Best Contracting Practices Best Contracting Practices for Businessfor Business
Unit 1:Unit 1: Building Successful Building Successful Partnerships in the e-Business Partnerships in the e-Business Age – The Executive’s Role Age – The Executive’s Role
Building Successful Partnerships – Four Common ActionsBuilding Successful Partnerships – Four Common Actions
• Unleashing Buying and Selling Power
• Changing Buying and Selling Processes
• Developing an Integrated Supply Chain
• Learning & Applying Best Practices & e-Tools from Industry Leaders
What AreWinning Organizations Doing?
Reference Text – World Class Contracting, By Gregory A. Garrett, CCH 2001, pg. 2
New Supply Environment – The World We Live InNew Supply Environment – The World We Live In
• Relaxed barriers to entry• Increased pricing flexibility • Pro-entrant incentives• Mandatory wholesale of unbundled elements
Reg
ula
tion
Supply Drivers New SupplyEnvironment
• Emergence of Internet architecture• Growth of Automated Sales Tools• Use of Enterprise Resource Planning (ERP) Software• Growth of e-procurement Software and Contract Management Enterprise Software
Tec
hn
olog
y
Pros+ New product and service providers
+ Wider range of products and services
+ More modular products and services
+ Improved price/performance
+ Accelerated pace of changeCons-More complexity
- Higher cost of integration
- Less reliability
- Accelerated pace of change
- Rapid Obsolescence
Increased Range of Services andProduct Choices for End Users
Unleashing Buying & Selling PowerUnleashing Buying & Selling Power
• Use of electronic catalogs, self-service internet sales, Net marketplaces, etc.
• Use of e-sales and e-procurement tools has caused a revolution in the roles & responsibilities of:
• Sales managers/account executives
• Procurement managers/purchasing agents
• Contracts managers/contract administrators
• Fewer people with broader responsibilities requiring more education, training, and business skills to propose, negotiate, and administer complex innovative deals and partnerships
Changing Buying & Selling ProcessesChanging Buying & Selling Processes
Maximizing e-procurement Success
Procurement Today:Managed per Transaction
e-procurement:Managed by Exception
Online productselection
Search large catalogsPersonalized views; namedshopping carts
Requisitionapproval
One to 12 levels of manualapproval
Transactions automaticallyapproved based on rules
P.O. TransmissionFax, e-mail, EDI direct tosupplier; supplier retypes theorder
Order is sent through a supplierclearinghouse
Paymentauthoirzation
Dependent on three-way matchof P.O. with invoice and receipts
Immediate; based on shipmentnotice
AnalysisSporadic; not linked to supplierperformance
Continuous; integrated in realtime; drives optimization ofprocess
Source: Forrester Research, Inc.
Reference Text, pg. 5
Developing an Integrated Supply ChainDeveloping an Integrated Supply Chain
• Integrated - means providing Enterprise Resource Planning (ERP) to ERP, core business transaction functionality to all participants
• Going beyond Supply Chain Management to the integration of databases between companies
• Today - large trade exchanges, built cooperatively by industry participants are changing the nature of business
• More companies are creating shared virtual workspaces, with appropriate security and access measures.
Trade Exchange – Example: ExostarTrade Exchange – Example: Exostar
Exostar’s Mission:To become the standard e-business platform for everyone in the Aerospace & Defense industry
EXOSTAR
Founding Members
BAE Systems
Boeing
Lockheed Martin
Raytheon
Rolls-Royce
Trading Partners
Large OEM’s
Government Buyers
Airlines
Tier 1 –3 Suppliers
Service Providers
Boeing’s Forum Pass – Virtual Collaborative WorkspaceBoeing’s Forum Pass – Virtual Collaborative Workspace
How Forum Pass Fits
Contracts
Design
MFG
PM
Virtual Mtgs.
ACCTG
Check-out/Check-in Via Forum Pass
Contracts
Design
MFG
PM
Virtual Mtgs.
ACCTG
Partner A
Contracts
Design
MFG
PM
Virtual Mtgs.
ACCTG
Partner B
httpshttps
https
https
Logos obtained from Boeing website
Example: Boeing ForumPassExample: Boeing ForumPass
ForumPass offers a collaboration solution to address the challenges of integrated project teams
Supports creation of dynamic, opportunistic project teams, independent of computing support
Provides a common workspace that fosters innovation
Breaks down barriers to collaboration
Process and schedule visibility
Immediate notification of changes
Visualization via Computer-Aided Design (CAD)
Balances security with access to key collaboration partners
ForumPass Key CapabilitiesForumPass Key Capabilities
• Project Management and Administration
• Document and Data Management
• Online Meetings
• Visualization and Mark-up
• Workflow
• Subscription-based notifications
• Security and access control
Goal: Establish a Common Collaboration WorkspaceGoal: Establish a Common Collaboration Workspace
• Project Management
• Document Management
• Product Data/Change Control
• Virtual Meetings
DOD
Boeing
Firewall
Shared Workspace
Firewall
Supplier A
FirewallSupplier B
Firewall
Supplier C
Firewall
Learning & Applying Best Practices & e-tools from Industry LeadersLearning & Applying Best Practices & e-tools from Industry Leaders
MicrosoftBill Gate’s New Rules
for e-Business
Bill Gate’s New RulesBill Gate’s New Rules
1. Insist that communication flow through e-mail
2. Study sales data online to share insights easily
3. Shift knowledge workers into high level thinking
4. Use digital tools to create virtual teams
5. Convert every paper process to a digitalprocess
6. Use digital tools to eliminate single-taskjobs
7. Create digital feedback loop
8. Use digital systems to route customercomplaints immediately
9. Use digital communication to redefineboundaries
10. Transform every business process into just-in-time delivery
11. Use digital delivery to eliminate middleman
12. Use digital tools to help customers solveproblems for themselves
Reference Text, pg. 7
Hormel Foods: Best Practices with Oracle Internet Hormel Foods: Best Practices with Oracle Internet Procurement e-toolProcurement e-tool
CaseStudy
• Hormel Foods has recently completed the installation of Oracle’s Internet Procurement at all of its 50 locations. Employees at all of these sites are now able to create purchasing requisitions for non production items and have them automatically routed for approval, as well as track and access information on a real-time basis
• Self-guiding on-line catalogs allow workers to search for goods and services from approved suppliers
• Most of the savings associated with the implementation of Oracle Internet Procurement is as a result of Hormel’s procurement personnel no longer having to spend considerable amounts of time dealing with routine purchases
Reference Text, pg. 8
Lockheed Martin: Best Practices with SAP Business to Lockheed Martin: Best Practices with SAP Business to Business (B2B) e-toolBusiness (B2B) e-tool
CaseStudy
• In June 1999, the Missiles and Fire Control Division of Lockheed Martin located in Dallas, TX selected the Business to Business (B2B) Procurement system developed by SAP to replace an out-dated paper-based indirect procurement process.
