56 Contract Management July 2015
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In both the public and private business sectors, buyers worldwide are becoming more informed and demanding as they require suppliers or contractors to assume greater business risks to win the buyer s valued business; mergers, acquisitions, and longstanding partnerships of former competitors are increasing; and the integration of products, services, and solutions is growing at an exponential rate in business transactions. Thus, contracts are becoming more complicated to plan, negotiate, create, and administer. Globally, companies and government organizations have increased their contracting for goods and services with the specific intent of focusing more on their core business and allowing suppliers to do the other work. Competition is growing, speed to market is critical, and costs must be reduced, but only those with a solid understanding of contract management will achieve ultimate success. There is power in contract management today and tomorrow. All business professionals, especially executives, must realize the power of the expectations that have been created by their organizations contract management actions in either buying or selling products, software, professional services, or integrated solutions. The business deals an organization made several years ago and how it manages the resulting contracts and projects dramatically affect its success and reputation today. Likewise, the contracts an organization negotiates today and performs tomorrow will significantly affect its profitability and reputation in the marketplace of the future. Professional contract management is vital to ensure that both buyers and sellers perform as expected and get what they have mutually agreed to in their contracts. In this article, we will discuss the seven steps to create a world-class contracting organization supporting either the buying or selling process. The steps required to optimize an organization s buying and selling of products, systems, software, professional services, and integrated solutions are not conjecture; rather, they are each proven successful proactive actions to improve the people, processes, performance, and pricing needed to achieve high-performance results. Creating a World-Class Contracting Organization: Seven Steps to Success In both the public and private business sectors, products and services are bought and sold via contracts. Thus, it is important for every organization to have a well-educated and properly staffed, trained, certified, qualified, efficient, and cost-effective contract management organization. Likewise, the same is true with all other key business functional areas, such as sales, human resources, accounting, information technology, marketing, legal, engineering, logistics, program management, and others. So, what exactly should organizations do to optimize their respective contract management organizations? Based upon our extensive research and experience, we suggest the following seven steps to create a world-class contracting organization: 58 Contract Management July 2015
1 Hire, train, and retain world-class contract management talent, 2 Conduct a comprehensive contract management organizational and workforce assessment, 3 Form a contract management office, 4 Develop a contract management methodology, 5 Provide customized contract management training to achieve professional certification, 6 Integrate contract management discipline enterprise-wide, and 7 Conduct contract management performance reviews with rewards for outstanding performance. Step 1: Hire, Train, and Retain World-Class Contract Managaement Talent It is all about the people! Fundamentally, every contract management organization is an internal professional services team, which is hopefully composed of well-educated, properly trained, and highly motivated people who provide expert knowledge and skills to facilitate the legal, ethical, efficient, and compliant transactions of products, systems, professional services, and integrated solutions between buyers and sellers. Today, most organizations seek to hire individuals with business, legal, and or technical formal education and related business experience to serve as their contract managers, contract administrators, buyers, purchasing managers, subcontract managers, or subcontract administrators. Continuous learning is critical for contract management professionals to stay abreast of new laws, regulations, emerging technologies, products, and services that affect their areas of business responsibilities. Thus, providing appropriate and timely professional training for contract management personnel is essential to their success and often linked closely to their retention with the organization. In addition to expert knowledge of contract management, analytical skills, strong communication skills, negotiation skills, integrity, and leadership skills are critical to the success of contract management personnel. Further, often overlooked but of extremely high value is the ability to understand the needs and point-of-view of the other side of the Contract Management July 2015 59
