1. society
2. work
3. contracts

A SERVICE BUYERS HANDBOOK
show me how to
buy from you!
ROSS MITCHELL CHANGING DIRECTIONS 2012
C HAPTER 1
Transforming the
Way Contracts are
Managed to Create
Sustainable
Outcomes
“the experience of a Service Buyer in
receiving what is expected, is being paid
for and actually received can be
different from site to site. This guide
will reveal some of the secrets that you
are not meant to know”
S ECTION 1
is this how it is for you?
Performance Management Made Easy
As the custodian of a multi million dollar asset and possibly in your own case
multi billions, there are several undeniable truths, not least of these is that
managing the outcomes for your organisation and finding the most
appropriate service partners to assist you in managing those assets is not
particularly easy.
Throw in the need to achieve sustainability today it keeps deepening in need
and complexity.
Contract relationships start the same as those in our personal lives and just
like the rate of personal relationship breakdown continues to remain
unabated so too do many contractual relationships between service deliverer
and buyer.
The First Date
Before you even start managing a new contract you need to find your way
through the maze of information that is provided by potential service
providers, the overload of information, the relevance or irrelevance in many
cases of that information just to find your way to make that appointment
that you hope and trust will be the right one.
At best it is daunting and often overwhelming. Worst of all you need to do it
every 3 – 5 years for every service under your control, or bite the bullet and
outsource the entire responsibility and then know that someone else has
done the really hard yards.
It need not be that way.
Will You Marry Me?
It is when the selection process is complete, the appointment made and a
new contract is in place that you hope and pray that the service provider,
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(your new partner in managing the multi billion dollar assets)is going to
deliver.
You wonder what it is that you have done wrong, why don’t they get it? After
all you only want what was agreed to. That is fair, isn’t it?
The moment of truth has finally arrived.
The problems that cause this level of dissent and distraction are not new.
They have occurred over time immemorial.
Contract Performance Management is now the most important part of your
agreement with that provider for the next few years.
It is no wonder that companies become reluctant to change a contractor
when things are at an OK level and you give up. You are human after all.
If appointing a contractor is daunting, how about managing a relationship,
that has traditionally become adversarial as the competing interests of the
parties come to the fore.
Wedded Bliss
Just like entering a new relationship, when dinner and flowers are a
frequent distraction and everyone is being extra nice to each other, perhaps
even overlooking each others imperfections as part of the getting to know
you period, so it can be true that a contract is the same.
The first few weeks are all about finding your feet, agreeing that we started
from a low base, agreeing that we must give each other time and we’ll
evaluate every couple of months.
We’ll go through a formal meeting process in a couple of months, pretty
much the week after the contractor’s mobilization team has left and the
reality of the marriage is starting to hit home
The Honeymoon is Over
Just as the wedding bells fade into the distance and become merely a distant
memory, so too is the memory of what was agreed to by your new service
provider’s business development team as the reality of the work ahead for
the operational/ production team of your new partner finally hits home and
the penny finally drops as to what has been committed to early on.
Accountability and truth in service delivery need not be some pipe dream
that only other people can get.
It is now time for your new partner to start to deliver beyond the point of lip
service and that can be a point of major distraction as you start to hear the
excuses for the failure to deliver what was agreed.
The only thing is that we are in the second, third or fourth month of our new
5 year partnership and because as humans, many of us find it difficult to be
confrontational, we don’t want to upset our newlywed, so we let things go
unsaid, to them at least.
We then hit the fifth or sixth month and by now if you have not taken action
things are now staring to spiral out of control. You are now getting heat
from your boss, your fellow employees, the board, the stakeholders, the
general public and everyone you come into contact with. It seems everyone
has an opinion.
The First Fight
Now you have to lay the cards on the table and say what you really feel and
let your new partner that you are unhappy, that some of what they said they
would do has not materialized and you say what you would like them to do,
at least that is what you thought you said. It is just that the heard you say it
so nicely that they thought you were kidding.
Another month goes by and they still don’t improve, you get madder and still
don’t say what really needs to be said.
Until…………..
We should see a Counselor
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But then one day you are just fed up, the phone has not stopped ringing, the
board have threatened you that it is them or you. Of course you are now
going to take action.
The problem is now that the service has been in place for about 6 months
and the bad service has gone unabated, the maintenance of your asset fallen
by the wayside, the expected asset life started to shrink and replacement
costs increasing and looming a lot faster than you had planned and hoped.
