• Forsythe and Long Engineering, Inc.
Usually evaluations are broken into two separate categories which are technical and commercial. There are usually team members that are specialized in certain areas that will review the Proposal for different requirements. (ie. the contract specialist may review the commercial portion of the proposal such as pricing and breakdowns. The Engineering team may review the technical side to ensure the Contractor has quoted all items within spec and has also included all items.) Are your RFP's for Lump Sum, T&M or Unit prices?
It is hard to share a general answer for this topic. It depends very much of the type of work, country and sector the customer is operating in. In the Netherlands "Best Value Procurement" is growing at Public companies. In many books are the techniques and processes described. For software development the understanding of function point analysis might help to understand the scoring of building software. And further are most evaluation processes described in the RFP.
I agree with your two respondents. My experience, and we consider this to be a best practice, is to do the technical evaluation first, separate from the commercial. This allows an unbiased review without people thinking about price or the price of their favorite vendor. Technical normally involves components like: HSE/Safety, technical capability, capacity, experience, past performance/recommendations, plant load, and possibly the personnel and their individual experience offered up to the project.
If you use the technical to create a weighting then the commercial evaluation can be weighted by the technical to determine the winner. This means a less technically efficient company would need to have a substantially better price than a more technically efficient one.
Examples of this kind of weighting I believe are listed in the IACCM's large Contracts reference manual.
• Forsythe and Long Engineering, Inc.
I also agree with the responses that have been provided in lieu of my initial response. I think it is a good practice to conduct the technical evaluation before the commercial. However, some of the technical evaluation can be conducted during the prequalification process. This may include capacity, safety, insurance, personnel, etc. If the contractor passes this stage and submits a proposal then the award may only be subject to technical requirements such as submitted equipment manufacturers, product types, and very project specific requirements. The commercial evaluation will remain the same.
Carolyn, while we wait for someone else from our community to share with us their "best practices" identified in regards to this point, I wanted to provide this link www.iaccm.com/resources/; where, as you will se, it is covered the matter related to the drafting of enforceable teaming agreements.
• Ministry of Justice
I have gone through the process of ensuring flow down of terms from prime contracts to subcontracts and understand your feelings. It is laborious. The contracts that I managed had 'mandatory' clauses to be included in the sub-contracts; hence it was somewhat easy to navigate through. We also put in place a simple tracker listing all the clauses and if the sub-contract had complied with the mandatory term flow-down. We referred the matter to the legal team if there was any discrepancy. What I found was that once I completed verification of a sub-contract, other sub-contracts for the same prime contractor was easier to go through.
You could categorise your sub-contract into high (significant),medium and low groups and could vary the mandatory clauses for flow-down as appropriate.
• New Zealand Defence Force (NZDF)
Interesting situation, I may be misunderstanding things here...and correct me if I'm wrong, but typically the point of having a Prime is to "manage" subcontractors and they should negotiate back to back agreements that adequately ensure that as a Prime they can fulfill their obligations...it should also reflect the spirit and intent of the agreement...happy to explore this further.
• Ministry of Justice
Hi MC - Agree with you that purpose of the Prime is to "manage" subcontractors... In central Government (not sure if this is required in private sector) sector contracts, it is necessary to ensure that there is a flow-down of the terms to sub-contracts. For example the 'Data Protection' Clause. My response was in this context. The IACCM link given above is a good reference.
My current approach is to have the subcontractor "aware of" the whole contract (coupled to an indemnity if they cause us to be in breach - if I can get it!)
I then add a detailed flow-down of (i) the mandated flowdowns from client - usually things like anti-corruption and audit and (ii) the terms which are essential for us to ensure that the commercial risks are back-to-back - eg. the specific standard of workmanship that the subcontractor must exercise in their design.
Generally speaking this means 5-6 flowdown clauses, for which I either amend terminology by hand or rely on "mutatis mutandis" if I'm short of time.
