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Contracting Excellence Journal

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Contracting Excellence Magazine - Oct 2012

 
 

 

 

IACCM's Innovative Awards program recognizes leaders in our community - individuals and teams who are raising the profile of contract and commercial capability within their organizations.

The awards were in the categories below.  The finalists were announced at an Awards Dinner at the IACCM Americas Conference, on October 17th in Houston.

Award for personal initiative
For an individual practitioner who has shown outstanding leadership or endeavor in delivering value and raising the profile of contract and commercial management.

Award for operational improvement
Awarded for initiatives that have delivered significant business value through improved commercial or contracting process or practices.

Award for strategic direction
Awarded for initiatives that have raised the strategic profile and contribution of the commercial or contracting process or function.

Award for outstanding service provider
For consultants, service or application providers who have led or enabled high value initiatives at client organizations.

Here are the summaries of the finalists... 

 

Category: Personal Initiative

Monitise -
Graham Drew

CHALLENGE 

Monitise, known for being an enabler at the centre of a global network, believes that to create a truly balanced mobile money ecosystem, there are no such things as customers and suppliers: it’s all about partnerships. Monitise’s partnership approach has been central to its vision and strategic execution. 

Plan for change! As the business grew quickly, so did the opportunities and challenges in Monitise’s supply chain.  Monitise was investing in many products and services that were intrinsic to its clients’ solutions, primarily technology, such as security products, hardware, software and communications.

Optimize partnerships! As these changes developed, management recognized the need to develop a consistent, more strategic approach to managing suppliers.  The goal was to optimize contractual agreements and partnerships.

Eliminate potential obstacles before they become problems! Departments were working with suppliers at a ‘local’ level, and although this helped to enable a quick response to client requirements, it could have caused problems as the company scaled to meet client demand.

Maximize benefits! Monitise’s executive team decided to create a co-ordinated, single point of control for the company’s partner relationships and a dedicated procurement function to focus solely on this activity. The clear objective was to retain all the benefits that had been enjoyed through delegated procurement responsibility and to maximise the benefits of taking a more coordinated approach to support their growth.

To maximize benefits that suppliers can bring, the company hired former IT sales executive Graham Drew as commercial contracts director to implement new initiatives and bring a fresh perspective to the Group’s procurement process. Graham had gained an IACCM accreditation and brought with him a ‘licence to act differently’.

APPROACH  - THREE PHASES

Phase one:Gain control of the supplier landscape and deal with urgent issues.

This phase was about taking supplier engagements off the critical path and providing some improvements in capability for the business. It was key to align supplier behaviours to Monitise’s requirements and to introduce interim controls such as centralising supplier selection process. The team successfully created a quotes and order process so individuals had a simple method to purchase items and, this being a new working method for the company, Monitise assigned a commercial administrator to act as the ‘interpreter’ between the business and regular suppliers.

Phase two:Capture benefits from phase one and extend them to the group internationally, but with a lower overheard by using policy and process to drive behaviour across the company.

The business selected preferred partners with whom to maximise engagement, revised its approach to managing supplier entry and exits, and is continuing to adopt other industry best practice.

Phase three:Implement a strategic relationship management model with suppliers in order to leverage the supply chain as a differentiator for clients.

Client engagement and feedback throughout all phases was critically important to clearly understand why clients select the business and to gather objective and subjective feedback. These insights are then used to help influence both what suppliers need and the manner in which it is delivered.

RESULTS 

Since beginning the process, the business has delivered cost savings and cost avoidance in excess of millions of pounds. Importantly, the company’s ability to meet client requirements has continued to improve and many of the distractions and uncertainties associated with supplier selection have been removed. A governance model with preferred suppliers has now been formalised so the business and partners are aligned to shared objectives.

The Commercial Contracts function has grown to be a critical part of the ongoing growth of the business and its partner network, and suppliers have given very positive feedback on the manner in which they have been given clarity on requirements which reduces their cost of sale and in some cases increases their share of addressable spend. The team has also brought certain suppliers much closer to the business so they’re better placed to provide value for Monitise and its clients.

LESSONS LEARNED

The business continues to execute on the programme and progress the work-streams through the three phases. The activity has provided some valuable lessons and insights: 

  • The importance of executive support;
  • The need to provide the business with capability, not just cost reductions;
  • The importance of engaging with the business early to determine requirements;
  • The value of supporting clients and the sales team to link supplier capability with customer demand;
  • The suppliers who invest time and resource and think about long-term relationships are the ones which are most likely to prosper;
  • The mutually supportive relationships with other functions across the business are critically important, especially legal, finance, HR and the internal audit team.

 
For further information, contact:

Graham Drew:
graham.drew@monitise.com

Gavin Haycock
Gavin.haycock@monitise.com

Computer Sciences Corporation (CSC) -
Nancy Nelson

CHALLENGE

CSC’s Contracts and Commercial Department endured many organizational and structural issues, preventing it from either acting as a global organization or performing efficient and cost effective contract management.  This had to change!