NCMA Education Partners To increase the depth and breadth of learning opportunities for our members, NCMA has entered into formal partnership with leading training and education providers. Whether your goal is an advanced degree, specialized training courses, or certification, NCMA Education Partners can help. American Graduate University 733 N. Dodsworth Avenue Covina, CA 91724 www.agu.edu American Management Association 1601 Broadway New York, NY 10019 www.amanet.org American Public University System www.apu.apus.edu Centre Law & Consulting 1953 Gallows Road Suite 650 Vienna, VA 22182 www.centrelawgroup.com Chicago Training and Consultancy www.chicagotcs.com ESI International 901 North Glebe Road Suite 200 Arlington, VA 22203 www.esi-intl.com FedBid, Inc. 8500 Leesburg Pike Suite 602 Vienna, VA 22182 www.fedbid.com Federal Market Group www.gbs-llc.com Federal Publications Seminars 1100 13th Street, NW Suite 200 Washington, DC 20005 www.fedpubseminars.com The George Washington University Master of Science in Government Contracts 2000 H Street, NW Burns Hall 510 Washington, DC 20052 msgc@gwu.edu Management Concepts 8230 Leesburg Pike Vienna, VA 22182 www.managementconcepts.com Northwest Procurement Institute, Inc. PO Box 1328 Edmonds, WA 98020 www.npi-training.com Old Dominion University 5115 Hampton Blvd Norfolk, VA 23529 http://dl.odu.edu/ncma Public Contracting Institute PO Box 27951 Washington, DC 20038 www.publiccontractinginstitute.com Saint Louis University 3840 Lindell Blvd. Saint Louis, MO 63108 www.sluonline.com University of California Irvine Extension Irvine, CA 92697 http://extension.uci.edu/ncma University of Virginia School of Continuing and Professional Studies 104 Midmont Lane, PO Box 400764 Charlottesville, VA 22904 www.scps.virginia.edu thinc, LLC 725 Green Garden Circle Chester, VA 23836 www.thinc-llc.com Villanova University Online 9417 Princess Palm Avenue Tampa, FL 33619 www.villanovau.com/ncmaedu Want to become an NCMA education partner? Contact: CHRIS MARTIN 410-584-1967 cmartin@networkmediapartners.com www.ncmahq.org
transaction. Exchange programs between government and industry could greatly enhance the contract management talent at both sides of the table. World-class contract management talent can make a real and significant difference in the revenue, cost, and or profitability of the organization; thus, contract management professionals should be well compensated and treated as highly valued assets. Coaching, mentoring, and training, combined with rewarding yet challenging work, often result in highly motivated personnel who tend to stay where they are valued, respected, and appreciated by their team members, peers, and leadership. Step 2: Conduct a Comprehensive Contract Management Assessment World-class contracting support is vital to achieve mission success. Meeting the challenges of buying and or selling products, services, and solutions requires a comprehensive approach to successfully managing the contracting organization and the related contracting workforce. Thus, it is imperative to conduct both a top-down organizational contract management capabilities assessment combined with a bottoms-up individual contract management knowledge assessment. It is important to have an accurate understanding of where you are in order to get where you want to be in the future. Contract Management Organizational Assessment Tools The Contract Management Maturity Model (CMMM) is a proven successful tool to enable organizations to evaluate and benchmark their respective contract management performance. The CMMM provides an evolutionary roadmap for contract management process capability from ad hoc (immature) to optimized (mature). See FIGURE 1 above. The Contract Management Maturity Assessment Tool (CMMAT) is the enabler for an organization to conduct a cost-effective, top-down organizational assessment. CMMAT collects and analyzes the data required to FIGURE 1. THE CONTRACT MANAGEMENT MATURITY MODEL LEVELS OF MATURITY perform the maturity assessment, based upon survey information provided by the members of the contracting workforce. 1 The results of the top-down contract management organizational assessment can provide valuable data and knowledge to the organization leadership for actionable, targeted process improvement resulting in better performance. As discussed in the second article of this three-part series of articles, the CMMM and CMMAT have both been widely used in the U.S. government and industry for the past 10 years with excellent results. 2 Individual Contract (Knowledge) Assessment Tool (icat) World-class contract management requires more than sound processes and policies. A proficient workforce is paramount and the workforce is made up of individual employees. For industry, addressing and identifying skills gaps are simply best practices. Within the U.S. federal government acquisition workforce, the Government Accountability Office (GAO) Report GAO-15-223 and numerous other GAO reports have repeatedly stressed the need for federal agencies to identify and close skill gaps, specifically naming contracting as one of the six critical skill areas that is particularly problematic. The new Individual Contract Assessment Tool (icat) uses the diagnostic power of individual knowledge assessments to provide feedback mapped to targeted learning interventions, customized to the development needs of individual employees. This focused feedback accelerates workforce development by routing employees to high-impact learning opportunities. icat delivers exceptional insight to both individuals and leadership, improving individual learning outcomes and organizational return on investment. The individualized coaching report reveals an individual s unique knowledge strengths, weaknesses, and benchmark comparisons. When knowledge gaps are identified, the report provides direct links to focused, highimpact learning content. Leadership gains an equally detailed view when the data of many individual knowledge assessments is combined to produce the workforce proficiency report, a strategic view of a workforce s overall knowledge strengths and weaknesses. This can be used to significantly improve strategic workforce planning and resource allocation. Contract Management July 2015 61
