Transcript Document

CONTRACT MANAGEMENT &
CONTRACTOR PERFORMANCE
MEASUREMENT
TALLAHASSEE NIGP
OCTOBER 14, 2003
Russ Rothman, CPPO
Chief Purchasing Operations Officer
[email protected]
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WHY FOCUS ON CONRACT
MANAGEMENT NOW?
 Changes in purchasing from commodity
transactions to commodity, service and
system contracts, including outsourcing.
 Report “Roadmap to Excellence in
Contracting,” June 2003 by the
Governor’s Inspector General, Derry
Harper highlighted several problems…
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DMS shortcomings in leading
contract management
 Inadequate management of contracts by
agencies due to abdication of leadership.
 No collection of information on contractor
performance.
 Failure to share information on contractor
performance among agencies.
 Missed opportunity to use performance
information in contracting decisions.
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COURSE OBJECTIVES:
TO UNDERSTAND…
Part I:Overview of Contract Management Generally
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OUR MISSION
THE DECISION TO CONTRACT
WHAT GOES INTO A CONTRACT
PERFORMANCE MEASURES
VENDOR SELECTION AND PRICE DETERMINATION
CONTRACT MANAGEMENT, PERFORMANCE
MONITORING
 PROBLEM RESOLUTION
 COMMON TERMINOLOGY
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COURSE OBJECTIVES:
TO UNDERSTAND…(continued)
Part II:Collecting, Compiling and Sharing
Contractor Performance Records, and Using for
Contracting Decisions.
DOCUMENTS, FORMS AND TOOLS YOU CAN USE:
Contract files, spreadsheets, linked documents
What to do before, during and after the contract
performance period
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PART ONE
Overview of Contract Management
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Four ways of looking at the
issues:
 Our Missions (including Governor,
Secretary, Director of State Purchasing,
Chief Purchasing Operations Officer).
 Inspector General’s criticism.
 Statutory responsibility.
 NIGP’s Three Es of public purchasing.
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Our Mission at State Purchasing flows
from the Governor’s top priorities:
1. Reducing Violent Crime and Drug Use
2. Creating a Smaller, More Effective, and Efficient
Government
3. Building Economic Opportunity for All
4. Helping the Most Vulnerable
5. Improving Quality of Life and the Environment
6. Improving Student Achievement
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And From Our Secretary Bill
Simon’s Mission:
To become a customer focused
agency providing effective and
efficient services in order to better
enable state agencies and
employees to deliver the Governor’s
priorities to the people of Florida.
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Director of Purchasing Fred
Springer’s Mission:
To gladly deliver useful and
innovative purchasing services
in order to become a customer
focused agency providing
effective and efficient customer
services.
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Chief Purchasing Operations Officer
Russ Rothman’s Mission:
To deliver effective and efficient
support services, governance
processes and professional training
to State Purchasing and agency
purchasing staffs in order to deliver
useful and innovative purchasing
services.
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What Do All These Aligned Missions
Mean?
For DMS and State Purchasing, we
see our role as driving down both
your administrative costs and the
prices you pay for goods and
services by delivering…
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DELIVERING..
 (1) Purchasing statutes, rules and policies
that support economical, efficient and effective
purchasing on behalf of the State and its
subdivisions.
 (2) An effective and efficient electronic
purchasing system, MyFloridaMarketPlace.
 (3) State term contracts, strategically sourced,
administratively easy to use, with the best
value (prices, item/service quality, terms and
conditions) obtainable by a customer of our
stature.
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DELIVERING…
 (4) Training and support to State
Purchasing, state agency and
subdivision purchasing professionals in
key skills, including general purchasing,
contract negotiation, contract
management, and management of
purchasing operations.
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Audit Report, Derry Harper, Chief
Inspector General, Office of the
Governor
 Existing patchwork of statutes and rules…has failed to
provide effective and consistent guidance in the contracting
process to state agencies.
 Staff assigned to contract with vendors too often lack the
training and experience needed to obtain the best deal for the
state.
 There is no statewide system for logging vendor
performance and sharing that information with other
agencies as a measure for determining whether to contract
with a particular vendor.
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INSPECTOR GENERAL
(continued)
There are performance monitoring problems
including risk of financial losses to the state, failure
to obtain desired performance…payment for
defective deliverables…”
 “We recommend that DMS accept the mantle of
leadership bestowed by Florida Statute.