Now the meeting with your service provider is a bit more intense, the CEO
from their side attends because you threatened them with termination and
he is here to placate you, make some new promises, including replacing that
poor manager who he now feels is not right manage your service.
Only problem is they don’t take action and another month goes by.
This month you write a letter, invoke the penalties you have (you do have
that available don’t you?) and you are now spending hours each day fielding
calls from disgruntled employees, and anyone else who has an opinion.
You call the service provider, more promises to fix it, little further
enhancement.
I want a Divorce
The eventual reality is that you don’t renew the contract, you go over the
same ground again in twelve months, your new provider needs money to
restore the asset to the condition you expect and then you are looking to go
back to stage one all over again.
Unlike your personal monogamous relationship, at work you are
polygamous, you have not one but two, three, four, five maybe even fifty
partners.
It really is no wonder that you have no peace at work.
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S ECTION 2
maybe it could be different
To Achieve Sustainability You MUST Do Something
Differently!
Now that we know that we need to make a change, let’s make a change.
It is said that the definition of insanity is to do the same thing over and over
again and expect a different result.
Please do not prove yourself ready for the asylum.
Taking a different approach to contracts is not really that hard, it takes
commitment and a genuine desire to work in a true partnership with you
service partners that is founded on a well defined contract that is genuinely
fair to all parties involved.
It must be said that a contract that is based on the historical perspective of
master servant hood is surely a thing of the past. They are the types of
contracts that invariably become adversarial at some point, where disputes
and service failures are prevalent, where the service provider is paid more
for what they don’t do than what they actually do. Contracts where they are
like a football coach who has either been sacked or is about to be sacked.
Sadly many service partners, not all, take an approach that says that they
must make hay while the sun shines.
A contract that does not fully reveal the requirements or where the client
accepts an offer that seems too good to be true and either knowing or
suspecting that the contractor may have got it wrong in their bid takes it
anyway and then uses adversarialism to manage their outcomes is surely
destined to provide the scenario above.
What is peace worth?
The new way of sustainability in contracting is one that is founded on
sustainable practices, social, environmental and economical and relies on
trust, full disclosure and entering into a partnership where it is not only
expected that honesty will prevail, it is genuinely lived and delivered.
Let’s look at what Sustainability In Contracts really means.
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When considering sustainability, most people will say that it is engaging in
ecologically and environmentally sustainable practice. Some will say that it
is using Green cleaning, manufacturing, recycling, etc. and all of the other
Green Labeled elements.
7.
Will the contract create new learning opportunities for all people
involved?
8.
Will the contract provide security to the people touched by it, the
employees, stakeholders, owners and customers of both organisations?
Yet if these were the only things to be considered as important for the
sustainability in contracts, what else would be potentially forfeited?
Environmentally Sustainable
Sustainable contracting involves areas equally important to building owners
such as:
9.
Will the contractor use processes and ingredients that have the least
environmental impact?
How sustainable is a contract that has been let? How much at risk is my
multi billion dollar asset? How much time will I be involved in managing
the contract and will it distract me from my principal role?, et al.
10.
Will the contractor use locally made ingredients and components
wherever possible?
11.
Financially Responsible
1.
Does it afford the contractor the necessary opportunity to generate a
commercial return?
2.
Will it allow you as the Asset manager to be able to have true visibility
across the entire asset and contract to ensure that you are gaining best
value?
3.
Will the contract place in jeopardy the lifetime value of the asset
through having the appointed partner not being up to the job and fulfilling it
properly?
Socially Responsible
4.
Will the rates being paid in the contract allow all levels of the supply
chain to be paid at the correct rates?
5.
Will the contractor engage in illegal contracting that places you at risk
through having engaged a contractor who has little or no intention of
complying with legal requirements?
6.
Is the contract sufficiently profit generating, that will mean that
employment is increased and potential burden on social welfare diminished?
Will the contractor use Green labeled products?
12.
Will your contract contribute to or diminish the affect of Carbon
Emissions?
13.
Will your contract be a source of inspiration to others to take up the
mantle of Sustainable Contracts?
Pay It Forward
Once you have established the desire to have a sustainable contract and
understand the components required to have what you want, it will be
something that takes enormous effort and commitment. This is where the
really hard work begins in the development of sustainable contract
management.
Pay Now, Pay Little, Pay Later, Pay More
You could take the traditional approach that has not always lived up to
expectations.
