Copyright (c) IACCM World Commerce and Contrac8ng. This PDF … · 2020. 9. 25. · • Book + slides are part of exam ... Opportunity evaluaon (chap. 15, 16 and connecon to chap

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.


•  Name•  Company•  RolewithinContract/commercialmanagement?•  Yourexpec8onsastoexpectedoutputofthiscer8fica8on?

Aroundthetable–andbehindthescreenes

•  Module1:29.-30.September2020•  Module2:27.-28.October2020•  Exam:Onlinemul8plechoice;2hours,upto120ques8ons,

minimum70%or84ques8onsrighttopass

•  Exammustbetakenwithin1yearfrom29.September2020–ending28September2021

•  Re-exampossible(ca.650kr.)•  Prac8cali8es(lunchetc.)


Topcisandschedule

•  End-to-end(lifecyclus)ContractManagement•  IACCMmembershipandrules•  Book+slidesarepartofexam•  Whattodo–howtodo?•  Awarenessversusexpertknowledge•  Appendixes….


CCMPrac>>oner

(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


Appendixes,cases,examexercises:day1–day2.

Expert

AdvancedPrac88oner

Prac88oner

(Fundamentals)


CCM-cer>fica>on

Strategy,organisa8on,leadership

Advancedtopicsandknowledge,CRM,SRM,introduc8ontoleadershipandplanning.

Opera8onalknowledgeandcompetences–connec8ontothe

above…


CCM-cer>fica>on

Documentedexperiences,results,specificcase,

peer-review

Onlinemul8plechoice,100-120ques8ons,Cases

Onlinemul8plechoice,ca.100-120ques8ons


CCM-cer>fica>on

•  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)


Program–Day1(breaksaLereverylesson)

•  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)



•  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)



•  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.



Thecourseconsistsof5sec>ons;>Ini8atephase>Bidphase>Developmentphase>Nego8atephase>Managephase

Course structure


Day 1; Objectives

> Definecontractmanagementandourroleincontrac8ng

> Introducetheprinciplesofcontrac8ng

> Howdoesarequirementneedtobeaddressedtoturnitintoacontract?

> Understandfinancialtoolstohelpevaluateastar8ngposi8ontoacontractgo/nogodecision

> Outlinethecommontypesofrela8onshipsweencounterandsourcingop8onswhenprocuringgoods,productsandservicesandtheiroriginandrespec8veapplicability–andtheconsequencesforcontractmanagement

Ø  Learnthebasicsofotherstrategicprinciplesindeliveringcontractmanagement

Ø  Howdoweensurethatweremaincompe88veinthemarketplaceandgainaccesstothebestnego8ateddealsviaatermsaudit

Ø  Understandwhentousearequestforinforma8on,arequestforproposalorarequestforquota8on

Ø  Apply–cases.


Introducing IACCM


Whatwedo

> Raisecommercial/contractmanagementandsupplierrela8onshipmanagementprofessionalstandardsandorganiza8onalcapability

Whywedoit

> Toincreaseeconomicvaluefromtradingrela8onships

Howwedoit

> Researchandpromoteuseofbestprac>cetoimprovecompetenceincontractandcommercialmanagement

So;

> Haveyouexploredwhetheryourcontrac8ngprocessesarevalued?

> Howmuchwouldyourcorpora8onbeworthifithadnocontracts?

About IACCM – now World Commerce and Contracting


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


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


Contract(under)performance

Onaverage,30–35%ofanorganiza8on’scontractsunder-perform

Thecostofthatunder-performanceistheequivalentof9.2%ofannualrevenue


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


Initiate Phase Contrac8ngintroduc8on


FromtheIACCMLinkedIngroup

Whatiscontractmanagement–Opinion1(fromaLinkedIngroupdiscussion)

Thefounda8onofcontractmanagementisbuiltonthreepillars.

1.  Contractadministra8on-Handlestheformalgovernanceofthecontractandchangestothecontractdocumenta8on.

2.  Rela8onshipmanagement-Keepstherela8onshipbetweenthetwopar8esopenandconstruc8ve,aimingtoresolveoreasetensionsandiden8fyproblemsearly.