For 'awareness of the whole' I think the donor clause was from the CECA Blue Book.
I have also drafted some subcontracts in which I had to ensure that the subcontractor had the same commitment that the prime; as Girija stands, it is very laborious since you need to understand which of the obligations within the prime contract are transferable to the corresponding subco and also you have to modify the wording. I would never attached the entire agreement because of confidentiality concerns and also because usually prime contractors do not wish to share financial details with subcos in order to seek a more profitable negotiation with them.
You bring up an interesting point. You as the contractor and the owner do not want to share the details of the contract, but want to subs to agree to them. Doesn't that seem unreasonable? I will never agree to something I have not seen. I do get copies where some details are redacted and that is fine, but the text has to be reviewed in order to be agreed to. I would be interested to hear your rebuttal as the contractor in this case when I say I have to see the prime to agree to it.
• New Zealand Defence Force (NZDF)
Some great discussion point coming through - A recent experience - last month our prime contractor needed to conduct a MRO work package at a location controlled by another party (Subcontractor). As the Prime, they commenced negotiation; however this subcontractor only provided 3 months warranty on their work while our agreement with the prime had a twelve month warranty. The prime formally requested dispensation from the twelve warranty and was rejected due to the following reasons:
1) It is the primes obligation to ensure the test and acceptance of standards and quality of the work
2) The prime included in their financial model, an element of risk which they would absorb based on their contractual obligation.
Part the above negotiation included some issues around IP ownership during the work package being conducted. In this instance we accepted the deviation from the standard IP clauses as we deemed the subcontractor clauses to be reasonable as it didn't affect the operation and future requirements to maintain the vessel.
So while the prime is ultimately responsible for the deliverables, we needed to assess on a case by case situation if any deviations were acceptable...and also had to be careful that we don't set a precedence.
In my experience the Prime Contract is the negotiated version which your company's legal eagles would have negotiated with your client so it would certainly contain more stringent clauses than your company's boiler plates. Usually once the prime contact is negotiated the necessary amendments are made to the the boiler plates to align them with the prime contract. The flow downs are usually attached as "Special conditions" of contract and they take precedence over the 'General Conditions' of contract due to the fact that the GCC are usually amended under SCC and the more stringent approach is adopted. this eliminates any misalignment between the two forms. e.g. 'Limits of Liabilities', 'Indemnification' and 'Insurances' are mostly dictated by Client and the risk must be transferred down to the lower level to protect your company's interest.
• New Zealand Defence Industry Association (NZDIA)
Australia is about to introduce new legislation about unfair contract terms with SMEs. This is going to make it harder for Primes to push terms down for fear of being void. Hopefully this will start new discussions about getting rid of clauses which are unfair!
• APL Norway AS
1. Always remember that if you miss a Clause, it's not the end of the
world, because, as Contractor, you will always be responsible for the
delivery of your contract, regardless of who you choose as your
2. Check your subcontract template. If your subcontract template and your
Contract and Procurement Principles match, then the Prime Contract
negotiated between you and the Client is much easier to flow down.
3. Semantics. Don't get caught up in the details of the Clause having to be
an exact copy of what you have in your Prime Contract. If it says the
same thing, then it doesn't matter if you use different words or the
words are in a different order.
4. Remember that you are a buffer between you and your subcontractor. As a
company, you do not want the Client getting into your business.
5. The top 8 flow downs (no particular order):
a. Warranty duration
b. Exclusion Clauses
c. Indemnities including pollution
f. Intellectual Property
g. Benefit Clauses such as paid suspension
h. Days, remember to allow for internal processing as well as Client
There will always be exceptions but number 3 is where most people fail, including the Client.
Don't use the back to back Method unless there are high risks, high value and/or Client appointed Subcontractors and if you plan on using this Method, take that subcontractor's qualifications with you from day one. In addition you need to develop a standard template for Form of Agreement and Exhibits because it isn't possible to just blindly throw your contract at a subcontractor, they are a Third party, and it just doesn't work without some modifications to the Prime Contract.