What will the development of a sustainable contract really entail?
• Board Commitment
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• Agreement on what is a sustainable contract.
• Full disclosure up front: Each way
Once you have gone down the path of putting into place a Sustainable
Contract that ticks most, if not all, of the boxes you will wonder why you
have put yourself through the grief of the past.
• Truth In Tendering: Each Way
• Appropriate Selection of Service Partners
• Realistic Budgets
• Unambiguous Contracts: Clearly defined in expectations and outcomes
• True Partnerships that acknowledge that Contractors MUST ACHIEVE A
COMMERCIAL RETURN, Clients MUST ACHIEVE AN OUTCOME,
without both parties accomplishing that we have adversarialism
Trust that if you provide a contractor with the opportunity to provide you
with solutions that those solutions may well be better than those you
currently have, so working with the contractor to establish some new rules is
important.
• Responsibility of the parties
• Accountability of the parties
• Proof that the services meet expectations
• Agreement that the services have met expectations
• Regular dialogue that is productive, effective and outcomes driven
• Openness in communication
The Last Word
Engaging a professional mediator in this process, in the form of domain
expert consultants, is not only good for your sanity, it is good for your
bottom line as those experts are working daily across the same sorts of
contracts that you may be offering every 3 years or so. They are up to date
with industry trends and have access to relevant knowledge about who
might be the best fit for you specific business at a specific time.
7
S ECTION 3
eureka! it really does work
We could write hypothetically forever, but you need to know that this works
right?
This is not some pipe dream where a consultant creates a theory that he or
she thinks might work and and, with all care and no responsibility, walks
away after a few months and a series of lease payments on the latest BMW
M5 later, having left a trail of destruction that takes many months to repair
and a sour taste in everyone’s mouths so that the next time someone with a
bright idea for change is howled down.
This is a proven reality.
The following case study is about a contract that Changing Directions
manages, end to end including as far as approving payments to contractors,
such is the success and completeness of the program.
Western Australia’s Water Corporation is one of Australia's largest and most
successful water service providers, with nearly $9 billion invested in water
services infrastructure. It is the principal supplier of water, wastewater and
drainage services to hundreds of thousands of homes, businesses and farms,
as well as providing bulk water to farms for irrigation. Their services,
projects and activities span over 2.5 million square kilometers with regional
offices in Perth, Bunbury, Albany, Karratha, Geraldton, Northam and
Kalgoorlie.
Requirement
In July 2001, Changing Directions was engaged by the Water Corporation to
review all of their contract documents for the delivery of cleaning services to
their thirteen locations in the Perth metropolitan area. The Water
Corporation’s objective was to determine how well each facility was
complying with the processes and standards detailed in the cleaning services
scope of works.
The Changing Directions review examined the contractual documentation in
detail and compared the Corporation’s desired outcomes against actual dayto-day results. The review recommended that the Corporation should create
8
a single contract that would cover all of the cleaning services for its thirteen
metropolitan facilities.
of the independent audits were accessible via the CIMAS web-based
platform to all Water Corporation managers and to the cleaning contractor.
Solution
Commitment to Sustainability
In 2002, the Corporation acted on this advice. In order to implement the
change, Changing Directions was asked to:
Early in 2009 Changing Directions were asked to again review the contract
documentation to ensure that it met the Corporations commitment to
sustainability. This was carried out following an extensive stakeholder
engagement process to ensure that the outcome would address the changing
needs of all facilities. Sweeping changes were made to the documentation to
address environmental responsibilities including the emerging impact of
Green Cleaning practices, changes in Occupational Health and Safety
regulations and the impending changes to the cleaning industry award
structure.
•Assist with the preparation of specifications for each site
•Collect all site data and prepare a site-specific building information matrix
•Assist with the preparation of evaluation criteria
•Assist in the preparation of tender documents
•Conduct site visits and tender briefing sessions, respond to all queries and
record responses for inclusion in the due diligence process
•As part of the tender evaluation committee, facilitate a fully transparent
and accountable process and prepare a detailed recommendation for the
Water Corporation
The upgraded documentation not only addressed sustainability, it also
included increased accountability by adding performance management
processes and strong KPI’s that covered all aspects of the services to be
delivered. Furthermore, a greater level of transparency and reporting was
included to ensure the contractor took responsibility for managing their
compliance on a day to day basis.