3.  Servicedeliverymanagement-Ensuresthattheserviceisbeingdeliveredasagreed,totherequiredlevelofperformanceandquality

Contrac8ngIntroduc8onCopyright(c)IACCMWorldCommerceandContrac8ng.ThisPDFifforthesoleuseoflearnerAnaRitaCunhaandmaynotbesharedinanyway.Viola8onswillbesubjecttoprosecu8on.



Isolicit,compete,nego8ate,ensurecompliancewiththetermsandcondi8onsofthecontractforthebenefitoftheen8tyIserve




Wespecialiseinensuringthattheclientgetsvaluefromthepost-awardopera8onofcontractsbyensuringthatcontractsarewripenwiththeiropera8oninmindandthattheyarecloselymonitoredastheinvoicesarrive.Thisensuresdeliveryofvalueandtheavoidanceofloss.


> Whatdowemeanbybestprac8ce?

?

Programintroduc>on


Commitmenttochange

Howdowedemonstrateourunderstanding,commitmenttochangeandleadershipinthe

fieldofcontractmanagement?


Characteris>csofcommi\edprofessionals

Bestprac>ceincludes;> Highperformancestandards

> Masteryofacommonapproach> Beliefinamission

> Sharedlanguageandknowledge> Par8cipa8on

> Self-management> Peerreview> Abilitytocommunicate

> Cri8calthinkingskills> Careergrowth


Communi>esofprac>ce

Bestprac>ceincludes;

> Avalidatedapproachthathasdeliveredresultsandvaluewithinacompany,industryorins8tu8on

> Communicatewithcolleaguestocreateafounda8onforcollec8veac8on

> Useofinternettools,forumsandcommuni8es

> Developmentofchecklistsandprocesses

> Crea8onofcorporatemodelagreements

> www.iaccm.com


Success

Con>nuedlearning

Bestprac>ceisalsoaboutcommitmenttoongoinglearninganddevelopment

Enthusiasm

Ideas

Change


Problemsolving

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Theprofessionalcontractmanager

The4C’softheprofessionalcontractmanager;


ContractManagement

Control

Crea8vity

Communica8on

Compliance

TheIACCM’sbestprac>cesincontractmanagementinclude;> Ownershipandaccountabilityforthecontrac8ngprocess

> Termsandstructureauditandupdate> Integra8onwithPLM(ProductLifecycleManagement)

> Porsolioriskmanagement> Supplychainfocus

> Anelectroniccontrac8ngstrategy> Templatesandversioncontrol> Self-helpskillsassessmentanddevelopmenttools


IACCMbestprac>ces

TheIACCM’sbestprac>cesincontractmanagementinclude;> Strategicallyalignedmeasurementsandrepor8ng

> Pro-ac8vechangemanagement> Differen8a8onandsourcesofvalue:awarenessandmarke8ng

> Abilitytoalignscopewithcommercialrequirements,riskmanagementandpricing

> Understandingclaimsprocessandmanagementofthisprocess

Ul>mately,plantheworkrightupfront.Thereasonthatmanycommercialagreementsfailtoproducetheresultsintendedisbecauseinsufficient>meis

providedtocompletealltheac>vi>es.


IACCMbestprac>ces

Whatisacontractandwhydoesitma\er?> Acontractisanagreementwithavalidoffer(forsomething)

andavalidacceptancewithconsidera8on(paymentorperformanceofsometype)fortheoffer.

> Acontractisalsoaboutdecidingwhatyouwanttobuyorsell,howyouwilldefineacceptance,andhowmuchyouarewillingtosellitfor(orpayforit.)

> Ithastobelegal(e.g.notforassassina8on!!),> Thepar8esinthecontractmustbeofalegalcapacity(nota

minor/insane)


Whatisacontract

Contrac8ngIntroduc8on

Beyondadescrip>onoftheitem,itsprice,anditsacceptancearemanyimportanttermsthatshouldorcouldbepartofthecontract;> Contractualtermsdealingwithriskmanagement> Termsdealingwiththe8mingofthedeal> Termsaddressinganyon-goingpaymentobliga8ons> Ownershipandusageissuesforlicensed/leasedgoods(suchassojware)> Deliveryandacceptance> Confiden8ality> Regulatory,securityandprivacyissues> Howchangeismanagedandqualityensured> Therolesandresponsibili8esofallpar8es> Countryoflaw> Precedenceforconflic8ngterms


Areasthatthecontractshouldaddress

Contrac8ngIntroduc8on

Initiate PhaseContractadministra8onoverview


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…


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.


