This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
John Lake, Project Manager – Subcontracts (Roke Manor Research)
Dr. Jon Broome, chair, APM Contracts & Procurement SIG.managing consultant, leading edge projects consulting ltd
1
A dAgenda
Housekeeping
Intro to the C&P SIG
The main eventThe main event.
Housekeeping
Fire proceduresp
ToiletsToilets
Focus : mobiles off etc.
One of the first SIGsFlourished and then declined.A conference some 3 ¾ years ago :A conference some 3 ¾ years ago : members wanted the basics of contracts & procurement.pWe run a combination of basic training events called “seminars” (always booked upevents called seminars (always booked up well in advance) & more leading edgeevents.
Aim of the C&P SIG :The Contracts & Procurement Specific Interest Group :The Contracts & Procurement Specific Interest Group :
Exists to promote and disseminate knowledge, understanding and best practice of contracts and u de sta d g a d best p act ce o co t acts a dprocurement in a project environment. Aims is to become a lively and constructive debating f hi h t k i ti b t ti d h lforum which takes existing best practice and helps make it better. Wants to be disseminating this knowledgeWants to be disseminating this knowledge, understanding and better than best practice through a variety of accessible means.Has a long term aspiration to become recognised as an international forum at the leading edge of excellence in contracts & procurement for projects.excellence in contracts & procurement for projects.
2011 Contracts & Procurement SIG StructureThe Bulls Eye : Committee membersThe Bulls Eye : Committee members & those who want to initiate ‘projects’ & pro-actively contribute. Copied in on most emails wrt SIG initiatives.Bi monthly web / tele conference
The Inner Circle Circle : Those who
Bi-monthly web / tele-conference meetings.
are willing to contribute when asked e.g. Talks, contributing & reviewing documents. Limited direct emails.
The Middle Circle : Those on the C&P web mailing list.
The Outer Circle (& beyond) : Receive Information via general APM publicity.
Future EventsBasic Contract Law for Successful Projects – VWV – Newcastle –Basic Contract Law for Successful Projects VWV Newcastle 14th September (day)What is NEC3 ? – Me - Newcastle – 14th September (evening)Annual Conference : How to write winning bids – Various –London – early October.The Top Ten Mistakes in Contracts & Procurement andThe Top Ten Mistakes in Contracts & Procurement … … and what to do about them – David Beare – Leeds 24th November.
We are also developing a Procurement Guide & discussing an event on Agile Procurement some time in late October.
Effective Subcontractor Management
About Roke
R&D t f ll
Roke snapshot
› R&D centre of excellence
› Situated in Hampshire, UK
› Trusted List X site
Some of the world class test facilities at Roke:
› Turnover in excess of £50M
› Over 350 world class scientists & engineersengineers
› Specialise in ‘First, Fast, Difficult’
› Delivers technological advantage to G t C i l & Si
› CTIA Chamber › High Voltage Chamber
› EMC Chamber
8
Government, Commercial & Siemens organisations
Effective Subcontractor Management
Objectivesj
Mission Statement for today:
To enhance your skills and capabilities in the management of subcontractors during the delivery phase.
● Focus on pitfalls and gotchas
● Review actions that can help to address or avoid costly pitfalls
● Gather your inputs and create a Working ● Gather your inputs and create a Working Paper
● Provide some example management tools p g
9
Effective Subcontractor Management
Agendag
1. Setting the scene:• Project Life Cycle• Key Issues
b d d• Subcontractor types – Management demand• Some common “Gotchas”• Typical Scenario
2. Break-out Scenarios – Covering some difficult points in the delivery Life Cycle
3. Break-out Reports
4. Primary findings/discussion
5. Summary and close
10
Effective Subcontractor Management
Project Life Cycle (APM) j y ( )
X
X
Concept
Definition
Implementation Handover &
X X X
Design Build ●
O O O O
& closeout
Operations
TerminationBusiness
XBusiness
Case
Project Management
Plan
Integration
Strategy
X
X
Strategy
SelectionContract Award
Handover &
X
X
Implementation
Subcontractor X
Closeout
11
Effective Subcontractor Management
Key Issuesy
● One throat to choke: No matter how many subcontractors areused the customer will consider you liable as prime (its your
t ti )reputation)● Subcontractor failures: Failure by a subcontractor may have
onerous knock-on consequences on the overall project
● Timing is everything: Contract Negotiation times are oftenli ti S b t t t b d l d ft
● Legal recourse: Legal recourse is generally impractical as thecosts and consequences are excessive
● Negotiating strategy: Agreements made at the core negotiationtable need to be underpinned by the subcontractor(s)
unrealistic. Subcontractors must be engaged early and often
● Out-of-the-woodwork issues: Unforeseen issues may stress theprime/subcontractor relationship and dealing with these matters requires calm and open-minded thinking
These issues emphasise why subcontractor management is so important and a key skill that is required on projects.
q p g
12
Effective Subcontractor Management
Subcontracting “Boston Matrix”g
What is your typical type of subcontractor?
