Published Article - Creating a World Class Contracting Organization - Jul 2015
- 1. 56 Contract Management | July 2015
- 2. 57Contract Management | July 2015
- 3. 58 Contract Management | July 2015 Globally, companies and government organizations have increased their con- tracting 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 profes- sionals, especially executives, must realize the power of the expectations that have been created by their organizations’ con- tract management actions in either buying or selling products, software, professional services, or integrated solutions. The busi- ness 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 to- day and performs tomorrow will significant- ly 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 solu- tions are not conjecture; rather, they are each proven successful proactive actions to improve the people, processes, per- formance, 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 sec- tors, 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 con- tract management organization. Likewise, the same is true with all other key business functional areas, such as sales, human resources, accounting, information technol- ogy, 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: IMPROVING THE U.S. ACQUISITION WORKFORCE, PART 3 OF 3: CREATING A WORLD-CLASS CONTRACTING ORGANIZATION I n 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.
- 4. Contract Management | July 2015 59 1 | Hire, train, and retain world-class contract management talent, 2 | Conduct a comprehensive contract management organizational and work- force assessment, 3 | Form a contract management office, 4 | Develop a contract management methodology, 5 | Provide customized contract manage- ment training to achieve professional certification, 6 | Integrate contract management disci- pline 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, ev- ery contract management organization is an internal professional services team, which is hopefully composed of well-educated, prop- erly 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 solu- tions 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 con- tract managers, contract administrators, buyers, purchasing managers, subcontract managers, or subcontract administrators. Continuous learning is critical for con- tract management professionals to stay abreast of new laws, regulations, emerging technologies, products, and services that affect their areas of business responsibili- ties. Thus, providing appropriate and timely professional training for contract manage- ment personnel is essential to their success and often linked closely to their retention with the organization. In addition to expert knowledge of contract management, ana- lytical 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 IMPROVING THE U.S. ACQUISITION WORKFORCE, PART 3 OF 3: CREATING A WORLD-CLASS CONTRACTING ORGANIZATION
- 5. NCMA Education Partners 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 www.ncmahq.org 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. CHRIS MARTIN | 410-584-1967 | cmartin@networkmediapartners.comContact: Want to become an NCMA education partner?
- 6. Contract Management | July 2015 61 IMPROVING THE U.S. ACQUISITION WORKFORCE, PART 3 OF 3: CREATING A WORLD-CLASS CONTRACTING ORGANIZATION 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. Coach- ing, 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 compre- hensive 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 assess- ment combined with a bottoms-up individual contract management knowledge assess- ment. 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 evolu- tionary roadmap for contract management process capability from ad hoc (immature) to optimized (mature). See FIGURE 1 above. The Contract Management Maturity As- sessment 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 perform the maturity assessment, based upon survey information provided by the members of the contracting workforce.1 The results of the top-down contract man- agement organizational assessment can provide valuable data and knowledge to the organization leadership for actionable, tar- geted process improvement resulting in bet- ter 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 employ- ees. 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 numer- ous 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, high- impact 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 signifi- cantly improve strategic workforce planning and resource allocation. FIGURE 1. THE CONTRACT MANAGEMENT MATURITY MODEL— LEVELS OF MATURITY