Hi Carolyn. Depending on cooperation levels of your prospective subcontractor / subconsultant, you can 'seal the deal' with an RFP document and a Letter of Acceptance. If you give me your email address, I can send you a template document I created for implementing back-to-back subcontracts to a prime FIDIC contract.
Hi Keith, this is a very interesting question and I am glad you are undertaking the exercise.
I haven't come across a dynamic tool that would support the sort of pre-analysis you suggest, although it may be that you could adapt one of the systems used by marketing to undertake customer segmentation. Another approach could be to build relevant questions into whatever requirement definition tools you use, cuasing the business to consider the points you make regarding issues such as innovation, likelihood of change etc
In working with another IACCM member, we have developed a model that looks at three core levels of relationship and then overlays the extent to which there is potential uncertainty which would impact the nature of the relationship / terms required. I'll be pleased to discuss with you and share ideas..
• Halburton Quillan
Hi Keith. I'm also unaware of the existence of such tools.
My suggestion (assuming you haven't done so already) is to align your organisational objectives with the business cases, service specifications that were developed during the tender process, justifications for contract variations, etc. Once this has been done, identify the commonalities across the service spectrum and then compare against the performance of each contractual arrangement including the extent to which the service is being successfully delivered and then how this may relate to the business activities of the individual business unit. No mean task!
Understanding contract management within broader organisational strategy and commonality that exists between contracts is likely to yield insights into what you're trying to achieve e.g. innovation, appropriately skilled staff, etc. And by taking such an approach, it may increase the likelihood that decision-makers outside of your own business unit who may also benefit from this work will support your efforts more readily.
You may also find as a result of using this type of analysis, the requirement for knowing whether the relationship is growing, etc becomes less relevant as an end in itself - assuming of course that the appropriate aspects of organisational strategy are being delivered as intended through its contractual arrangements and that risk appetite for further value / profit-seeking under each or multiple contract(s) is not being exceeded, and is being properly managed.
IACCM conducted a Ask The Expert webinar on this topic, featuring James Mullock of Bird and Bird. His session was highly rated. The recording and James's presentation are in the IACCM Library. Plus, there are a few other resources in the IACCM Library which are relevant. If you have trouble finding these resources, please let me know.
You can also have a look at the Article 29 Working Party webpage - there is a page setting out draft contract provisions that are in line with the GDPR as it is currently being interpreted. You may not want to use the clauses themselves but can use them as a measure for your own inclusions.
I guess you need to establish key assumptions and/or minimal functionality or license metrics you need to achieve before you have anything you can benchmark against. Once that is established, you can ask for alternative software solutions which solves your need and then incentivize the best price found. Further you could measure the fulfillment of the key assumptions and have a payment attached to each of them. If the solution is going to introduce a certain workflow you could set pricing according to how fast it is implemented or how much money is saved/earned. If there is a license price and a T&M project, you could say have a differentiated discount scheme based on the number of hours spent. I.e the first X hours are paid at 140%, hours between X -Y are paid at 100% and hours after Y are paid by 50%.
I recommend you look at this article "Time and material vs Fixed price: hot discussion of the best pricing model" - www.cleveroad.com/blog/time-and-material-vs-fixed-price--hot-discussion-of-the-best-pricing-model
Firstly, I suggest to draft a SWs Portfolio document, which will list all the required SWs. SW portfolio will consist of details like SW name, description, area of application, criticality, user applicability, SL% requirements and other optional technical details like program language etc. Each of the listed SWs may be given a percentage split of charges between various applications, summing up to 100% (in this case DKK 0,5 M is 100%). This document can be kept open for addition/deletion for SWs.
Whenever Supplier adds/removes a SW this % split can be used for commercials/invoice purpose. For eg: a SW which falls between 10-25% will have 2% incentive, SW with 25-50% will have 5% incentive etc.