• Lockheed Martin leveraged the capabilities of the SAP business workflow component to implement consistent business rules to ensure user’s purchases were appropriate, priced within limits, and ordered from approved suppliers.
• As a result of SAP’s focus and rapid implementation, ease-of-use, and flexibility Lockheed Martin was able to control the use of their indirect procurement expenses achieving dramatic cost reductions.
Reference Text, pg. 8
Qwest: Best Practices with V-Source e-toolQwest: Best Practices with V-Source e-tool
CaseStudy
• Qwest, formerly, US WEST, Interprise Networking Services recently selected Vsource, Inc. of Ventura, California, a provider of a “pure-play” Internet e-procurement solution called Virtual Source Network (VSN).
• Vsource charges $100 per seat for each password and small per-line transaction fees for purchase orders and Request-for-Quotations (RFQs). Customers who want VSN to tie into their existing back-end systems can do that through the Business Ware Middleware solution from Vsource partner Vitra Technology, Inc., of Sunnyvale, California.
• Depending upon a company’s current internal procurement processing costs and the volume of transactions VSN can save buyer’s hundreds, thousands, or millions of dollars each year. VSN requires little time to set-up and no training. All you need to use VSN is a browser and web access.
Reference Text, pg. 9
Exercise 1 – Building Successful PartnershipsExercise 1 – Building Successful Partnerships
• Divide into teams of 3 – 4 people
• Select one of the four common actions that winning companies are taking to build Successful Partnerships
• Conduct a 15 – 20 minute Brainstorming session, discussing and listing the advantages and disadvantages of the selected action and what actions you as executives should take to maximize success.
• Present your findings to the class (Be Brief 3 – 5 minutes)
Common Action:Common Action:
Advantages Disadvantages Executive Actions
Building Successful Partnerships in the e-Business Age Building Successful Partnerships in the e-Business Age SummarySummary
• The power of e-Business has been unleashed by the advent of new communication technologies and the the Need for Speed!
• However, to achieve high performance results, year over year, companies must form successful partnerships based upon trust
• Winning organizations are taking Four Common Actions to build Successful Partnerships:
(1) Unleashing Corporate Buying & Selling Power(2) Changing Buying & Selling Processes(3) Developing an Integrated Supply Chain(4) Learning and Applying the Best Practices & e-tools from Industry Leaders
Unit 2:Unit 2: Building Trust: Managing Building Trust: Managing Expectations and Honoring Expectations and Honoring Commitments Commitments
Understanding How to Manage ExpectationsUnderstanding How to Manage Expectations
Ask Align Fulfill
ClarifyExpectations
ControlExpectations
Meet or Exceed Expectations
Listen Understand Negotiate Agree Communicate
• Surface explicit & Implicit expectations
• Surface Assumptions
• Compare Expectations to reality
• Resolve Gaps
• Communicate differences
• Re-set expectations
• Set realistic expectations
• Document acceptance criteria
• Meet with customer
• Obtain agreement that expectations were met
• Identify gaps
Adapted from:“Managing Expectations”by Dorothy Kirk, PM Network, August 2000
The Managing Expectations Process
Reference Text, pg. 13
Honoring Commitments: Lessons LearnedHonoring Commitments: Lessons Learned
Listen to the customer
Understand the customers needs vs. desires
State the obvious
Be Accessible
Return phone calls, vmails, & emails in a timely manner
Provide regular communication on contract, program, partnership status
Develop a project plan for every deal (Scope of Work (SOW), Integrated Schedule, Work Breakdown Structure (WBS), Responsibility Assignment Matrix (RAM), and acceptance criteria)
Develop Risk Management Plan
Disclose problems early and mitigate negative impacts
Back up all verbal agreements and conversations in written documents
Successful PartnershipsSimple Actions Checklist
Reference Text, pg. 14
Honoring Commitments: Lessons LearnedHonoring Commitments: Lessons Learned
Develop a changes management process
Provide frequent communication via multiple-media
Be prepared to deliver both good and bad news at multiple levels, both internally and with customers
Be flexible, develop alternatives
Set challenging but achievable objectives
Demonstrate passion to honoring commitments
Recognize that trust is the most important thing in a successful business relationship
Learn from mistakes openly communicate Lessons Learned
Celebrate joint successes
Document and share best practices
Reference Text, pg. 14
Partnership IngredientsPartnership Ingredients
Three Major Ingredients
• Complementary Strength
• Common Customer-base
• Chemistry
Discuss Examples of Partnerships based upon each of the above.
Reference Text, pg. 15
Successful Partnerships – Key DefinitionsSuccessful Partnerships – Key Definitions
Partners: Two or more People or organizations workingtogether toward a mutually beneficial commongoal with loyalty an a long-term commitmentto each others success.
Loyal Customer: A buyer who chooses to do business with a particular seller and commits to buy from that seller in the future.
Satisfied Customer: A buyer who buys from a particular seller but expects to buy from others in the future.
CustomersSatisfaction/
Loyalty
SuccessfulLong-Term
Partnerships
BuildingTrust
Four Common Actions
Managing Expectationsand Honoring Commitments
Partnership Agreement(s)
Partnership Ingredients
ComplementaryStrength
CommonCustomer-base Chemistry
Customer Need/Desires = Business Partnership
Reference Text, pg. 16
The Successful Partnership PyramidThe Successful Partnership Pyramid
Exercise 2: Building Trust Q&AExercise 2: Building Trust Q&A
1. On a scale of 1 (Low) to 10 (High), How effective is your organization/company in building long-term buyer/seller relationships? Give examples.
2. On a scale of 1 (Low) to 10 (High), How well does your organization/company manage your customers expectations? Give examples.
3. On a scale of 1 (Low) to 10 (high), How well does your organization ensure requirements and acceptance criteria are aligned, agreed to, and documented before the contract is signed?
Unit 3:Unit 3: Government Contracting and Government Contracting and Commercial Contracting Commercial Contracting
Similarities Similarities
Contract Management – What Is It?Contract Management – What Is It?
A process of planning, forming, and administering agreement(s) to buy or sell goods and services from or to another party
The art and science of managing a contractual agreement(s) throughout the contracting process
Buyer Seller Subcontractor(s)Contract Contract
ContractsContracts
Definition
An agreement between two or more (competent) parties or persons that creates an obligation to do or not do a particular thing
A contract has two aspects:
Document: Written manifestation of an agreement between parties
Relationship: The personal or professional commitment that forms the understanding between people who enter into agreements, either oral or written
Reference Text, pg. 19
Contracts AreContracts Are
Sources of business: For sellers
Sources of goods and services: For buyers
Risk management tools: For both buyers and
sellers
Projects: That must be managed by people from both the buyer’s and seller’s organizations.
Contract Management’s Four “Ps”Contract Management’s Four “Ps”
People
Authority: Who can sign or approve?
Responsibilities: Who does what?