•Carry out baseline assessment of the cleaning standards prior to handover
•Monitor the contractor’s service delivery in all areas for the life of the
contract and provide detailed reports and trend analysis
To manage this new contract The Water Corporation engaged the domain
expertise of Changing Directions to project manage all aspects the cleaning
contract.
•Provide a web-based monitoring system for all parties to monitor contract
performance outcomes.
Scope of Work
Subsequently, Changing Directions was appointed as third party auditor to
monitor the cleaning performance against contractual service level
agreements in all Water Corporation facilities. The auditors used the CIMAS
mobility platform to monitor compliance.
The compliance audits were carried out randomly, with each site being
audited at least twice yearly. To involve all stakeholders in the process of
ownership and to allow them to compare the outcomes achieved, the results
The scope was to monitor the service delivery of the appointed cleaning
contractor across the specified metropolitan Water Corporation sites. This
was achieved by adding addition modules to the CIMAS web-based platform
to allow all work orders and invoicing to be processed through the system by
Site managers and Changing Directions and also made accessible by the
contractor to generate invoices and monthly expenditure summaries.
Additional modules were added to allow all contractual compliance and
reporting to be created by the contractor and be visible to all stakeholders on
the web platform.
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Service compliance was to be achieved though physical inspections,
performance audits, web based monitoring and periodic face to face site
visits with the appointed site and regional or group managers to confirm
their levels of satisfaction and or to adjust the scope of work to reflect site
changes and or their cleaning requirement. Additionally to initiate this there
was hands on training at each location with follow up sessions over the first
quarter and ongoing periodically as staff changes occurred.
Processes Implemented
• Carry out baseline assessment of each site prior to the new contract start
up
• Continue with the established inspection/audit process where all site are
visited at a minimum of twice yearly at random over the year with a
number of the sites being visited each month
• Monitoring the Performance of the contract via the new web portal
• Train the contractor in the correct use of the Performance Management
system and to respond to periodic requests, NCR’s, OFI’s and Customer
Surveys.
• Monitor the contractors use of the Performance Management system and
accurate recording of weekly inspections and monthly reports
• Monitor Contract Compliance and Operational Governance including
logging of compliance requirements
• Liaise with the Corporation on planned changes to site layouts and usage
and adjust specifications to reflect changes and create cost variations to
reflect these changes
• Monitor periodic works and ensure agreed standards are met.
• Provide web access to the Performance Management system for all
stakeholders
The process of moving the responsibility for managing the contract from the
Water Corporations Corporate Real estate office across to the project
managers, Changing Directions was a challenge. The contractor had been
the incumbent for 12 years and in that time had established their own
operational culture. Furthermore the contractor who was not that computer
literate was reluctant to give his field managers the electronic tools,
preferring to continue using a paper based system.
To achieve the objectives Changing Directions developed detailed data
capture forms that eliminated the need for most written input by using drop
boxes with predefined outcomes and the ability to capture issues via photo
and have them automatically attached and uploaded with the data. Not
surprisingly staff embraced the technology as they could see it made their
jobs easier.
The work orders are now all web generated and all invoicing is also done the
same way. All compliance documentation and reports are managed via the
web. Daily performance reports are also generated following inspections
allowing the contractor to take a proactive role in managing the contract.
We knew we were stepping on new ground outsourcing what was
traditionally a role managed by the Corporation, however we also realized
that we needed to focus our resources on our core business and engaging
domain expertise to achieve our objectives seemed the smart thing to do.
We saw the process as a transition, one that would take time and patience
to achieve but in the end would allow us to engage with all stakeholders to
better manage our commitment to sustainable procurement.
Rob Macri – Corporate Accommodation Manager
• Monitor customer satisfaction surveys to ensure agreed KPI’s are met.
• Provide annual reports on Contract outcomes
• Attend Periodic management meetings as required
10
C HAPTER 2
you really can
have it all
“getting everything you need from a
contract is no longer the domain of a
nasty contract manager. it comes down
to clarity and accountability”
S ECTION 1
sustainability in contracts,
it is not just green
The green lobby has done an outstanding job of having people become
conscious of their need to look after the environment. All of this has been
brought to consciousness in the name of environmental sustainability.
We plant new trees, make sure that chemicals are not discharged into
waterways, have enzymes used in cleaning services, CFC free gases in Air
Conditioning, recycled paper products, (milk cartons are now being 100%
recycled to make toilet paper and hand towels and some stationery items
(http://youtu.be/1eN0fiEwtiY) electric vehicles and all sorts of other things
to convince us that we are making a difference.
