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Canadian Public Procurement Council conference presentation Nov 2012 in Vancouver. A joint presentation with QCsolver and Merx. Presentation brought to you by QCsolver.com
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PERSPECTIVES ON VENDOR
PERFORMANCE MANAGEMENT:
LET’S MITIGATE THE RISK
Vancouver 2012 Gerald Ford & Arthur Skuja
What is Vendor Performance
Management?
It is a business practice that is used to measure, analyze, and manage a supplier’s performance in an effort to cut costs, alleviate risks, and drive continuous improvement.
The ultimate intent is to identify potential issues and their root causes so that they can be resolved as early as possible.
What is Audience Response
Technology?
Audience Response Technology is an interactive tool
which allows YOU to weigh-in in real time using
simple intuitive polling software and response
devices.
Corporate sponsor:
Which image best describes how you feel
today…
1 2 3 4
32
02
5
1. 2.
3.
4.
Things less painful than an eight minute survey
Survey Says!
Top 8 answers on the Board
Stick in the eye
Salt on open wound
Pocket full of bees
A punch in the ….
14
12
8
5
Case Study: Ministry of
Transportation Ontario
MTO uses the Registry, Appraisal & Qualification System (RAQS/MERX) to manage vendor qualification and vendor performance for infrastructure procurement
RAQS/MERX is an integrated procurement solution with support for:
MTO user roles
Process workflows
Internal system data flows
Internal and external communications
MTO Approach to
Vendor Performance Management
Vendor performance, qualifications and ratings are
linked
Vendor qualifications and ratings are tied to fixed
categories of work
Rating assessments are subject to formal workflows and
based on detailed contractor information
Published tenders refer to required categories of work
and required ratings
RAQS/MERX Key Processes
Vendor management Vendor registration & qualification
Vendor performance assessment
Vendor rating
Project tendering Project notice advertising
Document distribution
Contractor communications
Bid results and evaluation Results evaluation / trend analysis
Awards and Work On Hand update
MTO Vendor Qualifications
Qualifications based on detailed vendor information:
Financial assets
Financial liabilities
Business information
Litigation
Experience
Work on Hand
Equipment
Key personnel
MTO Vendor Performance
Management
Vendor contract performance evaluation is focused on key parameters
Quality
Safety
Timeliness
Execution
Any performance issues reported immediately
Infractions
Warnings
MTO Vendor Rating
Vendor ratings are expressed as dollar values
Ratings are used to assess capability for vendor to do
work and bid on new projects
Ratings are calculated based on: Qualification data
Work on Hand
Performance and infraction data
Vendor Selection Process
Transparent procurement process
• Advertisements open to the public
• Categories of work and dollar value rating identified
• Contractors apply for permission to bid
• Only qualified vendors with an adequate rating are
approved to bid
• Supported by workflow & appeal process
Benefits of the MTO Approach
Open process promotes competition
Higher quality bids only from qualified contractors
Detailed vendor information supports better decision making
Lowers costs by reducing need for bonding
Integrated system supports consistent processes supported by audit trails
How do you compare to MTO - which
sector are you in?
1 2 3 4 5 6 7
8
6
0
16
1
44
1. Municipal
2. Academic
(University/College)
3. School Board
4. Health Care
5. Broader Public Sector
6. Private Sector
7. Federal/Provincial
How many employees work for your
organization?
2 3 4 5 6 7 8 9
0
2
1 1
14
9
7
3
1. 1 to 9
2. 10 to 24
3. 25 to 99
4. 100 to 249
5. 250 to 499
6. 500 to 999
7. 1000 to 2499
8. 2500 +
Other than CPPC which Organization(s) do
you belong to? Pick as many as you would like!
1. OPBA
2. OIPMAC
3. NIGP
4. OECM
5. CMC
6. HSCN
7. Construction Association
8. ISM
9. Other
10. None 1 2 3 4 5 6 7 8 9 10
5
20
13
1
4
11
1
4
3
0
Survey Says!
OPBA = Ontario Public Buyers Association
CPPC = Canadian Public Procurement Council
NIGP = National Institute of Governmental Purchasing
OECM = Ontario Educational Collaborative Marketplace
CMC = Canadian Association of Management Consultants
HSCN= Healthcare Supply Chain Network
How many competitive bids did your
group issue in 2011?
1. 1 to 49
2. 50 to 99
3. 100 to 149
4. 150 to 199
5. Greater than 200
1 2 3 4 5
9
11
13
4
1
180
How many competitive bids did the
Town of Oakville issue in 2011?