Step 3: Form a Contract Management Office Every organization that manages numerous complex contracts and subcontracts and employs numerous contract and subcontract management personnel should have or form a contract management office or supply chain management office. The purpose of the contract management office or supply chain management office is to serve as the functional center of excellence and as the home of contract management and subcontract management: Subject matter experts to provide advice, coaching, and support services to the contract and subcontract management personnel; Policies; Processes and procedures; Tools, templates, and software applications; and Historical documents and best practices. FIGURE 2. THE COMBINATION OF CM3 AND ICAT PROVIDES A CM ASSESSMENT Combining Contract Management Organizational Assessment and Contract Management Individual Assessments Creates a Comprehensive Contract Management Assessment By combining the CMMM, the CMMAT (i.e., CM3), and the new icat, the result is a truly comprehensive assessment of the health of an organization s contract management capabilities and individual knowledge. See FIGURE 2 above. Using the CM3 and icat allows contract management leadership, in both government and industry, to quickly, cost-effectively, and objectively assess individual and organizational knowledge and performance gaps. Once the performance gaps are identified, leadership can affect change by focusing on those initiatives such as new contract management policies, process changes, customized training, targeted coaching, etc. with the greatest value and return on investment for both leadership and the workforce. Combing the power of organizational assessments and individual assessments with targeted training and coaching can deliver the most comprehensive contract management assessment framework ever produced to affect real performance improvements. Further, the contract management office leadership should lead the organization. Every large organization should consider forming a contract management or supply chain management leadership council, with key representatives from every business unit, department, or geographic region. The council should be chartered to provide an enterprise-wide forum for the contract management community to foster the growth and development of a world-class corporate resource. Organizations with a contract management leadership council have helped foster contract management attributes by sharing lessons learned and best practices throughout their respective enterprise. Step 4: Develop a Contract Management Methodology Best-in-class organizations worldwide have developed customized, process-driven, Webbased contract management or supply chain management methodologies, which include: 62 Contract Management July 2015
Contract management and supply chain management life-cycle processes; Integrated policies, procedures, and templates; Automated contract document creation, modification, storage, distribution, review, and approval; and at Los Angeles, GCS International, The Public Contracting Institute, and NCMA, just to mention a few. In addition, the U.S. federal government has developed its own internal education and training programs in U.S. government contract management provided by organizations such as the following: 40,000 members worldwide; and The newest association, the International Association of Contract and Commercial Management (IACCM), founded in 1999, with membership that includes more than 2,000 publicand private-sector organizations from over 100 countries Sample documents, including nondisclosure agreements, teaming agreements, standard terms and conditions, representations, certifications, and contracts. Some organizations have developed their contract management methodology on their own, while many organizations have purchased or leased contract management, purchasing, and supply chain management commercial-off-the-shelf software and modified or customized the software application(s) to meet the specific requirements. There are numerous proven-effective contract management, purchasing, and supply chain management software applications and modules available from Microsoft, SAP, Oracle, Deltek, and others. Step 5: Provide Customized Contract Management Training to Achieve Professional Certification Today, very few colleges and universities have a bachelor s degree program in contract management, supply chain management, or U.S. federal government contract management. As a result, most contract management personnel require advanced and customized training for their unique industry, especially for those involved in highly complex and regulated U.S. federal government contracts and related subcontracts. As a result, there is a wide array of master certificate programs, graduate degree programs, and specialized courses, seminars, and webinars available. Some of the leading providers of U.S. government contract management education and training include: The George Washington University, ESI International, Management Concepts Inc., Villanova University, The Keller Graduate School, The University of Virginia, University of California The Federal Acquisition Institute, The Defense Acquisition University, The Department of Veterans Affairs Acquisition Academy, The U.S. Department of Agriculture University, The U.S. Naval Postgraduate School, The Defense Systems Management College, and The Air Force Institute of Technology. Contract management is principally represented by three professional associations: NCMA, founded in 1959, focuses on U.S. government contracting and commercial contract management from both the buying and selling perspectives, with about 20,000 