copyright (c) iaccm world commerce and contrac8ng. this pdf … · 2020. 9. 25. · • book +...
TRANSCRIPT
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Copyright(c)IACCMWorldCommerceandContrac8ng.ThisPDFifforthesoleuseoflearnerAnaRitaCunhaandmaynotbesharedinanyway.Viola8onswillbesubjecttoprosecu8on.
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Copyright(c)IACCMWorldCommerceandContrac8ng.ThisPDFifforthesoleuseoflearnerAnaRitaCunhaandmaynotbesharedinanyway.Viola8onswillbesubjecttoprosecu8on.
Welcome!
ReneFranzHenschel
Professor,DepartmentofLaw,BSS,AarhusUniversity
IACCMCCMExpert
Co-authorIACCMCCM–TheOpera8onalGuide
IACCMmodelcontractsandcontractprinciplesproject
IACCMAcademicAdvisoryBoard
IACCMContrac8ngExcellence
DanishCommentaryontheCISG(withBenhardGomard)
Ar8clesoncontractandcommercialmanagementetc.
InhousecoursesforcompanieslikeGrundfos,Danfoss,Ecco,Vestas,
DanishTaxAuthori8es,DanishDefense,DanishCastlesandCultureServicesetc.
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• Name• Company• RolewithinContract/commercialmanagement?• Yourexpec8onsastoexpectedoutputofthiscer8fica8on?
Aroundthetable–andbehindthescreenes
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• Module1:29.-30.September2020• Module2:27.-28.October2020• Exam:Onlinemul8plechoice;2hours,upto120ques8ons,
minimum70%or84ques8onsrighttopass
• Exammustbetakenwithin1yearfrom29.September2020–ending28September2021
• Re-exampossible(ca.650kr.)• Prac8cali8es(lunchetc.)
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Topcisandschedule
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• End-to-end(lifecyclus)ContractManagement• IACCMmembershipandrules• Book+slidesarepartofexam• Whattodo–howtodo?• Awarenessversusexpertknowledge• Appendixes….
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CCMPrac>>oner
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(Tobedownloaded)
Ø 1:IACCMBenchmarkreport
Ø 2:NAOGoodPrac8ceFramework
Ø 3:NAOCommercialandcontrac8nginsightsandemergingbestprac8ces
Ø 4:CrownCommercialServices–Opera8ngModel
Ø 5:TCO–dilemmaØ 6:Prince2BusinessCaseTemplate
Ø 7:Top10mostnego8atedclausesØ 8:RFPexamplefromtheUS
Ø 9:RACIexample
Ø 10:Examplesoflaws(DanishAFTL;CISG,UCC)
Ø Addi8onal:Examexercisesandcases
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Appendixes,cases,examexercises:day1–day2.
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Expert
AdvancedPrac88oner
Prac88oner
(Fundamentals)
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CCM-cer>fica>on
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Strategy,organisa8on,leadership
Advancedtopicsandknowledge,CRM,SRM,introduc8ontoleadershipandplanning.
Opera8onalknowledgeandcompetences–connec8ontothe
above…
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CCM-cer>fica>on
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Documentedexperiences,results,specificcase,
peer-review
Onlinemul8plechoice,100-120ques8ons,Cases
Onlinemul8plechoice,ca.100-120ques8ons
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CCM-cer>fica>on
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• 08:30-09:15Introduc8ontoCCMPrac88oneretc.• 09:15-09:30IntroducingIACCM(intro,chap.1)
• 09:30-10:15Ini8atephase.Contrac8ngintroduc8on• 10:15-10:45Ini8atephase.Contractadministra8onoverview
• 10:45-12:00Ini8atephase.Requirementsdefini8on(chap.3)
• 12:00-13:00Lunch• 13:00-13:45Ini8atephase.Costbenefitanalysis(chap.4,5and14)
• 13:45-14:30Ini8atephase.Sourcingop8ons• 14:30-15:30Ini8atephase.UndertakingaTermsaudit(chap.8)
• 15:30-17:00Bidphase.RFI,RFP,RFQ(chap.7,9,10,11,12,15)
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Program–Day1(breaksaLereverylesson)
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• 08:30-09:15Bidphase.Bidprocessandrules(chap.9,10og11)• 09:15-10:00Bidphase.Theinfluenceoflawsonthebidprocess(chap.13)
• 10:00-11:00Bidphase.Developingevalua8oncriteria(chap.9,10,11,12)• 11:00-12:00Bidphase.Applyingevalua8oncriteria(chap.9,10,11,12)
• 12:00-13:00Lunch
• 13:00-14:00BidPhase.Stakeholdermanagement• 14:00-15:00Bidphase.Understandmarkets(chap.2og16)
• 15:00-16:00Bidphase.Opportunityevalua8on(chap.15,16andconnec8ontochap.30)
• 16:00-17:00Developmentphase.Contractsandrela8onshiptypes(chap.18)
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Program–Day2(breaksaLereverylesson)
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• 08:30-09:30Developmentphase.Termsandcondi8ons(chap.19,20og21)• 09:30-10:30Developmentphase.Partnerships,alliancesanddistribu8on(chap.6)
• 10:30-11:15Developmentphase.StatementofWork/SLAs(chap.22)• 11:15-12:00Developmentphase.Contractdrajingtechniques.(chap.23)
• 12:00-13:00Lunch
• 13:00-14:00Developmentphase.Otherstrategicconsidera8ons(chap.21)• 14:00-15:00Nego8a8onphase.Planning,overview,goals(chap.24)
• 15:00-16:00Nego8a8onphase.Framing,strategyandgoals(chap.24)• 16:00-17:00Negota8onphase.Styles.(chap.25)
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Program–Day3(breaksaLereverylesson)
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• 08:30-09:30Nego8a8onphase.Techniques(chap.26)• 09:30-10:30Nego8a8onphase.Tac8cs,tricksandlessonslearned(chap.27)
• 10:30-11:30Nego8a8onphase.Priceandfinancialconsidera8ons(chap.4and21)• 11:30-12:00Managephase.Overview(chap.28)
• 12:00-13:00Lunch
• 13:00-13:45Managephase.Implementa8onandcommunica8on(chap.29)• 13:45-14:30Managephase.Monitoringandperformancemanagement(chap.30
and31)
• 14:30-15:15Managephase.ContractChangeManagement(chap.32)
• 15:15-16:00Managephase.Disputes(chap.33)
• 16:00-16:45Managephase.Contractcloseout.(chap.34)• 16:45-17:00Endingday4–forwardandexam.
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Program–Day4(breaksaLereverylesson)
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Thecourseconsistsof5sec>ons;>Ini8atephase>Bidphase>Developmentphase>Nego8atephase>Managephase
Course structure
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Day 1; Objectives
> Definecontractmanagementandourroleincontrac8ng
> Introducetheprinciplesofcontrac8ng
> Howdoesarequirementneedtobeaddressedtoturnitintoacontract?
> Understandfinancialtoolstohelpevaluateastar8ngposi8ontoacontractgo/nogodecision
> Outlinethecommontypesofrela8onshipsweencounterandsourcingop8onswhenprocuringgoods,productsandservicesandtheiroriginandrespec8veapplicability–andtheconsequencesforcontractmanagement
Ø Learnthebasicsofotherstrategicprinciplesindeliveringcontractmanagement
Ø Howdoweensurethatweremaincompe88veinthemarketplaceandgainaccesstothebestnego8ateddealsviaatermsaudit
Ø Understandwhentousearequestforinforma8on,arequestforproposalorarequestforquota8on
Ø Apply–cases.