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.


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.


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


Pre-awardcontractmanagement:Ac>vi>es

Contract Administration

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.


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.


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


Post-awardcontractmanagement:Ac>vi>es

Contract Administration

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.


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)


Initiate Phase Requirements definition


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!


Risksofdeficientrequirements;

•  > Wasted8me•  > Highlevelsoffrustra8on•  > Decisiontoproceedwiththewrongsolu8on•  > Failureoftheprojectaltogether•  > Exactalignmentwithspecifica8onsmaybe

impossible•  > Objec8vemaybe“closestfit”basedonpriori8zed

requirements

Requirementsdefini>onalsoma\ersbecause...


Moredetailedrequirementsmean;> Greaterunderstandingamongstakeholders> Abilitytoan8cipateculturalandtechnicalissues> Clearercommunica8onwithvendors> Reducedcostofpoorqualityandrework

Requirementsambiguity

Projectcosts

Highcon>ngencyfactoringincontractprice

Uncontrolledchange

Pooradop>onrates

AbandonmentVaguerequirementsriskspiralingcosts

Costandriskofpoorcontrac>ng


Requirementscanchangeandmaybecomereflectedinachangetothescopeofwork

Changestoscopecanbecontrolled,accordingtowhetherthepar8esdeemthatthechangetorequirementscanbemetforanacceptablepriceand8mebudget

Managingchange,becausethingsgowrong

> Founda8onforchangecontrol> Businessprocess,regulatoryandtechnical

environmentschange> Specifywhereflexibilitywillbeimportant


Andissuesarisebecause…

Mostfrequentissuesinrequirementsdefini>on;> Requirementsareojenincomplete

> Dependentonviewofthesolu8on

> Failtoreflectrangeofstakeholders

> Ignorepoliciesandstandards

> Predisposi8ontorushtosolu8on

> Requirementswillevolveandcondi8onswillchange


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


Requirementsdefini>onworkshop> Cri>calelements;

•  Communicatethesessiontoallstakeholders•  Invitestakeholdersaccordingtosessionstrategies•  Recordallitemsinnotes•  Createformaldeliverable•  Referencethedeliverableintherequirements

Requirementsgatheringtechniques


Beyondtherequirementsdefini>onworkshop(1)

Standards,policiesandtemplates> Technicalstandards> Servicelevelrequirements> Communica8onsprotocols> Termsandcondi8onsStructuredinterviews> One-on-onefocusallowsextensiveanalysis


Beyondtherequirementsdefini>onworkshop(2)

Pro-formaandques>onnaires> Essen8alforglobalorothergeographicallydispersedorganiza8ons> Low-costalterna8vetoface-to-facesessionsResearchandbenchmarking> Bestprac8ces/technicalstandards> ServicelevelrequirementsforSLAs> Trainingandsupportprograms


Causesfordelayorfailure

Requirementsaimedatasolu>on-drivenresponse> Pre-definedsolu8onmaybedrivenbyperceivedlowcostandeaseof

implementa8on> “Shrink-wrapped”solu8onsmaylackthecapabilitytoconformtorequirements> Solu8onmayrequireprocessreengineering> Performgapanalysis:solu8onspecifica8onsvs.ar8culatedrequirementspriorto

selec8on


Causesfordelayorfailure

Requirementsdriventhroughignorance> Ignoranceofrangeofstakeholders> Ignoranceofinternaleconomy> Failuretounderstandcomplexity> Ignoranceofstandards> Ignoranceofhumanimpact> Ignoranceoftheobjec8ve(orendgame)> Ignoranceofhowscopewillbeadministered> Ignoranceofhowpricingandscopearealigned


Initiate Phase Costbenefitanalysis


CostBenefitAnalysis

Costbenefitanalysis

> Keyknowledgeareas> Seyngbaselinesandtargets> Evalua8ngalterna8ves> Linkingmetricswithrequirements> Incorpora8ngkeyindicatorsinsupplierevalua8on> Cost-onlyanalysis> Returnoninvestment(ROI)> Paybackperiod> Riskscenarios> Alignmentwithstrategy


Acquisi8on

Delivery

Maintenance

Installa8onSupport

Upgrading

Decommissioning

Totalcostofownership(TCO)

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Ø  Appendix5:TCO

ReturnonInvestment(ROI)

