Using Project Management Techniques

to Be a Better Contract Manager

Don Shannon PMP, Lifetime CPCM and CFCMdon@contract-coach.com

Overview

Project / CM Roles and responsibilities Integrated Project Teams

Program Management Techniques Chartering Planning

Program Management Plan Program Schedule Program Budget Communications Plan Scope Management Plan Change Management Plan Subcontracting Plan

Funds Management Sub-supplier Management Deliverable Management Risk Management Program Management / Baseline

Reviews

Project / Contract Management

Which are you? Which do you choose to be?

Project, Program, Contract

The Project is a defined set of tasks leading to a desired end result.

A Program is a collection of projects or a single large project comprised of smaller units of work which could be called projects.

A contract is a legal agreement that enables a project or a program to be performed for the benefit of another.

Today I will mix these terms together but understand they are actually different facets of the same entity.

If I wish to differentiate between the contract (as a legal construct) and the work to be done I may use the terms “Technical” “Program” or “Project” interchangeably to describe the work

PM/CM Roles and Responsibilities 

PM Exclusive roles Technical management of

program Technical documentation Represents upper management

with respect to the project Profitability

CM Exclusive roles Contractual Management of

program Scope Cost Compliance with terms and

conditions Advocate for company or agency Lead negotiator Contract documentation

Project Team

PM/CM Shared roles Customer interface and

communication Financial management

How/where funds are spent

Staying within budget Customer satisfaction

Team management approach Sometimes called

“Integrated Project Team” (IPT)

Led by technical PM CM is advisor on areas of

expertise

IPT Membership

PM1 Contracts1 Safety Quality Accounting / Finance Engineering

Mechanical Electrical Software

Logistics Training Spares Documentation

Manufacturing Key Subcontractors / Suppliers Others as required

1. PM and Contracts are the “Voice of the Customer”

IPT Best Practices

Meet often Frequently in early phases

where impact is greatest Adjust frequency as

program evolves “Concurrent engineering”

Allows interaction among disciplines to identify and resolve issues up front

Reduces cost impact of design changes

Why is this important to CM?

Co-locate team members if possible

Conduct team building exercises

Contract Manager Competencies1

Using effective communications

Attend contract kick-off meetings

Conducting periodic status reviews

Preparing written status reports

Observe and monitor performance

Document performance

1. Contract Management Body of Knowledge, 4th Edition

Active vs. Passive Management

Active management means: Getting out from

behind your desk Meeting with

stakeholders to discuss requirements and performance

Taking the lead on addressing contract issues

Being informed

Contract Management as a Customer Service Discipline

CM supports PM Advisor for contractual

matters Acquisition strategist

Contract/subcontract type

Competition Manages business

matters for subcontracts and consultants Agreements/

subcontracts Payment Non-disclosure

General Techniques to Improve Customer Service

Go on “walkabouts” (Management by Wandering Around aka “gemba walk”) Promotes informal

communications with PMs and team

Improves understanding of technology and potential issues

Demonstrates approachability and willingness to be a team player

“Own” the contract / procurement process Be accountable for meeting

schedules / deadlines Represent Contracting at team

meetings Offer solutions not roadblocks

when problems arise

Program Management Techniques

Chartering Project Planning

Program Management Plan Program Schedule Program Budget Communications Plan Scope Management Plan Change Management Plan Subcontracting Plan

Funds Management Sub-supplier Management Deliverable Management Risk Management Program Management / Baseline

Reviews

CharteringGive me a clear statement of what to do and the

authority to do it …

Chartering

Official management statement empowering PM (e.g., letter of appointment etc.)

CM needs similar charter to empower them to bind the company signature authority for

contract documents negotiation authority 

Program/Project Planning

Plan it like you will do it; do it like you planned it ….

Program Management Planning as Applied to Contract Management

Management Plan (from PM) Identification of stakeholders Project roles and responsibility

matrix Schedule baseline

Technical Work Breakdown Schedule Program tasks Time phased actions Resources

Contract Management Required reports/meetings Project milestones

CM’s should review and offer appropriate input to these plans Conformance to contract and

SOW

Program Management Planning as Applied to Contract Management

Project budget/spend plan Time phased budget Funding requirements

Project team Roles and responsibilities

Communications Management Who says what to whom and when?

Quality management (see subordinate plan) Does it follow contractual

requirements Requirements Management / Scope

Management (see subordinate plan) Is there a change management plan

in place Who is authorized to direct changes What is the change process

Communications Plan – What’s in it?