We even give a building a Green Star Rating. (more about that later)
But let’s talk about what sustainability really is in services delivery.
It takes into account the whole spectrum of a service.
Sustainability needs to take into account, Social, Environmental and
Financial or commercial factors.
Environmental Sustainability
The environmental factors are pretty well documented but as technology
advances they will continue to expand. It is a veritable moving feast.
Financial Sustainability
Financially, sustainability in contracts relates to whether the awarding of a
contract or bidding of a contract is a sustainable event. Can you survive or
can your service supplier survive on the financial component of the
contract?
Will the contract cause someone to go bankrupt or not be able to pay the
correct wages to their employees?
As a contract manager YOU may be liable for any actions that result from
legal action taken by disgruntled workers who have not been paid their
entitlements.
12
As a client you could be liable because you awarded a contract that, had it
been analysed effectively, would have revealed that the service provider had
no possibility of delivering the outcome had they met the required financial
commitments to their staff.
Accepting what the tenderers dish up to you and taking cheapest price
(under the cloak of value for money) will at some time be an excuse that
must be deleted from your tender awarding practices.
As a service buyer you are not responsible for the tenderers submitting their
cheap low value potentially undeliverable offers, that is their problem.
You are however, guilty of assisting the sustaining of the types of practices
that have seen wages diminish, multi tier contracts flourish and people being
paid without their correct entitlements the moment.
As a service buyer you have a responsibility to whomever you work for to
spend appropriately. You need to do so with a bigger picture in mind.
Social Sustainability
Ensuring that people are paid the right rates, that they are afforded training
that is not just about their job but provides some added life skills, that their
work schedules are in more socially acceptable time zones, reduction in the
frequency or elimination of shift work, hiring new staff from a diversity of
backgrounds, ages and cultures. Teaching people new skills and creating
new opportunities.
Ultimately when practices that do not have people paid their correct
entitlements, the big picture problem will land in a collective someone’s lap
and that someone will be the TaxPayer.
As that person or those people who have been denied their appropriate
wages and accompanying entitlements, are unable to fund their own
retirement and seek hand outs from the social security purse into perpetuity
you need to be considering “how much could I have changed that had I
ensured that my contracts were fair?”
The Whole Gamut
There are things that you could do which will have a triple benefit and these
are the sorts of things that you, as a contract manager or a service provider
could introduce to your company and will reap an immediate benefit and in
the long term be even more beneficial.
They may be harder to asses the financial benefits up front but when you
start to survey people about what you are doing they will smile. And after all
isn’t a smile sometimes worth more than anything?
Think about what you could do to offer your company or your clients a
different solution that would have that triple effect.
It might be multi skilling employees, adjusting shift start up times which will
lead to reduction in waste bi-products from the facility, reduce fuel usage,
reduce electricity costs.
There is no set formula, it will take thinking about, pitching the idea, getting
buy-in and other stakeholder engagement, it will take trialling and tweaking
as you find the weaknesses in the strategy or find even more opportunities.
In any way you consider it, for something to change, something must
change.
For something to change you must first change.
Green Star Rating System
It may or may not be a little known fact that the Green Star rating system
used to rate the environmental performance of a building is only a snap shot
in time, the snapshot in time is on the day of opening.
As I understand it, the rating relates to the design and then the build phase.
Once the building is running (well standing still and in use) everything being
done in that building is either adding to or subtracting from the
performance of that building relative to its green star rating.
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Until such time as the rating system is based on ongoing operation of the
facility, people may or may not do what needs to be done.
I am pretty sure that in the future the rating system will be able to be applied
relative to operations. If and when that occurs, any performance
management systems and scopes of works and specifications for that
building’s contracted services will need to amended to impose the
requirement upon the contractor and or internal staff to deliver service that
only adds to the value of that rating.
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S ECTION 2
let’s be clear about what I
want
Any contract manager, whether they are from the service recipient or service
provider has a fundamental interest when they enter into a contract.
The Buyer wants to get what they are paying for and the Seller wants to get
paid for what they are giving.
Pretty simple right?
Well maybe not. For eons buyers and sellers have failed to reach an
equilibrium at all times.
From my year 11 economics, “equilibrium is the point at which buyers and
sellers agree”. I knew that all those school years would come in handy some
day.