Describesthedegreetowhichaninvestmentcontributesfinancialreturntothecompanyoveraperiodof>me

ROIprovidesnoindica>onofstrategicvaluenorthelikelihoodofsuccess

CostBenefitAnalysis

Returnoninvestment(ROI)


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


CostBenefitAnalysis

Cashflowanalysis

Analysisofcashinflowsandouslowsrelatedtoaninvestmentoveragivenperiodof8me


Presentvalueaccountsforthecostofcapital

> Higherinterestrates=greatercostofcapital

> Thehighertheinterestrate,thelowerthePresentValue

> Asn(numberofyearsofinvestment)increases,thepresentvalueoftheinvestmentdecreases

Investment

(1 + Annual Interest Rate)Present Value = n

CostBenefitAnalysis

Presentvalueofmoney


DCFintegratestheconceptofTimeValueofMoneySoatannualinterestrateof10%....

CostBenefitAnalysis

Discountedcashflowanalysis


> IRRdiscountrateforwhichpresentvalueoffuturecashflowsequalsthecostoftheinvestment

> AhighInternalRateofReturnmeansa

lowPresentValueorcostofinvestment

> Aninvestmentisconsideredacceptableifitsinternalrateofreturnisgreaterthananestablished“HurdleRate”–ie.AminimumIRR

CostBenefitAnalysis

Internalrateofreturn(IRR)

IRR=~12.65%


CostBenefitAnalysis

Balancedscorecard

Evalua>nginvestmentsbasedupona“balanced”setofcriteriathatenablenear-termandsustainedvalue

> Financialperformance> Customerrela8onships> Businessprocess> Employeelearningandgrowth

Managementtoolevaluatesperformanceagainstcriteria


CostBenefitAnalysis

Businesscase;Cri>calsuccessfactors

> Useacceptedbusinesscaseapproachtocreatecompellingcaseforalternateapproach,supportedwithfacts,researchandanalysis

> Usepreviousperformancedatatovalidateclaims

> Expressbenefitsinfinancialterms

> Incorporateriskanalysistoiden8fypoten8albarriersthatwillderailcashinflowsorotherexpectedbenefits

> Iden8fyhiddencoststoassurerealis8cfinancialprojec8ons

> Extendbusinesscasetobefounda8onforongoingperformancemeasurement


CostBenefitAnalysis

Credibilityofassump>ons

> Ar8culateassump8onsclearly

> Provideevidenceonwhichassump8onsarebased

> Providealternatecost/benefitscenariosifspecificassump8onsproveunrealized

> Providean8cipatedremediesandprojectedcostsifspecificassump8onsproveunrealized

> Valida8onwithkeyindividualsthatarerespectedfortheirknowledge


CostBenefitAnalysis

Typicalbusinesscasestructure

•  > TheManagementSummary–outliningthepreferredop8onandtheapproachtakeninarrivingatthis

•  > TheStrategicCase–outliningthecompellinglongertermdriversforchange,contribu8ontocorporatestrategyandobjec8ves,costreduc8onsandnetbenefits,keyoutcomesexpectedandop8onalscenariosummaries

•  > TheFinancialCase–Outliningdifferentbenefitscenarios(eg,low,mediumandhighyieldop8onstoallowforop8mismbias),andthephasingthrough8meofwhenthesebenefitsaretobedeliveredorrealised

•  > PrincipalBenefitAreas–Ojenincludescontractrenego8a8onandrenewal,innova8vetechniques,processesandexis8ngequipmentupgradeinlinewithtechnologicaladvancement,corporatesocialresponsibilityenhancement,mee8ngregulatoryrequirements


CostBenefitAnalysis

Typicalbusinesscasestructure

•  > ConstraintsandDependencies–Areasofblockagetotheopportunitythatneedtobeovercomeifsuccessistobeachieved.Capabilityoftheexternalmarkettosupportini8a8ve

•  > TheEconomicCase–op8onsconsidera8onfromadonothingapproachrightthroughtothepreferredop8on.

•  > TheCommercialCase–Subsequentcommercialbenefitsarisingfromimplementa8on,eg.abilitytotradeandleveragetheimplementa8on

•  > TheManagementCase–Projectmanagementrequirements,highlevelplanwithmilestones,riskandissuemi8ga8onandmanagement,benefitsrealisa8onprocessownership,opportunityanalysis,8mescalesandcon8ngencyplans

Ø  Appendix6:Prince2BusinessCaseTemplate


Initiate Phase Sourcingop8ons


Analysis;Iden>fyingcontribu>on


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?