- 7. 62 Contract Management | July 2015 Combining Contract Management Organizational Assessment and Contract Management Individual Assessments Creates a Comprehensive Contract Management Assessment By combining theCMMM, theCMMAT (i.e., CM3), and the newiCAT, 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 theCM3 and iCAT allows contract management leadership, in both govern- ment and industry, toquickly, cost-effec- tively, and objectively assess individual and organizational knowledge and performance gaps. Once theperformancegaps 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 thegreatest value and return on investment for both leadership and theworkforce. Combing thepower of organizational as- sessments and individual assessmentswith targeted training and coaching can deliver the most comprehensive contract manage- ment assessment framework ever produced to affect realperformance improvements. Step 3: Form a Contract Management Office Every organization that manages numerous complex contracts and subcontracts and employs numerous contract and subcon- tract management personnel should have or form a contract management office or supply chain management office. Thepur- poseof the contract management officeor supply chain management office is to serve as the functional center of excellence and as the homeof contract management and subcontract management: ƒƒ Subject matter experts to provide ad- vice, coaching, and support services to the contract and subcontract manage- ment personnel; ƒƒ Policies; ƒƒ Processes and procedures; ƒƒ Tools, templates, and software applications; and ƒƒ Historical documents and best practices. 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. Organiza- tions with a contract management leader- ship 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, Web- based contract management or supply chain management methodologies, which include: IMPROVING THE U.S. ACQUISITION WORKFORCE, PART 3 OF 3: CREATING A WORLD-CLASS CONTRACTING ORGANIZATION FIGURE 2. THE COMBINATION OF CM3 AND ICAT PROVIDES A CM ASSESSMENT
- 8. Contract Management | July 2015 63 ƒƒ Contract management and supply chain management life-cycle processes; ƒƒ Integrated policies, procedures, and templates; ƒƒ Automated contract document cre- ation, modification, storage, distribu- tion, review, and approval; and ƒƒ Sample documents, including nondisclo- sure agreements, teaming agreements, standard terms and conditions, repre- sentations, 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 manage- ment commercial-off-the-shelf software and modified or customized the software application(s) to meet the specific require- ments. There are numerous proven-effective contract management, purchasing, and supply chain management software applica- tions 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 con- tract management, supply chain manage- ment, or U.S. federal government contract management. As a result, most contract management personnel require advanced and customized training for their unique in- dustry, especially for those involved in highly complex and regulated U.S. federal govern- ment 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 man- agement education and training include: The George Washington University, ESI Interna- tional, Management Concepts Inc., Villanova University, The Keller Graduate School, The University of Virginia, University of California 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 organiza- tions such as the following: ƒƒ The Federal Acquisition Institute, ƒƒ The Defense Acquisition University, ƒƒ The Department of Veterans Affairs Acquisition Academy, ƒƒ The U.S. Department of Agriculture University, ƒƒ The U.S. Naval Postgraduate School, ƒƒ The Defense Systems Management College, and ƒƒ The Air Force Institute of Technology. Contract management is principally repre- sented by three professional associations: ƒƒ NCMA, founded in 1959, focuses on U.S. government contracting and commer- cial contract management from both the buying and selling perspectives, with about 20,000 members worldwide; ƒƒ The Institute for Supply Management (ISM), founded in 1915, which focuses mainly on commercial purchasing and supply chain management, with about 40,000 members worldwide; and ƒƒ The newest association, the Interna- tional Association of Contract and Commercial Management (IACCM), founded in 1999, with membership that includes more than 2,000 public- and private-sector organizations from over 100 countries Most NCMA and ISM members are from within the United States, but each associa- tion 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 relation- ship management, organizational global strategy, and risk compliance. Those who want to become a CPSM must have three years of experience in supply manage- ment, a bachelor’s degree from a region- ally 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 IMPROVING THE U.S. ACQUISITION WORKFORCE, PART 3 OF 3: CREATING A WORLD-CLASS CONTRACTING ORGANIZATION It is all about the people!
