclear

where to locate or identify requirements for procurement

and contracting”

► “Depends on which area of PCS you work in”

► “All stakeholders should be involved when developing

these. They are being updated without including

everyone that is involved”

► “Procedures are constantly changing”

‘I believe there are sufficient policies and procedures governing the procurement and contracting processes in place today’(ThinkTank voting assessment)

HHSC participants made optional freeform comments within this section of ThinkTank. Note: these do not reflect the opinions or statements of EY

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Strongly disagree

Disagree Neutral Agree Strongly agree

2.49

1 2 3 4 5

56 votes 77 votes

Rate your level of agreement from strongly disagree (1) to strongly agree (5):

Anonymous HHSC participant comments provided in ThinkTank sessions:

► “CAPPS is a hindrance to getting work done

efficiently”

► “The learning curve has been extraordinary difficult,

especially for CAPPS”

► “Technology should be implemented with the input of the

users”

► “System sometimes runs very slow but I make it work”

► “We are wayyyy behind the times technology wise. It’s

really sad. We are one of the largest agencies in the

state and do not have adequate technology”

► “CAPPS implementation has stalled contracting and

purchasing significantly. Incorrect mapping, approvers

out of office, users not knowing what to do or how to

use it”

► “Training for the technology is not sufficient to provide a

certain level of competency”

► “Too many systems which do not communicate or

share with one another. Retrieval of information is

painful and wasteful”

► “We have IT problems constantly and sometimes systems

shut down for days. This is a serious issue”

► “The systems are consistently down. Users don’t seem to

know their roles/responsibilities in the systems (CAPPS,

SCOR)”

‘The Agency’s technologies allow me to complete the duties of my job effectively’(ThinkTank voting assessment)

Average rating is based on 278 votes.

HHSC participants made optional freeform comments within this section of ThinkTank. Note: these do not reflect the opinions or statements of EY

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Anonymous HHSC participant comments provided in ThinkTank sessions:

► “CAPPS has left us unable to perform simple contract

actions without moving mountains”

► “Without workarounds nothing would ever get done”

► “I have to jump through hoops just to print a PO. CAPPS

requires a lot of redundant information and steps that are

not necessary to complete the task”

► “Lack of understanding system causes the perception that a

workaround is needed”

► “I don’t even know. I think almost everything is a

workaround”

► “Daily. Never know where our procurements or

contracts are. Must use offline tracking as the systems

are not effective (e.g., have to request PCS to push a

button to keep workflow going)”

► “I rely on my personal relationships with staff to help me

with things”

► “Almost every requisition requires a different strategy

to achieve the same goal, execution of a contract”

► “We have to keep our own spreadsheets and records to

keep track of reqs and funding”

Very frequently

Frequently Very rarely Never

2.61

1 2 4 5 6

Occasionally Rarely

3

58 votes 69 votes

Choose a level of frequency from very frequently (1) to never (6):

Average rating is based on 267 votes.

‘How often do you use workarounds to get around processes or inadequate technology?’(ThinkTank voting assessment)

HHSC participants made optional freeform comments within this section of ThinkTank. Note: these do not reflect the opinions or statements of EY

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Management Friendly staff Flexibility

► “I think everyone knows that we need to make changes,

and that most people are open to change”

► “The passion people have for the type of work we do in

public health”

► “Most people are supportive and knowledgeable. There

is always an opportunity to learn from teammates,

whether it be policy and procedure, or historical

perspective”

► “Responsiveness and open to constructive criticism”

► “Support of management and the true sense that we

are trying to make things better”

► “Employees are willing to help each other and their external

customers”

► “Dedicated staff who want to make a positive difference”

► “Seems like new management listens and wants to

improve”

► “Relaxed atmosphere/dress code”

► “Opportunity to help others”

► “Flexibility”

► “Most people here are friendly and helpful”

► “No micromanagement”

► “Dedicated staff”

► “Managers understanding of life outside of work”

► “Diligent in remaining in compliance with procurement and

contract management activities”

► “We are all in this together and want to help each other

succeed”

In recognizing the recent changes in PCS leadership, process and approach, we wanted to understand early indicators to the department –‘What do you appreciate the most about the current environment/culture within the organization?’