Thesourcingdecision

SourcingOp8ons

Awelldefinedgovernancestructure;

> Withinbothownandsupplierorganiza8ons

> Ensureproceduresaredefinedandagreed

> Iden8fyperiodsforreview,con8nuousimprovementplanning

> Mo8vateperformance,deliveraddedvalue

> Managementisajointresponsibility


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


•  > Noprojectcanbemaderisk-free.Totheextentpossible,risksmustbedefined,understoodandmanaged.ConductPESTLEanalysis


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.


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


Num

bero

frela>

onships

Buildvs.Buy

InternalDelivery


Fulloutsourcing

•  > Theoppositeofinternaldelivery•  > Contractwithasinglesupplierfordeliveryof

theen8rescope

•  > Mayhavemul8plecomplementarycapabili8es

•  > Fulloutsourcingismorealignedtocommoditydelivery

•  > Astraightonetoonerela8onship•  > Servicesmaybebrokenintocons8tuent

partsaspartofalatermul8-sourcingdeal


Num

bero

frela>

onships

Buildvs.Buy

FullOutsource


Selec>veoutsourcing

•  > Aboutmaintainingownershipoftheprojectscope

•  > Sizeablepor8onsofwork•  > Customerperformsintegra8on

•  > Usedwhensuppliersdonothavebreadthofcapability

•  > Usedwhensuppliershaveanichespecialty

•  > Lookingtoleverageacompe88vemarketplace

•  > Onesuppliermays8lldelivermajorityofproject/services


Num

bero

frela>

onships

Buildvs.Buy

Selec>veOutsourcing


Buildoperatetransfer

•  > Amorecomplexmodel•  > Contractwithsupplybasetodesign,build,

operateandsubsequentlytransferprojecttocustomer

•  > Thebasisofalongtermrela8onship

•  > Usedbycommissioningbodies•  > Greaterresponsibilityonthecustomerto

beinvolved

•  > Strongrela8onsnecessaryduetolatertransferofassets


Num

bero

frela>

onships

Buildvs.Buy

BuildOperateTransfer


Jointventureoutsourcing

•  > Usuallycreatesanewlegalen8ty•  > Supplierorcustomerorbothhaveaneed

fortheothersservicesincrea8ngamarketopportunity

•  > Maygoontoprovideservicestoothersaswellastotheclientorganisa8on

•  > Clientisnotonlyinasupplierrela8onship,buthasaresponsibilitytowardsitselfanditsownshareofthejointventure


Num

bero

frela>

onships

Buildvs.Buy

JointVentureOutsourcing


Bestofbreedconsor>um

•  > Agroupofsuppliersprovideacoordinatedtenderresponseiden8fyingthatitsthereinten8ontoworktogether

•  > Eachhasaspecialtythatmakesacombinedbidstronger

•  > Maynotbeabletodeliverinisola8on•  > Doesnotcreatealegalen8ty

•  > Mainconcernisaboutdeliveringtothescope

•  > Therewillbeaconsor8umleadpartner

•  > Clientwillrequireexcellentcontractandrela8onshipmanagementskills


Num

bero

frela>

onships

Buildvs.Buy

Consor>ums


Primecontractor

•  > Aboutriskalloca8onandtheownershipofresponsibility

•  > Primecontractortakesresponsibilityfordeliveringen8rescope

•  > Willinvolveanumberofsubcontractrela8onships

•  > Clienthasarela8onshipwithprimecontractorandleveragesthisforissueresolu8on

•  > Clientmaynominatespecificsubcontractorswhichtheprimecontractorhastomanage


Num

bero

frela>

onships

Buildvs.Buy

PrimeContractor


Commonlyoutsourcedfunc>onsandprocesses


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


0% 20% 40% 60% 80% 100%

Primarydriversandtheirrela>veimportance

Accesstonewmarkets

Systemredundancy

Increasedspeedtomarket

Changerulesofgame

Businessprocessredesign

Improvedservicelevels

Industryprac8ce

Accessqualifiedpersonnel

Compe88vepressure

Growthstrategy

Takingoutcost


SourcingOp8ons

Considera>onsbasedonoutsourcingcategory


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


SourcingOp8ons

Whatcanyoudotocontractsuccessfully?

