I've developed KPI's for services (maintenance and support) and a service desk, however i'm unsure what you mean by 'Commercial'.
I have a couple of KPI's related to payment, and if you can be more specific in your request, I'll send you more info.
You probably need to be a bit more specific about what "Commercial" is / does. I've led commercial management functions on the buy side and we had a number of metrics to track and managed the team, as well as supplier KPI's.
Thank you Mike and Giles for your responses.
Giles, for us 'Commercial' refers to sell side, both in terms of front-end business development support and contract management.
I've seen reference to negotiation times being used as a measure, though I find this difficult to establish a target around this (what's 'good' and 'bad' is dependent on the circumstances in terms of cycle times, short might not necessarily lead to a good outcome).
Probably the first step is spend or impact to the bottom line. After that you might try to assign each contract to a complexity or risk quadrant using a standard 4 box matrix clockwise from upper right ( high risk/high impact); (low risk/high impact); (low risk/low impact); (low risk/high impact) or something similar.
• The Manitowoc Company (Manitowoc Cranes, LLC)
You may also want to consider which contracts are vital to the business. Which ones have high risk, high spend, are critical suppliers or service providers, which ones can cause disruption to the business, etc. Those are factors we use to determine which are the critical or top contracts.
I agree with Layne. Need to decide on the key elements both risk and reward first and then rank. Will vary depending on industry. What are "third rail" risks? What are highest value elements?
• Independent Consultants
Dear Thomas, Contracts are by nature reflective of projects undertaken for a business case. As such, i would go by a simple check list
a) Global strategy, b) Business case, c) Resource allocation and quantum, d) Major immediate impact upon failure, e) All other business case considerations
• ATCO Electric
The ranking of contracts with their Risk/reward assessment would be good way. However, it would be very important to keep consideration company business goals and policies. A small project with new client when you expect repeated high value business, would fall in high ranking due to positive risk (opportunity) associated.
on average, our pre-award staff are managing 5 - 7 per head and post-award 15.
in terms of spend (post award) this means average $33m per head
Varied greatly depending on number of resources, projects, etc. Average in queue was about 10 - 12 and could get as high as 30. Contracts were commodity purchasing, consulting, license, and service type agreements primarily related to IT. Post-award management of contracts were passed to the project owner and contracts did no tracking of deliverables or vendor management unless they were called back in to work on follow-up agreements or deal with conflict issues.
Assigning an average number of contracts per FTE gets tricky for all the reasons you're probably aware of. Turnaround time from initial receipt of a contract for review to the point of execution can vary based on too many variables to mention.
One way to determine what you're asking would be to log your contracts and include various stats such as receipt date, contract value, department, vendor, execution date, etc. (if you're not doing it already) and then do some analysis based on the information you capture. I did one at two separate jobs to get a baseline of turnaround times for getting to contract execution. Although the contracts were the same and the industry was the same (basically), the internal dynamics (one was much more bureacratic than the other) had a major impact on turnaround times and workload per Contracts FTE.
Any average that's out there (including what I gave you) may not apply to your situation.
I would look that this not based on the sheer number of "contracts", but on the basis of the number contract "actions" taken each year. For example, I could be the CM on 25 or more services contracts if they mostly followed a standard form and I had to touch them once a year or less often, barring answering questions, helping on an invoice issue, etc. However, I might be overwhelmed managing one contract if I had multiple change orders each week, monthly invoicing reconciliation, a 3 month annual renewal negotiation, service quality reporting, etc.
• Independent Consultants
Just extending Edward Willey's reasoning, i would allocate a common CM based on a) Commonality in legal nature of Contract, b) Common clients (major contracts), c) Nature of business and lastly d) Organization structure and competency of support staff.
In general for major EPC Contracts > 500 mm $, i have observed a single CM for each Contract
with regard to your first question, i think you are right that there is no standard. It depends on the types of contract under management, what other tools exist and what goals the company wants to achieve.
On the question of metrics, we have data on those most frequently used and i will arrange for this to be sent to you.
Tim - Thank you for the feedback and I look forward to receiving the metrics.
On the first question they'd asked I may have misunderstood what they were driving towards. I think now (although I haven't confirmed it yet) that they are looking for a ratio of vendors to contracts as a rough way to determine if they had captured all of the contracts for their CMS.
So, for example, if the "average" number of contracts per vendor was universally estimated at 4 and they have 100 vendors they could work from the basis they should have somewhere in the neighborhood of 400 contracts. If they only have 200 in their CMS then they would know they were likely missing some.