A contract is the time when buyers and sellers reach their equilibrium at
least temporarily. It is only when their competing interests finally kick in
that the problem starts and that is when each side of the table needs to start
to be accountable.
Contract and Performance Management is all about accountability. It is
about the capacity of one person to be able to say to the other person, “show
me what you have done, prove to me why I should pay you or prove to me
why you shouldn’t pay me”. It most definitely should not be a one way
street.
Once upon a time, long long ago in a far away land, we could rely on a
handshake and we could look people in the eye and know that something
was as it should be. Unfortunately for those of us old enough to remember,
those days are long gone.
We now have a need to document everything, I believe that it is mainly out
of a fear that something may not get done, or may happen and then we all
need to have our collective backsides covered.
Someone after all may lay a false claim on Twitter or Facebook or release it
on Wikipedia, which we know is always true.
15
So with all of the worries of what might happen, we need to prove that we
have done what we have said. But how and what will we have to tell you?
A quick Lesson In History
Let’s go back in time to look at how we once communicated
• Fred Flintstone used a baby bird and a tablet of clay or rock to write things
down.
• Gen X&Y prefer to TXT and Facebook each other for hours rather than
speak
• most people use the internet
• most people watch some TV and more are now watching TV on the
internet
• the art of writing by hand is being lost (unless it is on the train windows)
• most people have a car
• most communities had not created writing as a form
• More people are working legitimately from home than ever before.
• Native Indians of America used smoke signals
Oh and we are supposed to be working less, not more. All of this seems to
ensure that everyone has a need for more information, yet we are so
inundated by messages that it is really hard to decipher what is important
and what is not.
• Australian Aboriginals drew paintings on the walls of caves using ochres
and other natural paints
• Inuit People (used to be called Eskimos) touched noses
• Ancient Romans and Greeks used tablets and stones
That is why clarity is so important.
• Egyptians used hieroglyphics on either papyrus or stone.
How does this relate to Performance Management? you say. Because
without clarity how would you know what is important and what is just
noise? How would you know what you should measure.
The list goes on.
These methods were ways that people could say that they had done
something and they may have spoken it or written it (apart from smoke
signals and rubbing noses)
Move forward to the Industrial Age
• and most people had an inkwell and quill and wrote on paper. Most had
beautiful handrwiting.
• Newspapers were being published
The saying that “if you can measure it you can manage it” is true, but “just
because it can be measured doesn’t mean that it matters”. I prefer “if it
matters you will work out how to measure it”
If you are a contract manager, either as a service supplier or service
recipient,there will be information that is absolutely mission
critical to capture, measure,
analyse, manage and ultimately
report on.
• the horseless carriage was starting to be made and the only things that
flew were birds.
Most of us know these as Key
Performance Indicators and then
wrap some Key Performance
Today we are in the Information Age
Measures around them.
• Most people have a mobile phone
If you were operating in the stone-age it might look like this.
16
In the industrial Age it would be like this or maybe if you were lucky a
Remington Typerwiter
• regularly undertake visual, physical and anecdotal inspections and
reviews
Today the options are endless and knowing just which device to put your
hands on is really confusing. If you are Apple oriented it is a choice of the
iPad, iPod touch, iPhone, iPad Mini, Mac Book Pro, Mac Book Air, yada yada
yada.
• Test against known benchmarks. If none exist, and no-one from your
team knows how to do it, engage with a consultant to collect data and
analyse the results and in the process develops a benchmarking tool for
you. Whatever you have developed, it should be relevant to your industry
type, country and or region if there are real reasons that they will matter.
If you go Android or Windows there are even more choices but you get the
picture.
You could still use paper and a pen, but that is so yesterday and besides, who
has time to do the work twice? Use digital to capture information and report
on it immediately, that is the way of today.
So how do we manage contracts better and then make sure that we are
managing performance:
• implement an Integrated Management System that includes at least ISO
900 1 Quality Management, ISO 14000 Environmental and AS 4801
(Australia) or international equivalents as they become the norm.
• define the scope: be absolutely clear about the agreed parameters of work
• develop a set of clearly defined and unambiguous performance measures
• develop a set of clearly defined and unambiguous performance indicators
• agree on the reporting timelines
• agree on the reporting protocols
• hold stakeholder meetings to ensure that everyone is on the same page
and has a crystal clear understanding of what has been agreed to.
• develop a communications plan to ensure that everyone who will be
impacted by the agreement (staff, clients, partners, shareholders and
whoever else) and then carry out that plan.
