Chicago : A Qualified Approach to Outsourcing

Walter Smith, CIO of the Chicago Housing Authority, wants to try something a little different. Traditionally, when cities (including Chicago in the past) outsource technology, they issue RFPs, then sign a multiyear deal with a vendor to take over an IT process.

But Smith’s new approach is to issue RFQs?requests for qualifications?so that he can develop a list of prequalified vendors for any IT task imaginable. Then he can accept competitive bids on individual, short-term projects such as PC and network upgrades. “We’re looking at outsourcing from a strategic sourcing perspective, rather than as a long-term solution,” Smith says. “We’ll manage the vendors, but we won’t hire them for long-term engagements.”

The advantage of Smith’s idea: Rather than tie up city money to have vendors sitting on the bench while between projects, he pays for exactly the work that needs to be done, when it needs to be done. Smith says this move will result in an additional cost savings of 10 percent to 15 percent during the next three to five years.

The challenge, however, is doing the due diligence to prequalify vendors. He’s put together a cross-functional team from his legal, finance, IT and user groups to study the marketplace and certify the vendors. But it’s become an ongoing process?not a one-time deal?because new projects and new vendors keep arising.

In the first 18 months of his administration, Smith’s approach has worked well enough that it’s being copied by other Chicago agencies as well as public housing authorities across the country. And if the vendor community doesn’t like the extra level of competition and price-cutting to stay in contention, that’s just too bad. “If they want to do business with the authority, then they have to compete with other vendors,” Smith says. “With the market the way it is, we can afford to do it this way.”