APPROACH

Nancy Nelson, CSC’s Global Contracts Director, studied the department challenges, requirements and researched solutions. She created a series of projects designed to generate new initiatives to enhance the department’s future effectiveness. Then she put talents to work.

Obligation Management Service (OMS)

One of the early projects was to develop Obligation Management service (OMS). Originally, it had limited success. Research showed it to be very labor intensive, putting the burden on already overworked contract managers, and using somewhat complex processes.   Ideally, if OMS was going to be successful, it would have to be flexible and simple yet powerful, requiring minimal contract manager oversight and minimal cost. But this proved to be impossible. 

UnitedLex, a Legal Process Outsourcing (LPO) Subcontractor

So, Nancy searched for the most time and cost efficient methods of performing this work. Working closely with the IACCM, she discovered a Legal Process Outsourcing (LPO) subcontractor, UnitedLex.

This OMS service assures that CSC meets its contract obligations, given the high complexity and customization of each contract. It also provides early alerts as to relationship trends.  It permits both a high level overview and a drill down to see the actual critical milestones. It contains a multitude of reports, as well as a management “heat map” showing the relative health of the account in meeting CSC’s obligations to its customers.

UnitedLex provides most of the labor, both in India and the US for citizenship-restricted accounts needed to extract and manage the obligations, with oversight provided by the responsible CSC CCM.

Looking forward, CSC can use this feature to discover what obligations are more difficult to meet and provide input for “lessons learned” for subsequent negotiations.

Because UnitedLex and CSC had to co-develop a robust system, it took over one year to implement in a pilot phase.  Also, detailed processes had to be created and tested. Over the next two years, the project team focused on turning the basic service, processes and system into a very robust (but simple), creative and progressive service. This service provides great visibility into the status of all contractual obligations across all of our contracts, with minimal CSC effort and at a fraction of the cost of performing the function internally.

Contracts Shared Services India (CSSI)

Another very successful project has been the creation of the Contracts Shared Services India (CSSI) group. Many of the India staff are dedicated to providing greater support and knowledge to the account teams for their very large, complex contracts. The common tasks include conforming contracts, research, compiling flowdowns to subcontractors, creating contract summaries, and support of obligation management activities.

CLMS  - a third project currently underway  

This team is currently overseeing the planning and implementation of a single uniform and global system that will be used for all types of contracts within CSC.

Putting Talents to Work, Globally!

In addition to creating the projects, Nancy also created the Global Contracts Shared Services department to deliver leveraged and effective contracting solutions to facilitate effective contract management.

Three primary operational groups in this organization are staffed by contracts professionals from around the world. 

  • The first is the Contract Systems group which manages global tools and processes such as knowledge management, obligations management, records management and the future Contract Lifecycle Management System (CLMS).
  • The second group is Contracts Shared Services. Based in Bangalore, India, the group is comprised of contracts professionals who will be responsible for providing simple to complex contract management expertise to the on-site commercial contracts management community.
  • The third group is Third Party Agreement Transition Management (TPATM).  TPATM implements CSC “best practices” for the transition, transformation and management of Customer Third Party Agreements during the following stages of an outsourcing services agreement: due diligence, new business, and disengagement. 


RESULTS

Simplify and transform!

The initiatives that Nancy has put in place have completely transformed the CSC Contracts and Commercial department by streamlining, centralizing, simplifying and automating many of the administrative functions performed by CCMs, thereby allowing the CCMs to be true professionals.

She achieved the following benefits by establishing the Global Contracts Shared Services structure:

  • Economies of scale by effectively leveraging global resources (staff, infrastructure/tools, and technology) and capabilities, which adapt more easily to expansion and contractions within the business environment.
  • Streamlined functions by creating common, standardized processes for effective and efficient service delivery.
  • Single organization performing centralized tasks; minimizing work fragmentation; using labor and systems at an overall lower cost; and enabling contracts management to devote full attention to strategic responsibilities.
  • Improved information reporting through the various global systems.
  • More measurable functions, improved effectiveness and increased timeliness of delivery.
     

Save Money!  Further, Nancy has generated great monetary savings to CSC due to greater use of lower cost centers, automated systems, and specialized skills. Nancy’s innovations have also promoted a renewed focus on professionalism by enabling our account CCMs to focus on valuable face time with customers.

With more freedom to perform the more creative aspects of the job, our CCMs’ morale has been lifted.

For further information, contact:

Nancy Nelson
nnelson@csc.com

University of Tennessee -
Kate Vitasek

CHALLENGE

Find a better way to outsource! 

When the U S Air force approached the University of Tennessee (UT) for help in identifying a better way to outsource, Kate Vitasek, lead researcher at UT, studied some of the world’s most successful outsourcing agreements.  She needed to determine how to codify a methodology that would allow the Air Force and others to replicate the success.  

APPROACH

Kate combined her personal experience, academic theories, and the case-based research from successful companies to create a methodology companies and service suppliers could use to help them physically develop “win-win” contracts. The research team called this methodology Vested Outsourcing – or Vested™ for short.  The research resulted in the book, Vested Outsourcing: Five Rules That Will Transform Outsourcing, which was published by Palgrave Macmillan in 2010.