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Introducing IACCM
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Whatwedo
> Raisecommercial/contractmanagementandsupplierrela8onshipmanagementprofessionalstandardsandorganiza8onalcapability
Whywedoit
> Toincreaseeconomicvaluefromtradingrela8onships
Howwedoit
> Researchandpromoteuseofbestprac>cetoimprovecompetenceincontractandcommercialmanagement
So;
> Haveyouexploredwhetheryourcontrac8ngprocessesarevalued?
> Howmuchwouldyourcorpora8onbeworthifithadnocontracts?
About IACCM – now World Commerce and Contracting
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MoreaboutIACCM–nowWorldcommerceandcontrac>ng
TheInterna>onalAssocia>onforContractandCommercialManagement
> Over24,000organisa8onsfrom182countries
> 70,000individual&300corporatemembers
> Equaldivideofbuy-sideandsell-side–legal,commercial,procurement
Americas, 41%
Europe, Middle East, Africa;
39%
Asia-Pacific, 20%
Aerospace, Defence 8% Automotive
1% Banking, Ins'ce,Finance
4%
Business Services & Consulting
14% Retail,Consumer 2%
Engineering & Construction
6%
Health Care Equip & Serv
4% Legal 4%
Oil & Gas 15%
Manufacturing & Capital Goods
3%
Other 7%
Public Sector & Government
5%
Software & Info Serv 15%
Telecom 9%
Transport, Logistics 3%
IACCMGeographicProfile
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Thepurposeofacontract
-25%
-20%
-17%
-12%
-12%
-5%
75%
80%
83%
88%
88%
95%
99%
-40 -20 0 20 40 60 80 100
Pain/Gainsharing
Establishcodesofbehavior
Enableapplica8onofcontractualremedies
Linkthecontracttotheagreementofdesiredbehaviors
Enshriningcommonperformancemeasurement
Appropriateriskalloca8onbasedoncommonunderstanding
Definingclearmutuallyunderstoodobjec8ves
NotImportant Important
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Contract(under)performance
Onaverage,30–35%ofanorganiza8on’scontractsunder-perform
Thecostofthatunder-performanceistheequivalentof9.2%ofannualrevenue
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Under-performance,thecauses
Ø Underes8ma8onofcomplexityandscopeofprojectØ Failuretokeeprecordsofcri8caldecisions
Ø Costoverruns-requirementsinstabilityØ Underes8ma8onoftheneedtoengagestakeholders,poorcommunica8on
Ø Inadequatebusinesscase,failuretoiden8fyrealis8cfundingrequirements
Ø Issueswithsupplierselec8onandgovernance-failuretotestcapability,understandincen8ves
Ø Lackofdisciplineinprocess,lipleanalysisorapplica8onof‘lessonslearned’Ø Contractwasnotcommunicatedtoexecu8onteam
Ø Contractscopeandlegaltermswerenotalignedtoachieveonesinglegoal.
Ø Appendix1:IACCMBenchmarkingreport2019
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Initiate Phase Contrac8ngintroduc8on
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FromtheIACCMLinkedIngroup
Whatiscontractmanagement–Opinion1(fromaLinkedIngroupdiscussion)
Thefounda8onofcontractmanagementisbuiltonthreepillars.
1. Contractadministra8on-Handlestheformalgovernanceofthecontractandchangestothecontractdocumenta8on.
2. Rela8onshipmanagement-Keepstherela8onshipbetweenthetwopar8esopenandconstruc8ve,aimingtoresolveoreasetensionsandiden8fyproblemsearly.
3. Servicedeliverymanagement-Ensuresthattheserviceisbeingdeliveredasagreed,totherequiredlevelofperformanceandquality
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FromtheIACCMLinkedIngroup
Whatiscontractmanagement–Opinion2(fromaLinkedIngroupdiscussion)
Isolicit,compete,nego8ate,ensurecompliancewiththetermsandcondi8onsofthecontractforthebenefitoftheen8tyIserve
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FromtheIACCMLinkedIngroup
Whatiscontractmanagement–Opinion3(fromaLinkedIngroupdiscussion)
Wespecialiseinensuringthattheclientgetsvaluefromthepost-awardopera8onofcontractsbyensuringthatcontractsarewripenwiththeiropera8oninmindandthattheyarecloselymonitoredastheinvoicesarrive.Thisensuresdeliveryofvalueandtheavoidanceofloss.
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> Whatdowemeanbybestprac8ce?
?
Programintroduc>on
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Commitmenttochange
Howdowedemonstrateourunderstanding,commitmenttochangeandleadershipinthe
fieldofcontractmanagement?
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Characteris>csofcommi\edprofessionals
Bestprac>ceincludes;> Highperformancestandards
> Masteryofacommonapproach> Beliefinamission
> Sharedlanguageandknowledge> Par8cipa8on
> Self-management> Peerreview> Abilitytocommunicate
> Cri8calthinkingskills> Careergrowth
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Communi>esofprac>ce
Bestprac>ceincludes;
> Avalidatedapproachthathasdeliveredresultsandvaluewithinacompany,industryorins8tu8on
> Communicatewithcolleaguestocreateafounda8onforcollec8veac8on
> Useofinternettools,forumsandcommuni8es
> Developmentofchecklistsandprocesses
> Crea8onofcorporatemodelagreements
> www.iaccm.com
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Success
Con>nuedlearning
Bestprac>ceisalsoaboutcommitmenttoongoinglearninganddevelopment
Enthusiasm
Ideas
Change
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Problemsolving
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Theprofessionalcontractmanager
The4C’softheprofessionalcontractmanager;
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ContractManagement
Control
Crea8vity
Communica8on
Compliance
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TheIACCM’sbestprac>cesincontractmanagementinclude;> Ownershipandaccountabilityforthecontrac8ngprocess
> Termsandstructureauditandupdate> Integra8onwithPLM(ProductLifecycleManagement)
> Porsolioriskmanagement> Supplychainfocus
> Anelectroniccontrac8ngstrategy> Templatesandversioncontrol> Self-helpskillsassessmentanddevelopmenttools
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IACCMbestprac>ces
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TheIACCM’sbestprac>cesincontractmanagementinclude;> Strategicallyalignedmeasurementsandrepor8ng
> Pro-ac8vechangemanagement> Differen8a8onandsourcesofvalue:awarenessandmarke8ng
> Abilitytoalignscopewithcommercialrequirements,riskmanagementandpricing
> Understandingclaimsprocessandmanagementofthisprocess
Ul>mately,plantheworkrightupfront.Thereasonthatmanycommercialagreementsfailtoproducetheresultsintendedisbecauseinsufficient>meis
providedtocompletealltheac>vi>es.
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IACCMbestprac>ces
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Whatisacontractandwhydoesitma\er?> Acontractisanagreementwithavalidoffer(forsomething)
andavalidacceptancewithconsidera8on(paymentorperformanceofsometype)fortheoffer.
> Acontractisalsoaboutdecidingwhatyouwanttobuyorsell,howyouwilldefineacceptance,andhowmuchyouarewillingtosellitfor(orpayforit.)