Project percentage
StarQuestion Mark
*Complexity
Dog Cash Cow
Subcontractor’s Validated Experience
13
Effective Subcontractor Management
Supplier Management Risks – Some Gotchas!pp g
Things to watch out for:
● Single source dependency
● Re-assignment of risk during the contract
• Always have an alternative (selection process)
● Acceptance ambiguity
Di i i hi R P i it
• Ground rules for meeting/communications control
• State Acceptance criteria in SoW – allow for integration● Diminishing Resource Priority
● Excessive and unreasonable Change Requests• Obtain CVs of key personnel – specify approval of changes
S if b li i il• Specify a baseline setting milestone
• Include formal CCR procedure in your SoW
Schedule reviews of performance against risks regularly and at key milestones
14
Workshop (part 1)O b i fl thi k b t h t hOn your own, briefly think about what, when you come away from this evening, answered question or “tips about how to … …” would make it really worthwhile having y gattended. Come up with one *.* This could be going down a level of detail wrt what John has
id “h t ” ti / ti thi t ti d t llsaid, a “how to” question / tip or something not mentioned at all.
Have chat around the table around these.
A bl i h N 1 h i d i hAs a table, come up with your No.1 choice and write on the BIG Post-It.
Have two in reserve and write each on a large’ish Post ItHave two in reserve and write each on a large ish Post-It.
Name your table and just record on bottom of each Post-It before bringing upbefore bringing up.
Workshop bit (Part 2) - ProcessI th BIG P t It i l i l d f J hI arrange the BIG Post-Its in a logical order for John to answer. I arrange the large’ish ones around these so if easy to easy ‘cos related can be ticked of as wellso if easy to easy cos related can be ticked of as well.
I hand them to John in logical order one-by-one.
John (mainly) or I attempt to at least answer all BIGPost-Its by end.
After answering one, John & I check in that answered and we (i.e. including you) attempt to address if not.
After end of evening, any slides, tools etc. that John demonstrates are distributed to participants.
Email : jon@leadingedgeprojects co ukEmail : [email protected] | your | projects | up for | success
19
Effective Subcontractor Management
Extended Slide Set
N t t f th t ti 21 J l 2011Not part of the presentation on 21-Jul-2011
but some used in the interactive sessions - may be useful for explanationuseful for explanation
Contact John Lake (john.lake@roke,co.uk) with any questions
20
Effective Subcontractor Management
How do we manage subcontractors?g
Prime
Controlling Designated S b t t Communications Issues/Crises Soft/Personal Controlling
Documents Subcontract Manager
Communications Plan
Issues/Crises Management
Soft/Personal Skills
e.g. Contract, Ts & Cs, SoW, Requirements Specification, Quality Plan, Config Management Plan
SubcontractorConfig. Management Plan , Change Control Procedure, Risk Management Plan, Schedule, Milestones, etc.
21
Effective Subcontractor Management
What is Supplier Relationship Management (SRM)?pp p g ( )
There is still some confusion about what SRM is:There is still some confusion about what SRM is:
1. SRM is the process that defines how a company interacts with its suppliers.
2. SRM is the mirror image of “Customer Relationship Management” (CRM). Just as a company needs to develop relationships with its customers, it also needs to foster relationship with its suppliersalso needs to foster relationship with its suppliers.
3. The immediate objective of SRM is to streamline and make more effective the sourcing process between an enterprise and its suppliers (via the sourcing process between an enterprise and its suppliers (via technology).
22
Effective Subcontractor Management
What is Supplier Relationship Management (SRM)?pp p g ( )
SRM should be a collaboration of several disciplines:SRM should be a collaboration of several disciplines:
Th i d h SRM b hi d id f h d j b f There is a danger that SRM may be something done outside of the day-job of Programme and Project Managers (where dedicated roles and responsibilities are not fully defined)
23
Effective Subcontractor Management
What is Supplier Relationship Management (SRM)?pp p g ( )
Getting the Relationship right at the outset and understanding both sides of Getting the Relationship right at the outset and understanding both sides of the equation is the most effective way of obtaining excellence in performance. This will involve several factors:
● Segmentation/categorisation: Commodity, Performance monitor only, Development potential, Strategic partnership
● Technical Risks specific to the work 5. Recommendationson the ‘Nature of the Relationship’ for each Package/Contract.
responses
The Nature of Relation -ship sought
● Technical Risks specific to the work being undertaken by the subcontractor
● Technical risks owned by the Prime associated with the dependencies on the success of the subcontractor in containing its risks.
