Commercial Masterclasses Slides

7/27/2019 Commercial Masterclasses Slides

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Commercial Masterclasses

Day One

Written by ACEVO, AVANTA, Capita, Ingeus, NAVCA, NCVO,Serco and Social Enterprise UK

With additional support from Aylesbury Partnerships and

James Barrett Consulting


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Introductions

The trainers

Housekeeping

Introductory exercise

2 Commercial Masterclass, Day One


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Objectives

Confident knowledge on- The emerging context for public service delivery

- The role and mission of your organisation within this context

- The emerging options for partnership

- The role and quality of governance

Skill competencies to

- Identify and build appropriate relationships

- Assess opportunities in supply chains

- Manage efficient bidding processes

- Recognise and manage financial risks

- Negotiate effectively



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Style of training

What do we mean by a masterclass? Commercial sector case studies testing translation of process

Discussion-based learning making the most of delegates

Emphasis on delegate questions

What additional support is there?

Toolkit

Website materials

How do we put this into practice? Discussion and exercises

Competencies to measure progress



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Timetable

Day one

Introductions and objectives

Policy and procurement context

Understanding supply chains and the commercial sector

Exercises 1 and 2Lunch

Building relationships

Exercise 3

Bid or no bid

Exercise 4

Summary and reflections



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TimetableDay two

Recap

Governance and performance management

Exercise 5

Modelling financial riskExercise 5

Negotiation

Exercise 7

Managing bid effectively

Exercise 8Summary and reflections

Competencies and evaluation



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Agreements for working together

Confidentiality: Chatham House rulesThe masterclass format means everyone has something to contribute

Respectful challenge

Respect for diversity of needs

Allow the facilitator to move discussion on

Time given to reflect and test learning

Phones turned off



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Context:Policy and Procurement


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Government Expenditure on the VCSE

2009/210



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Policy Context (I)

Changing funding environment

Big society agenda

Open Public Services

Increasing opportunities for VCSE in public service delivery Plurality (e.g. mutuals, NHS restructure)

Continuation of commissioning

Localism new commissioners (e.g. PCCs, CCGs, HWBs)

New investors



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Policy Context (II)

New funding structures

Payment by Results

Personalisation and choice

Integration of budgets

Outcomes focus

Social value

Information and accountability

UNCLASSIFIED12 Commercial Masterclass, Day One


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Procurement context


Now Evolving


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Examples of Different Contracting Structures

Prime

Work

Programme(e.g. Ingeus

DirectDelivery

Area 2

S1 S2 S3 S4 S5 S6

Specialist sub-contractors

End to end Sub-contractors

Prime

Justice

Sector(e.g. Serco, Doncaster)

DirectDelivery

Catch 22

Sub-contractors

Prime

S1 S2 S3AdvisoryBoard

Personal Independence

Payments(e.g. Capita)

Primes bring: Scale (able to carry risk) Governance

Service integration &

delivery skills

Area based sub-contractors bring:

Geographical

presence/knowledge

End to end capability

Specialist sub-contractorsbring:

Specialist capability

Proven track record



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Local commissioning context

Content to be added from host



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Understanding Supply Chains(& the commercial sector)


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Commissioning system model


Commissioner

Commercial Prime VCSE Prime

VCSE

Specialist

VCSE

Specialist

VCSE

Specialist

VCSE

Specialist

VCSE

Specialist

VCSE

Specialist


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Exercise one: perceptions and motivations

As a group, in your role discuss and write down:

1. How do you see yourselves? (Your culture, values, concerns,

attitude towards getting involved?) What are your motivations?

2. How do you see the other groups? (Their culture, values, concerns,

attitude towards getting involved?) What are their motivations

Be prepared to feed back to the whole group



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Private Sector Expectations

Why they are involved

1. Shareholder value2. Deliver quality and value

3. Outcomes

4. End to end oversight

5. Risk placement

6. Commercial best practice i.e.communications, performancemanagement

7. Meet CSR objectives

8. Mission i.e. find employment forpeople

What they want from the VCSE

1.Able to bring insight and expertise2.Evidence competence andachievement

3.Open, realistic and motivated

4.Commercially attuned5.Able to help us to help you (and viceversa)

6.Aligned governance/decision making

7.People who are easy to work with




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Selling: the negative connotations


Cold calling Hard selling

Loss leaderWin at all costs

Selling short

Selling is the process by

which you persuade people

to buy things they dont

want or need


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21

.a more positive view of selling

Relationship

Consultative Solution

Customer-centric

Insight

Selling is the way that

you help customers to

buy products or services

from your organisation



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LUNCH


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Exercise two: making it work

As a group, in your role discuss and write down:

1. What are the risk for you in this model?

2. What do you need most from the other groups to make this modelwork?

3. What might they need most from you?

Be prepared to feed back to the whole group



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Building Relationships


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Why do relationships matter?