•  > Implementrulesofthumbformanagingchange•  > Obtainprojectsponsorshipandgovernance

•  > Provideanalysis:Aclearmethodology

•  > Defineandrevalidateobjec8ves•  > Managestakeholderexpecta8ons

•  > Managerisks/keyques8ons•  > Ensurerela8onshipmanagement/seniormanagementinvolvement

•  > Haveacompletecontractwithclearmeasuresofperformance


Successfactors;Adecadeoflearning

SourcingOp8ons

Initiate Phase Undertakingatermsaudit


Whywouldyouundertakeatermsaudit?

Toremaincompe>>ve!

Undertakingatermsaudit

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Conduc>ngatermsaudit

•  > A‘termsaudit’needstoensurethattermsalignwith;•  Businessprocesses(andopportuni8esfortheirimprovement)

•  Marketorbusinessneedsandpriori8es

•  Resourcecapabili8esandcommitments•  > Iftermsarealignedwiththesefactorsandstepstakentoensurecon8nued

alignmentover8me,thencontractualandbusinessrisksareminimized.


Areyourtermsfitforpurposeandaligned

UndertakingATermsAudit

Whywouldyouundertakeatermsaudit?> Cost&easeofdoingbusiness> Maintainingeffec8vecomplianceHowwouldyouundertakeatermsaudit?> Startwithinternaldata(ifavailable)&externalstudies> Useinternalques8onnaire> Benchmarkwithothers> U8lizetheservicesof3rdpar8es&associa8ons> Listentotradingpartners(developrela8onships)> Par8cipateinroundtables,interviews,networkevents

Sotermsauditsareabout


EnsureyourauditcoversallelementsoftheContract;

> Coretermsandapprovedtermop8ons> Apachments> Specifica8ons> Workorders> Changeorders> Servicelevelterms> Governance> Dates> Pricing

Thetermsauditshouldconsiderabusinessperspec8ve;whatbusinessissueshavearisen,thatcouldhavebeenavoidedifthetermshadaddressedthemspecifically,orhadbeenbeperappliedinprac8ce?

Scope


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


Consequencesofinappropriateterms

Whataretheconsequencesofinappropriateterms?> Othercompaniesmayrefusetodobusiness> Reducedcompe88onmayfavoroneparty> Conten8oustermsdelayclosure,increasenego8a8on

andcosts> Containingfailurewhilemissingopportuni8es> Lostefficiency,unnecessarycomplexity> Missedincrementalrisk,failuretotacklerealissues> Don'tmeettheopera8onalneedsofthebusiness> Presentapoorpictureoftheorganisa8ontoother

contrac8ngpartners> Failtoaddressgenuineriskareas,whilefocussingon

theore8calrisks(e.g.indemni8es)


Somecommonexamplesare;

Examplesofpoorlyplanned/managedterms

> Internalstakeholderpolicies> ClarityonownershipofIP> Liabili8es> Transferringcontractsbetweencountries,e.g.UStoGB> Corporategovernanceregula8ons> Clarityonchangemanagementcostsandresponsibili8es


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


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!


Doyourtermsdeliverwhatyouwant?

Tooojencontractsarewripentospecifyhowsomethingwillbedone,ratherthanwhatthegoalis.Thatojens8flescrea8vityandcausesconten8on;itusuallyresultsinthegoalbeingmissed.

SOWorSLAsareclassicexamples.Forexample.....thisclause;

•  “GrasswillbecuteveryWednesdayduringthemonthsofAprilthroughOctoberandtreatedwithFamousLawnfer8lizerandweedkillereveryfourthcut.”

Whatarethegoalshere?Whymaytheynotbeexactlymet?

Whatcouldbedoneinstead?


Outcomesversusac>vi>es

UndertakingATermsAudit

Don’tIjustwantanoutcome?