Process: The means by which goods and services are exchanged
Performance: How effectively the goods and services are bought and sold
Price: What determines a reasonable price? How do terms and conditions affect price?
Quality, cost, and schedule
Contract Management ProcessContract Management Process
Buyer1. Procurement
Planning2. Solicitation
Planning3. Solicitation
Make-or-buy decision
Seller1. Presales
Activity2. Bid/no-bid
Decision making3. Bid or Proposal
Preparation
Bid decision
Phase 1: Preaward
Buyer4. Source Selection
Contract Award5. Contract
Administration
6. Contract Closeout or Termination
Seller4. Contract
Negotiation & Formation
Contract Award5. Contract
Administration
6. Contract Closeout or Termination
Phase 2: Award Phase 3: Postaward
Buyer’s and seller’s steps
Reference Text, pg. 20
Government (Public) Contracting and Commercial (Private)Government (Public) Contracting and Commercial (Private)ContractingContracting
Similarities Include:
* (Similar – CM Process) Both follow a similar Contract Management process.
* (Similar – CM People Skills) Both require well-trained and educated people with broad skills sets (competencies including: Negotiation skills, financial skills, legal skills, interpersonal skills, communication skills, organizational skills, leadership skills, and others.
* (Similar – Performance Requirements) Both need to focus on delivering and/or providing quality products, services, and/or solutions for their customers – faster, better, and cheaper.
So What’s the Point – According to W. Gregor MacFarlan, CPCMSo What’s the Point – According to W. Gregor MacFarlan, CPCM
• An immense increase in knowledge workers and a decrease in manual workers.
• Contract Management professionals are knowledge workers. Individual effectiveness and collective growth required:
– Reasonable empowerment (Autonomy to act is essential).
– Opportunities to apply innovative judgment (strive to improve the deal).
– Continuous learning for growth (no other useful option).
• Biggest mistake of our time: treating knowledge workers as a cost rather than as an asset.
A Few More PointsA Few More Points
• Demographics and work environments relate:
– In millions of cases, the knowledge worker is not dependent on a single employer for a career.
– The knowledge worker’s professional capabilities and skills are portable.
– The high likelihood exists for knowledge workers to pursue three or four successful growth jobs over a career. Many people will be crossing-over between either buyer or seller roles and/or government and commercial contracting sectors.
So Where Are We Headed?So Where Are We Headed?
• Recent research (1999 and 2000) by CMI* and ISM* relates for every 100 surveyed contracting/purchasing professionals concerning their roles:
• 90 indicate “more time sensitive”
• 85 indicate “more responsibility”
• 85 indicate “more team-oriented”
• 85 indicate “more strategic”
• 60 indicate “less clerical”
• Performance metrics are increasingly tied to strategic rather than transactional business measures
The Contract Management Institute (CMI) is the research arm of the National Contract Management Association (NCMA). The Institute of Supply Management (ISM) was formerly the National Association of Purchasing Management (NAPM).
Most Recent Research (1)Most Recent Research (1)(Contract Management Institute – 2001)(Contract Management Institute – 2001)
•Performance Metrics for the Contract Management Discipline – a survey.
• Senior contracting/purchasing personnel
• 3,180 surveys distributed; 872 returned – 27 percent response rate.
• Public sector (35%); private sector-government (37%); private sector-non-government (21%); educational, not-for- profit, other (7%).
• Three quarters at least 15 years experience; more than half over 20 years.
• Education: high school (1%); some college (10%); undergraduate degree (33%); masters degree (46%); post- graduate degree (9%).
Most Recent Research (2)Most Recent Research (2)(Contract Management Institute – 2001)(Contract Management Institute – 2001)
• Which metrics are currently used by your organization to evaluate personnel?
Top 10 choices:
1. Responsiveness. 6. Human/interpersonal2. Integrity/ethical standards relations.3. Timeliness. 7. Process focus.4. Written communication. 8. Education.5. Oral communication. 9. Customer service (internal).
10. Accountability
Most Recent Research (3)Most Recent Research (3)(Contract Management Institute – 2001)(Contract Management Institute – 2001)
• Which metrics will be used in the next 3 to 5 years?
Top 10 choices:
1. Business Judgment. 6. Integrity/ethical standards.2. Decision making 7. Education.3. Problem-solving ability 8. Human/interpersonal4. Negotiation skills. relations.5. Customer service (external). 9. Responsiveness
10. Communications
Most Recent Research (4)Most Recent Research (4)(Contract Management Institute – 2001)(Contract Management Institute – 2001)
• Some bottom lines:
– The contract and purchasing management function is evolving toward a strategic business management focus.
– Performance evaluation metrics increasingly assess results not just activity.
– Employees are motivated to perform when they are measured about things they have control over.
– Performance evaluation systems should be pervasive across an employee’s career path (i.e., recruitment, hiring, placement, training, evaluation, promotion, rewards, and compensation).
Exercise 3: CM Process & Teamwork Q&AExercise 3: CM Process & Teamwork Q&A
1. Does your organization/company have a well-defined ContractManagement (CM) process, which is documented, understood,and followed by everyone in your organization/company?
2. What is the role of the Contract Manager in your organization/company?
3. What is the Executive’s role in the CM process?
Unit 4:Unit 4: Contract Management: Contract Management: What Executives should Know What Executives should Know & Do! & Do!
What is the role of the Executive
in the CM Process?
Why is Contract Management Important to Executives?Why is Contract Management Important to Executives?
• In most organizations/companies the success of winning and executing contracts will determine the entire future of the enterprise
– Business opportunities and risks are managed via the contract
– Growth via changes management and follow-on contracts
• Contract performance is typically inconsistent
– Some do well, but most do not
– Very team dependent
• Managing contracts is difficult
– Complicated and not well understood
– Requires broad set of management skills
– Poorly implemented internally and externally
– Traditional management incentive structures usually at variance with successful contract management
Why is Contract Management Important to Executives?Why is Contract Management Important to Executives?• Contract management teams are often formed of a diverse temporary group of talented individuals
– Usually not well trained in contract management
– Little previous experience working together
– Expected to immediately be proficient
• There is often a negative bias against contract management
– Personnel are unfamiliar and untrained
– Prior experience with contract management has been unsuccessful
– Technical personnel typically look down on contract management and the people that attempt to manage contracts
– It is not uncommon for the very best contract management techniques to be disliked by the team
– It is sometimes viewed as non-producing overhead
– People often do not want to follow a disciplined and documented process
What is There About Contract Management That Makes it So What is There About Contract Management That Makes it So Difficult?Difficult?