We recommend DMS fulfill the statutory mandate
to develop formal procedures for agencies to
perform and document needs assessment.
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INSPECTOR GENERAL
(continued)
We recommend a statewide training initiative
led by DMS.We recommend a uniform
vendor monitoring and rating system be
created which incorporates links to contract
monitoring reports, vendor websites, closeout
evaluations, and a method for other agencies
to access performance evaluations.
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DEFINITIONS: WHAT IS CONTRACT
MANAGEMENT? CONTRACT
ADMINISTRATION? COMPARE NIGP AND
FLORIDA STATUTES.
NIGP’s “CONTRACT MANAGEMENT” TEXT
Contract Management: “All activity that occurs in the
contracting process, i.e., all activities that take place
from the establishment of the original requirement until
the contract is closed out.”
Contract Administration: “The management of all
actions, after the award of a contract, that must be
taken to assure compliance with the contract; e.g. ,
timely delivery, acceptance, payment, closing contract,
etc.”
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Florida Statutes
S. 287.057(15): “For each contractual services
contract, the agency shall designate an
employee to function as contract manager who
shall be responsible for enforcing performance
of the contract terms and conditions and serve
as a liaison with the contractor. The agency
shall establish procedures to ensure that
contractual services have been rendered in
accordance with the contract terms prior to
processing the invoice for payment.”
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Florida Statutes
S. 287.057(16) “Each agency shall
designate at least one employee who
shall serve as a contract administrator
responsible for maintaining a contract file
and financial information on all
contractual services contracts and who
shall serve as a liaison with the contract
managers and the department.”
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DMS’s Statutory
responsibility.
S.287.042 “Development of procedures to be
used by an agency in deciding to contract,
including, but not limited to, identifying and
assessing in writing project needs and
reqirements, availability of agency employees,
budgetary constraints or availability, facility
equipment availability, current and projected
agency workload capabilities, and the ability of
any other state agency to perform the
services.”
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S.287.042 FS, (continued)
“Development of procedures to
be used by an agency in
maintaining a contract file for
each contract…”
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NIGP’s Three Es of public
purchasing.
Effective service: Getting end users what
they need, when they need it.
Efficient operations: Getting the job done
with minimum resources in minimum
time.
Economical purchasing: Obtaining the
best value (lowest total cost of ownership
or operation) for the dollars expended.
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What is a contract?
An agreement between two
(or more) parties, written or
oral, with some common
elements.
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NIGP’s “Contract
Management” includes
 Offer and Acceptance
 Consideration: Each party agrees to do or
provide something. NIGP includes discussion of
the related concept “Mutuality of Obligation,”
meaning both parties are bound
 Competent parties (and agents if
applicable).
 Legal purpose.
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Consideration & Obligations
include:
General and special conditions
Specifications and/or Statement of
Work
Price(s)
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What kind of document is
necessary?
S. 287.058(1) “Every procurement of
contractual services in excess of the
threshold amount provided in s.287.017
for Category Two…shall be evidenced by
a written agreement embodying all
provisions and conditions…In lieu of a
written agreement, the department may
authorize the use of a purchase order…”
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What kind of document is
necessary (continued)?
Addressing the award of competitive
solicitations, Florida Administrative Code
Rule 60A-1.001(9): “The contract shall
be awarded by purchase order or other
written notice… Issuance of a written
notice of award or a purchase order for
the purchase of commodities shall
establish a contract.”
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What goes into the decision
to contract?
Consider
 Performance objectives, both outputs
and outcomes
 Availability of both internal resources and
external resources
 Compare as to anticipated cost; quality;
risks; core competencies; etc.
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What goes into the decision
to contract (continued)?
Make/Buy decided by the
objective of timely delivery of the
required quantity and quality of
service at the lowest cost,
consistent with acceptable level
of risk.
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WHAT PERFORMANCE
MEASURES SHOULD BE
INCLUDED?
Contracts can and usually do contain:
“Deliverables,” (outputs) a definite or indefinite
quantity of goods to be delivered and/or services
to be performed, and