What will be communicated Status Reports CDRL Requirements Event driven

communications (LOF/LOC)  Technical communications

Who will (is authorized to) communicate

When will information be communicated

Where (or to whom) will communications be transmitted

Communications Planning

Develop mailing/distribution list To primary individual(s) e.g.,

PCO etc. as per CDRL or other guidance

Copy to your PM Update these lists as

appropriate Pre-print labels

CD Labels, address labels etc. Create boilerplate letters

Transmittal of periodic reports

Limitation of Funds Set-up reminders in Outlook

or other program.

Change Control Plan

Technical Changes Design changes must be processed by

Engineering / Configuration Control function and approved by customer

In-scope Generally to address performance

or reliability issues May reflect value engineering or

address obsolescence Paid for by contractor

Out of scope Adding functions or features Revising requirements Changes to delivery location or

date Generally paid for by customer Generally results in a contract

modification Administrative Changes

Appointing officials such as COR Address changes Incremental funding

Change Order Processing

Configuration Management

Product oriented change management

Configuration Control Board Establish engineering

baseline Once baseline is established

CCB must approve all changes to engineering baseline

Identify and quantify change impacts

Is Contracts a member of your configuration management team? DEMAND a seat at the table!

Change Management

Change order request/proposal Capture costs of

change Identify ‘who pays’

Unique job number for each change Track incurred costs for

change Ensure proper

accounting of costs

Subcontracting Plan

Not to be confused with small business subcontracting plan

Part of “make/buy” determination

What work will be subcontracted and by what basis Teaming agreements Small business set-asides Competitive

subcontracting Procurement of materials 

Subcontracting

Contracts Manager Responsible for ‘flow-

down’ requirements Creates and negotiates

agreement1

Monitors subcontractor performance1

Coordinates funding requirements1

Coordinates payment issues1

1. This function may be delegated to a sub-contracts or supply chain management function

Funds ManagementMoney is the lifeblood of a project: the Contract

Manager’s job is to keep the arteries full and monitor the blood pressure ...

Funds Management

How much funding do you need?

When do you need funding?

How much funding remains?

Can you complete the contract effort with the allotted funds?

Cost / Funds Management

Consequences rely on contract type Cost contract

Overrun Stop work Incomplete effort

Fixed Price Profit/loss Long term future of the

enterprise CM must provide appropriate

notices Limitation of Funds Limitation of Cost

Special requirements Guaranteed Final Report

clause

Sample Project

4 Primary Tasks System design Hardware Design Software Design Functional Prototype

12 Month Duration

Approximate $4,000,000 total cost

Incrementally funded CPFF Contract

Sample Project Schedule

Sample Project Cost

Sample Project Funds Planning

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

Planned Funded

LOF1

LOC

LOF1 Notice LOC1 Notice

1Assumes FAR 52.232-20 & -22 parameters are 60 days and 75%

Commitments

Commitments = Purchase Orders

Materials Components

Subcontracts Incremental funding Termination costs

Can not commit in excess of funding

“Spent = actual + commitments”

Adding Commitments to Cost

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

Commitment Planned FundedActual Actual + Commitment Estimate @ Complete

LOF Notice

Cost Performance Monitoring

Sample

May be required for contracts > 1 Million and > 6 Months. Contractor format is acceptable. DID-DI-MGT-81468 provides for tailoring requirements to ensure only minimum information required for effective management control is obtained from contractor. Generally N/A to FFP contracts

Schedule Performance Monitoring

Earned Value Management System

Implementation (e.g., FAR 52.234-2 or DFAR 252.234-7001 or -7002) can be expensive Usually reserved for large programs

(> $20M – $50M) Usually reserved for programs > 1

year ANSI Standard 748 requires

compliance with 32 separate guidelines Oftentimes the processes needed are

in place – especially in ISO 9000 organizations

Full implementation is not needed unless required by the contract

Significant benefit can be derived by simply using EVMS techniques to monitor performance Tracking cost performance Projecting Estimate at Completion

EVMS = Cost + Schedule Monitoring

Variance Analysis

On/Slightly Behind Schedule. Why?

$21,000 Under Cost. Why?

Why Costs Never Meet Projections

Driving by rear-view mirror Assume future costs or

performance will mimic past performance

Any anomalies were ‘bumps in the road’

Straight line projection based on known spend rates.