Companies such as Intel and UPS were immediately drawn to the Vested concept. The results – too numerous and detailed to mention in this summary -- began to escalate from that point on. 

RESULTS

Research produced a practical and proven method to create win-win contracts and governance structures to make them sustainable. In a phrase, Vested is a game-changer, and Kate and her fellow researchers are teaching us the new rules.

Today the University of Tennessee views the Vested concept not as a “project” but as a philosophy that is creating a paradigm shift in how companies contract complex outsourcing agreements. Here are a few examples of how Vested has succeeded since the Vested concept was launched: 

  • More than 200 articles in the press
  • Four books. Vested Outsourcing: Five Rules That Will Transform Outsourcing has consistently been the #1 selling book on outsourcing on Amazon since its publication. It is now in its eighth printing and a completely revised and updated second edition is due out early next year
  • Ten documented success stories – including Dell and Genco ATC, two companies that followed the methodology to drastically improve their outsourcing relationship and drop real “win-win” bottom line results to both companies.
  • Kate Vitasek and the Vested concept was named in the World Trade Magazine’s “Fab 50+1” list of most influential people and concepts impacting world trade.
  • The Supply Chain Council awarded the Vitasek and UT its “Academic Advancement Award” for academic research that had the greatest impact to the profession.
     

The University of Tennessee is not only proud of the market acceptance of Vested in such a short timeframe, UT is also profoundly proud of Kate herself and the impact she has had on the industry.

For further information, please contact:

Bric A. Wheeler 
Director, Center for Executive Education
University of Tennessee 


bwheeler@utk.edu

Kate Vitasek
University of Tennessee
kvitasek@utk.edu

Category: Operational Improvement

Ministry of Defence, United Kingdom (MOD UK) –
Darren Bone

CHALLENGE

Unlock Wind Energy Safely

Wind farms interfere with UK Air Defence Radars, generating ‘false returns’ to the radar that can appear to operators as unresponsive, therefore potentially hostile aircraft.  To safeguard UK airspace, the Ministry of Defence (MOD) often places planning objections to wind farms in line of sight of radars.

Recognising the UK’s ongoing, legal obligations to meet renewable energy targets, MOD’s Project CRETHEUS team responded to this challenge.  The team’s objective was to unlock potential wind energy without degrading the UKs ability to protect the nation’s air space.

This was an opportunity to unite energy companies and government departments to overcome these issues and improve the potential for wind farm development both on and off shore. It would be the first time that the MOD, Department of Energy and Climate Control (DECC), Scottish Government and 3 international energy companies would work together under a collaborative venture.

APPROACH

Single Air Defence Solution

In 2011 energy companies were pursuing a range of Wind farm mitigation solutions. But, they tended to focus on isolated, mutually exclusive and technologically immature solutions without certainty that any of the solutions would work for MOD’s exacting requirements for safeguarding UK airspace.  MOD decided to use a single air defence radar solution that would allow development of wind farms in previously un-suitable areas.

RESULTS

Save money, displace emissions!

The MOD, as the end-user, delivered the radar to demanding performance requirements. Mitigation solutions resulted in equipment savings of over 25% in costs achieved from aggregating acquisition operations and seizing the opportunities identified from future production operations.

The wind farms will displace the emission of hundreds of thousands of tons of carbon dioxide every year. Indirect benefits achieved as a result of this agreement include the creation of thousands of jobs throughout the supply chain.

The project success was recognized within the department and was awarded the Minster for Defence Equipment Science and Technology award in 2011.  It was also shortlisted for the UK Civil Service award for procurement and project management reaching the top 3 of 700 nominations received.

LESSONS LEARNED

Saved time!  Previous independent attempts for energy companies to provide solutions to the planning restrictions placed on them by the MOD, had taken five years to agree and consumed large amounts of effort on all sides.  This was largely due to a lack of joint working, lack of clear and timely decision making and the need for one party to take the lead.

Quick decisions!  Project Cretheus proved that the collaborative approach could work, taking only nine months to reach an agreement.  Key to this was the MOD’s leading role within the venture along with its willingness to make quick decisions.

Set a precedent!  This project has set a precedent for future developers wishing to develop wind farms within proximity to defence radars.  Energy companies now have a clear understanding of the process, timelines and the costs associated wind farm development.

For further information please contact:

Clive Tarver, ISTAR Defence Equipment and Support, Ministry of Defence
Email: desistar-dir@mod.uk

Darren Bone (FCIPS) ISTAR (Commercial)
darren.bone583@mod.uk

Cardinal Health -
Gregg McConnell

CHALLENGE

Cardinal Health faced the challenge of noncompliance to the Contracts, Sourcing & Purchasing Policy.  Concerns included… 

  • not obtaining negotiated pricing,
  • not meeting purchasing thresholds with preferred suppliers to obtain maximum rebates,
  • improper or no contracts to mitigate risk appropriately,
  • payment terms not in alignment with standards, redundant suppliers and contracts.
     