> Ithastobelegal(e.g.notforassassina8on!!),> Thepar8esinthecontractmustbeofalegalcapacity(nota
minor/insane)
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Whatisacontract
Contrac8ngIntroduc8on
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Beyondadescrip>onoftheitem,itsprice,anditsacceptancearemanyimportanttermsthatshouldorcouldbepartofthecontract;> Contractualtermsdealingwithriskmanagement> Termsdealingwiththe8mingofthedeal> Termsaddressinganyon-goingpaymentobliga8ons> Ownershipandusageissuesforlicensed/leasedgoods(suchassojware)> Deliveryandacceptance> Confiden8ality> Regulatory,securityandprivacyissues> Howchangeismanagedandqualityensured> Therolesandresponsibili8esofallpar8es> Countryoflaw> Precedenceforconflic8ngterms
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Areasthatthecontractshouldaddress
Contrac8ngIntroduc8on
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Initiate PhaseContractadministra8onoverview
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Whatiscontrac>ng.
> Contracting is the act or process of defining, recording and managing the agreement of two or more parties to undertake specific obligations or to achieve particular outcomes in return for specified rights or rewards.
> Contracting is often complex and requires dedicated practitioners to achieve positive results. They are frequently in a position where they must reconcile competing interests and tensions within the business. Failure to achieve this reconciliation results in a loss of value for the contracting parties.
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Variations
Stability
Volatility
Regulation
Creativity
Contrac>ng,abalancingact…
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Purposeofacontractmanager
> The value of contracts is in the outcomes they produce. Today’s contracts are becoming more complex and the risks of failure more severe.
> Too often, companies have had no one providing sustained oversight for achieving those outcomes or managing that complexity and risk – and that is why the role of Contract Manager is emerging as a critical competency in today’s organizations.
> Contract Managers themselves need to start focusing less on what makes them different from each other, and more on recognizing that there is a common and consistent core of activities that underlie their role and professionalism.
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Therole:Pre-award
> Review and provide input / guidance on bids and proposals, in particular on scope, requirements and commercial terms.
> Serve as the point of contact on contractual matters. Identify and evaluate issues / risks in terms; act as “facilitator” between company employees, ensuring timely review and approval / reconciliation of variations to standards, or to negotiated agreements.
> Provide redlined recommendations and negotiate directly with staff from other party until consensus has been reached.
> Initiate / participate in escalations, as required.
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Therole:Pre-award
> Ensure that signed contracts are communicated to all relevant parties to provide contract visibility and awareness, interpretation to support implementation.
> Identification / negotiation of sub-contractors. > Provide guidance to project managers or other operational staff, including
training to new project managers and other employees in contracting practices and procedures.
> Develop and implement procedures for contract management and administration in compliance with company policy.
> Monitor compliance by company employees with established procedures.
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Requirements Gathering
Proposal Generation Guidance Evaluation Approvals
Analysis Facilitate input Others in deptCriteria identification
Negotiation planning
Formalise process
Performance metrics
Project managers Weighting
Winner identification
Direct the team Quality control Legal interactionConflicting criteria BAFO round
CoordinationData management & recording
Suppliers Matrix developmentTerms and conditions
Communication Identify bidders Other stakeholdersEvaluation decision
Monitor process
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Pre-awardcontractmanagement:Ac>vi>es
Contract Administration
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Therole:Post-award
> Maintain contractual records and documentation such as receipt and control of all contract correspondence, contact information sheets, contractual changes, status reports etc.
> Manage sub-contractors, equipment or service supply (as below). > Handle on-going issue and change management, monitor transaction
compliance (milestones, deliverables, invoicing etc.) and oversee Service Level Agreement compliance.
> Monitor / report on claims; provide support to Legal in the event of dispute.
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Therole:Post-award
> Provide guidance to project managers or other operational staff, including training to new project managers and other employees in contracting practices and procedures.
> Develop and implement procedures for contract management and administration in compliance with company policy.
> Monitor compliance by company employees with established procedures. > Work with internal functions (e.g. Risk Management / Finance / Export
control etc.) to coordinate contractual requirements on insurance, shipping, payment, guarantees, and adherence to revenue recognition, pricing and discounting policies, etc.
> Ensure contract close-out, extension or renewal.
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Implement Manage Change Dispute Close
Analysis Schedule ManagementIdentify Need / Opportunity Document
Termination- Cause- Convenience
Process (Quality Standards)
Performance Monitoring Communicate Claim Closeout
Standard Forms & Methods Quality Control Negotiate Escalation
Continuing Obligations
ToolsData Management & Recording
Record Negotiation Accounting / Payment
Communication Payment Mediate / Arbitrate Documentation
Cost Management & Reporting
Litigate Lessons Learned
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Post-awardcontractmanagement:Ac>vi>es
Contract Administration
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Therole:Strategyandenablement
Ø Involved in setting, managing and changing the policies, practices and procedures that determine contract terms.
Ø Ensure that commitments sought or given are ethical, achievable and in compliance with organizational policy.
Ø Undertake competitive and market research on commercial terms, policies and practices; audit contract structures and terms to provide competitive advantage.
Ø Align with product / service lifecycle management to ensure go-to-market strategies include competitive terms and conditions.
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-
Therole:Strategyandenablement
> Undertake financial assessments of risk terms and financial modelling of contract offerings.
> Identify and implement technology systems and tools to improve efficiency and effectiveness of contracting process.
> Propose opportunities for innovation and improvement in contracting to executive management.
Ø In some cases, may have a major role in market entry or management, new business development, channel strategy / management.
Ø Appendix 2: NAO Good Practice Framework Ø Appendix 3: NAO Commercial and contracting emerging best practices Ø Appendix 4: Crown Commercial Services – Operating Model (post-award)
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Initiate Phase Requirements definition
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-
Requirementsarethe;> Opportunitytodefinethecardinalpointsoftheproduct> BasisforRFP(RequestforProposal)andsolici8ngresponses> Frameworkforguidingappropriatesolu8ons> Basisforpricing> Founda8onfornego8a8ons> Communica8oncomponentamongstakeholders> Contractcomponentorreference> Basisforchangecontrol
Therequirementsarethebasisfordefiningthescopeofworkorthescopeofsupply
Definingtheroleofrequirements
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-
Whydorequirementsma\er?
• > Qualityofrequirementsiscri8caltothesuccessoftheproject• > Poorrequirementsusuallyresultininefficientdelivery• > Poorrequirementscancreateambiguityandconfusion• > Poorrequirementscanresultincostorotherresourceinefficiencies
Benefitsofgoodrequirementsinclude;• > Bepersolu8on• > Lowercosts• > Improvedimplementa8onandadop8on.
Requirementsdefini>onisimportant!
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Risksofdeficientrequirements;
• > Wasted8me• > Highlevelsoffrustra8on• > Decisiontoproceedwiththewrongsolu8on• > Failureoftheprojectaltogether• > Exactalignmentwithspecifica8onsmaybe
impossible• > Objec8vemaybe“closestfit”basedonpriori8zed
requirements
Requirementsdefini>onalsoma\ersbecause...