Go-live

Horizon Scanning

Shaping

Pre-bid Engagement

Bidding

Go live-Y1-Y2-Y3

Ongoing Qualification

Recognising

needs

Formulating

strategy

Procurement

strategyProcuring

Commissioner/Client

Private Sector

Indicative Timeline

Evaluating

options



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TACT: customer concepts in practice


Goodrelations

Understand your customer

needs

Assessopportunities

againstmission

Build your reputation

Manage yourrelationships

Drawn from a case

study of the VCSE

fostering agency,

TACT


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Principles to building relationships Plan ahead before making contacts

Saves time Leads to better outcomes

Enables you to measure success

Be realistic about what you can achieve

Be clear about the reputation you want to project

Involve staff, trustees and engaged stakeholders



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Relationship Managing

Relationship Manager: challenges of the role

The shop front, the brand, the access point

Expectations are high, and not achievable

Prioritising the long-term over the short-term

Reactive, hard to size portfolioNew or existing customers?

Demanding or deserving customer?

you will never get all this right: be realistic



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How to map Stakeholders

?

Supporter

Undecided

Negative

Dont know

Mary James

Commercial

Lead

Tom Jones

Supply Chain

Mgr

Jean SmithFinancial

Modeller

Tommy Steel

Risk Analyst

John Smith

Sales Lead

?

NG

NGTH

THSR

NG Our relationship owner

Mandhese Patel

Solutions

Lead

TH



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Exercise three: valuing relationshipsPositive perception

Influenceon appointment

Supply Chain Manager

Negative perception

Financial

Modeller

Solutions Lead

Commercial Lead

Sales Lead

Risk Analyst



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To bid or not to bid?


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Mission-Money Matrix


majority activity

stay out! proceed with caution

prime target

(love it here)

on mission

off mission

more moneyless money


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What opportunities are available?Grants

Block Contracts

Preferred Provider Frameworks

Spot purchasing (e.g. Individual service Funds)Payment by Results (inc. Bonds)

Prime / sub models (often private VCS)

Consortia (SPV, hub and spoke)



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To bid or not to bid?

1. Suitability of contract terms, specification and payment

Supply chain conditions

2. Market positioning (relationship building)

Future opportunities

Practice in the new market Competition and partnership options?

Viability next time round?

Provider and/or influencer

On-going suitability for mission and business

3. Portfolio (cross-subsidy; core funding)

Sustainable funding (non-statutory options)

Investment

Sufficiency and suitability of funding34 Commercial Masterclass, Day One


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Suitability of contract terms, specification

and payment

Consider:Contract terms (*we cover this more, later)

Mission fit

Likelihood of a win (SWOT)

Competitor analysis

What value you bring

Business viability (financial risk) (*we cover this more, later)

Risks that you own and variables you dont

i.e. contract volumes

Supply chain make up



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Control over Success Factors

ImpactonOutcomesInfluence

/Control In-House Intervention B

Partner Intervention Referral numbers

Referral quality

Project Management

Information Management

In-House Intervention A

Programme Management

Key:

External

Internal

Great

delivery

Risk

assessment

Many risks within PbR contracts are inevitably outside your control

Understanding their likelihood and impact is crucial

Understanding incentives helps predict your partners focus areas

Governance


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Exercise four: assessing opportunities

In pairs, discuss

- What are the variable factors in a supply chain?

- Given limited resources, which factors do you prioritise learning

about before you commit to a contract?

Be prepared to feed back to the group



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Working with a prim: things to considerRelationship: values fit?

What role do you want to (& can you) play?

Can you meet the requirements of the Commissioner?

Can you meet the specific requirements of the Prime Contractor?

Review all the terms

Minimum delivery & performance expectations

Financial modelling

Key contractual requirements

Information Security

TUPE

Implementation timescale Dont be afraid to ask questions!