The policy was designed to save money and mitigate risk, while taking less time to do it. Obviously, this was not happening.

APPROACH

Launch the Operational Excellence Black Belt project to improve compliance to Sourcing, Contracts, and Purchasing Policy for Indirect goods and services and reduce the overall process time while not shifting problems from one team to another.

  • Engage IACCM for benchmark data, best practices, and survey other companies in the industry to establish baselines for helping them determine goals.  This information was extremely helpful in showing immediate issues and areas that were in line with industry standards.
  • Follow the Lean Six Sigma DMAIIC (Define, Measure, Analysis, Improve and Control) process.  At each step in the DMAIC process, the team assembled the stakeholders, reviewed results and recommended next steps. 


RESULTS

  • Cost savings estimate: could reach $4,000,000.
  • Time Savings:  Contract review was reduced in several ways. Better information is now provided upfront.
  • Satisfaction: Clients are satisfied with the new single engagement process and single point of contact.  They have found the new engagement form to be easy to use and intuitive even without training.
  • Improvement in Management Information: The team can track a request from submission though contract review to purchase order release and all the steps in between.  This enables the team to spot issues quickly and react.  They now have the ability to compile clear statistics on the process and provide service levels that will set proper expectations with clients.
  • Shift in Resources:  The company can now align the purchasing and tactical sourcing teams with the strategic sourcing team for an end-to-end client interface.  They can define a career path and development plan for the resources in those current roles.


LESSONS LEARNED

  • Leadership support is a must.
  • Stakeholders and Sponsor involvement can help drive things forward but they need to make sure they are not influencing the direction of the team (the people that do the process every day).
  • Ground rules need to be set so that the team is not reluctant to air problems, speak up, question the process without offending others or feeling they are personally being attached.
  • Team members need to be dedicated, focused and present in the meetings to avoid repeating and revisiting the same points of discussion over and over.
  • Team needs to have open minds on solutions.
  • Discussions outside the room with others not in the process need to be kept to a minimum as it can disrupt the process.
  • The facilitator needs to insure that only one person speaks at a time and that the team stays on topic.
  • Speeding up the process can be done simply but doing it while maintaining quality is much more challenging.
  • You need to think through how changes impact others.  The goal is to fix the overall problem not just shift it from your area to another area.
  • Training and alignment is necessary.
  • We need to work the same way to provide consistent and reliable results to clients.
  • Hero’s in the process are not helpful; they are just covering up the problem and letting it continue unfixed.
  • Being customer oriented does not mean doing things different for every customer.  When you streamline you can give better overall customer service.
  • Shorter more frequent meetings would have helped maintain the momentum.

 
For further information, contact:

Gregg McConnell  - Gregg.McConnell@cardinalhealth.com

Tim Mills - timothy.mills@cardinalhealth.com

Shell Oil -
Jessica Powers

CHALLENGE

One goal! One process! One template!

This was the approach adopted when Shell decided it would centralise and standardise its procurement processes to drive down costs of supply and create simple automated ways of working.  The challenges:

  • Adopt one set of terms and conditions (T&Cs) enforceable in all countries where Shell operates, involving legal regimes as diverse as China, Kazakhstan, Kuwait, France, Columbia and the USA
  • Develop T&Cs to cover the whole spectrum of around US$65 billion annual spend across the Group: upstream, downstream, projects and technologies, and functions, with over 120,000 suppliers generating around one million contracts per year.
  • Whittle down 10,000 different contract forms used in the Shell Group to just one singular set of T&Cs in just one year. The scale of the project was unprecedented, the challenges seemed insurmountable, but the results have been remarkable.
     

The task seemed insurmountable but in 2012, the legal team helped the procurement function deliver over USD $250 million in third party spend savings back to the business, real savings that can be used for value-adding activities across the Shell Group.

APPROACH

Shell lawyers representing over 100 countries were consulted to develop a single starting point for the T&Cs.  A global network of procurement professionals added the commercial perspective.

The team introduced two new approaches considered controversial. First, eliminate the usual negotiation posturing. Second, clarify that any mark-up of the T&Cs would be rejected, inviting suppliers instead to define a prioritised and limited number of reservations on the T&Cs as part of their tender response. To make this approach work, the T&Cs had to reflect a fair allocation of risk.

The team discovered that some of Shell’s own suppliers prefer the Shell T&Cs for their own procurement activities.  They made some additional key discoveries including the following:

  • Support from senior leadership is essential to successfully implement global standard T&Cs;
  • Using different methods of communication such as email, webcasts, online training and townhall engagements helped reach local Shell businesses;
  • Collaboration and support from local Shell lawyers is necessary;
  • Early engagement with global suppliers to road-test T&Cs is critical to ensure efficient implementation; and
  • Outside counsel is not always required!