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-
Moredetailedrequirementsmean;> Greaterunderstandingamongstakeholders> Abilitytoan8cipateculturalandtechnicalissues> Clearercommunica8onwithvendors> Reducedcostofpoorqualityandrework
Requirementsambiguity
Projectcosts
Highcon>ngencyfactoringincontractprice
Uncontrolledchange
Pooradop>onrates
AbandonmentVaguerequirementsriskspiralingcosts
Costandriskofpoorcontrac>ng
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-
Requirementscanchangeandmaybecomereflectedinachangetothescopeofwork
Changestoscopecanbecontrolled,accordingtowhetherthepar8esdeemthatthechangetorequirementscanbemetforanacceptablepriceand8mebudget
Managingchange,becausethingsgowrong
> Founda8onforchangecontrol> Businessprocess,regulatoryandtechnical
environmentschange> Specifywhereflexibilitywillbeimportant
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-
Andissuesarisebecause…
Mostfrequentissuesinrequirementsdefini>on;> Requirementsareojenincomplete
> Dependentonviewofthesolu8on
> Failtoreflectrangeofstakeholders
> Ignorepoliciesandstandards
> Predisposi8ontorushtosolu8on
> Requirementswillevolveandcondi8onswillchange
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Requirementstoolsandtechniques
Requirementschecklist> Ini8aliza8onprocess> Requirementspriori8za8on> Requirementsdefini8onworkshop> Requirementsgatheringpro-formaor
ques8onnaire> Structuredinterviewsandusability
analysis> Researchandbenchmarking> Templates,policiesandguidelines> Prototyping> Tes8ngofscoperequirementsagainsta
teamofunassociatedspecialists.Cleaneyereviews
Otherconsidera>ons> Investmentstrategy> Corporategovernance> Corporatepoliciesandstandards> Financialperformance(e.g.ROI)> Func8onalperformance> Strategicpartnershiprequirements> Humanimpactevalua8on> Cross-boarderinteroperability> Qualitystandards> Requiredstandards(eg.SLA,KPI)> Termsandcondi8ons> Warrantyandmaintenance> Vendorrela8onship
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Requirementsdefini>onworkshop> Cri>calelements;
• Communicatethesessiontoallstakeholders• Invitestakeholdersaccordingtosessionstrategies• Recordallitemsinnotes• Createformaldeliverable• Referencethedeliverableintherequirements
Requirementsgatheringtechniques
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Beyondtherequirementsdefini>onworkshop(1)
Standards,policiesandtemplates> Technicalstandards> Servicelevelrequirements> Communica8onsprotocols> Termsandcondi8onsStructuredinterviews> One-on-onefocusallowsextensiveanalysis
Copyright(c)IACCMWorldCommerceandContrac8ng.ThisPDFifforthesoleuseoflearnerAnaRitaCunhaandmaynotbesharedinanyway.Viola8onswillbesubjecttoprosecu8on.RequirementsDefini8on
-
Beyondtherequirementsdefini>onworkshop(2)
Pro-formaandques>onnaires> Essen8alforglobalorothergeographicallydispersedorganiza8ons> Low-costalterna8vetoface-to-facesessionsResearchandbenchmarking> Bestprac8ces/technicalstandards> ServicelevelrequirementsforSLAs> Trainingandsupportprograms
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-
Causesfordelayorfailure
Requirementsaimedatasolu>on-drivenresponse> Pre-definedsolu8onmaybedrivenbyperceivedlowcostandeaseof
implementa8on> “Shrink-wrapped”solu8onsmaylackthecapabilitytoconformtorequirements> Solu8onmayrequireprocessreengineering> Performgapanalysis:solu8onspecifica8onsvs.ar8culatedrequirementspriorto
selec8on
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Causesfordelayorfailure
Requirementsdriventhroughignorance> Ignoranceofrangeofstakeholders> Ignoranceofinternaleconomy> Failuretounderstandcomplexity> Ignoranceofstandards> Ignoranceofhumanimpact> Ignoranceoftheobjec8ve(orendgame)> Ignoranceofhowscopewillbeadministered> Ignoranceofhowpricingandscopearealigned
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Initiate Phase Costbenefitanalysis
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CostBenefitAnalysis
Costbenefitanalysis
> Keyknowledgeareas> Seyngbaselinesandtargets> Evalua8ngalterna8ves> Linkingmetricswithrequirements> Incorpora8ngkeyindicatorsinsupplierevalua8on> Cost-onlyanalysis> Returnoninvestment(ROI)> Paybackperiod> Riskscenarios> Alignmentwithstrategy
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Acquisi8on
Delivery
Maintenance
Installa8onSupport
Upgrading
Decommissioning
Totalcostofownership(TCO)
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Ø Appendix5:TCO
-
ReturnonInvestment(ROI)
Describesthedegreetowhichaninvestmentcontributesfinancialreturntothecompanyoveraperiodof>me
ROIprovidesnoindica>onofstrategicvaluenorthelikelihoodofsuccess
CostBenefitAnalysis
Returnoninvestment(ROI)
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Investment amount
Income from investment
Investment amount
-
Breakevenanalysis
Time
Cos
ts /
Rev
enue
s
RevenuesInvestment
Net Loss
Profit
Immature Growth phase Maturity
Break-even Point
CostBenefitAnalysis
Wherepossible,break-evenanalysisaddsthedimensionofcostrecoverySimpleapproachiden8fiespointin8mewhencashin-flowsequalcashouslows
Thesooner,thebeper
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CostBenefitAnalysis
Cashflowanalysis
Analysisofcashinflowsandouslowsrelatedtoaninvestmentoveragivenperiodof8me
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Presentvalueaccountsforthecostofcapital
> Higherinterestrates=greatercostofcapital
> Thehighertheinterestrate,thelowerthePresentValue
> Asn(numberofyearsofinvestment)increases,thepresentvalueoftheinvestmentdecreases
Investment
(1 + Annual Interest Rate)Present Value = n
CostBenefitAnalysis
Presentvalueofmoney
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DCFintegratestheconceptofTimeValueofMoneySoatannualinterestrateof10%....