We could go down the pathway of using the good old pen and paper and
collect the information the way that we did before computers, smartphones
and the like.
But we already established that would mean doing the work twice and when
we are faced with competing pressures of time and money then we need to
do it differently.
There are myriad systems on the market today which will allow you to
manage services across the whole spectrum of service delivery.
• You can record the time in attendance of your employees or contractors.
It could be a swipe card, near field readers or now as many more
companies are doing bio-metrics. (time theft by contractors and
employees doing less time than they claim on a job has led to this
technology which repays your investment very quickly)
• You can record compliance with Occupational Health and Safety
• You can record customer satisfaction levels
• You can record service compliance levels relative to the legislated and
contractual requirements.
• Work Orders, Invoicing, Service Requests, Opportunities For
Improvement, Non Conformance Reports and employee details can be
recorded.
• seek regular feedback on service from the stakeholders
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• Work loading and scheduling can be done to have your staff rosters aided
by the technology that is available. You can host them on your website
and post online to your team, email and SMS their shifts and updates
• You can advise staff of specific items that they need to be aware of.
• Training such as OH&S and Inductions can be conducted online or even
on gadgets such as iPads and iPhones etc.
• You can track the transition around site of an employee of contractor
using GPS technology to ensure safety in lone worker environments.
This is just scratching the surface of what technology affords you the
opportunity to do. Information Technology is moving at such a rate that
to think that you know everything that is possible to know is crazy.
As I am constantly reminded by our Development team, it is just a matter
of imagination, time and money that will let you manage your team better
with technology.
Once you are managing contracts better you can then start to report on the
contract outcomes much more effectively.
By capturing data electronically, you only need to do the work once and
then be able to prove that service is the way it should be, or is the way it is.
Either way having an electronic reporting system in place will mean that
you are ahead of the curve in terms of the bulk of the competitors you are
dealing with as the early adoption of technology is still the prevailing
status. Look forward to 18 months or two years and then you will find that
unless you are using technology to manage and report you will be left miles
behind.
Just as an Integrated Management System was seen as unique in 2007/8,
(and gave you a marketing advantage) and now almost mandatory to win
work, so is the use of technology in managing and reporting on
performance.
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S ECTION 3
This section is short and the one that needs the most work on your part.
the buyer’s guide to more
effective contracts
Ensuring that contracted services are delivered at a level that is sustainable
and effective you MUST have tender and contract documentation that is
wriggle room free.
Ideally when you release a contract to the market, you will have someone
say, as happens to me frequently, “Ross your contracts are so tight” to which
my reply is always are they harsh, unfair or unjust? or are they just very well
defined with little ambiguity? Invariably the answer is that they are very
clear and nearly everything is covered.
If that is the case I am pretty satisfied that our team has developed another
good contract.
You see the most important thing is that everybody is aware upfront of what
is required. No ifs buts or maybes and when the contract is operating, there
is little argey bargey (what you may know as the contractor trying to fool you
and get you to pay more money or failing to deliver service and hoping you
don’t notice) and very little disagreement.
You need to ensure that your contract services can be delivered, tell
everyone who needs to know what the contractor will deliver, what you are
paying for in the contract, what you are prepared to pay for at different
moments in time and what you are not prepared to pay for at any point in
time.
If those parameters are met then you will have a wriggle room free contract.
All parties know upfront what to do.
High Level Contract Requirements
The following component list is not exhaustive and in no particular order.
• A good intro as to what is required, It should provide some information
about your organisation, thinks like values, intention of what your
company does and why. This will allow the tenderer to assess whether
there is values alignment sufficient to be able to want to work with you.
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• A glossary of terms
• A lack of Three Letter Acronyms (TLA) and your company or
department’s jargon. Just because you know what the TLA is, does not
mean that the tenderer does. If you must do so, always put the full words
etc into the first occurence of that TLA into the document with the TLA in
( ) just as I have done here. Also use the Glossary to have all TLA
displayed. You might even put its own index but that might be taking it
too far. Either way there are WTM, TLA in FRT these days. (What?)
