Lessons Learned for Contract Management

Lessons Learned

for

Contract Management

•

A Presentation for PMI-AGC

•

by

•

Kurt Robertson

•

PMP, MBA, Lean Sensei

•

6 Sigma Master Black Belt

•

CFPIM, C.P.M.

DISCLAIMER

•

Private person

•

May reference broad contracting experience beyond

Saudi Aramco.

•

Nothing in this presentation is specifically represents

Saudi Aramco policy or specific contracting problems

or events within Aramco.

Purpose:

To provide a high-level checklist of activities and

considerations for proper contract administration.

Objective:

To leave the meeting with tips on improving your

professionalism and on improving your life as a

contract administrator.

Applicability:

•

• Projects

• Contract Management or Contract Administration

8 WASTES

1.

Over production

2.

Over Processing

3.

Excess Inventory

4.

Transportation

5.

Motion

6.

Defects (Six Sigma)

7.

Waiting

8.

Human Resources

REMEMBER:

1.

Quality

2.

Cost

3.

Delivery

4.

Safety

5.

Morale

Q

C

D

S

M

LEAN CONSIDERATION

Two Areas of Responsibility

Two Points of View

1. Contractor: (submits proposal, performs work)

Contract Management – A Core Competency

The management of issues that arise during the performance of a contract, including the process of managing contract deliverables, deadlines,

contract terms and conditions (T&Cs), while ensuring customer satisfaction.

- National Contract Management Association, 2nd _ed.

Life Cycle Contract Management: The proactive and methodical management of a contract from initiation through award to compliance and renewal.

Open and fair Contract Management is the starting point for building positive customer/supply relationships. Contract Management has transformed from an administrative, tactical function to a strategic process integral to corporate

strategy and directly contributing to the organization’s competitive advantage. It is now a core process. Good contract writing and negotiation must be

accompanied by effective contract management. If you’re not effectively managing your contracts, you’re not effectively managing your business. To award and successfully manage effective contracts, organizations must have a disciplined, capable and mature contract management process in place.

Increased Interest in Contract Management

•

Internal Focus



Life Cycle Contract Management



Internal process improvement

•

External Focus



Outsourcing

• Supplier Relationships

• Strategic Sourcing



Cost control and transparency



Globalization



Complexity:

• Regulatory compliance

Contract Management Goal



Q

CD

S

M



Supplier Performance



Manage business risks



Cut expenses



Increase revenues by reducing:

•

Pricing errors

•

Mistaken payments

•

Operating and processing costs

•

Personnel

Costs of Sub-optimal Contract Management

1.

Sub-optimizing revenue:

• No enforcement of negotiated terms on your suppliers

• Unenforced rights may be waived

• Timely delivery

• Quality product

• Errors of double-handling

• Time wasted looking for contracts, schedules, file notes and data.

• Poor communications – disparate and ad hoc

2.

Being reactive instead of proactive

3.

Litigation

4.

Termination, Suspension or Disbarment

Contract Management-

Primary Responsibilities

1. Know the Contract (#1 complaint about contract managers)

2. Work Control

 Work ordering

 Work completion

 Work inspection and acceptance

 Invoicing and payment

3. Contract Compliance

 Day-to-day monitoring: enforce contract milestone schedule

 Plan of action if supplier underperforms or if contract requirements change

 Criteria for measuring success: QCD + supplier responsiveness

 RFP/IFB amendment, contract modification or change order

4. Contractor Payment (#1 complaint from contractors)

 Prompt and accurate

5. Administrative

 Rules of purchasing

 Contract law

 Transportation

 Health and safety regulations

 Social responsibilities

6. Documentation Requirements

 Document all actions, verify all requirements

 Invoicing, work plans, performance measures, insurance, supplier crew and material payments

7. Subcontract Plans

 Subcontractor clause

8. Contract Closeout



SOW (or technical specifications):

• Write it. Live with it

• Incomplete

• Gold plated

• Link pay provisions to specific stratified deliverables to make contract

enforcement easier

• Make deliverables clear, specific, measurable

• Schedule C to the contract can be an excellent tool to drive behavior



Contract Format and Ts & Cs non-standard



Prequalification:



The Team:

• Team Leader.

• Team Resumes: Everybody looks good on paper.



JOB EX:

• What kinds of questions do they ask?

•



Improve the process (Lean)



Automate the process



Repository

•

Lessons Learned/Best Practices



Standardization (

SIMULATION

if time allows)

•

Vocabulary

•

Terms, Conditions and Format

•

Standards of performance (expectations)



Contract Work Plan

•

List of tasks and schedule for completing those tasks.

Checklist for POST-AWARD Contract Management



Monitor Contract Compliance

•

Know and shepherd the deliverables

•

Contract Key Performance Indicators (KPIs)

•

Cost

•

Quality

•

Delivery (time, location, quantity)



Evaluate Contractor Performance

•

Provide timely corrective feedback to the contractor

•

Administrative



Avoid Conflict of Interest

• For you – The Customer (remember who you work for: Stockholm

Syndrome)

• For the Contractor

• Ask yourself if activities are:

• Illegal

• Immoral

• Unsafe

• Unethical

 Anticipate, eliminate or mitigate risk.

 Inform appropriate parties (project manager, quality manager) of

potential problems.

 Represent your organization in meetings – be there.

 Keep your finger on the pulse of the project.

• Cultural interface and sensitivity.



Only one contract administrator per contract



Contract Modifications:

• Dated and sequentially numbered

• Specifically what has changed

• Specifically what has NOT changed

• Properly approved and executed



Conduct Organizational Assessments and self-audits.

• Contract Management Maturity Model (CMMP)

• Maturity Levels: Ad hoc, Basic, Structured, Integrated, Optimized

Ref: “Contract Management Organization Assessment Tools” By Gregory A. Garret, Rene G. Rendon



Conduct periodic research on your contractor (or customer) for

financial or legal problems - lien searches.



Lessons Learned/Best Practices:

• Begin documenting early and share as appropriate to improve the

process and deliverables

• Repository: common accessible storage area



Kickoffs, Phase Wrap Ups, Status Meetings:

• Communicate Early

• Communicate Clearly

• Communicate Often



Expectations:

• Establish them early.

• Manage them often.

• We receive the product quality and contractor performance we are



Unauthorized Commitments

• Only one spokesperson per contract

• Communication Ladder:

 Problems

 Authorization to perform work



Site Visits

• Be Present: Difficult to manage a contract from behind a desk

• Let the contractor and the proponent know by your frequent

presence you are the company’s contract representative

• Insist on being kept informed

• Make random quality checks and other evaluative functions

• When in charge, take charge!

The Contractor’s Point of View

•

Everything above still applies.

•

If your

authorized customer representative

asks for

additional level of effort and it isn’t:



Illegal



Immoral



Unethical



Unsafe

•

Get a signed change order – THEN proceed.



Following verbal direction, even from an authorized person,

often results in filing a claim for payment.

RESOURCES

•

National Contract Management Association (NCMA)

www.ncmahq.org.

•

“Contract Management Body of Knowledge” (CMBOK).

•

Next Level Purchasing

http://www.nextlevelpurchasing.com/free.html.

•

Institute for Supplier Management (ISM) http://www.ISM.com.