CostBenefitAnalysis
Discountedcashflowanalysis
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> IRRdiscountrateforwhichpresentvalueoffuturecashflowsequalsthecostoftheinvestment
> AhighInternalRateofReturnmeansa
lowPresentValueorcostofinvestment
> Aninvestmentisconsideredacceptableifitsinternalrateofreturnisgreaterthananestablished“HurdleRate”–ie.AminimumIRR
CostBenefitAnalysis
Internalrateofreturn(IRR)
IRR=~12.65%
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CostBenefitAnalysis
Balancedscorecard
Evalua>nginvestmentsbasedupona“balanced”setofcriteriathatenablenear-termandsustainedvalue
> Financialperformance> Customerrela8onships> Businessprocess> Employeelearningandgrowth
Managementtoolevaluatesperformanceagainstcriteria
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CostBenefitAnalysis
Businesscase;Cri>calsuccessfactors
> Useacceptedbusinesscaseapproachtocreatecompellingcaseforalternateapproach,supportedwithfacts,researchandanalysis
> Usepreviousperformancedatatovalidateclaims
> Expressbenefitsinfinancialterms
> Incorporateriskanalysistoiden8fypoten8albarriersthatwillderailcashinflowsorotherexpectedbenefits
> Iden8fyhiddencoststoassurerealis8cfinancialprojec8ons
> Extendbusinesscasetobefounda8onforongoingperformancemeasurement
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CostBenefitAnalysis
Credibilityofassump>ons
> Ar8culateassump8onsclearly
> Provideevidenceonwhichassump8onsarebased
> Providealternatecost/benefitscenariosifspecificassump8onsproveunrealized
> Providean8cipatedremediesandprojectedcostsifspecificassump8onsproveunrealized
> Valida8onwithkeyindividualsthatarerespectedfortheirknowledge
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CostBenefitAnalysis
Typicalbusinesscasestructure
• > TheManagementSummary–outliningthepreferredop8onandtheapproachtakeninarrivingatthis
• > TheStrategicCase–outliningthecompellinglongertermdriversforchange,contribu8ontocorporatestrategyandobjec8ves,costreduc8onsandnetbenefits,keyoutcomesexpectedandop8onalscenariosummaries
• > TheFinancialCase–Outliningdifferentbenefitscenarios(eg,low,mediumandhighyieldop8onstoallowforop8mismbias),andthephasingthrough8meofwhenthesebenefitsaretobedeliveredorrealised
• > PrincipalBenefitAreas–Ojenincludescontractrenego8a8onandrenewal,innova8vetechniques,processesandexis8ngequipmentupgradeinlinewithtechnologicaladvancement,corporatesocialresponsibilityenhancement,mee8ngregulatoryrequirements
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CostBenefitAnalysis
Typicalbusinesscasestructure
• > ConstraintsandDependencies–Areasofblockagetotheopportunitythatneedtobeovercomeifsuccessistobeachieved.Capabilityoftheexternalmarkettosupportini8a8ve
• > TheEconomicCase–op8onsconsidera8onfromadonothingapproachrightthroughtothepreferredop8on.
• > TheCommercialCase–Subsequentcommercialbenefitsarisingfromimplementa8on,eg.abilitytotradeandleveragetheimplementa8on
• > TheManagementCase–Projectmanagementrequirements,highlevelplanwithmilestones,riskandissuemi8ga8onandmanagement,benefitsrealisa8onprocessownership,opportunityanalysis,8mescalesandcon8ngencyplans
Ø Appendix6:Prince2BusinessCaseTemplate
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Initiate Phase Sourcingop8ons
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Analysis;Iden>fyingcontribu>on
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Contribu>ontoBusiness
Opera>ons
Contribu>ontoCompe>>vePosi>oning
Low High
UsefulCommodity
Cri>calCommodity
Cri>calDifferen>ator
UsefulDifferen>ator
High
SourcingOp8ons
-
Analyzeandiden>fywhattobuildanddevelopyourselfandwhattosourceexternally
> Ifstar8ngthebusinesstoday,wouldyous8llbuildthisfunc8onorprocess
internally?
> Isyourcompanysocompetentatthisfunc8onthatothercompaniesmightcontractwithyoutodoitforthem?
> Willmostofyourfuturetopexecu8veslikelycomefromthisfunc8on?
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Thesourcingdecision
SourcingOp8ons
-
Awelldefinedgovernancestructure;
> Withinbothownandsupplierorganiza8ons
> Ensureproceduresaredefinedandagreed
> Iden8fyperiodsforreview,con8nuousimprovementplanning
> Mo8vateperformance,deliveraddedvalue
> Managementisajointresponsibility
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Rela>onshipmanagement
SourcingOp8ons
-
EXECUTIVEMEETING
SERVICE&OPERATIONALMANAGEMENTMEETINGServiceManagement
Opera>onalManagement
COMMERCIAL&RELATIONSHIPMANAGEMENTMEETINGRela>onshipManagementCommercialManagement
ServicePerformanceReport(Periodic/MonthlyReport);-KPI(R/A/G)Trending-Historiccommentary-Forecastac8onplan(tac8cal)-ServiceCredits,etc
Excep8onRepor8ngServiceImprovementSugges8onsForecastac8onplan1stLevelEscala8on
Execu8vebriefingSharedAccountPlan2ndLevelEscala8on
JointStakeholderCommunica8on
SharedAccountPlan-Mission-Jointstatementofintent-Objec8ves-PerformanceMeasures-Excep8onRepor8ng-Ac8onPlan-Innova8on/ValueAdd
JointPerformanceEduca8on
PartnershipCharter(op>onal)Execu8vestodefine
Sharedaccountplan
Copyright©BManagement2014SourcingOp8ons
Role Responsibili>esMD/ChiefExecu8ve Guidance&Advice
Execu8vesponsor
Approval,sponsorshipanddirec8onofPartnership
AccountDirector
Owningandassuringrela8onshipsatalllevels.
ServiceRela8onship JointDeliveryofService
AllstaffToworkwithcontrac8ngorganisa8oninlinewiththePartnershipCharter
Role Responsibili>esDirector Guidance&Advice
Execu8veLead Approval,sponsorshipanddirec8onofPartnershipSupplierRela8onshipManager
ToleadthePartnership
AllstaffToworkwithSupplierinlinewiththePartnershipCharter
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-
• > Noprojectcanbemaderisk-free.Totheextentpossible,risksmustbedefined,understoodandmanaged.ConductPESTLEanalysis
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Definetherisks
SourcingOp8ons
-
SWOTanalysis
Strengths> Whatwehave
Opportuni>es> Whatwecouldhave
Weaknesses> InternalProblems
Threats> ExternalProblems
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-
Sourcingop>ons
Tradi>onalmodels;> Internaldelivery
> Fulloutsourcing
> Selec8veoutsourcing
Co-opera>vemodels;> Build-operate-transfer
> Jointventures
Onetomanymodels;> Best-of-breedconsor8um
> Primecontractor
Themodelchosendependsupontheoutcomeofabuildversusbuydecision,andalsothenumberofdeliverypartnerstobeinvolved.