• Requires a broad set of skills
– Business, legal, financial, interpersonal, leadership, team building, negotiation, multi-cultural
– Rare to find personnel with this broad capability
• Contract management is complex and is difficult to describe succinctly
– Makes it difficult to convey to others and install as a culture
– Personnel believe that it is just paperwork anyone can do it
What is There About Contract Management That Makes it So What is There About Contract Management That Makes it So Difficult? (continued)Difficult? (continued)
• Contract management appears overbearing to the uninitiated
– Falsely appears to stifle creativity
– Falsely appears to slow things down
– Falsely appears to be bureaucratic
• It is not uncommon for management to only give contract management lip service (Don’t walk the talk)
– Lack of understanding = Lack of support
Why the Complexity of Contract Management Is An Issue?Why the Complexity of Contract Management Is An Issue?
• State of the Art
• Most available models are over-simplified and inadequate
• Henry Fayol’s: Planning, Organizing, Staffing, Directing, Controlling falls short in today’s environment
• Many models confuse and intermix sequential activities and on-going processes
• Communication – Without a well-defined contract management process in place:
• It makes it difficult to convey to the team how the contract will be managed
• It makes it difficult to communicate with others about the health and progress of the contract
• Execution – A well-defined contract management process is mandatory because:
• Continued growth of contracts as a result of increased outsourcing
• It is impossible to install a culture if it can’t be described
• It is difficult to install a culture even if it can be described
Business Conduct Issues What Executives Should Know & Business Conduct Issues What Executives Should Know & Do at the OutsetDo at the Outset
Create a clear vision, mission, and goals.
Establish lines of authority – who’s in charge of what?
Create lines of communication – How to get work done!
Facilitate communication methods and structure – Make sharing info easy!
Set expectations of each other – Clarify roles and responsibilities to to ensure teamwork!
Develop escalation processes – When problems arise who do you contact!
Ensure employee feedback/performance evaluation process is regularly conducted
Create a shared reward and recognition process
Create and follow a Code of Conduct
Indicators of Poor TeamworkIndicators of Poor Teamwork
• Communication stops
• Information is withheld
• A climate of suspicion and distrust exists
• Counterproductive subgroups and cliques form
• “Fear-of-Failure” causes individuals to avoid making decisions
• Complaining is prevalent
Separateness and distrust prevail
Indicators of Good TeamworkIndicators of Good Teamwork
• Spontaneous, positive interpersonal interaction
• The collective energy level of the team is high
• A positive cooperative climate prevails
• Information flows freely between team members
• No work is considered beyond an individual’s job description (If it needs to be done, someone is doing it)
• Complaining is almost non-existent
• The coffee pot is never left empty for other team members
Separateness and distrust prevail
Executive Role in Creating TeamworkExecutive Role in Creating Teamwork
Be able to communicate your vision and the contracts role in achieving it.
Understand stakeholder expectations and conflicts.
Listen to your team members speak of their teammates and notice the vocabulary and mood.
– Encourage respect and business like interaction among the team members
– Get involved if adversarial relationships emerge.
Ensure that rewards and incentive structures acknowledge team performance.
Look for, and encourage your Contract Managers to provide evidence of teamwork with:
– Users
– Customers
– Supporting organizations
Executive Role in Establishing A Common Contract Executive Role in Establishing A Common Contract Management (CM) Vocabulary and ProcessManagement (CM) Vocabulary and Process
Understand – and use – the correct CM terminology yourself.
Demonstrate your understanding of the CM process through your actions.
Fund and support development of a glossary of common CM terminology, used in you industry, organization, and contracts.
Produce electronic copies and see to it that all Team members have the glossary of CM terms as a resource.
Insist that all team members faithfully use the approved CM process and terminology
One thing said, ten things understood
Executive Oversight of Contract and Project PlanningExecutive Oversight of Contract and Project Planning
Ensure that time and money to plan is provided for.
Require an internal Contract Kick-off Meeting to review the plan.
Review the contract risks and how they will be managed.
Establish Executive Management Milestones reviews.
Define the business aspects you need to review and approve.
Set the schedule and measure performance against it.
Executive Oversight of Opportunity and Risk ManagementExecutive Oversight of Opportunity and Risk Management
Encourage everyone to identify potential opportunities and risks.
Require that tailoring of procedures and templates be accompanied by risk assessment.
Require and review opportunity and risk assessments throughout the contract management process.
Require the planning and execution of approved risk mitigation and opportunity enhancement actions.
Stay cognizant of the high risks and the progress toward mitigation.
Executive Commitment to Contract Changes ManagementExecutive Commitment to Contract Changes Management
Define the changes management process that must be used on all contracts.
Be an advocate of contract changes, as appropriate.
Constructively challenge informal contract changes at your initial reviews with team members.
Constructively challenge the effectiveness of the contract changes management at program reviews.
Executive Participation in Contract Visibility ManagementExecutive Participation in Contract Visibility Management
Ensure that corporate information systems benefit the teams and provide Contract Managers with contract-level information necessary to manager their contracts.
Share as much company information as possible.
Eliminate barriers to sharing information.
Create a method for exchange of lessons learned between contracts and programs.
Ensure that all contracts are properly planned.
Ensure that you receive status on all contracts and related projects.
Do not allow activity reports to substitute for status reports.
Do not substitute paper optimism for intelligent, perceptive judgment.
Verify that the reported status is consistent with contract results.
Focus on corrective actions in status meetings.
Ask how you can help in the corrective action process.
Be sure that you are not a bottle-neck to required resources.
Executive Oversight of Contract StatusingExecutive Oversight of Contract Statusing
Ensure your managers have the correct corporate and contract management vision.
Know your managers and their leadership styles. Provide training or counseling to correct deficiencies.
Executive Development of Contract ManagementExecutive Development of Contract Management
Executive Support of Contract Corrective ActionExecutive Support of Contract Corrective Action
Publicize expectations that contracts be technically compliant, completed on time, as as much under budget as possible.
Require the use of Action Item Registers to drive corrective actions to closure.
Exercise 4: What Executives Should Know & Do!Exercise 4: What Executives Should Know & Do!
• Individually, review charts all of the previous charts in this unit, which contain boxes.
• Place a check in each box, which you consider yourself and/or your organization/company executives do well.
• Count up the number of checked boxes you have on the previous charts in this unit.
• Executive Assessment
Excellent: 45 to 50Good: 39 to 44Average: 34 to 39Below Average: 28 to 33Poor: 27 or below
Why Executive Management Has an Essential Role In Why Executive Management Has an Essential Role In Contract ManagementContract Management
• Contract Management is a complex process, difficult to install as a corporate culture.
• Exceptional Contract Managers may institute sound practices in spite of the prevailing corporate culture.
• Most Contract Managers will take their guidance from the prevailing culture.
• A non-supportive or misinformed Executive Management will generally lead to ineffectual Contract Management practices.
Organizations that routinely execute contracts successfully usually have a well understood and practiced Contract Management culture backed by strong, knowledgeable,
Executive Management Support.