HHSC participants made optional freeform comments within this section of ThinkTank. Note: these do not reflect the opinions or statements of EY

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“Boost staff morale in these challenging times”

“If you want to retain talent, allow merit pay increases and pay people in vital positions what they deserve”

“Communicate! Communicate! Communicate!” “Promote from within”

“Stop the favoritism”

“Know your staff, respect your staff, praise your staff, reward your staff and you’ll see the results”

“Communication, presence, transparency”

“Level employee pay to recognize experience and hard work”

“Increase accountability throughout”

“Stop leading from the top of the mountain and get in the trenches with the people doing the work”

‘If you could give leadership one piece of advice to preserve, improve or change the culture, what would it be?’(free response ThinkTank question)

HHSC participants made optional freeform comments within this section of ThinkTank. Note: these do not reflect the opinions or statements of EY

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“Ease the current fear based culture. For awhile, it seems that PCS staff was afraid to do anything for fear of being fired”

“Need automation to make things faster and easier”

“Recognize employees that consistently perform well as well as hold those who do not accountable”

“Transparency and consistency would increase morale. Provide adequate training so that PCS staff is not worried about repercussions if mistakes are made.”

“Break down the silos”

“Talk to the staff in the trenches doing the work”

“Be open and honest and reward employees that deserve it”“Acknowledge past failures and set a clear

path to improving all aspects of HHSC”

“Communicate all the way down -not just to the level just below you”

‘If you could give leadership one piece of advice to preserve, improve or change the culture, what would it be?’(free response ThinkTank question)

HHSC participants made optional freeform comments within this section of ThinkTank. Note: these do not reflect the opinions or statements of EY

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Operating model and strategy considerations

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Critical issue: converting strategy into operating model

An operating model is the foundation for successful execution, which delivers on

an organization’s strategic intent.

What is our core mission?

► Service populations

► Equity, access, accountability

► Transparency, integrity and trust

Who are our customers/constituents?

► Citizens

► Medical providers and researchers

► State leadership

What is our service delivery strategy?

► Products and services

► Client and provider engagement

► Education and outreach

How do we operationalize our strategy?

► Business process structure

► Organizational structure

► Governance and decision-making

► Performance metrics and accountability

► Operating locations

► Technology enablement

How will we allocate resources and

measure results?

► Budget allocation

► Performance scorecard

► Service delivery vendor scorecards

Agency strategy Operating model

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Document list

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Data request list

Document(s) requested

Organizational chart for the Agency

Organizational chart for Procurement and Contracting Services

Lines of defense – is there a formal structure in place for first, second and third lines of defense along with roles and responsibilities? If yes, please advise

State procurement statute/rules

Policy, procedures and process manuals for procurement, budgeting, contracting (pre-award and post-award) and subcontracting processes/functions (with all

amendments)

Internally or externally published Contract Administration Guides and (if available) HHSC contract manual

Process flowcharts showing procurement process (if available)

Any reports used to track and report performance internal to HHSC procurement or external to management and leadership

All assessment reports (Texas State Auditor’s Office, HHSC OIG, HHSC IA, etc.)

Training – need details for formal or informal training programs run by the department along with the content

List of governance/user groups related to procurement and the procure to pay life cycle

Tools and systems used – need list of all technology solutions/tools deployed by the department in the process, with the purpose and high-level functionality

Any other documents in addition to the above that may help provide foundational knowledge of the department and the procurement function

List of spend categories along with value and % of spend

Spend by vendors

Three effective complex contracts that occurred in the last 12 months

Three complex contracts that were found in fault by the audit reports

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Data request list

Document(s) requested

Process for black-listing/removing vendor from the approved list

Number of incidents or protest/complaints log by vendor and status

Number of contracts terminated early with reason in the last 12 months

Latest contract management reports (vendor scorecards/contract health status/compliance status/cost savings)

Survey results (user function, vendor, subcontractors) in the last year

Percentage of cases where liquidated damages/penalties that were levied by/on the Agency in the last 12 months

Documents for sample transactions (end to end)

Salary compensation by job/role plus any additional compensation information

Number of contracts/bids pulled back/canceled based on internal issues (incorrect scope, evaluation, etc.) within the last 12 months

PCS plan to meet 31 August timeline (prioritized list of contracts to achieve 31 August deadline)

Revised procurement guide

Summarized deltas between previous procurement guide requirements and the new procurement guide requirements

Sunset report (2014)

Rider from last session that prohibits contract extensions beyond three years

Support service agreements draft (from transformation office)

Bid evaluation criteria from Jimmy Ramirez (a few examples)

Bid evaluation criteria from other programs for all major categories of spend (a few examples from each (grants, open enrollment, RFx))

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Data request list

Document(s) requested

Obtain access to Medicaid performance dashboard

Form 515 for approval

IT portfolio rubric

IT (CAM, QAM, SAM)

C046 – Delegation of Authority Document

Compliance/QA – all documents, checklist, desk procedure (draft or final)

Volume of contracts that come through budget office

MSS CM Guide/HDIS CM Guide

PCS 160 – HHSC Solicitation Checklist

Aging report example

Sample of Excel monitoring tool

Delegation of authority (or equivalent document defining who is required to approve what for requisitions and contracts)

Mapping of system workflow for approvals in CAPPS

Process for adding vendors to the masterfile

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