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JointVentureOutsourcing
Selec>veOutsourcing PrimeContractor
Consor>ums
FullOutsourceInternalDelivery
BuildOperateTransfer
Num
bero
frela>
onships
Buildvs.Buy
Source:GartnerNineSourcingOp8ons;G00211001
-
Internaldelivery
• > Deliveredbyyourownstaff• > Becomeaspecialismuponwhichyourely
• > It’sa“letsbuildit”decision• > Donotwanttobedependentuponothers
• > Requirecontroloverdelivery
• > Aviablesourcingop8on,evenifthereisnoformalcontractinplace
• > Mayendupbeingoutsourced
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Num
bero
frela>
onships
Buildvs.Buy
InternalDelivery
Source:GartnerNineSourcingOp8ons;G00211001
-
Fulloutsourcing
• > Theoppositeofinternaldelivery• > Contractwithasinglesupplierfordeliveryof
theen8rescope
• > Mayhavemul8plecomplementarycapabili8es
• > Fulloutsourcingismorealignedtocommoditydelivery
• > Astraightonetoonerela8onship• > Servicesmaybebrokenintocons8tuent
partsaspartofalatermul8-sourcingdeal
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Num
bero
frela>
onships
Buildvs.Buy
FullOutsource
Source:GartnerNineSourcingOp8ons;G00211001
-
Selec>veoutsourcing
• > Aboutmaintainingownershipoftheprojectscope
• > Sizeablepor8onsofwork• > Customerperformsintegra8on
• > Usedwhensuppliersdonothavebreadthofcapability
• > Usedwhensuppliershaveanichespecialty
• > Lookingtoleverageacompe88vemarketplace
• > Onesuppliermays8lldelivermajorityofproject/services
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Num
bero
frela>
onships
Buildvs.Buy
Selec>veOutsourcing
Source:GartnerNineSourcingOp8ons;G00211001
-
Buildoperatetransfer
• > Amorecomplexmodel• > Contractwithsupplybasetodesign,build,
operateandsubsequentlytransferprojecttocustomer
• > Thebasisofalongtermrela8onship
• > Usedbycommissioningbodies• > Greaterresponsibilityonthecustomerto
beinvolved
• > Strongrela8onsnecessaryduetolatertransferofassets
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Num
bero
frela>
onships
Buildvs.Buy
BuildOperateTransfer
Source:GartnerNineSourcingOp8ons;G00211001
-
Jointventureoutsourcing
• > Usuallycreatesanewlegalen8ty• > Supplierorcustomerorbothhaveaneed
fortheothersservicesincrea8ngamarketopportunity
• > Maygoontoprovideservicestoothersaswellastotheclientorganisa8on
• > Clientisnotonlyinasupplierrela8onship,buthasaresponsibilitytowardsitselfanditsownshareofthejointventure
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Num
bero
frela>
onships
Buildvs.Buy
JointVentureOutsourcing
Source:GartnerNineSourcingOp8ons;G00211001
-
Bestofbreedconsor>um
• > Agroupofsuppliersprovideacoordinatedtenderresponseiden8fyingthatitsthereinten8ontoworktogether
• > Eachhasaspecialtythatmakesacombinedbidstronger
• > Maynotbeabletodeliverinisola8on• > Doesnotcreatealegalen8ty
• > Mainconcernisaboutdeliveringtothescope
• > Therewillbeaconsor8umleadpartner
• > Clientwillrequireexcellentcontractandrela8onshipmanagementskills
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Num
bero
frela>
onships
Buildvs.Buy
Consor>ums
Source:GartnerNineSourcingOp8ons;G00211001
-
Primecontractor
• > Aboutriskalloca8onandtheownershipofresponsibility
• > Primecontractortakesresponsibilityfordeliveringen8rescope
• > Willinvolveanumberofsubcontractrela8onships
• > Clienthasarela8onshipwithprimecontractorandleveragesthisforissueresolu8on
• > Clientmaynominatespecificsubcontractorswhichtheprimecontractorhastomanage
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Num
bero
frela>
onships
Buildvs.Buy
PrimeContractor
Source:GartnerNineSourcingOp8ons;G00211001
-
Commonlyoutsourcedfunc>onsandprocesses
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IT Administra>ve ProductDevelopment
Sojwaredevelopment Finance&Accoun8ng Research&Development
Managedservice
BackOffice
• Ordermanagement• POprocessing• Contractmanagement
Engineering
Technicalhelpdesk/support HumanResources ProductDesign
Source:DukeUniversity/ArchstoneConsul8ngReportDecember2005
SourcingOp8ons
-
Considera>onsbasedonoutsourcingcategory
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0% 20% 40% 60% 80% 100%
Primarydriversandtheirrela>veimportance
Accesstonewmarkets
Systemredundancy
Increasedspeedtomarket
Changerulesofgame
Businessprocessredesign
Improvedservicelevels
Industryprac8ce
Accessqualifiedpersonnel
Compe88vepressure
Growthstrategy
Takingoutcost
Source:DukeUniversity/ArchstoneConsul8ngReportDecember2005
SourcingOp8ons
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Considera>onsbasedonoutsourcingcategory
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0% 20% 40% 60% 80% 100%
PrimaryRisksAndTheirRela>veImportance
Instability
Operational efficiency
Disaster recovery
IP loss
Weakening morale
Loss of control
Employee turnover
Client acceptance
Corporate culture buy-in
Data security
Cultural fit
Service quality
Source:DukeUniversity/ArchstoneConsul8ngReportDecember2005
SourcingOp8ons
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Whatcanyoudotocontractsuccessfully?
• > Implementrulesofthumbformanagingchange• > Obtainprojectsponsorshipandgovernance
• > Provideanalysis:Aclearmethodology
• > Defineandrevalidateobjec8ves• > Managestakeholderexpecta8ons
• > Managerisks/keyques8ons• > Ensurerela8onshipmanagement/seniormanagementinvolvement
• > Haveacompletecontractwithclearmeasuresofperformance
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Successfactors;Adecadeoflearning
SourcingOp8ons
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Initiate Phase Undertakingatermsaudit
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Whywouldyouundertakeatermsaudit?
Toremaincompe>>ve!
Undertakingatermsaudit
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Conduc>ngatermsaudit
• > A‘termsaudit’needstoensurethattermsalignwith;• Businessprocesses(andopportuni8esfortheirimprovement)
• Marketorbusinessneedsandpriori8es
• Resourcecapabili8esandcommitments• > Iftermsarealignedwiththesefactorsandstepstakentoensurecon8nued
alignmentover8me,thencontractualandbusinessrisksareminimized.
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Areyourtermsfitforpurposeandaligned
UndertakingATermsAudit
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Whywouldyouundertakeatermsaudit?> Cost&easeofdoingbusiness> Maintainingeffec8vecomplianceHowwouldyouundertakeatermsaudit?> Startwithinternaldata(ifavailable)&externalstudies> Useinternalques8onnaire> Benchmarkwithothers> U8lizetheservicesof3rdpar8es&associa8ons> Listentotradingpartners(developrela8onships)> Par8cipateinroundtables,interviews,networkevents
Sotermsauditsareabout
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EnsureyourauditcoversallelementsoftheContract;
> Coretermsandapprovedtermop8ons> Apachments> Specifica8ons> Workorders> Changeorders> Servicelevelterms> Governance> Dates> Pricing
Thetermsauditshouldconsiderabusinessperspec8ve;whatbusinessissueshavearisen,thatcouldhavebeenavoidedifthetermshadaddressedthemspecifically,orhadbeenbeperappliedinprac8ce?
Scope
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Whatisanac>veterm> Ac8vetermsrequireresources,processandmustbeac8velymanaged–greatest
impactonefficiency,cost&profit> Theserequireaprocessorresourcefortheirimplementa8onormanagement
Whatisapassiveterm> Passivetermsareinvokedasaconsequenceofsomeothereventandmaynever
comeintoeffect> Theselimitorcontroltheconsequencesifandwhensomethinggoeswrong,but
typicallyareirrelevantifthingsgowell
Specialcases> Someterms-forexamplewarran8es–containbothac8veandpassiveelements.
Inthisexample,awarrantydefinesthescopeofresponsibilityorliability(passive),butmayalsosetaperiodof8melimit,specificlevelsofserviceorac8onsthatwillbetakentoensurecompliance(ac8ve).