Unit 5:Unit 5: Pre-Award Phase Pre-Award Phase & Best Practices & Best Practices
Buyer4. Source Selection
Contract Award5. Contract
Administration
6. Contract Closeout or Termination
Seller4. Contract
Negotiation & Formation
Contract Award5. Contract
Administration
6. Contract Closeout or Termination
Phase 2: Award Phase 3: Postaward
Buyer1. Procurement
Planning2. Solicitation
Planning3. Solicitation
Make-or-buy decision
Seller1. Presales
Activity2. Bid/no-bid
Decision making3. Bid or Proposal
Preparation
Bid decision
Phase 1: Preaward
Reference Text, pg. 79
Contract Management Process - Buyer’s and Seller’s stepsContract Management Process - Buyer’s and Seller’s steps
Contract Management Process: Preaward PhaseContract Management Process: Preaward Phase
Buyer’s steps
1. Procurementplanning
2. Solicitation planning
3. Solicitation
Procurement PlanningProcurement Planning
Is the process of identifying which buyer needs can be best met by procuring products or services outside the organization
Involves the buyer’s consideration of –
Whether to procure (make-or-buy decision)
How to procure (contracting method)
What to procure (products and services needed)
How much to procure (quantity desired)
When to procure (delivery schedule)
Procurement Planning (continued)Procurement Planning (continued)
Input Tools & Techniques Output
• Scope statement
• Product description
• Procurement resources
• Market conditions
• Other planning output
• Constraints
• Assumptions
• Make-or-buy analysis
• Expert judgment
• Contract type selection
• Opportunity and Risk Management Process
• Contract terms and conditions
• Procurement management plan
• Statement of work
Reference Text
Solicitation PlanningSolicitation Planning
• Involves preparing the documents needed to support the solicitation
Input Tools & Techniques Output
• Procurement management plan
• Statement of work
• Other procurement planning output
• Standard forms
• Expert judgment
• Procurement documents
• Evaluation criteria
• Statement of work updates
Reference Text, pg. 86
SolicitationSolicitation
Involves obtaining information (bids and proposals) from perspective sellers on how project needs can be met
Types of solicitations
Request for proposals (RFP)
Request for tenders (RFT)
Request for quotations (RFQ)
Invitation for bids (IFB)
Invitation to bid (ITB)
Types of information-only solicitations
Request for information (RFI)
Request for information and qualifications (RFI&Q)
Solicitation (continued)Solicitation (continued)
Input Tools & Techniques Output
• Procurement documents
• Qualified seller lists
• Bidder conferences
• Advertising
• Solicitation that leads to the submission of bids or proposals
Reference Text, pg. 88
Contract Management Process: Preaward PhaseContract Management Process: Preaward Phase
Seller’s steps
1. Presales activity
2. Bid/no-biddecisionmaking
3. Bid or proposal
preparation
Presales ActivityPresales Activity
• Is the process of early involvement with potential buyers, understanding and influencing their needs, plans, and expectations
Input Tools & Techniques Output
• Customer Identification
• Determination of customer needs
• Evaluation of competitors
• Proactive sales management
• Market research
• Competitive analysis
• Potential and existing customer lists
• Customer-focused sales plan
• Competitive analysis report
Reference Text, pg. 90
Bid/No-Bid Decision MakingBid/No-Bid Decision Making
• Is the process of evaluating risks vs. opportunities and making an informed and intelligent decision
Input Tools & Techniques Output
• Solicitation
• Buyer-specific information
• Competitive analysis report
• Seller’s strategic objectives and plans
• Opportunity and Risk Management process
• Opportunity and Risk Management (ORM) Model
• Bid/no-bid decision
• Justification document for bid/no-bid decision
Adapted from Reference Text, pg. 93
Bid or Proposal PreparationBid or Proposal Preparation
Input Tools & Techniques Output
• Solicitation
• Analysis of solicitation
• Competitive analysis report
• Past proposals
• Compliance matrix
• Standard terms and conditions
• Past proposals
• Lessons-learned database
• Executive summary
• Bid or proposal
• Supporting documentation
• Oral presentation
Reference Text, pg. 95
Adapted from Reference Text, pg. 97
Pre-Award Phase – Best Practices (Buyer)Pre-Award Phase – Best Practices (Buyer)
Best Practices Observed Extent of ApplicationDecide what products, services, or solutions you need. (Use of off-the-shelf products or services)
Inconsistent
Conduct market research and benchmarking of industry practices
Widespread
Develop a solicitation that clearly and concisely communicates your needs in terms of performance
Limited – but growing
Use of risk management process Inconsistent
Create Standard Terms and Conditions (Ts and Cs)
Widespread
Develop Qualified Seller’s Lists Widespread
Use draft solicitations to obtain seller’s feedback
Widespread
Conduct Seller’s conferences to address solicitation concerns
Inconsistent
Adapted from Reference Text, pg. 97 - 98
Pre-Award Phase – Best Practices (Seller)Pre-Award Phase – Best Practices (Seller)
Best Practices Observed Extent of Application
Identify potential customers early Widespread
Evaluate competitors and create a competitive analysis report
Inconsistent
Conduct proactive sales mgmt. Know & Influence customer needs
Widespread
Conduct market research and benchmarking of industry
Widespread
Develop customer-focused sales plans
Inconsistent
Apply an Opportunity and Risk Management process
Inconsistent
Develop and use a proposal lessons learned database
Limited
Provide oral presentations of proposals
Limited
Conduct proposal reviews before submission
Widespread
Develop and use a Proposal Requirements Compliance Matrix
Inconsistent
Unit 6:Unit 6: The Award Phase The Award Phase & Best Practices & Best Practices
Contract Management Process - Buyer’s and Seller’s stepsContract Management Process - Buyer’s and Seller’s steps
Buyer4. Source Selection
Contract Award5. Contract
Administration
6. Contract Closeout or Termination
Seller4. Contract
Negotiation & Formation
Contract Award5. Contract
Administration
6. Contract Closeout or Termination
Phase 2: Award Phase 3: Postaward
Buyer1. Procurement
Planning2. Solicitation
Planning3. Solicitation
Make-or-buy decision
Seller1. Presales
Activity2. Bid/no-bid
Decision making3. Bid or Proposal
Preparation
Bid decision
Phase 1: Preaward
Reference Text, pg. 132
Contract Management Process: Award Phase – Source SelectionContract Management Process: Award Phase – Source Selection
Buyer’s Step
Source selection is the process of applying evaluation criteria to bids or proposals to select a supplier
Price may or may not be the primary determinant
Other criteria may be used: technical, past performance, quality, schedule, reputation, management, and so on
A weighting system may be used to select a source or to rank all proposals to establish a negotiation sequence
Contract Management Process: Award Phase – Source Selection Contract Management Process: Award Phase – Source Selection (continued)(continued)
This process may be simple to very complex
May involve one person or a large team
May use a screening system, establishing minimum requirements of performance
Contract Management Process: Award Phase – Source Selection Contract Management Process: Award Phase – Source Selection (continued)(continued)
Input Tools & Techniques Output
• Proposals
• Evaluation criteria
• Evaluation standards
• Organizational policies
• Contract negotiation
• Weighting system
• Screening system
• Independent estimates
• Contract
Reference Text, pg. 133
Source Selection ProcessSource Selection Process
Process of comparison and decision
Informational prerequisites
Knowledge of required goods and services
Knowledge of industry
Knowledge of market practices
Selection criteria elements
Attributes of interest
Standards
Weights
Contract Management Process: Award Phase – Contract Contract Management Process: Award Phase – Contract Negotiation and FormationNegotiation and Formation
Seller’s step
The process of having your bid or proposal evaluated by the buyers, anticipating and responding to questions the buyer may have, negotiating, and forming a contract between the parties
Contract Management Process: Award Phase – Contract Contract Management Process: Award Phase – Contract Negotiation and Formation (continued)Negotiation and Formation (continued)
Input Tools & Techniques Output
• Solicitation
• Bid or proposal
• Buyer’s source selection process
• Seller’s past performance
• Previous contracts
• Competitive analysis report
• Contract negotiation process
• Highly skilled negotiators
• Market and industry practices
• Legal review
• Contract or
• Walk away
Reference Text, pg. 142
Contract Negotiation: A Complex Activity for Both Buyers and Contract Negotiation: A Complex Activity for Both Buyers and SellersSellers
Successful negotiators must –
Have the ability to perceive and comprehend factors shaping and characterizing the negotiation
Exhibit behavioral and analytical skills to diagnose problems and adapt winning strategies
Understand their own personalities and personal ethics and values
Know their products and services, desired terms and conditions, and pricing strategy
We All Negotiate Every DayWe All Negotiate Every Day
Personal: Family and friends
Professional:
Internal Organization
External: Buyers and subcontractors
Question: How well do you negotiate?