members worldwide; The Institute for Supply Management (ISM), founded in 1915, which focuses mainly on commercial purchasing and supply chain management, with about Most NCMA and ISM members are from within the United States, but each association has chapters worldwide. ISM formerly offered a Certified Purchasing Manager (CPM) program worldwide, but is no longer offering this professional credential. Since 2008, ISM offers the Certified Professional Supply Manager (CPSM) designation, which requires skills in finance, supplier relationship management, organizational global It is all about the people! strategy, and risk compliance. Those who want to become a CPSM must have three years of experience in supply management, a bachelor s degree from a regionally accredited institution or international equivalent, and successfully pass three CPSM exams, or if he or she is a C.P.M. in good standing, pass the bridge exam. 3 IACCM has a well-established Web-based skills assessment tool and unique set of professional certification programs. The certification programs offered by IACCM are supported by a growing portfolio of Web-based learning modules, addressing the needs of both buyers and sellers. The IAACM Management Learning Program is also unique in its capabilities, combining each recorded module with a wide array of texts, research results, and recommended Contract Management July 2015 63
readings. Since IAACM currently has no chapters, magazines, or journals, it provides Web-based information transfer via message boards, mentoring, member surveys, and webcasts worldwide. Thus, IACCM effectively provides virtual membership globally using the power of the Internet. Like NCMA and ISM, IAACM offers conferences worldwide and a wide-array of classroom training for those that want on-site, live programs to enhance the Web-based materials. 4 Education and training in contract management, purchasing, and supply chain management should be focused on mastering key competencies as embodied in the NCMA Contract Management Body of Knowledge (CMBOK), the Federal Acquisition Institute Competencies, and/or the Federal Acquisition Regulation. The leading contract management professional association is NCMA, which offers numerous professional certification programs in contract management, including: The Certified Federal Contracts Manager (CFCM), The Certified Commercial Contracts Manager (CCCM), The Certified Professional Contracts Manager (CPCM), The Industry Certification in Contract Management Defense (ICCM-D), and The Industry Certification in Contract Management Federal (ICCM-F). While professional education, training, and certification are necessary, they alone are not sufficient. Knowledge is good, but the application of knowledge via demonstrated skills resulting in improved performance is best. Thus, contract management education, training, certification, continual learning, and performance assessments must all occur within an organization in order to optimize contract management performance results. Step 6: Integrate Contract Management Discipline Enterprise-Wide The premise of an integrated contracted management discipline is that the multiple functional areas (e.g., sales, marketing, accounting, legal, engineering, program management, etc.), and multiple parties (i.e., customer, prime contractor, and subcontractors) all need to be unified and focused on achieving contract and subcontract requirements, meeting service performance levels and ensuring legal and regulatory compliance. Integrating is about all of the functional areas and parties involved in large, complex contracts and subcontracts working together to achieve customer goals. So, what does it take to integrate contract management discipline enterprise-wide: Create integrated contract teams or integrated project teams; Co-locate contract managers with project management team members; Apply consistent yet flexible contract management practices; Provide Web-based contract management policies, processes, tools, and templates; Ensure contract managers work the entire contract life-cycle; Provide professional contract management training enterprise-wide; and 64 Contract Management July 2015
Coaching, mentoring, and training, combined with rewarding yet challenging work, often result in highly motivated personnel who tend to stay where they are valued, respected, and appreciated by their team members, peers, and leadership. Empower contract managers to lead the contract formation, contract negotiation, contract administration, contract compliance, and contract close-out. Step 7: Conduct Contract Management Performance Reviews with Rewards for Outstanding Performance As it is in any high-performing team, it is vital to conduct regular or periodic organizational and individual performance reviews. Some organizations refer to these contract management performance reviews as health checks, team assessments, or benchmarking. Contract management organizations should be evaluated both objectively and subjectively against key performance indicators specific to either the buying/purchasing perspective and/or the sales contract perspective. Some of the most frequently used key performance indicators for contract management and subcontract management teams include the following. Buying/Purchasing Top 10 Key Performance Indicators Active supplier that accounts for 80 percent of purchase dollars, Percentage spend woman-owned suppliers, Percentage spend minority-owned enterprises, Percentage spend strategic alliances, Percentage spend procurement cards, Percentage spend e-auctions, Percentage spend e-commerce, Percentage spend awarded competitively, Percentage of suppliers with 100- percent on-time delivery, and