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Todays modules

Policy and procurement context



Bid or no bid



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Tomorrows modules


Modelling financial risk

Managing bid effectivelyNegotiation


41 Commercial Masterclass, Day Two


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Day one reflectionsDiscuss in pairs

- What went well for you?

- What was less helpful (and how could we change it)?

- What do you need to get the most out of the next days programme?

- What has this inspired you to explore further after the Masterclass

programme?

If you wish, you can feed back key points to the whole group.



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Thank you from:

And to the Office for Civil Society, Cabinet Office for funding thisProgramme.



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Commercial Masterclasses

Day Two

Written by ACEVO, AVANTA, Capita, Ingeus, NAVCA, NCVO, Sercoand Social Enterprise UK

With additional support from Aylesbury Partnerships and JamesBarrett Consulting


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ObjectivesConfident and knowledgeable on

- The emerging context for public service delivery

- The role and mission of your organisation within this context

- The emerging options for partnership

- The role and quality of governanceSkilled and competent to

- Identify and build appropriate relationships

- Assess opportunities in supply chains

- Manage efficient bidding processes

- Recognise and manage financial risks

- Negotiate effectively



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Introductions

Welcome back!

Recap on yesterdayPolicy and procurement context



Bid or no bid

Introductory exercise



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TimetableDay two

Recap


Exercise 5

Modelling financial risk

Exercise 5

Negotiation

Exercise 7

Managing bid effectively

Exercise 8





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Governance and PerformanceManagement


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What is performance management?

In competitive markets performance is crucial

In publicly-funded markets performance is crucial

In outcomes markets performance is crucial

What drives the need for performance management?

Performance management is:

Monitoring against contract terms

The systems / information required to prove your work

The corrective steps taken The rewards offered

The comparison with other providers / the wider market



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Good GovernanceWhat systems and information do you need?

Principles from code of good governance

1. Understanding the boards role

2. Doing what the organisation was set up to do

3. Working effectively4. Effective control

5. Behaving with integrity

6. Openness and accountability

http://www.governancecode.org



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Exercise five: governanceGet into groups of similar organisation size

Imagine you are considering entry to the example supply chain.

Consider the implications for your governance. Discuss:

- What governance procedures would you want in place to

manage performance risk in this regime?- How would you need to reconfigure your resources (skills,

capacity, information) to implement this governance approach?

Be ready to feedback



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Complexities for Performance

If it isnt proven, it doesnt count

Move to results oriented monitoring

Tools to capture and analyse outcomes / rather than outputs

Performance managing staff

Aligning systems e.g.

data capture with prime/contractor

IT systems

Governance decision timetable

Performance management

Build in flexibility (e.g. staff) to deal with fluctuating demand

Maximise performance by utilising the full portfolio of contracts you deliver



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Mobilization from winning to delivery Often an afterthought

Consequences of not getting ready

What needs to happen and when

Exercise in groups to identify the different aspects of delivery readiness you

would consider important

What good mobilisation looks like



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Example Gantt ChartTo come from AVANTA



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Adjusting Delivery Capabilities

Have you got whats needed?

Step up from grants to contracts?

Exercise in groups to brainstorm what capabilities organisations might need

to develop in order to meet their obligations to deliver and manage

contracts.

Would it depend on their particular role subcontractor or prime contractor?



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e.g. Move to results oriented monitoring

Capturing of outcomes/ rather than outputs

Performance managing staff

Aligning systems e.g. data capture with prime/contractor

Build in flexibility (e.g. staff) to deal with fluctuating demand.

Maximise performance by utilising the full portfolio of contracts you deliver



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Modelling Financial Risk


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Financial Risk: the impact of payment-by-results Scenario Analysis and cash-flow modelling helps identify pinch-points

At what point do you breach your reserve policy? Is that a problem?