On average how many vendor performance
evaluations do you do per year?
1 2 3 4 5
9
14
10
0
4
1. None
2. 1 to 10
3. 11 to 25
4. 26 to 49
5. 50+
Survey Says!
Which tools or methods do you use? Pick as many as you would like!
1. Checklists
2. Forms
3. Templates
4. User Guides & Manuals
5. Progress meetings
6. Performance
documentation
7. 3rd Party verification
1 2 3 4 5 6 7
17
16
15
8
1717
8
Which tools or methods do you use?
What triggers an evaluation?
1. Periodic
2. Budget Threshold
3. Contract performance
4. Project profile
5. New vendor
6. Project complexity
7. Client Dissatisfaction
8. Repeat vendors
9. Length of Engagement
10. Every Project
1 2 3 4 5 6 7 8 9 10
10
9
19
6
8
9
1
19
11
6
Survey Says!
Problems with Purchasing and Supply
Chain Measurement and Evaluation
27
Too much data
Wrong data
Measurements that are short-term focused
Lack of detail
Drive the wrong performance
Measures behavior vs. accomplishments
Leopold Koff, B.A., B.Ed., CPSM, CPM, CSCMP
Professor, Supply Chain & Operations Management
School of Business & Hospitality
Examples of Automated Systems
TQRDC
VPM
On a scale from 1 to 5, what is the average score you
give to your contractors when you do evaluations?
1. Poor
2. Acceptable
3. Standard
4. Good
5. Excellent
1 2 3 4 5
23
1
1313
Central tendency State of Florida
3%
66%
31%
0%
10%
20%
30%
40%
50%
60%
70%
>= 1.00 to <= 2.80 >= 2.81 to <= 3.20 >= 3.21 to <= 5.00
Overall Rating
Overall Rating
5105 Surveys conducted in April 2010
Simplified 3M team rating (TQRDC)
T – Technology
Q – Quality
R – Responsiveness
D – Delivery
C – Cost
Courtesy: Jeff van Geel
Manager Sourcing & Accounts Payable
Courtesy: Jeff van Geel
Manager Sourcing & Accounts Payable
Simplified Scorecard
1. Focus on improvement
2. Present facets of performance without
aggregation. Do not dilute message.
3. Communicate dashboard – detail in meeting
4. Scope: all material & services Courtesy: Jeff van Geel
Manager Sourcing & Accounts Payable
All information for exercise only
Courtesy: Jeff van Geel
Manager Sourcing & Accounts Payable
ABC Contracting
Grand River
Excavation
Ford’s
Landscaping
For ratings
that are
“Below
Standard”
and
explanation
must be
entered
Easy to create, fill out and explain!
The “below Standard” Comment
Easy colour
coding to spot
what needs to
be reviewed
quickly. Data
can be exported
for further
calculations if
required.
1 2 3 4 5 6 7 8
23%
6%5%
6%
18%
12%
11%
20%
1. Effective communication throughout
engagement
2. Quality of resources
3. Availability of resources to carry out
contract
4. Quality of the final deliverables
5. Providing value added services
6. Maintaining timelines/deadlines
7. Budget/cost control
8. Having a vendor contact for dispute
resolution
What is important for an effective engagement? Pick in order of priority. 1st , 2nd or 3rd most important
Survey Says
What are your greatest challenges to
having an effective VPM!
1 2 3 4 5 6
15
12
6
10
0
4
1. Not enough time
2. End user input difficult to get
3. Poor systems
4. Not required
5. Missing linkage between contract and
performance
6. Comparative Consistency
Is the use of bonding a viable alternative
to vendor performance management?
1. Yes
2. No
3. Depends
1 2 3
9
16
11
Do you share performance results with vendors?
1. Yes
2. No
1 2
6
25
Do you tie VPM data to proposal evaluations
and vendor selection?
1. Proposals
2. Evaluations
3. Both
4. Neither
1 2 3 4
2
12
87
Do you tie vendor qualification to
specific procurements or a general
work or product category?
1. Specific
2. General
3. Product Category
1 2 3
21
3
6
1.Construction – Commodity - Contract
2.Contractor - Consultant
3.Consistency - Customizable
4.Crowdsourcing – Collaborative - Comments
5.Compare - Contrast
6.Credible – Context
7.Cost
And how do you feel now?
1 2 3 4
18
566
1. 2.
3.
4.