 
RESULTS

Standardization works

  • One standard set of T&Cs is now used by all Shell’s businesses and functions.
  • A global standardization of the legal T&Cs for every Shell procurement contract, narrowed down from over 10,000 different sets of T&Cs used in more than 100 countries.
  • Tracking data shows the standard T&Cs are being used by over one thousand procurement professionals in Shell every month.
  • On average, the time taken to negotiate the T&Cs has been halved.
  • The need for direct legal resource requirements has been reduced by more than half.
  • Shell has seen a measurable impact on its P&L.
  • The roll out of the standard T&Cs and the model contracts library was voted by the procurement function’s extended leadership team as the single most beneficial simplification and standardisation achievement in the last year across the entire procurement function.
     

The legal team who revolutionised the procurement process internally for Shell believes that this can be done on an industry-wide basis for commodity type procurement such as cables and valves. Now the challenge is to industry leaders and organisations like IACCM to see whether through collaboration together, we can implement industry standard T&Cs for certain standard procurement categories to achieve even greater efficiency and simplification for the industry as a whole.  Shell has shown what can be done.  Are other industry players up to the challenge?

For further information, contact:

Pamela Nelson
p.nelson@shell.com

Category: Strategic Development

SAP AG -
Christian Baese

CHALLENGE

SAP AG lacked an efficient contract management system and recognized the need for facing the issue and solving it.  Research surfaced the following anomalies: 

  • Data was being manually entered into contract templates.
  • Contract data was scattered throughout SAP and there was no centralized storage system in place.
  • It took too much time to harmonize and localize contract templates, because SAP operates in a truly global environment. 


APPROACH 

Kai Jacob and the Global Contract Management Services Team (GCMS) of SAP AG designed and implemented the Contract Management Solution (CMS).

The CMS approach used to redesign the global contract management process was to: 

  • Define the concept
  • Form a team
  • Evaluate tools
  • Align and merge several SAP initiatives
  • Perform Change and Stakeholder Management
  • Implement prototyping and developing
  • Implement piloting and deploying
     

RESULTS

First installed within SAP in 2010, CMS was implemented throughout nearly all of SAP’s entities and will be completely deployed by the end of 2012. Deploying CMS -- and the establishment of GCMS -- is just the beginning of an ongoing initiative.  The GCMS team not only changed SAP’s global contract management, the team continues to improve the contract management process by… 

  • Decreasing contractual processing time and corresponding costs
  • Automating contracting for indirect sales and enablement of eContracting
  • Improving the way to do Contract Template Management at SAP
     

GCMS -- through the establishment of CMS -- provided immense benefits to SAP. The most significant achievements made to the contract management process are:  

  • Automatic creation of contracts
  • Full text search of contract content
  • Central online storage of contracts
  • Improved contract data quality
  • Decreased contract processing time
  • Harmonized contract management process
     

For further information, contact:

Kai Jacob, Global Contract Management Services Team
Kai.Jacob@sap.com

DELL and Genco ATC -
Darren Browder

CHALLENGE

Redefining relationship!

In 2005, Genco ATC - a supply chain service provider with a solid reputation for managing reverse logistics – held responsibility for Dell’s returned merchandise.  On July 22, 2009, Genco ATC acquired Dell’s 298,000 square foot manufacturing facility in Lebanon, Tennessee.  The acquisition included receipt and manufacturing operations, including testing, remanufacture, repair, refurbishment of desktop, notebook, server, and storage systems. The building purchase coupled with a three-year commitment to use Genco’s reverse logistics services offered Dell a complete North American margin recovery solution.

The contract was a transaction-based arrangement within which Genco ATC was paid for specific billable activities with the contract having over a hundred SLAs. One thing was abundantly clear: neither party was happy. The existing contract structure and relationship dynamics put a wedge in the trust level between the two companies. Both parties were considering calling it quits when the contract expired. They needed a better way.

APPROACH

Darrin Browder, Strategist and Dell Supplier Relationship Manager believed adopting a Vested© approach for the contract could revitalize the Dell – Genco ATC relationship and transform results. Browder convinced McIntosh (Dell’s Executive Director of Global Reverse Supply Chain) a Vested approach would provide a strategic alliance focused on adding value, not simply managing transactions.   Together, Dell and Genco ATC restructured their agreement and rebuilt their relationship to carefully follow the Five Rule of Vested Outsourcing.    This meant looking beyond activities to outcomes and restructuring all aspects of their contract – including the statement or work, metrics, pricing model and the governance mechanisms for how they would jointly run manage the business.

Shifting from a conventional contractual model to a Vested strategic alliance enables the companies to form a true and transparent partnership that aligned both parties interests to a common set of mutually desired outcomes.   The results brought significant benefit to both parties.

RESULTS

Collectively, both parties realized several million dollars in bottom line benefits just six short months after restructuring their contract to a Vested win-win approach. Dell Reverse Logistics has experienced remarkable 32% cost savings and improved their margins for the Global Dell Outlet business group by 200 basis points.   Additionally, the duo has successfully reduced scrap by half in less than six months.  Because the Vested approach uses shared value approach – Genco ATC also came out a winner - its margins tripled over industry averages.