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Bid Phase RFI,RFP,RFQ


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


Requestforinforma>on(RFI)

RFI,RFP,RFQ

Coverle\er> Intent,evalua8oncriteria,legalstatusofagreement,responseinstruc8ons

Execu>veoverview> Introduc8on,objec8ves,scopeandsummary

Generalinforma>on(egguidelines)> Productorservicepurpose,process8melines,changes,confiden8ality

Informa>onformat> Requiredtobeconsistentacrossbidders,assump8ons,schedulees8mates


ContentforanRFI

RFI,RFP,RFQ

Requiredbidderinforma>on> Corporateinforma8on,financial,legalrestric8ons,previousworkperformed

Func>onalandtechnicalrequirements> Skillsetsneeded,tes8ngmethodsandacceptanceop8ons,managementof

change

Budgetarypricingrequirements> Supplyaspreadsheetcostformatthatthesuppliersfillintoguaranteeuniformity

inresponsesandallowquickapples-to-applescomparisons.> Thecostresponseisusuallyhighlyconfiden8alandyouwanttolimititsexposure

withinyourcompany.

Termsandcondi>ons> IncludeyourstandardT&CswithintheRFI


ContentforanRFI

RFI,RFP,RFQ

RFPareusedbecause...

RFP’s(versusRFQandRFI)comeintoplaybecause;> Thepurchasemaybeverycomplex> Therearespecificgovernancerequirements> Youaredocumen8ngthatafairprocessisbeingused> Youarereleasingalargeamountofinforma8ontobidderstogiveyouthebest

solu8ontotheprojectorproductrequirement> Youarelookingtoleveragemarketcompe88on


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


RFPprepara>onandcontent

Execu>veoverview> GainapprovaltosendoutRFP> Basicdetailsandobjec8vesofproject> Re-introducethemtoprojectincasetheyareinvolvedinmany> Proposedscopeandrela8oninrespectofbusinesscontext

Othersinvolved> Projectmanager> Technicalrepresenta8on> Legal,security(auditandcomplianceforbiddersandinforma8onreleased)and

contractmanagementdept> Financeforbudgetaryplanning


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


RFQisused...

Whenthereis;

> Aclearanddefinitedescrip8onofthetype,quan8tyandqualityofthegoodsandremedies

> Aspecifiedtotalprice/apricegivenperunit/byweight/othermeasurement> Aclearunderstandingofpricechanges> Anindica8onofwhatcosts,willbechargedseparately(e.g.delivery,taxesand

du8es,especiallyforinterna8onaldeals)


KeydifferencesbetweenanRFIandRFP/Q

> ThekeydifferencebetweenanRFIandanRFP/Qisthatthelaperwillalwaysincludepricinginforma8on,whereasanRFImaysimplybeusedtoexplorewhatisavailableinthemarket.

> Consequently,anRFImaynotincludecontractterms,whereasanRFP/Qshouldalwaysdoso.

Ø  AnRFIisnotproviding“proposals”–theyareproviding“informa8on”.

Ø  SeeAppendix8:RFPexamplefromtheUS


RFPmanagement(1)

> Thecontractmanagementdepartmentojenactsasthecentralcontrolpointforthecrea8onandwri8ngoftheRFPdocument.Theyfurnishthelistof“approved”suppliersthathavebeenqualifiedtopar8cipateintheRFPprocess

> RequesteachbiddertoprovidefullandcomprehensivepricingandfeeschedulesfortheproposedRFP.Ifaselectedbidderintroduces“hiddencosts”duringnego8a8ons,theyshallbedisqualifiedandbasedonyourbidevalua8ons,thenextbestbidderwouldbechosen


RFPmanagement(2)

> Includeyourcompany’scontractforthetypeofprojectrequiredwithintheRFP,alongwithanyuniquetermsandcondi8onsthatmayapply.

> Itshouldbeunderstoodthatcontractmanagementhascompletedistribu8oncontrolofallverbalandwripencommunica8onsintheRFPprocesswiththebidders.

> Anyques8onsreceivedshouldbeadvisedtoallbiddersandrespondedtoallbidders.