Negotiation ApproachesNegotiation Approaches
Intuitive approach
Nonstructured
Informal – not written
Inconsistent results
Process approach
Structured, planned
Documented actions
More consistent results
What Is Different About Global and Domestic Negotiations?What Is Different About Global and Domestic Negotiations?
Political and legal issues
International monetary factors
Foreign governments and their bureaucracies
Potential instability and sudden change
Cultural diversity
Export/Import regulations
Key to a Successful Contract NegotiationKey to a Successful Contract Negotiation
Preparation and planning
Effective planning
Negotiation skills
Effective follow-up documentation
Getting to Yes Means - Getting to Yes Means -
Getting past no
Getting around “yes, but—”
Focusing on common interests not positions
Use of joint problem solving
Internally
Externally
The right solution is a matter of perspective – buyer or seller
Buyer’s Negotiation Objectives (Interests)Buyer’s Negotiation Objectives (Interests)
Acquire necessary supplies and services of the desired quality, on time, and at the lowest reasonable price
Establish and administer a pricing arrangement that results in payment of a fair and reasonable price
Satisfy needs of the end user (customer)
Seller’s Negotiation Objectives (Interests)Seller’s Negotiation Objectives (Interests)
Profitability (long-term vs. short-term)
Market share
Satisfy needs of the customer
The Contract Negotiation Process: The Risk ZoneThe Contract Negotiation Process: The Risk Zone
Three Phase 1: Prenegotiation Phase 2: Conducting Phase 3: Postnegotiation ContractPhases Planning Negotiations Actions Award
Key 1. Prepare yourself and your team 1. Determine who has authority 1. Prepare negotiation minutes
Steps or 2. Know the other party 2. Prepare the facilities 2. Send mintues ot the other party
actions 3. Know the big picture 3. Use an agenda 3. Offer to write up the contract
4. Identify objectives 4. Introduce the team 4. Prepare the contract
5. Prioritze objectives 5. Set the right tone 5. Prepare negotiation results
6. Create options 6. Exchange information summary
7. Select fair standards 7. Focus on objectives 6. Obtain required reviews and
8. Examine alternatives 8. Use strategy, tactics, and approvals using CMS
9. Select your strategy, tactics, countertactics 7. Send contract to the other party
and countertactics 9. Make counteroffers for signature
10. Develop a solid and approved 10. Document agreement or know 8. Provide copies of the contract
team negotiation plan when to walk away to affected organizations
9. Document lessons learned
10. Prepare contract administration
plan
Adapted from Reference Text: pg. 145
Phase 1: Prenegotiation Planning (10-Step Process)Phase 1: Prenegotiation Planning (10-Step Process)
Step 1 Prepare yourself and your
team
Step 2 Know the
other party
Step 3 Know the big
picture
Step 4 Identify
objectives (interests)
Step 5 Prioritize objectives
Step 6 Create options
Step 7 Select fair standards
Step 8 Examine
alternatives
Step 9 Select your
strategy, tactics, and
countertactics
Step 10 Develop a solid and
approved team negotiation
plan
The Importance of PriceThe Importance of Price
Price
ScheduleTechnology
(R&D)
Services
Ts and Cs
Products
CustomerObligations
Type ofcontract
Miscellaneous
Adapted from Reference Text: pg. 147
The Importance of Terms and ConditionsThe Importance of Terms and Conditions
Ts and Cs:Cost, Risk,and Value
PaymentsInspection andacceptance
Financing
Warranties
Taxes
GuaranteesIndemnityand liability
Exchange rate
Spares
Obligations
Deliveryterms
And so on
Adapted from Reference Text: pg. 148
Phase 2: Conducting NegotiationsPhase 2: Conducting Negotiations
Step 1 Determine who
has authority
Step 2 Prepare the
facilities
Step 3 Use and agenda
Step 4 Introduce the
team
Step 5 Set the right
tone
Step 6 Exchange information
Step 7 Focus on objectives (interests)
Step 8 Use strategy, tactics, and
countertactics
Step 9 Make
counteroffers
Step 10 Document
agreement or walk away
Tactics and Countertactics I (Buyer vs. Seller)Tactics and Countertactics I (Buyer vs. Seller)
Tactics Countertactics Attacks (hot buttons)
Personal insults Emotional reactions Professional insults
Tricks False data No authority to negotiate
Disclose the attack Strike back Give in Break off Explore alternatives
Know the truth Have the right data Establish in writing who has authority
Escalate
Adapted from Reference Text: pg. 149
Tactics and Countertactics II (Buyer vs. Seller)Tactics and Countertactics II (Buyer vs. Seller)
Tactics Countertactics Arbitrary deadlines
Limited availability
Agree with deadline Counter the offer with compromise schedule Refuse to change schedule
Coordinate schedules in advance Counter with your limited availability Be flexible Escalate
Tactics and Countertactics III (Buyer vs. Seller)Tactics and Countertactics III (Buyer vs. Seller)
Tactics Countertactics Third-party scapegoat
Real approval required Pretend such approval is required
Giveaways
Escalate to third party Compromise
Disclose them as giveaways Exchange giveaways
Tactics Countertactics Good guy – bad guy
Prolonging the negotiation
Counter with bad guy – good guy Escalate
Take a break or have a caucus Maintain silence
Tactics and Countertactics IV (Buyer vs. Seller)Tactics and Countertactics IV (Buyer vs. Seller)
Tactics and Countertactics V (Buyer vs. Seller)Tactics and Countertactics V (Buyer vs. Seller)
Tactics Countertactics Delays
Submission of data Start of negotiation Return from breaks
Diversions Questions Telephone calls Faxes Personal breaks
Start on time Claim limited availability Leave or create greater delays
Keep things on track Refocus team No phones in room No interruptions
Take a break
Tactics Countertactics Stonewall
Take it or leave it! I shall not move!