Secondly, SLA is completely depends on how you want specific SW to work for you. In the portfolio, for eg: if some SW is impacting critical users or functions you may set the SLA to required higher percentage and flow-down those SLAs to OEM as well. Also, I would suggest to a research on Pass-through charges, in which the supplier charges a fixed % incentive, but this is possible only if the SWs are fixed.
It´s great to hear that organizations like the one you´re working for as Senior Contracting executive are undertaking this type of exercises in order to gather information around best practices in contract, supplier and performance management.
As the unique global organization identifing best practices in this area, at the IACCM we will be happy to assist enabling other members to share what they have been applying in their respective organizations and, furnished with the results and findings of this networking atmosphere, you will be achieving our goals at Philips 66.
Behind 'best practice' is a simple concept: measurable standards. And that means some form of benchmark is required. So, the exercise proposed in your posting, Alan, is a great example. It will be a comparison against peers, organizations at the same level, in order to get standards and then, you will see how you and others do things and what you and they do.
I know that your company has invested in the developement of contracting skills among your CM staff, and most of your colleagues are currently taking the CCM (Contract and Commercial Management) learning program, in its different certification levels (practitioner, advanced practitioner). At this point, it will be extremely important to consider what IACCM states in module 1 ('Best practices in contracting'), so I'd extremely recommend to review that content, at first sight.
Second, in this link you will find the 'IACCM top ten best practices in contracting' (general): www.iaccm.com/resources/;
Among other relevant resouces provided by IACCM corporate membership, as you might be aware, you have the right to get access to ATEs (webinars) via our IACCM library in subjects such as 'best practices selecting the right supplier': www.iaccm.com/resources/;
In addition, refer to 'Supplier relatioship management: best practices'
In sum, over the past several years, supplier relationship management (SRM) has become a major focus within the procurement and supply chain community and many companies are analyzing how best to expand SRM efforts and investment. We look forward to hearing from other members.
• Seal Software
At Seal Software, we can provide you with a technology which locates, understand and extracts data from your contracts. This can help you with supplier and performance management by:
- Extracting information from your contracts, such as the parties to contracts, and their obligations.
- Maximizing revenue opportunities, by identifying unknown business intelligence.
It would be great to discuss how Seal can help you, in more detail. Please feel free to call me on +4420 735 9892.
We are revamping as well this year and I attended a training from State of Flux in Chicago a couple of weeks ago. I found there approach on planning very particle. For me it is very situation on how you manage your supply base hwoever keys are
1) Outlining performance expectations
2) Holding regular reviews
3) awarding business based on performance
San Diego Association of Governments ...
Jack - a vehicle purchase will usually fall under either a category strategy and/or procurement process, leaving the decision to strategy and process rather than preference. If you are purchasing one vehicle, that acquisition might bring the transaction under the threshold of strategy/process guidelines, but that is rare. Please consider the total cost of ownership (TCO) of the acquisition, rather than simply the purchase price, as vehicles represent significant opportunities for overall cost savings.
Please can you share a copy of the 2015 Contract Management Benchmarking Report as I am not able to locate this on the website?
• Seiersen Enterprises
I suggest you go to the Resources tab, a do a search on Benchmarking Reports. Remember to click sort by most recent. You will find a wealth of materials on any aspects of benchmarking. I have also sent you the 2015 Contract Management Benchmarking Report. Be sure to participate in the 2017 Benchmark study.
Charlotte, building on Nick's reply, the study he has forwarded was issued early 2016 and provides a wide variety of benchmarks on process. This is supplemented by a series of reports that offer data on the issues that most often undermine the value achieved from contracts. These are part of the Ten Pitfalls series. Clearly, all benchmarks are norms or averages and if you have specific questions for a particular industry, geography, company size etc., you should ask us for the relevant break-out information.
• Info-Tech Research Group
Hello - could I also get direction on how to access this report?