36
g
● Risks associated with the subcontracting itself.
Effective Subcontractor Management
Subcontract Initiation
Subcontractor SelectionProcess
er 1
211
Supplie
Supplie
r Supplie
r 10
Supplie
r 9
pplie
r 8
lier
7r
65 1
21 S
Su
Supp
Supplie
Supplie
r 5
Supplie
r 4
Supplie
r 3
pplie
r 2
ier
1
Supplie
r Supplie
r 11
Supplie
r 9
upplie
r 5
plie
r 4
er 1
upplie
r 12
plie
r 5
ier
4
PQQ Final Selection
SSup
Suppl
Su
Supp
Supplie Su
Supp
Suppli
• Formal Selection Process• Selection Governance
37
Effective Subcontractor Management
Subcontract Initiation
Subcontractor SelectionRisks
• First time use of a subcontractor – Performance may be unsatisfactory (cost, time, quality).
• Subcontractor may leave the consortium - Bankruptcy, change of management, loss of personnel resources.
• Incompatible working practices – Methods, standards and p g p ,cultural differences may differ from expectations and cause friction in communications or make it difficult to gauge progress.
• Poor progress/financial reporting – The subcontractor may not give sufficient information to allow progress between milestones to be gauged or cost-to-complete to be gauged in T&M contractsT&M contracts.
• Poor Change Control – The subcontractor may initiate uncontrolled changes (e.g. add/remove functionality through ad-hoc communications)
38
ad hoc communications).
Effective Subcontractor Management
Subcontract Initiation
Subcontractor SelectionRisks
• Poaching of work or personnel – Subcontractors may campaign to work directly with your customer or recruit your key personnel.
• Export control issues – Where export licences are required work/communications may be delayed until all licences are
t d granted.
• IPR issues – There may be misunderstanding of the ownership of Intellectual Property Rights between customer, prime and subcontractorsubcontractor.
• Conflicts in division of work – Subcontractors may duplicate work being done by the prime or others.
• Poor support provision – Subcontractors may not provide the appropriate level of support for related tasks in the project or for post-delivery support.
39
Effective Subcontractor Management
Subcontract Initiation
Subcontractor SelectionFormal Selection Process
•Overall Advantages:
● Emphasises competitive status (to
Vendor Long List (VLL)
Vendor Pre-Qualification Form
Long List Vendors are issued
Interim
Down select
● Emphasises competitive status (to vendors)
● Explores/identifies shortcomings early
Sh Li
Interim List Extended Vendor Pre-Qualification Form
List Vendors are issued
Down select
● Can be used to demonstrate best practice (governance)
Vendor Short List (VSL) Evaluation Requirements (Vendor Questions)
Building a SubcontractEssential Documents - Ownership
D t O hi /A th hiDocument Ownership/Authorship
NDA Commercial Manager (CM)
Statement of Work Project/ProcurementStatement of Work Project/ProcurementManager (PM)
Costed Proposal Subcontractor
Commercial Subcontract (T’s& C’s)
CM
Instruction to Proceed (ITP) CM( )
Purchase Order PM (with Finance Approval)
Export Documents CM
Framework Agreement CMThe form of these documents is tailored to the project requirements (contract size, risk category, geography, classification)
43
Effective Subcontractor Management
Selection of Subcontractor(s) and Entry of Contract Selection of Subcontractor(s) and Entry of Contract
- Statement of Work (SOW)•Your SOW supplies the framework against which the Subcontractor can bid against which the Subcontractor can bid effectively and understand the controlling documents.
Description and Scope of Work
Requirements and Use Cases
Schedule (WBS)
Key Milestones P j t C t lli •Key Milestones
Deliverables List
Acceptance Criteria
Quality Requirements
Project Controlling Documents
Sub-project PlanProvisions for Change Control Management
Provisions for Configuration Management
Quality Plan
Project Management Requirements
Communications Provisions
Acceptance Plan
Risk Management PlanCo u ca o s o s o s
Security Requirements
Commercial Management Provisions ….etc…….
44
Warranty and Support
Effective Subcontractor Management
Selection of Subcontractor(s) and Entry of Contract Selection of Subcontractor(s) and Entry of Contract
- Statement of Work (SOW)•Your SOW is the seed document supplying the
b “DNA”subcontract “DNA”.