End-of-quarter or end-of-year negotiation pressure
Give in
Say “Yes, and...”
Walk away
Escalate
Settle in next quarter or next year
Tactics and Countertactics VI (Buyer vs. Seller)Tactics and Countertactics VI (Buyer vs. Seller)
Factors in Selecting Contract TypesFactors in Selecting Contract Types
Capability of seller’s accounting system
Uncertainty in the cost estimate
Type and complexity of the requirements
Urgency of the requirement
Marketplace and competition
Seller’s technical capability
Administrative costs to both parties
Size and amount of the contract
Contract Pricing (Incentives) – Best Practices (Buyer & Seller)Contract Pricing (Incentives) – Best Practices (Buyer & Seller)
Best Practices Observed Extent of Application
Use performance – based incentives Inconsistent
Develop clear, concise, and objectively measurable incentives
Inconsistent
Create a proper balance of incentives – cost, schedule, & quality
Inconsistent
Make incentives challenging yet attainable
Inconsistent
Use a combination of incentives objectively and subjectively determined
Limited
Consider using socio-economic incentives
Limited
Tie on-time delivery to cost and/or quality performance criteria
Limited
Avoid rewarding sellers for minimal performance
Widespread
Use a combination of positive and negative incentives
Inconsistent
Include incentives for early payments
Widespread
Ensure all incentives have limits Inconsistent
Reference Text, Pgs. 118-119
Step 1 Prepare
negotiation minutes
Step 2 Send minutes to the other
party
Step 3 Offer to write
up the contract
Step 4 Prepare the
contract
Step 5 Prepare
negotiation results summary
Step 6 Obtain required
reviews and approvals
Step 7 Send contract
to the other party for signature
Step 8 Provide copies of contract to
affected organizations
Step 9 Document lessons learned
Step 10 Prepare contract
administration plan
Contract Administration
Contract Implementation
Contract closeout or termination
Phase 3: Postnegotiation ActionsPhase 3: Postnegotiation Actions
Understanding How Negotiations WorkUnderstanding How Negotiations Work
For about 15 years of my life, I watched negotiators I was trying to learn from and finally come to the realization that they did not know what they were doing. If something went wrong and I asked, “Well, why did it go wrong?” they could not tell me. If I asked, “What did you do right?” they could not tell me. The insight I got was that no one knew. You can assemble a group of great people who have taken part in great negotiations for a discussion, and they all come up with completely different reasons for why the negotiation was successful and how it worked.
- GERARD I. NIERENBERG
Contract Award Phase – Best Practices (Contract Negotiation & Contract Award Phase – Best Practices (Contract Negotiation & Formation) (Buyer & Seller)Formation) (Buyer & Seller)
Best Practices Observed Extent of Application
Select and train skilled negotiators to lead the contract negotiation process
Inconsistent
Select your negotiation strategy, tactics, and countertactics
Inconsistent
Use an agenda during contract negotiations
Widespread
Do not be too predictable in your tactics
Inconsistent
Develop an approved negotiation plan
Widespread
Conduct mock negotiations Widespread
Document your agreements throughout the process
Widespread
Understand everything affects price Inconsistent
Tailor Ts & Cs to the deal Widespread
Know what is negotiable and what is not
Widespread
Know when to walk away Inconsistent
Adapted from Reference Text, pg. 155
Exercise 4: Contract Negotiations Q&AExercise 4: Contract Negotiations Q&A
1. When does the negotiation begin?
2. Who is normally the chief negotiator?
3. Are you aware of any executives within your organization who makecommitments before the contract is negotiated?
Exercise 4: Contract Negotiations Q&AExercise 4: Contract Negotiations Q&A
4. Do you require and review prenegotiation plans and objectives?
5. Have you ever walked away from a multi-million dollar deal becausethe risks outweighed the benefits?
Unit 7:Unit 7: Post-Award Phase Post-Award Phase & Best Practices & Best Practices
Contract Management Process - Buyer’s and Seller’s stepsContract Management Process - Buyer’s and Seller’s steps
Buyer1. Procurement
Planning2. Solicitation
Planning3. Solicitation
Make-or-buy decision
Seller1. Presales
Activity2. Bid/no-bid
Decision making3. Bid or Proposal
Preparation
Bid decision
Phase 1: Preaward
Buyer4. Source Selection
Contract Award5. Contract
Administration
6. Contract Closeout or Termination
Seller4. Contract
Negotiation & Formation
Contract Award5. Contract
Administration
6. Contract Closeout or Termination
Phase 2: Award Phase 3: Postaward
Reference Text, pg. 159
Contract AdministrationContract Administration
The principal objective of contract administration for both the buyer and the seller is to ensure fulfillment of contractual obligations by all parties to the contract.
Reference Text, pg. 158
Input Tools & Techniques Output
• Contract
• Work results
• Change requests
• Invoices and payments
• Other tasks
• Contract Administration policies
• Contract analysis and planning
• Preperformance conference
• Performance measuring and reporting. Payment system
• Change control system
• Dispute management system
• Documentation
• Contract changes
• Payment
• Completion of work
Contract Management Process: Postaward Phase – Contract Contract Management Process: Postaward Phase – Contract AdministrationAdministration
Reference Text, pg. 159
Key Contract Administration Policies for Buyers and SellersKey Contract Administration Policies for Buyers and Sellers
Compliance with terms and conditions
Effective internal and external communication and control
Effective control of contract changes
Effective resolution of claims and disputes
Reasons for NoncomplianceReasons for Noncompliance
The six great excuses
I never saw the contract.
I didn’t have a chance to read the contract.
I didn’t understand the contract.
I thought the contract was wrong.
That’s not what the contract says!
What contract?
Need for Communication Between Buyers and SellersNeed for Communication Between Buyers and Sellers
Contracts are relationships
Relationships are not cast in concrete-they change with circumstances
Contractual relationships are dynamic
Communication is essential for effective responses to change
Sharing information is necessary, but not sufficient?