“Political” Pressures Must finish within budget Advocacy by Program

staff

Estimate at Completion (EAC)

EAC = Actual Costs to Date + Estimate to Complete (ETC)

Estimate to Complete = Budgeted Cost of All Work – Budgeted Cost of Work Performed adjusted for: Cost performance to date (CPI)

CPI = Budgeted Cost of Work Performed ÷ Actual Cost .85M Budgeted ÷ 1.0 M Cost = CPI

= .85 CPI > 1 is good If CPI < 1.0 project is overrunning

cost If 2M in work remains and CPI = .85 the

cost to complete (ETC) is likely to be 2.35 M

Cost at completion (EAC) would be 1M + 2.35M = 3.35M

Risk assessment Risk events can impact costs and their

impacts should be considered How? Stay tuned ….

Defense Acquisition University EAC Fundamentals

Recurring Themes in EAC Research PM’s are optimists

Things will get better

Just a bump in the road

Programs Do NOT improve over time

EVM based EAC can provide insights

Three Categories of EAC

EVM Performance Factor Based EAC Easiest to do re: previous example on

slide 42 Use Cumulative CPI to adjust estimated

cost of work remaining Several techniques possible - provides a

range of values rather than single point Regression Analysis

Fit a curve to project cost based on historic data

Extrapolation errors possible when estimating outside the data’s range

Risk Based – Forward Looking Uses Monte Carlo simulation tool to

estimate remaining risks Best when combined with a Program

Evaluation and Review Technique Schedule Uses range of data for task duration

rather than single estimate Optimistic, pessimistic, and most

likely Provides range of values and confidence

intervals

Deliverables Management

Deliverables fulfill contract requirements. Make sure they are on time, conform to requirements, and that

you document their delivery and acceptance.

Deliverables Management

List of deliverable items

Schedule of deliveries Soon to come due

listing Memory ‘ticklers’

Transmittal documents  DD250 Letter of transmittal

Notice to invoice

Create and Maintain a Deliverable Item List / Schedule

Risk ManagementMurphy was an optimist ….

Implement a Risk Management Program

Identify contract (program) risks and document them in a risk register

Risks include opportunities as well as negative events

Perform a qualitative risk assessment for each risk Likelihood of occurrence Consequences

Prioritize risks based on composite score

Develop mitigation, transference, or avoidance strategies for top scoring risks

Quantitative Risk Analysis

Statistical techniques used to quantify risk Assign probability or

confidence interval to events Estimate cost or impact

Best when integrated with schedule Identify likely completion

date(s) Identify final cost

Software based solution May take special training to

use or interpret results Performs complex analysis

including interaction and ‘what if’ scenarios

Risk Management is an Ongoing Effort

Periodic meeting to review and reassess risks Monthly during first stages

of project At least quarterly

thereafter Mitigation strategies

should be reassessed over time Still viable Has risk changed

Update the risk register to add new risks or retire risks that no longer threaten

Program ReviewsThe program team must be accountable for the

performance of their projects …

Program Reviews

Coordinate actions and inform stakeholders

Monitor progress Identify / discuss

program / contract issues

Approve decisions

Program Review Content

Adjusted to fit the organization’s needs Should Include

Technical accomplishments Schedule update

Items completed since last review Deliveries made Delays or issues requiring assistance Get well plan for late activities

Financials Performance to date Funds remaining Additional funds required

May include Upcoming events Staffing Problems or solutions needing approval Lessons learned

SummaryWhat to take with you as you leave

Key Points

Contract Management requires involvement Get out from behind your desk and talk to

people Take responsibility for the contract

Budget Deliverables Property management Reports Take the initiative to identify and resolve

problems

Key Points

Contract Managers are team players Get to know your teammates and learn how to

work with them We’re not gatekeepers so our approach

should be “Tell me what you want to do and I’ll tell you what we need to do that”

Be proactive Don’t wait for a problem to bite you if you can

head it off beforehand Offer solutions to perceived problems

Key Points

Stealing from the other guy’s toolbox is OK Be sure you understand your charter Participate in project (program) planning and share

input with the team Change Management Communications Management Cost Management

Plan it like you’ll do it … Do it like you planned it. Using advanced tools such as EVMS and Risk

Management will enhance your ability to do your job Learn the basics Learn the lingo Apply the techniques

Key Points

Program reviews are necessary Be prepared to brief contract status

Funds issues such as LOF or LOC Payment or invoicing as required Period of Performance etc. Reports and deliverables

Be prepared to assist others Notifying appropriate officials of issues or

changes required Offer strategies for success

That’s all folks!Don Shannon PMP, CPCMThe Contract Coachdon@contract-coach.comhttp://www.contract-coach.com