> Allsuppliersshouldbetreatedequitablyandfairly.> Noverbalresponses


Fromthesupplierperspec>ve

ItisimportantforsupplierstounderstandthatanRFIistypicallyusedtoengagespecificpoten>alsuppliersto:> Obtainuptodatetechnicalinforma8ononavailableproducts

> Iden8fyconsultantsandexperts

> Developconsor8a,alliancesandpartnerships

> Buildasuppliernetwork

> Obtaininforma8ontosupportdecisionmaking

> Prepareforaneffec8veRequestforProposal(RFP),RequestforQuota8on(RFQ)orInvita8ontoTender(ITT)


Execu>onofNDAs

Non-disclosureagreements(NDA)’sprotectthesupplier’sperspec>ve;anyresponsemaybecommerciallysensi>ve,detailing:> Currentstrategyandpossiblyfuturedirec8on

> Currentandpossiblyfuturetechnology

> Servicecapabili8es

> Opera8onalmethodology

> Pricing

> Exis8ngcustomersormarketpoten8al

Suppliershouldapprovepurchaser’sNDAbeforesignature


Iden>fyinganopportunity

Apoten>alcontractmustbe:

> Onethesupplierwantstowin

> Appropriate

•  Closefittostrengths

•  Commerciallysound

> Timeliness

•  Influencewithpurchaser’sprocess

•  Reduceopportunityforcompe8tors•  Bidprocessdecisionmaking


Commercialcontractsinvolvement

Whyisthecommercialcontractsorganiza>oninvolved?

> Compliance/leadroleinshapingthedeal?

> Wheredoesyourorganiza8onseetherole?

Ruledrivenculture

•  Riskavoidance

•  Review/nego8atealimitedsetofterms

•  Ojen“involvedtoolate”

Prime responsibility

•  Fully engaged

•  Contracts owns bids •  Shape deals •  Coordination


Whyhaveabidprocess?

Aneffec>vebidprocessisbuiltupon:> Mutualgoals> Serviceandperformancemetrics(bothsides)

> Segmenta8onandpriori8za8on> Workflowrolesandresponsibili8es(bothsides)

> Datagathering(bothsides)

Bestprac>ces:> Review/approvalrates> Cycle8mesimprovement

> Internalsa8sfac8on> Win/lossratesandcauseanalysis

> Disputelevels


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


Thebidteam

Roles

Ø  Bidmanager

Ø  ProjectmanagerØ  Businessdevelopmentorsalesmanager

Ø  Servicesrepresenta8vesØ  Financemanager

Ø  Contractorcommercialmanager

Ø  PurchasingmanagerØ  Legal

Ø  WritersØ  Appendix9:RACIexample Successfulteams

cooperate,communicate

andpriori8zetasks


ProposalPrepara>on

Awell-preparedoutlineisthefounda>onofaclear,consistentandlogicalproposal,aproposalthatcaneasilybeunderstoodbythepurchaser.

> UsetheRFPasyourframework

> Assigneachofthepurchaser’sevalua8oncriteria

> Reviewtheintendedoutlinetoensureitflowslogically

> Assignsec8onswithintheoutlinetoindividuals

> Providespecificinstruc8onstoeachwriter

Themes

Strategy

Solu8on

Assignments

Themes

Strategy

Solu8on


Roleofthecontractmanagementorganiza>on

LimitsinvolvementtoaddgreatestbusinessvalueMinimizeexposuretoriskDevelopcrea>vesolu>ons> Expandthevalueofthedeal> Exploittheopportuni8es> Createsourcesofcompe88veadvantage> Acceptableriskprofile


Contractmanagement:Addingcommercialvalue

Goal;> Makeanofferacceptabletopurchaser> Pointbypointresponse,non-standardapproachesAgreeingtopurchasertermsdependson;> Compe88on> Purchaser’skeycommercialconcerns> Previouscontractsandprojects> Reviewstatementofwork(SOW)> Removeoverblownmarke8ngrhetoric> Covercostimplica8onsinpricingmodel


Thebidwri>ngprocess

DetailedmilestonescheduletokeepbidontrackSolu>onreviewmee>ngDesignfreezeWri>ngbegins;> Involvetherightsubcontractors.> 3rdpar8esmustagreetoalltermsandcondi8ons> Readtheproposalfromthepurchaser’sstandpoint> Assessacceptabilityofproposal> Strengthsandweaknesseswithrecommenda8ons


Approvals

> Approvalsareanintegralpartofthecontrac8ngprocessforallcompanies.

> Allow8meinscheduleforapprovalprocess


•  Tomorrowwewillcon8nuetheprogram,Day2,aswellasexamexercisesandcases.

•  SEEYOU!


Endingday1…..

Documents

Copyright (c) IACCM World Commerce and Contrac8ng. This PDF … · 2020. 9. 25. · • Book + slides are part of exam ... Opportunity evaluaon (chap. 15, 16 and connecon to chap