It should supply a description of:
● The job to be done,
● How you are going to manage and control the subcontractor,
● Your expectations of performance and● Your expectations of performance and
● Your Acceptance Criteria.
•This underlines the disciplined approach expected from the subcontractorsubcontractor.
•If you produce a poor SOW (incomplete, vague, poorly drafted) then it may cause:
● A bad initial impression● A bad initial impression
● Many questions (wasted time)
● Incomplete response
45
● Ambiguity.
Effective Subcontractor Management
Subcontract Initiation
Statement of Work (SoW)Your SOW supplies the framework against which the Subcontractor can bid effectively and understand the controlling documents.
Description and Scope of Work
Requirements and Use Cases
Schedule (WBS)
Key Milestones P j t C t lli Key Milestones
Deliverables List
Acceptance Criteria
Quality Requirements
Project Controlling Documents
Sub-project PlanProvisions for Change Control Management
Provisions for Configuration Management
Quality Plan
Project Management Requirements
Communications Provisions
Acceptance Plan
Risk Management PlanCo u ca o s o s o s
Security Requirements
Commercial Management Provisions ….etc…….
46
Warranty and Support
Effective Subcontractor Management
Subcontract Initiation
Statement of Work (SoW)Your SOW is the seed document supplying the s bcont act “DNA”subcontract “DNA”.It should supply a description of:
● The job to be done,
● How you are going to manage and control the subcontractor,
● Your expectations of performance and
● Your Acceptance Criteria.
This underlines the disciplined approach expected from the subcontractor.
If you produce a poor SOW (incomplete vague poorly drafted) then it may cause:If you produce a poor SOW (incomplete, vague, poorly drafted) then it may cause:
● A bad initial impression
● Many questions (wasted time)
● Incomplete response
● Ambiguity.g y
47
Effective Subcontractor Management
2 Subcontract Delivery2. Subcontract Delivery
● Billing Basis Options
● Cost Control● Change Control● Planning
● Stakeholder Management
● Communications
● Reporting
48
Effective Subcontractor Management
Subcontract Deliveryy
Billing Basis OptionsFixed Price
● Define Payment Milestones according to work budgeted (agree with commercial).
● Link Payment Milestones to Prime Plan and PFS cycle (for cash flow & accurate EVA).
● Ensure subcontractor’s risk is clearly defined (SOW and Contractor’s Proposal Document)
Profit
(SOW and Contractor s Proposal Document).
● Regular updates of the subcontract schedule.
● Corrective action plans for schedule slippage.
● Implement strict Change Control.
Risk Allocation
Subcontractor Costs
49
Subcontractor’s Fixed Price
Effective Subcontractor Management
Subcontract Deliveryy
Billing Basis OptionsTime and Materials
● Prime price based on NTE Estimate.
● Project Cost model based on Deterministic Estimate.
● Any “Delta” cost is released via Change Request only.
Delta
CR1
CR2
● Ensure subcontractor’s CTC is declared each reporting period.
● Obtain Change Requests even for “zero cost” changes”.
● Prime’s duty is to minimise cost to the t C t t P i d d h
CR1
customer – Contract Price reduced when successful.
•Name each stakeholder and determine what their interest is in the project and what information they will require
• Assess
•It is important to understand the current level of commitment It is important to understand the current level of commitment of the stakeholder in order that they can be managed accordingly
• Plan
•Determine how each stakeholder will be managed, who by, and the frequency and format of contact
• Action• Action
•Ensure that engagement with stakeholders is maintained as planned and the Stakeholder Management Plan is regularly reviewed and update
52
reviewed and update
Effective Subcontractor Management
Subcontract Deliveryy
CommunicationsCommunications Planning
Wh S b t ti i ti f i t d d d th d i t t thi t When Subcontracting communications frequencies, standards and methods are important things to define:
● Communications Plan
● Roles & Responsibilities (Stakeholder Analysis)● Organisation Chart● Communications Channels and Media● Reporting and Escalation● Reporting and Escalation● Meetings● Review and Approval● Document Formats
C fi ti M t● Configuration Management
Important to cover communications expectations in the SoW (Resource time, locations, channels, t l t i t)travel – cost impact)
53
Effective Subcontractor Management
Subcontract Deliveryy
CommunicationsReporting
● Budget status
● Schedule status
● Earned Value/Cost-to-Complete Estimate
● Key Performance Parameter status● Key Performance Parameter status
● Priorities and Key Objectives
● Risk Status
● Issues status
● Change Request/Approved Change status
● Status against plan/Key Milestones status
● Exceptions and reason for incomplete/corrective action
● Next period plan
Important to cover reporting expectations in the SoW.