The Vested approach changed the culture within Genco ATC.  Perhaps the most impressive transformation (and biggest cost savings) is in the reduction of scrap materials. The previous contract paid Genco ATC a set fee for simply discarding returned product.  The Vested agreement provides incentives for reduction of waste.

LESSONS LEARNED

Dell and Genco ATC learned that creativity abounds with ideas emanating from top management to line workers that improve productivity and efficiency.  The potential for innovation is great and will continue long after the low hanging fruit is gone.

Both Dell and Genco ATC agree that the power of using Vested methodology for restructuring their contract helped them rethink their relationship and convert win-win theory into practice. Dell has a culture of allowing employees to take risks. The decision to be one of the pioneers in adopting the Vested concept is a testament to Dell’s ability to innovate, to reinvent itself not just with products, but within their procurement, contracting and operations community. 

For further information, please contact:

Kate Vitasek
University of Tennessee
kvitasek@utk.edu

Darrin Browder
Darrin_Browder@Dell.com

ConocoPhillips -
Jim Pearson

CHALLENGE

ConocoPhillips Company recently repositioned into an independent pure-play Exploration & Production company with the spinoff of its downstream businesses to Phillips 66. 

Upon the announcement of this repositioning, management appointed transition teams at the corporate level to address methods to separate functions and activities for the two companies.  Teams focused on workforce planning, systems, compensation and benefits, financial, and procurement, among other teams.

The Procurement Transition Team concluded that the procurement organization must operate differently as a leading exploration & production company in a new industry environment.  Some of the areas where opportunities became apparent were: 

  • Contracts Management System
  • Policies and procedures
  • People development protocols
  • Measures of Procurement enterprise contribution 


APPROACH

Improvements were needed to deliver on the company’s new vision of smart growth, superior returns and SPIRIT values (Safety, People, Integrity, Responsibility, Innovation, and Teamwork).  The decision was to move away from being a tactical procurement organization to a strategic supply chain organization.  The first step was to rename the organization Supply Chain. 

Initiatives enacted that have transformed the function: 

  • Global Contract Management System
  • Supply Chain Improvement Teams
  • Policy Changes
  • People Development
  • Standardization / Leveraging
  • Performance Planning / Reporting
  • Supply Chain Management System (SCMS)
  • Supply Chain Success Stories web portal (SCSS)
  • Supply Chain Commercial Competency Assessment
     

RESULTS

Implementing a new mandatory Global Contract Management System has transformed the Supply Chain function.  The following are noteworthy: 

  • Single instance contracting system across the entire company globally.
  • Contract template harmonization initiative:  Reduction from 600 templates to 100
  • New contract approval rules initiated, full alignment with revised corporate approvals
  • Transitioned existing contract data and added all delivered desk drawer contracts
  • Trained over 1,050 individuals on the Global Contract Management System
  • Increased the usage of required fields within the Global Contract Management System, allowing for improved analytics
  • Paradigm change:  All future contracts to be created within new Global Contract Management System.  Consistent message and alignment created within Center and individual Business Units
     

Other incentives

  • Supply Chain Improvement teams have developed future to-be states for improvement themes.
  • The SCMS has delivered improved fit-for purpose, process, and controls.
  • The SCSS has improved communication on Supply Chain’s value proposition.
  • The Supply Chain Commercial Competency has resulted in employee training being tracked within the functional Leadership Team Dashboard.
     

For further information, contact:

Nils Svanberg
Nils.I.Svanberg@conocophillips.com

James Pearson
James.Pearson@conocophillips.com

Category: Outstanding Service Provider

QinetiQ Australia -
Dr. Andrew Jacopino

CHALLENGE

The commercial relationship between the buyer and seller, the Australian government and a former government enterprise in a monopsony (symbiotic) relationship, was strained and not perceived as offering value for money to the tax payer.  This relationship, based on anecdotal performance and cost issues (some real, some perceived), is the subject of intense and constant scrutiny from internal and external agencies including the media.

APPROACH

As part of a wide ranging transformational project, QinetiQ Australia realigned incentives between contract scope, commercial terms and the desired materiel and behavioral outcomes.  This alignment was to occur both at the individual contract and wider enterprise level including other seller’s (third party) and internal buyer organizations.

The project involved developing, negotiating and implementing a holistic and integrated Performance Management Framework (PMF) over an 18 month period.

The team delivered a series of performance management workshops across a range of disciplines (e.g. commercial, engineering, quality, etc.) and stakeholders (e.g. individuals, general managers to CEOs).  The result was a PMF that describes in detail the buyer’s contractual outcomes through a variety of performance measures and the seller’s commercial outcome through a similar variety of contract consequences.