Ac>veandpassiveterms
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Consequencesofinappropriateterms
Whataretheconsequencesofinappropriateterms?> Othercompaniesmayrefusetodobusiness> Reducedcompe88onmayfavoroneparty> Conten8oustermsdelayclosure,increasenego8a8on
andcosts> Containingfailurewhilemissingopportuni8es> Lostefficiency,unnecessarycomplexity> Missedincrementalrisk,failuretotacklerealissues> Don'tmeettheopera8onalneedsofthebusiness> Presentapoorpictureoftheorganisa8ontoother
contrac8ngpartners> Failtoaddressgenuineriskareas,whilefocussingon
theore8calrisks(e.g.indemni8es)
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Somecommonexamplesare;
Examplesofpoorlyplanned/managedterms
> Internalstakeholderpolicies> ClarityonownershipofIP> Liabili8es> Transferringcontractsbetweencountries,e.g.UStoGB> Corporategovernanceregula8ons> Clarityonchangemanagementcostsandresponsibili8es
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Whentoaudit
Decidingfrequencyofauditsistricky> Internaldrivers> Shijsinmarketstrategy/condi8ons> Changeinlegalposi8ons,statutes,regula8ons
Essen>ally> Auditwhenyour‘Monitoringmechanisms’indicatea
need
Suchas> HighdemandforservicesfromContractsteam> Increasingconfronta8on–“roadblock”> Internal(withSales,BusinessUnits)> External(withtradingpartners)> Growingfrequencyof‘specialbids’orexcep8ons
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Undertakingtheaudit
Whenundertakingtheauditthinkabout;
• > Whattradingpartnersaresaying• > Driveyourownperformance
improvements
• > Lookfornon-obviousconnec8ons• > Incorporatechangesinlawortechnology
• > Understandporsolioofcontracts&rela8onshiptypes
• > Iden8fy“heavyhipers”
• > Documentexpectedbenefitsandmeansofmeasuring
• > Gainexecu8vesupporttodrivechange
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Sampleaudits;Example
Term Priority List Frequency Contracts AffectedLiability High MA, SMEPayment High MA, SME, RWarranty High AllReturns Medium RAcceptance Medium MAPrice (MFC) Medium MADelivery Medium SME, RIP ownership Medium MA, SMEDemo products Medium MA, R
020406080
100
%Revenue
%Contracts
Frequencyof Issues
Consumer ResellerSME Major Account
Termscausingproblems> Liabili8es> PaymentØ Warran8esØ Appendix7:Top10mostnego8atedclauses
Mostproblemsinmajoraccounts
> Affec8ng40%Revenue> 80%+Frequency
StartHere!
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Doyourtermsdeliverwhatyouwant?
Tooojencontractsarewripentospecifyhowsomethingwillbedone,ratherthanwhatthegoalis.Thatojens8flescrea8vityandcausesconten8on;itusuallyresultsinthegoalbeingmissed.
SOWorSLAsareclassicexamples.Forexample.....thisclause;
• “GrasswillbecuteveryWednesdayduringthemonthsofAprilthroughOctoberandtreatedwithFamousLawnfer8lizerandweedkillereveryfourthcut.”
Whatarethegoalshere?Whymaytheynotbeexactlymet?
Whatcouldbedoneinstead?
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Outcomesversusac>vi>es
UndertakingATermsAudit
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Don’tIjustwantanoutcome?
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Bid Phase RFI,RFP,RFQ
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RFI/RFP/RFQ
RFI(RequestforInforma>on):Youhavelipleinforma8onaboutthesolu8onandneedtoexploreanideaorgetinforma8onfromsupplierstohelp
RFQ(RequestforQuota>on):Youhavepreciseinforma8onaboutpurchase(usuallyacommodityitem),you’reinterestedinbestpriceonthebestterms.
RFP(RequestforProposal):Isusedtosolicitproposalsfromsupplierswhereyouhavestrongandwellthoughtoutbusinessrequirements.
RFx:AtermojenusedtogenericallydescribetheRFI/RFP/RFQ
Butthefollowingmaynegatetheneedfortheabove;
> Whereyouneedtoprocuresomethingimmediately.
> Onlyonesuppliercansupplytheproduct,oryoucanonlyuseonesupplier
> Whereapre-exis8ngcontractalreadycontrolsthedeliveryoftheproduct.
> Wherecommodityorbusinessexchangesexistwithacompe88vesupplyoftheproduct
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AnRFIisarequestforinforma>on.ItisdifferenttoanRFP,arequestforproposal,andanRFQ,arequestforquota>onRFI(RequestforInforma>on):Youhavelipleinforma8onaboutthesolu8onandneedtoexploreanideaorgetinforma8onfromsupplierstohelpyou;> AnRFIoriginatesfromgatheringrequirements> Business> Func8onal> Technical
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Requestforinforma>on(RFI)
RFI,RFP,RFQ
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Coverle\er> Intent,evalua8oncriteria,legalstatusofagreement,responseinstruc8ons
Execu>veoverview> Introduc8on,objec8ves,scopeandsummary
Generalinforma>on(egguidelines)> Productorservicepurpose,process8melines,changes,confiden8ality
Informa>onformat> Requiredtobeconsistentacrossbidders,assump8ons,schedulees8mates
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ContentforanRFI
RFI,RFP,RFQ
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Requiredbidderinforma>on> Corporateinforma8on,financial,legalrestric8ons,previousworkperformed
Func>onalandtechnicalrequirements> Skillsetsneeded,tes8ngmethodsandacceptanceop8ons,managementof
change
Budgetarypricingrequirements> Supplyaspreadsheetcostformatthatthesuppliersfillintoguaranteeuniformity
inresponsesandallowquickapples-to-applescomparisons.> Thecostresponseisusuallyhighlyconfiden8alandyouwanttolimititsexposure
withinyourcompany.
Termsandcondi>ons> IncludeyourstandardT&CswithintheRFI
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ContentforanRFI
RFI,RFP,RFQ
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RFPareusedbecause...
RFP’s(versusRFQandRFI)comeintoplaybecause;> Thepurchasemaybeverycomplex> Therearespecificgovernancerequirements> Youaredocumen8ngthatafairprocessisbeingused> Youarereleasingalargeamountofinforma8ontobidderstogiveyouthebest
solu8ontotheprojectorproductrequirement> Youarelookingtoleveragemarketcompe88on
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RFPsasaprojectwithadefined>meframe
TheRFPisaprojectinitselfandcantakemanymonthsfromincep>ontocontractaward.TimeframesintheRFPshouldcontainthefollowing;> RFPissuedate> Intenttobidduedate> Responseandbidduedate> Finalsupplierselec8on(s)date> Bestandfinaloffer(BAFO),finalsupplierresponsedue> Finalsupplier(s)BAFOdecisiondate> Contractnego8a8ons> Product(deliverables)readyforacceptance/deliverydate> Product(deliverables)accepted/in-servicedate
Runningatendershouldbeconsideredaprojectandhavephases,milestonesandfollowaprojectplan
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RFPprepara>onandcontent
Execu>veoverview> GainapprovaltosendoutRFP> Basicdetailsandobjec8vesofproject> Re-introducethemtoprojectincasetheyareinvolvedinmany> Proposedscopeandrela8oninrespectofbusinesscontext
Othersinvolved> Projectmanager> Technicalrepresenta8on> Legal,security(auditandcomplianceforbiddersandinforma8onreleased)and
contractmanagementdept> Financeforbudgetaryplanning
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RFPcontent
> ACoverle\er(statementthatevaluateallresponsesonthebasisofnetprogramcost,completenessofthebidder’sresponse,bidder’swarran8es,managementsupport,productsupportandrelatedbusinessfunc8onstogetherwiththequalityandserviceexpectedbythecompany)
> AnExecu>veoverview(highlevelexpecta8ons)> GuidelinesfortheRFP(8melines,specificinstruc8ons)> Arecommendedorrequiredproposalformat> Requiredbidderinforma>on(notbelimitedtofinancialstatements,corporate
structure,legalormaterialrestric8onsthatwouldprecludethebiddersabilitytodeliveronaproject)
> Func8onalandtechnicalrequirements(includingSOW,acceptancecriteria/acceptablenon-compliance)
> Pricinginforma8on> Legaltermsandcondi>ons> Securityrequirements
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RFQisused...
