Monitoring Contractor Performance

G R A H A M C O N S TA B L E

P496 Rev 0

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Questions

1. What systems deliver good monitoring of contractor performance?

2. What are the key metrics?

3. How is the contract structured to maximise performance outcomes?

4. How do clients ensure the contractor is reporting the correct level of

details (not too much/too little)?

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• Provider’s Poor Performance (8%)

• Poor Communication (11%)

• Not Mutually Beneficial (11%)

• Other (11%)

• Poor Governance (13%)

• Interests Become Misaligned Over Time (15%)

• Buyer’s Unclear Expectations Up Front (23%)

• Buyer’s Multi-Supplier Environment (3%)

• Poor Cultural Fit (5%)

Why Contracts Fail

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Buyer – Provider Disconnects

• Unclear Expectations from both clients and contractor;

• Perceptions vs Reality:

• relationship – behaviours;

• performance;

• Divergent views on savings:

• contractors believe savings occur more often than clients;

• New Ideas:

• have clients asked for innovation;

• Communication & inconsideration of each other; and

• Behaviours.

Source: Outsourcing Centre

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• Relying on relationship than on performance indicators;

• Protecting trust and the Buyer’s proprietary information;

• Understanding and living selection and retention criteria of the

Buyer;

• Create Value and move on from BAU;

• Set and agree joint expectations; and

• Govern well and aim for longevity.

Buyer – Provider Connects

Source: Outsourcing Centre

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• Better Communication (40%)

• Better Governance (14%)

• Clearer Expectations (21%)

• Better Contracts/SLAs (8%)

• Cultural Fit (1%)

• Additional Scope of Services (5%)

• Better Commitment (4%)

• Longer Term Contracts (4%)

• Flexibility (3%)

What would add more value

Source: Outsourcing Centre

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What Buyers expect of Incumbents

Source: Nigel Thacker “Rebid Team”

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What really matters?

• Demonstrating you have had an impact on things that are really

important to the client (operationally & strategically);

• Reviewing the performance measures; mix of input, output and outcome

based;

• Knowing, understanding and mapping your client’s business priorities;

• Linking your activities to the client’s goals;

• Finding a way to measure your work in ways which show the impact you

have; and

• Focusing, changing & improving.

Source: Nigel Thacker “Rebid Team”

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1. What systems deliver good monitoring of

Provider performance?

• Specification – define deliverables;

• Select provider with partner mentality – key site personnel;

• CMMS – Buyer internal processes and procedures;

• Monthly reporting; and

• Direct Buyer monitoring, contractor ‘self monitoring’, joint monitoring via

an alliance board, client random auditing (financial) and customer

surveys.

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2. What are the key metrics?

• Monitored through monthly report;

• Aligned with specification/deliverables;

• Balance scorecard, lead & lag indicators – technical PMs, CMs & minor

works;

• Data must be easily available and KPIs able to be objectively measured;

• Select what is KEY and mandatory rather than extensive list of

performance measures; and

• WH&S, response & job completion times, financial, invoicing, etc...

3. How is the contract structured to maximise

performance outcomes?

• Specification – define deliverables – PM, CM & minor works;

• Contract Model - specialist contactors, managing agent, head contactor

or hybrid

• Relationship – traditional or collaborative (partner);

• Pricing structure – comprehensive, management fee, schedule of rates,

target cost/GMP;

• KPIs and risk/reward;

• Duration (3+1+1) and CPI increases linked to performance; and

• Communication – kick off workshop, team building, monthly operational,

quarterly management and annual executive meetings – issue

resolution.

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4. How do clients ensure the contractor is

reporting the correct level of details?

• Every Buyer is different and it’s tied to the contract model;

• May vary depending on performance – Contract Governance;

• Enough information – what is minimum level required;

• Structure report around KPIs & deliverables;

• Establish what and how many reports are actually required; and

• Executive Summary – traffic light (red, amber & green). In addition what

level of technical reporting is required.

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Summary

Specification &

deliverables

Right

relationship

Reporting, KPIs

& incentives

Proactive contract

management

15 Performance Management Company – ‘Square Wheels’

What’s the Buyer want?

16 Performance Management Company – ‘Square Wheels’

What is the Provider doing?

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Buyer Vision

Performance Management Company – ‘Square Wheels’

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Provider’s Vision

Performance Management Company – ‘Square Wheels’

19 Performance Management Company – ‘Square Wheels’

Joint Vision

GRAHAM CONSTABLE

E: graham.constable@aquenta.com.au

P: 0466 795 518