Having done a couple of blind contract "inventories" I can understand why they might find it useful but also know that the only way to do a proper inventory is to not assume anything. Just treat it the same you'd approach hunting for your car keys in a football stadium at 3 a.m. with the lights out -- assume they can be anywhere and it's going to take awhile to find them.
Thanks again for your response.
There are also softwares out there that manage contract discovery and migration. Ones that find the contracts in any repository or do an open water search through the systems you point it at and extract only documents which look like contracts. You can then search through these contracts, by contractual parties, clauses, termination date, auto renewal, etc. and indentify which ones are needed to be kept in your CLM and load them into the CLM of your choice.
I don't understand the drive to put a KPI or measurement on things that are not quantified without gargantuan effort by a team of actuaries. I would suggest asking the person responsible for managing vendor X to verify that all the active contracts are loaded. Also, I think that your legal organization or perhaps an archiving or "document management" group in the company might already have a list of what they think are the definitive agreements. From my own view, I would suggest that the standard be to load **all** contracts for each customer or vendor, including amendments, additional SOWs, official contract correspondence and notices, etc. It can be a pain to hunt down a name change or billing address notice down the road.
Sound advice as usual and I agree. The whole process has to start from the ground up. The problem, as I understand it, is that company invested in a contract management system, and is now trying to build a management process around it. I'm in the role of a subcontractor providing advise on various parts of the process so I'm not interacting directly with the company that acquired the system. For the most part, the questions that have come across have been the right questions to ask.
The organization is split into 4 regions so they are struggling to find some ways to expedite the process. I know there are no shortcuts (that don't come back and bite you later) but the contract community is always working on surveys, developing best practices, and coming up with other tools so it was worth checking into. Thanks for the input.
A member of the IACCM team would certainly be happy to discuss this with you and share our experiences. we could also connect you with others in your industry to explain thier approach. Please email me if you would like to pursue either or both fo these options. email@example.com
My rather simplistic suggestion: Ask for everything to which you could be entitled and negotiate down to where the SP will agree to pay. If they refuse to pay any substantial amount, you might need to sue, of course, but this would gut the relationship and, as you say, you don't have many great alternative SPs.
That said, I would check in the contract for any limitation period for making claims of money owed. Some contracts have such clauses.
• Sutherland Global Services
This should be a back to back agreement and the SP should pay exactly on the terms as the customer has applied service credit to you for missed SLA’s.
Since you have all the documentation in place this can be easily negotiated and claimed with the SP.
On other terms you can even negotiate with the customer to lower the service credits and subsequently deal with the SP to provide you a catch up program wherein they agree to achieve the SLA's in time hereon and even improve on the same. This can be a big factor when you negotiate with the customer to wave off the service credits for misses SLA's.
I am not sure what’s the verbiage in the contract between you and the SP; however when it comes to claiming service credits from the SP you can do it right from the start date of the term of the contract.
Question for practitioners outside the US: Is it at all common to have "Late Claims" provisions in contracts, whereby a party is prohibiting from bringing a claim for monies owed under the contracted scope after a certain point?
These clauses sometimes are included in US contracts for the primary reason that the customer wishes to be able to close its books on a project and seeks to avoid unbounded obligations. The period is usually not less than a year. I would not say that they are in the majority of contracts I've handled over the years, but I am not surprised when I see the customer asking for the clause. Obviously, one has to read the clause against other terms in the agreement, such as acceptance and payment.
Practice outside the US in O&G Drilling contracts: Yes, we do include in payment clause that invoices submitted later than 6months after the drilling work completed will be rejected. This proved to work very well from client's perspective as we then can manage to close our books and complete all kinds of reports and approvals.
Alternatively, we would request the Contractor to sign off a Final Account, confirming the final amount due under a contract.
If anyone has more experience or can explain further on legal aspects of these practices, please chip in.
• Nansi Holdings
It would seem that you are entitled to claim from the point at which you have notified them of the shortfall or issue. That can be the length of the Agreement. Still I think that this should be used as a starting point for further discussion. When a party continually misses Service Levels, you really have a choice to make as to whether you wish to continue. Without the threat of a competitive bid, they simply may not be motivated to do better. This should involve a tighter Vendor Management model to monitor and check progress on the SLA. It could also involve a period of probation where if the levels are not satisfactory in a short time frame (4-6 months) then the contract will be terminated.
• ESP Global Services
Thank you all for your valued input. Some good points made that I'll put into practice.