RESULTS

By implementing the PMF several benefits resulted: 

  • Selecting performance measures and consequences required the detailed understanding of the required contractual outcomes.  This definition process highlighted the wide variety of buyer needs from enterprise alignment including behavioral expectations (e.g. safety culture), to contractual outputs (e.g. product quality) and governance aspects (e.g. key staff turnover).  Of importance, the PMF also includes reverse performance measures from seller to buyer.
  • Acknowledging that performance management isn’t “set-and-forget”, but is an integral part of a continued dialogue between buyer, seller and the other organizations in the wider enterprise.  In recognition of this, formal contract performance review points -- known PMF Efficacy Reviews --  have been included.
  • Using an outcomes-focused, Performance Based Contracting (PBC) approach has lead to a better understanding and definition of the buyer need, thereby allowing the seller to optimize their support solution to ensure the successful, continued delivery of the buyer requirement in both the short and long term.
  • Using a PMF has allowed the buyer commercial team to change their roles and responsibilities from the management of transactional processes to the governance of buyer outcomes.


LESSONS LEARNED

The results from the QinetiQ Australia approach are being applied in a range of other contracts and are also being incorporated in Better Practice guides and PBC training.  Specifically, these include: 

  • A tiered approach to the selection and application of performance measures to appropriately reflect the nature of the ‘consequence’ being used to align behaviours.
  • Acknowledgement that performance management isn’t “set-and-forget” through contract structures which supports changes to both the performance measures and performance levels, especially in transformation project; and
  • Explicit inclusion of transitional performance measures within PMFs highlighting organizational performance in delivering the transitional outcomes.
     

For further information, please contact:

Dr Andrew Jacopino
agjacopino@QinetiQ.com.au
Phone: +61 (0) 438 853 171

Microsoft and Accenture -
Srini Krishna

CHALLENGE

Problems arise too often when client and service provider begin collaborating.  Relationships often break down.  Conventional outsourcing arrangements often end up in a quicksand of mistrust, dispute and sub-optimized benefits for both the client and service provider, especially in the area of transformational service enhancements and value creation initiatives.

Result?  Adversarial relationship worsens as the contract ages. And both parties miss transformational opportunities that would create value for both!

Microsoft and Accenture worked together to disrupt conventional thinking and in doing so delivered gains of approximately 15% of the Total Contract Value (TCV).

APPROACH

The two companies entered into a multi-year contract with OneFinance to outsource Microsoft’s global Finance, Accounting and Procurement operations in more than 95 countries. Their approach was for contracting collaborative service transformation. The challenge was to think beyond initial labour arbitrage benefits.  Major focus: 

  • Create a commercial and contractual structure embracing a strong transformation agenda at the heart of the relationship.
  • Determine how to influence both parties in driving service enhancements and value creation initiatives.
  • Make transformation efforts attractive to both parties, operating as one team.
     

How they met the challenge

Based on the principles of vested outsourcing, both sides contracted to a set of “Transformation gain-share principles”. They agreed that… 

  • Transformation projects will be mutually agreed to ensure fair return to both sides.
  • Projects should create additional value (operational, financial or otherwise), beyond the original contract economics, delivering adequate incentive for both sides to ensure they are vested in the program.
  • Gain-share model to be repeatable across different types of projects and across multiple years.
  • It would be a simple model to administer and manage.
     

The business case for each transformation project would be jointly agreed to include the following:

  • An implementation plan defining the management review gates
  • Obligations and dependencies on both parties
  • Specific governance and reporting requirements
  • Financial benefits of the project consisting of total costs, total benefits and the final share of benefits.
     

RESULTS

The Transformation programme has delivered total contract lifetime savings to Microsoft of approximately 15% of TCV in the first three years since program commencement.

  • On one project implemented under this program, the gain-share approach delivered additional savings to Microsoft in excess of $5M over the stretch target for discounts realized for the first year of the project an increase of nearly 17% over the prior year discounts realized; this project increased discount capture rate from 91% to 97% for the financial year.
  • Accenture has expanded its service offering and generated additional revenues.
     

The transformation gain-share principles remain at the heart of how Microsoft and Accenture collaborate to identify and deliver value creation opportunities with demonstrable benefits for both parties. 

For further information, contact:

Srini Krishna
srikrish@microsoft.com

Prodagio Software -
Jennifer Springer

CHALLENGE

Create a Contract Asset Repository and Enable Further Process Standardization

As a leader in the Media, Entertainment and Movie industry, this well known company is often in the forefront of innovation. The practice of being early adopters of technology extends beyond the walls of movie or television sets and is implemented throughout its business units and offices around the globe. This organization relies heavily on the contracts that are executed for managing Production, Distribution Rights, and Talent, Writer and Producer Agreements.

APPROACH

Use a Single system

So when the leaders at this company identified an immediate opportunity to use innovative technology to create one single system of reference for all contract data and documents they did not hesitate.

The team immediately began researching solutions that included a contract asset repository – which would increase visibility and allow them to dynamically manage critical contract events such as obligations, contracted terms, and renewals.

Subsequent objectives included:

  • Facilitate and improve process standardization initiatives by controlling contract language by using templates and
  • Integrate with existing and future external systems.
     

Select Prodagio Contract

This web-based CLM was selected to meet their objectives and support contract data (Asset) centralization and standardization.   They adopted an approach that would be piloted within the HR Department. With the pilot program success, the solution has been expanded to other departments (Legal, Affairs, etc. …) and will ultimately be utilized across the entire Enterprise.