• Early in the document a section called MUST KNOW. It should have
in it key points that a tenderer can look at in 1 minute and make a
decision about whether this tender is one for them to bid on. I’ve
included a sample of the information that could be used. There are
several reasons a contractor will choose not to bid. They may be short on
time, have other commitments that prevent them from giving themselves
the best chance of winning, they may not do work where a security
guarantee is required, they may not do work where liquidated damages
apply
• A well defined scope of works or service specification
• Key Performance Measures, Key Performance Indicators and a
clear Service Level Agreement
• Good levels of data required to bid on. Often we see incomplete,
confusing or conflicted information. There are sayings in computing
“Garbage in Garbage out” and the other one I was told in year 8 by Mr
Grundy teaching computer science on a Commodore 64 (you might find
one in the Museum of Prehistoric artefacts) “that a computer is a dumb
object and only as smart as its user”. It is vital that a tenderer has all the
facts to deal with and bid on. If you provide poor data to your tenderers
there are some likely scenarios that will occur. You will have a range of
bids that will make evaluation very difficult, you may pay above the odds
as every tenderer prices the job with an “insurance premium”, you may
appoint a tenderer who has bid on the incomplete data and then is unable
to fulfill on the contract. That presents its own problems for you. Lastly
you may not have the right tenderers submit because they have decided
that the deal is a bad one, when in fact it may be great one.
• if there are specifically legislated items that must be met, how to meet
them or at least what legislation it relates to.
• The General Conditions of Tender
• The General Conditions of Contract
• The Special Conditions of Contract#
• The Special Conditions of Tender#
• Dispute Resolution Process
• An easy to complete schedule of rates. I suggest you provide them in
Excel and lock all formulae so that you get to compare apples with apples.
• The tender schedules in an electronic format so that the contractor
does provide you the information in the required format. To send a
tenderer the electronic format as a PDF is next useless for them. They
have to recreate it and that takes time that they are not being paid for at
the moment. It is good manners to make it easier for them to bid where
possible. A little bit of courtesy early from you will make the quality of the
bids better for you and will advantage you in the long term.
• Clear rules of tendering. For example the definitions of a Non
Conforming tender as to a Non Compliant tender, the format of
tendering, eligibility of the tenderers, probity rules, methods of
communication etc.
• Selection Criteria identified and unambiguous. That way the tenderers
will know that you are serious.
• Two envelope practice. Qualitative and Quantitative evaluations are
important to be conducted separately and the only way to effectively do
this is to ensure that knowledge of pricing does not cloud people’s
thinking early in the evaluation process.
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# Note: you may wonder why there might be special conditions of Tender
and or Contract and ask why not have them in the Conditions of Contract or
Tender. There are some Governments and Corporations who have a generic
Conditions to start with and have a legal requirement not to amend them.
The special conditions is an area no less important to the tenderer that the
General ones. You just need to ensure that they know it.
Entering into a contract should be exciting times for everyone involved.
They should also be times when you know that what is about to start is fair.
We occasionally see Liquidated Damages Charges being applied in
services contracts. I still shake my head at that notion.
If Liquidated damages need to be applied, the charge or fee should be
appropriate to the level of non compliance and or damage. In other words,
let the punishment fit the crime.
It may be drawing a long bow, but when a service contractor fails to deliver
portion of a service in a month for whatever reason, the value of that
Liquidated Damages Charge should not exceed the initial value of that
portion of work not completed. If a service not delivered would have been
charged at $10, don’t charge Liquidated Damages of $50.
For a start that is the same as stealing a loaf of bread in the 1800s in
England and being transported to Australia for life. (although many
Australian’s are glad their forebears were transported).
Secondly in the unlikely event that a property manager was under significant
budgetary pressure or just wanted a contractor removed from the contract,
they may actively seek opportunities to apply a Liquidated Damages Charge
to either get some budgetary constraint applied or to make life so difficult
for the contractor that they had to withdraw or were terminated.
The Final Word
As I have said, this list is not exhaustive and will be added to in time by you
and your colleagues as you become more refined in your processes and
methodology.
Just remember that tendering and contracts are a partnership. They should
not be operated on the basis of traditional adversarial or master servant
relationship.
They should be based on:
• Fairness
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• Integrity
• Respect
• Commitment
• Empathy
If they are then good solid relationships that produce high quality work
will result as you will know what to expect and so will your service
partners.
Like a good marriage, there will be times when everything runs according
to plan and when they don’t you talk about it, resolve it and get back on
loving each other.
It is when the talking ceases and one person has to lose so the other person
wins that the problems really start and divorce will surely result.
Just as you did or will do on your wedding day you will will make a
declaration to grow old together. So it should be with your next Contract.
It’s now over to you!
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