Whenthereis;
> Aclearanddefinitedescrip8onofthetype,quan8tyandqualityofthegoodsandremedies
> Aspecifiedtotalprice/apricegivenperunit/byweight/othermeasurement> Aclearunderstandingofpricechanges> Anindica8onofwhatcosts,willbechargedseparately(e.g.delivery,taxesand
du8es,especiallyforinterna8onaldeals)
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KeydifferencesbetweenanRFIandRFP/Q
> ThekeydifferencebetweenanRFIandanRFP/Qisthatthelaperwillalwaysincludepricinginforma8on,whereasanRFImaysimplybeusedtoexplorewhatisavailableinthemarket.
> Consequently,anRFImaynotincludecontractterms,whereasanRFP/Qshouldalwaysdoso.
Ø AnRFIisnotproviding“proposals”–theyareproviding“informa8on”.
Ø SeeAppendix8:RFPexamplefromtheUS
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RFPmanagement(1)
> Thecontractmanagementdepartmentojenactsasthecentralcontrolpointforthecrea8onandwri8ngoftheRFPdocument.Theyfurnishthelistof“approved”suppliersthathavebeenqualifiedtopar8cipateintheRFPprocess
> RequesteachbiddertoprovidefullandcomprehensivepricingandfeeschedulesfortheproposedRFP.Ifaselectedbidderintroduces“hiddencosts”duringnego8a8ons,theyshallbedisqualifiedandbasedonyourbidevalua8ons,thenextbestbidderwouldbechosen
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RFPmanagement(2)
> Includeyourcompany’scontractforthetypeofprojectrequiredwithintheRFP,alongwithanyuniquetermsandcondi8onsthatmayapply.
> Itshouldbeunderstoodthatcontractmanagementhascompletedistribu8oncontrolofallverbalandwripencommunica8onsintheRFPprocesswiththebidders.
> Anyques8onsreceivedshouldbeadvisedtoallbiddersandrespondedtoallbidders.
> Allsuppliersshouldbetreatedequitablyandfairly.> Noverbalresponses
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Fromthesupplierperspec>ve
ItisimportantforsupplierstounderstandthatanRFIistypicallyusedtoengagespecificpoten>alsuppliersto:> Obtainuptodatetechnicalinforma8ononavailableproducts
> Iden8fyconsultantsandexperts
> Developconsor8a,alliancesandpartnerships
> Buildasuppliernetwork
> Obtaininforma8ontosupportdecisionmaking
> Prepareforaneffec8veRequestforProposal(RFP),RequestforQuota8on(RFQ)orInvita8ontoTender(ITT)
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Execu>onofNDAs
Non-disclosureagreements(NDA)’sprotectthesupplier’sperspec>ve;anyresponsemaybecommerciallysensi>ve,detailing:> Currentstrategyandpossiblyfuturedirec8on
> Currentandpossiblyfuturetechnology
> Servicecapabili8es
> Opera8onalmethodology
> Pricing
> Exis8ngcustomersormarketpoten8al
Suppliershouldapprovepurchaser’sNDAbeforesignature
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Iden>fyinganopportunity
Apoten>alcontractmustbe:
> Onethesupplierwantstowin
> Appropriate
• Closefittostrengths
• Commerciallysound
> Timeliness
• Influencewithpurchaser’sprocess
• Reduceopportunityforcompe8tors• Bidprocessdecisionmaking
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Commercialcontractsinvolvement
Whyisthecommercialcontractsorganiza>oninvolved?
> Compliance/leadroleinshapingthedeal?
> Wheredoesyourorganiza8onseetherole?
Ruledrivenculture
• Riskavoidance
• Review/nego8atealimitedsetofterms
• Ojen“involvedtoolate”
Prime responsibility
• Fully engaged
• Contracts owns bids • Shape deals • Coordination
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Whyhaveabidprocess?
Aneffec>vebidprocessisbuiltupon:> Mutualgoals> Serviceandperformancemetrics(bothsides)
> Segmenta8onandpriori8za8on> Workflowrolesandresponsibili8es(bothsides)
> Datagathering(bothsides)
Bestprac>ces:> Review/approvalrates> Cycle8mesimprovement
> Internalsa8sfac8on> Win/lossratesandcauseanalysis
> Disputelevels
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Bid/nobiddecision
TheOutputs
• DecisiontoPursueYes/No
• Fundingrequiredtobid(whereappropriate)
• Requiredpartnersand/orsubcontractors
Informa8on
• Risks• AbilitytoRespond
• Pricing• Make/buy• Timeline• Influence• Features• Themes
TheInputs
• Solicita8on(RFx)• PurchaserData
– Needs– Budget– StrategicPlans
• Compe88veAnalysis• MarketStrategy• BidCosts
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Thebidteam
Roles
Ø Bidmanager
Ø ProjectmanagerØ Businessdevelopmentorsalesmanager
Ø Servicesrepresenta8vesØ Financemanager
Ø Contractorcommercialmanager
Ø PurchasingmanagerØ Legal
Ø WritersØ Appendix9:RACIexample Successfulteams
cooperate,communicate
andpriori8zetasks
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ProposalPrepara>on
Awell-preparedoutlineisthefounda>onofaclear,consistentandlogicalproposal,aproposalthatcaneasilybeunderstoodbythepurchaser.
> UsetheRFPasyourframework
> Assigneachofthepurchaser’sevalua8oncriteria
> Reviewtheintendedoutlinetoensureitflowslogically
> Assignsec8onswithintheoutlinetoindividuals
> Providespecificinstruc8onstoeachwriter
Themes
Strategy
Solu8on
Assignments
Themes
Strategy
Solu8on
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Roleofthecontractmanagementorganiza>on
LimitsinvolvementtoaddgreatestbusinessvalueMinimizeexposuretoriskDevelopcrea>vesolu>ons> Expandthevalueofthedeal> Exploittheopportuni8es> Createsourcesofcompe88veadvantage> Acceptableriskprofile
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Contractmanagement:Addingcommercialvalue
Goal;> Makeanofferacceptabletopurchaser> Pointbypointresponse,non-standardapproachesAgreeingtopurchasertermsdependson;> Compe88on> Purchaser’skeycommercialconcerns> Previouscontractsandprojects> Reviewstatementofwork(SOW)> Removeoverblownmarke8ngrhetoric> Covercostimplica8onsinpricingmodel
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Thebidwri>ngprocess
DetailedmilestonescheduletokeepbidontrackSolu>onreviewmee>ngDesignfreezeWri>ngbegins;> Involvetherightsubcontractors.> 3rdpar8esmustagreetoalltermsandcondi8ons> Readtheproposalfromthepurchaser’sstandpoint> Assessacceptabilityofproposal> Strengthsandweaknesseswithrecommenda8ons
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Approvals
> Approvalsareanintegralpartofthecontrac8ngprocessforallcompanies.
> Allow8meinscheduleforapprovalprocess
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• Tomorrowwewillcon8nuetheprogram,Day2,aswellasexamexercisesandcases.
• SEEYOU!
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Endingday1…..