What if your organisations other contracts perform worse than expected


Shows example working capital requirements & break even point by month


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The Work Programme payment structure


Xweeks Yweeks

Payment()

TimeonProgramme(Weeks)

StartonProgramme

AttachmentFee

Payment()

TimeonProgramme(Weeks)

StartonProgramme

SustainmentpaymentsJobOutcomePaym

ent

AttachmentFee

JobStartPaymenttriggerpoint

Payment Groups on the Work Programme


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Payment GroupYear 1

At tachment Fee*

Maximum Job Outcome

Fee**

Sustainment

Payment (per 4

week)***

Maximum Total

Outcome Payment

JSA 18-24 400 1,200 170 x 13 3,410

JSA 25+ 400 1,200 215 x 13 3,995

JSA Early Access 400 1,200 250 x 20 6,200

JSA Ex-IB 400 1,200 250 x 20 6,200

ESA Volunteers (allgroups)

400 1,000 115 x 20 3,300

ESA Flow 600 1,200 235 x 20 5,900

ESA Ex IB 600 3,500 370 x 26 13,120

IB/IS Volunteers 400 1,000 145 x 13 2,885

Prison Leavers 400 1,200 200 x 20 5,200

* Reducesyearbyyear;0inyears4&5** Pricecompetitionelement discountexpectedbytheCommissioner***Numberrepresentsmaximumamountofsustainmentpaymentswhichcanbeclaimed


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Qualification: Selecting the right opportunities

Deal or

NoDeal?

StrategicAlignment

Measurableresults

Procurementprocess

GovernanceSponsorship

Rate ofReturn

Riskprofile

61 Commercial Masterclasses May 2013


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Risk Categories

Volume/Demand

Specification (complete? Accuracy?)

Service transfer or implementation

Cost overrun

Timescale overrun

Obsolescence

Termination and Exit



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Quantifying the financial opportunityParameter Bid Target range Red zone (re-qualify now)

Total value of all contracts of

this type

x% of fcast turnover x% of fcast turnover

Bid costs x% of target gross profit x% of target gross profit

Target profit margins Gross Profit > y (%)

Net profit > y(%)

Gross Profit > y (%)

Net profit > y(%)

Working Capital Worst position no more than

x% of revenue

Cap at x

Max exposure under worst

case scenario modelling


Net profit > y(%)


Net profit > y(%)

Revenue at risk from penalty

regime

x y

Max exposure if we have to exit

the contract early

x y

Win probability 10%



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Managing individual risks


Risk

Initial

RAG Mi ti gati on

Post

Mitigation

RAG CommercialTreatment

Dipinserviceperformanceduring

transferandtransitionperiod Red

Duediligence.Detailedplanningof

transition.Consultationand

communicationwithstakeholders Green

Setoutin

transition/implementation

schedule

Numberoftransactionsmaybe

higherthanforecast Red

Agreepricebandingsforadditional

volumesandtriggerforchange

control Green BandingsinPricingSchedule

Costofsolutionhigherthan

anticipated Red

Duediligenceandreviewofdesign.

Seektoagreeacceptable

assumptions Amber

LimitedprotectiononDue

Diligencethrougha'TrueUp'

Subcontractorfailstomeet

milestones/serviceperformance

targets Red

Flowdownkeycontractualterms.

Ensureliabilitiesarebroadenough

toincludelossessuffereddueto

failure.Establishperformancemgt

process Green

Subcontractandmanagement

arrangements

Contractmaybeterminated

beforenaturalexpiry Red

Agreeterminationtriggers.Ensure

clarityoncoststhatcanbe

recoveredindiferentscenarios. Green

Specifyterminationprovisionsin

maincontract


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Exercise six: financial risk modelling

In pairs consider the three opportunities listed in the

exercise pack.

Discuss the options and decide which opportunity you

would choose.

Be prepared to feedback and discuss your reasoning for

and against each option.



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Financial risk modelling best practice (I)Risk framework

Content

management

Information:

Check quality and gaps

Check veracity

Remember predictions are no guarantee

Variables:

What factors can vary

What do you control

What is the range of variation, and what can you bear



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LUNCH


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Negotiation


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NegotiationYou can negotiate on:

1. Contract terms i.e. IP rights, performance

2. Aspects of the specification i.e. quality, demographic3. Payment terms and mechanisms i.e. payment schedule

Negotiation should aim to achieve:

- Consensus of purpose and approach to the contract- Proportionate, relevant and sustainable terms of delivery and

management

- Flexible and transparency review, management and resolution

processes- Synchronicity between contract, specification and payment

schedule

- A good foundation for future communications and partnership


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Principles of negotiationBe prepared

Know what you want to achieve

Know your absolutes: when will you walk away

Know points you can vary onKnow how this fits with / subsidises the rest of your portfolio of work

Know what the other party wishes to achieve

The same questions as for yourself

Understand the power balance

Is any imbalance real or perceived?