Main Tasks for Buyers and SellersMain Tasks for Buyers and Sellers
Analyze obligations, assign responsibilities, and set performance goals
Observe, document decisions and events, and report performance
Identify and analyze variances
Take corrective action
Follow up
Manage changes and disputes
Close out contract
Contract AnalysisContract Analysis
Read all terms and conditions
Separate into technical and administrative requirements
Develop contract work breakdown structure to at least three levels
Identify who is responsible for work elements
Contract Work Breakdown StructureContract Work Breakdown Structure
1.1.1Specification s
1.1.2W ork statem ent
1.1.3Sche dule
1.1T echnica l
requirem ents
1.2.1Paym entproce dure s
1.2.2Cha ng em anagem en t
1.2.3D ispute s
1.2Adm inistrativ erequirem ents
1.0Contrac t
Requirem ents
Setting GoalsSetting Goals
Discuss requirements with affected managers
Determine
Who
What
When
Where
How
Seek agreement and/or commitment
Preperformance ConferencePreperformance Conference
Meeting between buyer and seller
Held before start of performance
Review contract terms and conditions
Establish administrative procedures
Establish communication protocols
Keep and distribute meeting minutes
Records and Files for Buyers and SellersRecords and Files for Buyers and Sellers
Official copy of contract and modifications
Conformed working copy of contract
Correspondence file, log or index, and suspenses
Telephone log
Records of deliveries, inspections, acceptances
Progress and surveillance reports
Property administration records
Invoice and payment records
Progress ReportsProgress Reports
May be oral or written
Include observations and conclusions of others
Present information that is not “real time”
Afford opportunities for errors:
Accuracy
Objectivity
Honesty
Timeliness
Competence of observer
Report ConsiderationsReport Considerations
Subject Matter
Contents
Raw data
Analyses
Conclusions
Combination of above
Frequency and timing
Format
Address(es)
Main purpose: Reduce reliance on human memory
Efforts must be thorough and consistent
Essential for –
Proof of performance
Management of changes
Proof of claims
Evidence in case of arbitration or litigation
Records and DocumentationRecords and Documentation
Contract Change ManagementContract Change Management
Contract
Change Management ActionsChange Management Actions
Changes modify contract requirements, terms, and conditions
They add, delete, or both
They affect the triple constraints:
Performance
Schedule
Cost
Change Management Actions (continued)Change Management Actions (continued)
Modifications are inevitable
Change provides an opportunity for additional sales
Management objectives include –
Control
Customer Satisfaction
Cost recovery
Schedule adjustment
Profit
Change AuthorizationChange Authorization
Ensure that only authorized representatives make, accept, or negotiate contract changes
Add the appointed representatives to the contract
Change orders in writing, when possible
Confirm oral changes in writing
Notification of ChangesNotification of Changes
Notify other party of actions or inactions that are changes, such as constructive change
Notify promptly, in writing
Provide full description and explanation
Control of Claims and DisputesControl of Claims and Disputes
Contract agreements are not perfect
Misunderstandings are inevitable
Claims and disputes –
Are a normal part of contracting process
Must not be allowed to disrupt performance
Must be resolved promptly and dispassionately
Resolution of DisputesResolution of Disputes
Negotiation, compromise
Arbitration
Submission of dispute to disinterested person or persons for final decision
Objective is final disposition in inexpensive, expeditious, and less formal manner
A substitute for litigation
Litigation
Contract Management Process: Postaward Phase – Contract Contract Management Process: Postaward Phase – Contract CloseoutCloseoutBuyer’s and seller’s steps
Contract closeout involves both product verification and administrative closeout
Input Tools & Techniques Output
• Completion of work
• Contract documentation or
• Termination notice
• Compliance verification
• Contract documentation
• Contract closeout checklist
• Termination
• Product or service completion
• Acceptance and final payment
• Contract closeout or termination documents
• Documented lessons learned
Reference Text, pg. 182
Sample Contract Closeout ChecklistSample Contract Closeout Checklist
Yes N/A No1. All products and/or services required have been provided to the buyer.
2. Documentation adequately shows receipt and formal acceptance of
all contract items.
3. No claims or investigations are pending on this contract.
4. Any buyer-furnished property or information was returned to the buyer.
5. All actions related to contract price revisions and changes have been
concluded.
6. All outstanding subcontracting issues have been settled.
7. If a partial or complete termination was involved, action is complete.
8. Any required contract audit is now complete.
9. The final invoice has been submitted and paid.
Sample Contract Closeout Checklist
Types of TerminationsTypes of Terminations
Termination by mutual agreement
Termination for cause or default
Termination for convenience (most widely used in government contracting)
Postaward Phase – Best Practices (Buyer & Seller)Postaward Phase – Best Practices (Buyer & Seller)
Best Practices Observed Extent of Application
Read and analyze the contract Widespread
Develop a Contract Administration Plan
Limited
Assign a Contract Administration Manager
Inconsistent
Comply with Contract Ts and Cs Inconsistent
Control contract changes via contract change process
Inconsistent
Resolve Claims & Disputes promptly
Widespread
Develop a Contract Work Breakdown Structure
Widespread
Manage the invoice and payments process
Widespread
Enforce Contract Ts and Cs Inconsistent
Develop and Implement Contract Admin policies & guidelines
Inconsistent
Adapted from Reference Text: pgs. 188-189
Postaward Phase – Best Practices (Buyer & Seller)Postaward Phase – Best Practices (Buyer & Seller)
Best Practices Observed Extent of Application
Provide copies of the contract to all affected organizations
Widespread
Maintain a conformed copy of the contract
Inconsistent
Document communications Inconsistent
Prepare & distribute meeting minutes
Widespread
Clarify team members roles and responsibilities
Widespread
Provide leadership support throughout
Inconsistent
Prepare contract close-out checklists Widespread
Document Lessons Learned Inconsistent
Share Best Practices Widespread
Reward Team Performance Inconsistent
Adapted from Reference Text: pgs. 188-189
Exercise 5: The Postaward Phase – Q & AExercise 5: The Postaward Phase – Q & A
1. What is the purpose of contract administration?
2. What are the main tasks of contract administration?
3. How important is change management to the successof your business?
Exercise 5: The Postaward Phase – Q & AExercise 5: The Postaward Phase – Q & A
4. How should contract disputes be resolved between the buyer and the seller?
5. How important is it to enforce the terms and conditionsof your contracts?
6. How important is it to document and share lessonslearned and best practices?
A Long-Shot Prediction (Future of Contract Managers) by W. Gregor MacFarlanA Long-Shot Prediction (Future of Contract Managers) by W. Gregor MacFarlan
• Contributory and knowledgeable team members throughout the contract management process.
• Innovative thinkers for strategic decision making, business alternatives, and partnering.
• Useful knowledge of multiple markets and the use of market research.
• Strong internal and external communication and facilitation skills.
• Proven skill in using computer-based programs and e-business media.
• Staying connected through an organization’s digital nervous system.
• Customer-service attitude and results.
• Concern for quality whatever the assignment.
• Continuous learning through professional certification.
How would you be evaluated today given these metrics?
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