- 9. 64 Contract Management | July 2015 IMPROVING THE U.S. ACQUISITION WORKFORCE, PART 3 OF 3: CREATING A WORLD-CLASS CONTRACTING ORGANIZATION readings. Since IAACM currently has no chapters, magazines, or journals, it provides Web-based information transfer via mes- sage boards, mentoring, member surveys, and webcasts worldwide. Thus, IACCM effec- tively provides virtual membership globally using the power of the Internet. Like NCMA and ISM, IAACM offers conferences world- wide 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 manage- ment, purchasing, and supply chain manage- ment should be focused on mastering key com- petencies 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 profes- sional association is NCMA, which offers nu- merous professional certification programs in contract management, including: ƒƒ The Certified Federal Contracts Manager (CFCM), ƒƒ The Certified Commercial Contracts Manager (CCCM), ƒƒ The Certified Professional Contracts Manager (CPCM), ƒƒ The Industry Certification in Contract Management—Defense (ICCM-D), and ƒƒ 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, ac- counting, legal, engineering, program man- agement, etc.), and multiple parties (i.e., customer, prime contractor, and subcon- tractors) 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: ƒƒ Create integrated contract teams or integrated project teams; ƒƒ Co-locate contract managers with proj- ect management team members; ƒƒ Apply consistent yet flexible contract management practices; ƒƒ Provide Web-based contract manage- ment policies, processes, tools, and templates; ƒƒ Ensure contract managers work the entire contract life-cycle; ƒƒ Provide professional contract manage- ment training enterprise-wide; and
- 10. Contract Management | July 2015 65 IMPROVING THE U.S. ACQUISITION WORKFORCE, PART 3 OF 3: CREATING A WORLD-CLASS CONTRACTING ORGANIZATION ƒƒ Empower contract managers to lead the contract formation, contract negotiation, contract administration, contract compli- ance, 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 organiza- tions refer to these contract management performance reviews as “health checks,” “team assessments,” or “benchmarking.” Contract management organizations should be evalu- ated 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 ƒƒ Active supplier that accounts for 80 percent of purchase dollars, ƒƒ Percentage spend—woman-owned suppliers, ƒƒ Percentage spend—minority-owned enterprises, ƒƒ Percentage spend—strategic alliances, ƒƒ Percentage spend—procurement cards, ƒƒ Percentage spend—e-auctions, ƒƒ Percentage spend—e-commerce, ƒƒ Percentage spend—awarded competitively, ƒƒ Percentage of suppliers with 100- percent on-time delivery, and ƒƒ Customer satisfaction survey ratings. Sales/Contracts Top 10 Key Performance Indicators ƒƒ Average contract duration; ƒƒ Total number of contracts managed; ƒƒ Total dollars of contracts managed; ƒƒ Total number of customers managed; ƒƒ Customer satisfaction ratings, based upon customer surveys, both internal and external; ƒƒ Percentage of on-time-delivery for all contract deliverables to customers; ƒƒ Percentage of profitability on contracts managed; ƒƒ Percentage of contract renewals; ƒƒ Percentage of contract revenue growth; and ƒƒ 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 learn- ing and improvement process that regular performance reviews be conducted on all contract and subcontract management per- sonnel 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 perfor- mance 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, 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.
- 11. 34th Government Contract Management Symposium! Announcing the Annual 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. Transforming the Profession: Anticipating and Adapting to Change Symposium Chair MELISSA STARINSKY, Director, Federal Acquisition Institute BETH COLBERT (Invited), Deputy Director for Management, Office of Management and Budget Featured Keynote Mark Your Calendar! Registration Opens July 24. #NCMAgcms www.ncmahq.org/gcms15
- 12. Contract Management | July 2015 67 spot bonuses, salary increases, paid vaca- tions, 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 in- volve 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 subcon- tract management workforce and organiza- tion is vital to ensure legal and regulatory compliance, cost control, risk management, profitability, and on-time delivery of quality products, professional services, and inte- grated 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, Vir- ginia. He is a highly respected industry execu- tive who served as the chief operating officer, Acquisition Solutions Inc.; and chief compli- ance officer, vice president of program man- agement, and vice president of supply chain management at Lucent Technologies, Inc. He is an acclaimed public speaker, expert wit- ness, a best-selling author of 22 published business books, decorated U.S. Air Force offi- cer, and an international business consultant who has advised and taught over 40,000 pro- fessionals worldwide. SHIRL G. NELSON, NCMA FELLOW, is cur- rently the president and chief operating officer at The Aurelius Group, a service-disabled vet- eran–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 exec- utive 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. IMPROVING THE U.S. ACQUISITION WORKFORCE, PART 3 OF 3: CREATING A WORLD-CLASS CONTRACTING ORGANIZATION Join BVTI at NCMA 2015World Congress 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) Now Hiring Acquisition and Program Management Specialists 703.229.4200 info@bvti.com 28JULYTUESDAY 27JULYMONDAY 26JULYSUNDAY VisitwithBVTIin Booth515 Meetwithour Acquisitionand ForecastExpertsMeetwithourAudit, BigDataandPricing ComplianceExperts