Trade, dont give

Wait til you have two points to discuss and balance them out

Stay solution focused

It is sales, not fundingRemember your long-term relationship building objectives

If you do walk away, do so carefully



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Weighing up your negotiation approach

MOSCOW is a tool that enables you to determine inadvance priorities for negotiation and your red lines

Must Should Could


MoSCow example

Negotiating point 1 Dream 2 Outcome where 3 Outcome


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Negotiating point 1. Dream

scenario

2. Outcome where

you might

proceed

3. Outcome

where you might

walk away

MUST Payments terms, need money

up front for cash flow

9 9 8

Quantity 9 98

SHOUL

D

Price(you have some flexibility)

9 8 8

Monitoring9 9 9

Approach 9 8 8

COULD Brand 9 8 8

Flow(you would prefer a steady flow of demand

but could live with more in year 2 than year

1 of this contract)

9 8 9

Communications 9 8 9

IP 9 8 9


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Exercise seven negotiation

In pairs use the scenario in the exercise packs to complete

the MOSCOW chart:

1. Your priorities absolutes that you must not negotiate on

2. Those terms you should be able to negotiate on

3. Those terms you could negotiate on

Be prepared to feedback and discuss your reasoning.



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How to negotiatePrepare

Know your case

Your strengths, weaknesses, needs and flexibility

Your starting & exit points

Your authority and position of board

Know your enemy partner

What does the other party want?

Find the right person to negotiate with?

What are their priorities & pressures they face?

What are their exit points?



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Managing Bids Effectively


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Bidding as a part of bigger strategy

Go-live

Horizon Scanning

Shaping

Pre-bid Engagement

Bidding

Go live-Y1-Y2-Y3

Ongoing Qualification

Recognising

needs

Formulating

strategy

Procurement

strategyProcuring

Commissioner/Client

Private Sector

Indicative Timeline

Evaluating

options



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Compelling

commercialproposition

Strong

servicesolution

Effective

sales campaign

Well managedand executed bid

The four elements of a good bid



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Good bid management

Designated roles co-ordinating and producing: Data and evidence

Internal and external input and relationships (people)

Finances, budgets and projections

Competing offers

Risk assessment, value, and strategic suitability

Drafts and deadlines; review and sign off Drawing on cross organisational strengths

Clear authority to make decisions

Proportionate system, suitable to your organisation Critical appraisal black hat



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The Importance of good InformationCentrally managed information Held by the lead

Everyone feeds in and takes ownership (TACT)

Suitable formats

Different channels

Use third parties

Know it well Mission driven

Key messages

Successes, not just activity

Quantitative evidence

SROI and other peer-assessed impact evidence

Do something different, that stands out



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Bid gates: the importance of critical review

Decision points gates

Gate 0 Internal qualificationGate 1 Go GetGate 2 Bid/No Bid (PQQ Stage)Gate 3 Internal re-qualification (ITT Received)

Gate 4* Approval to submit bidGate 5 Contract SignatureGate 6 Contract Start-upGate 7 Transition CloseGate 8 Service Delivery/TransformationGate 9 Rebid/Contract Close Down

* Gate 4 approval is required every time a detailed solution design orpriced proposal is submitted to the client.

Presentation title - edit in Header and Footer82 Commercial Masterclass, Day Two


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Exercise eight: bid gates

Individually in your exercise packs create action-plans thatrecord:

What the gates are in your organisation

Who is responsible at each gate What action / decision needs to be made

Be prepared to feedback to the group



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Summary and reflectionsCompetencies and evaluation


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Todays modules


Financial risk management

Bid management

Negotiation



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Competencies Complete the competencies

Reminder that we will contact delegates in 3-4 months to ask for

progress


R i bj ti


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Review: our objectivesRewrite!!!



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Day two reflectionsDiscuss in pairs

- What has made the biggest impact on you?

- What was less helpful (and how could we change it)?

- What are you inspired to explore further?

- What will you do differently as a result of the Masterclass?

If you wish, you can feed back key points to the whole group

Please fill in and leave the evaluation forms


Th k f


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Thank you from:

And to the Office for Civil Society, Cabinet Office for funding this

Programme.


Documents

Commercial Masterclasses Slides