Customer satisfaction survey ratings. Sales/Contracts Top 10 Key Performance Indicators Average contract duration; Total number of contracts managed; Total dollars of contracts managed; Total number of customers managed; Customer satisfaction ratings, based upon customer surveys, both internal and external; Percentage of on-time-delivery for all contract deliverables to customers; Percentage of profitability on contracts managed; Percentage of contract renewals; Percentage of contract revenue growth; and Dollars of contract revenue growth. The reality is that all contract management organizations are dynamic because they consist of people, processes, pricing, and a performance culture. Leadership can make either a positive or negative impact on an organization s performance. Turnover of key personnel can have a significant impact upon organizational performance. Likewise, the improvement of processes and the providing of timely professional training, coaching, and mentoring can all make a positive impact upon performance. Thus, it is critical to the continuous learning and improvement process that regular performance reviews be conducted on all contract and subcontract management personnel and organizations. The performance reviews should be focused on objectively assessing where the individual or group is today verses where they need to be going forward, and thus what actions need to be taken to affect positive change in performance results. It is essential to reward both individuals and organizations that have achieved outstanding performance results through a combination of methods, including verbal and written praise, promotions, advanced training, certificates or medals of excellence, Contract Management July 2015 65
34 th Announcing the Annual Government Contract Management Symposium! Transforming the Profession: Anticipating and Adapting to Change December 14 15, 2015 Washington Marriott Wardman Park Washington, DC NCMA s annual fall event in Washington, DC brings together 800+ professionals from government and industry to explore today s workforce, new legislation, anticipated trends to expect, and what the future holds for the profession. Symposium Chair MELISSA STARINSKY, Director, Federal Acquisition Institute Featured Keynote BETH COLBERT (Invited), Deputy Director for Management, Office of Management and Budget Mark Your Calendar! Registration Opens July 24. #NCMAgcms www.ncmahq.org/gcms15
spot bonuses, salary increases, paid vacations, etc. It is equally important to help lesser performers within the organization to enhance their skills via expanded training, coaching, and mentoring. Summary The aforementioned seven steps to create a world-class contracting organization are both proven proactive best practices and involve the application of some good common sense. Unfortunately, today, in both U.S. federal government agencies and within industry, there is a real and present need to improve business performance results. Thus, optimizing the contract and subcontract management workforce and organization is vital to ensure legal and regulatory compliance, cost control, risk management, profitability, and on-time delivery of quality products, professional services, and integrated solutions worldwide. CM ABOUT THE AUTHORS GREGORY A. GARRETT, CPCM, C.P.M., PMP, NCMA FELLOW, is a partner at Blue Canopy, a leading IT and cyber security firm with its corporate headquarters in Reston, Virginia. He is a highly respected industry executive who served as the chief operating officer, Acquisition Solutions Inc.; and chief compliance officer, vice president of program management, and vice president of supply chain management at Lucent Technologies, Inc. He is an acclaimed public speaker, expert witness, a best-selling author of 22 published business books, decorated U.S. Air Force officer, and an international business consultant who has advised and taught over 40,000 professionals worldwide. SHIRL G. NELSON, NCMA FELLOW, is currently the president and chief operating officer at The Aurelius Group, a service-disabled veteran owned small business. She is a highly respected industry executive who served as a senior principal at Acquisition Solutions Inc., and previously as the senior acquisition executive at the U.S. Department of Commerce. She is a director with the Procurement Round Table and the founding co-chair and current member of the Partnership for Public Service Strategic Advisors to Government Executives (SAGE) group for Chief Acquisition Officers. Send comments about this article to cm@ncmahq.org. ENDNOTES 1. Both CMMM and CMMAT are discussed in much more detail in the book Contract Management Organizational Assessment Tools, by Gregory A. Garrett and Dr. Rene G. Rendon, published by NCMA In addition, a new Web-based version of both CMMM and CMMAT are available in the new software package called CM3. 2. See Gregory A. Garrett and Dr. Rene G. Rendon, Improving the U.S. Federal Acquisition Workforce, Part 2 of 3 Contract Management Process Maturity: The Key for Organizational Survival, Contract Management Magazine (June 2015). 3. To learn more about ISM, go to www.ism.ws. 4. To learn more about IACCM, go to www.iaccm.com. Join BVTI at NCMA 2015 World Congress 26 JULY SUNDAY Come to Booth 515 and get a frst hand look at ValuePath - our of-the-shelf, full-life cycle acquisition software that powers the IC ARC and DHS Acquisition Forecast System (APFS) 703.229.4200 info@bvti.com 28 JULY TUESDAY 27 JULY MONDAY Visit with BVTI in Booth 515 Meet with our Acquisition and Forecast Experts Meet with our Audit, Big Data and Pricing Compliance Experts Now Hiring Acquisition and Program Management Specialists Contract Management July 2015 67