RESULTS

Various contracting and legal teams are already using the system and can immediately access critical contract information such as terms, expirations, and options: 

  • The Contract Asset Repository enables reporting and searches that were once cumbersome.
  • Using templates and standard language has streamlined the process of creating contracts.
  • Integration to external systems (such as Oracle) eliminates multi-system data entry.
  • A full audit trail provides continuity among contract management by tracking changes made to the contract/document, recording the user who made the change, and date/time stamping the items.
  • Automatic reminders keep users current with obligations, contract/term reviews, and renewals. These proactive reminders insure that obligations aren’t missed.


For further information, contact:

Fabrice Buron
fburon@prodagio.com
281-585-6980

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Need to prove something? If you are a member of IACCM in good standing you can now print out a certificate of membership on demand. Simply log into IACCM.com and go to My IACCM >> My Account >> Membership and there you will be able to download a Certificate of Membership in a PDF format and print it at will.

You can also print your accreditation Certificate in the same manner from My IACCM > My Account >> Certification.

You can also click on this link to go to 'My Account" https://www.iaccm.com/members/?view=myaccount
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Contract & Commercial Management: Operational Guide

The Definitive Guide to Commercial Contracting

We are excited to announce that IACCM's groundbreaking commercial contracting guide - the first global work of its kind - is now available.

Secure your copy of Contract & Commercial Management: The Operational Guide today - and find out why this highly recommended title is being called 'a great catch all book that can be referred to by both sell and buy side for worldwide contracts', that will 'serve as a reference handbook throughout a career'. The definitive work on contracting and commercial best practice provides a comprehensive overview of the entire contract life-cycle over more than 500 pages of detailed insight.

The Operational Guide is a unique work, addressing contract and commercial principles on a worldwide basis, for both buy-side and sell-side practitioners. Invaluable for training, as a reference work, or simply to update your understanding of current practices, this is a volume that you really must own!

For more details and to order online, please go to:
http://www.iaccm.com/store/?vp=10

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'Supplier Relationship Management ' Program

This pioneering program equips practitioners with the skills and knowledge they need to implement SRM practices effectively within their organizations. Completion of the program leads to individual certification and a 'license to practise SRM'.

Relationship management requires a blend of technical capabilities - for example, in process and organizational design, and structuring of appropriate contracts and future-facing measurement systems - and key behavioural competencies such as communication, influencing and trust building.

Participants of this e-learning program will learn how to:

  • Prepare convincing SRM business cases
  • Design an effective governance structure
  • Create and implement a communications plan
  • Engage key stakeholders and supplier executives
  • Develop metrics that drive successful behaviours
  • Encourage positive approaches to change
  • Collaborate with strategic partners
  • Devise appropriate contractual arrangements
  • Track and report SRM benefits
  • Resolve conflicts and issues collaboratively

The program is flexible. Learning typically takes up to four months.

SRM Program participation includes:

  • a secure learning portal for you to access learning modules and skills assessment
  • a learning progress page to track your progress through the program

Skills Assessment

  • individual self-assessment online, against commercial competencies
  • external benchmark of skill level
  • analysis of your skills data
  • personal development report including recommendations

Learning Program

  • structured curriculum of learning modules
  • up to four months course of study
  • a mentored message board (if you have selected to join a scheduled cohort)
  • share knowledge and experience with others in the learning program
  • IACCM interventions to add value to discussions
  • Powerpoint presentations with audio commentary
  • Extensive module document library of 'optional extras'
  • Module tests, to enhance and assess learning and test understanding
  • 12 month license to access the learning modules
  • Unlimited number of module visits


SRM CURRICULUM

Click below for information or to register:

https://www.iaccm.com/development/contracts-training/

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You may also apply for certification at one of two levels. See below.

SRM Practitioner Certification is open to anyone with a minimum of 3 years in a relevant business function, with a current active role in relationship management activities.

SRM Expert Certification requires a minimum of 3 years of leading on supplier relationship management activities, at an advanced level. Able to mentor others in the principles and practices of SRM. A track record of introducing innovative SRM initiatives in your organisation.

Click below for Certification information or to register:

https://www.iaccm.com/development/online-learning-programs/?view=certification

For further information, please contact:

Paul Mallory
Vice-President, Europe and Africa
IACCM
+44 (0)759 553 4239
pmallory@iaccm.com

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Editorial Board

Theo Adriaans, Capgemini, Contract Manager
Flora Cabean, VF Corporation, Sr. Contracts Analyst
Tim Cummins, IACCM, CEO
Ratislav Funta, Dell Inc., Contract Manager
Margo Lynn Hablutzel, CSC Inc., Senior Contract Manager
Katherine Kawamoto, IACCM, Regional Vice President, Americas
Sandra Lewy, IACCM, Regional Development Manager
Alan Roach, ConocoPhillips, Contracting Consultant
Haward Soper, Shell, Regional Contracts Manager

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Disclaimer

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