Sometimes goals, objectives or purpose
(outcomes) to be attained. Outcomes can also
apply to schedule, budget and customer service.
Schedule
Budget
Customer Service should be added to these.
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Measurable standards applying
to outputs and outcomes
Using State Purchasing deliverables
to state agencies as an example,
“Outputs” can be considered as
measurable units of something
delivered, e.g. state term contracts,
training seminars, an eprocurement
system, statutes, rules.
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Measurable standards applying
to outputs and outcomes
(continued)
“Outcomes” can be considered as the
purpose of the “outputs,” e.g.
Statutes and rules that result in the use of
more “best practices;”
Decreased administrative effort for state
purchasing offices;
Decreased prices of goods and services
(or “better value”);
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Measurable standards applying
to outputs and outcomes
(continued)
More agencies with a higher percentage of
certified purchasing professionals, making better
purchasing decisions
Faster transaction processing
Better data for planning
More effective purchasing tools (e.g. eQuotes,
SNAPS III, reverse auctions, single source
procedures).
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Measurable standards applying
to outputs and outcomes
(continued)
Some outputs can be measured easily, like
the number of training seminars or state
term contracts completed each year.
Outcomes may be tougher, from
measuring savings to surveying customers
on process times required or ease of use
and effectiveness of procurement
processes.
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Contractor Selection and
Price Determination
Three factors affecting cost:
1. To buy or not to buy, that is the
(first) question
2. Specifications (gold, brass or
plastic?)
3. Selection process
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SELECTION PROCESSES
1.
2.
3.
4.
5.
6.
7.
State Term Contract, SNAPS or Agency Contract
Informal Bid/Proposal/Negotiation
Invitation to Bid
Request for Proposal
Invitation to Negotiate
Single Source (Necessary and Unique)
Emergency (An immediate danger to the public
health, safety or welfare or other substantial loss
to the state. S.287.057(5)(a), FS.)
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SELECTION PROCESSES
(continued)
1. State Term Contract, SNAPS or Agency
Contract (consider responsiveness, price
and other factors)
2. Informal Bid/Proposal/Negotiation (ditto
plus responsibility)
3. Invitation to Bid (consider
responsiveness, responsibility, price)
4. Request for Proposal (More flexible than
ITB; consider responsiveness,
responsibility, price and other factors)
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SELECTION PROCESSES
(continued)
5. Invitation to Negotiate (More flexible than
ITB or RFP; consider responsiveness,
responsibility, price and other factors)
6. Single Source (Necessary and Unique)
7. Emergency (An immediate danger to the
public health, safety or welfare or other
substantial loss to the state.
S.287.057(5)(a), FS.)
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What is involved in contract
management?







Read and understand the contract, identify
Responsibilities of the agency and the contractor
Pricing
Schedule especially critical events
Performance Measures
Risks.
Anticipate requirements evolution, and impact on
Specifications, Scope of Work, Cost and Term of
Engagement
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What is involved in contract
management (continued)?
 Communicate, e.g. pre-start meeting,
and appropriate level throughout
 Cover the four basic elements of
contract performance:
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FOUR BASIC ELEMENTS OF
CONTRACT PERFORMANCE
1. Requirements, including:
A. Outputs:

Deliverables

Tasks

Standards
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FOUR BASIC ELEMENTS OF
CONTRACT PERFORMANCE
(1 continued)
B. Outcomes

Performance measures
Quality
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FOUR BASIC ELEMENTS OF
CONTRACT PERFORMANCE
(continued)
2. Schedule: milestones, completion
3. Budget: Contract delivered within
original budget. Accuracy, adequacy and
timeliness of invoices, invoice processing
and payment. Types of problems and
how to handle. S. 215.422 FS
requirements.
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FOUR BASIC ELEMENTS OF
CONTRACT PERFORMANCE
(continued)
4. Customer Service Level
(communication, reliability, flexibility,
problem resolution, change order
negotiation, exceptions, complaints)
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What is involved in contract
management (continued):
 Contractor’s Reports: Specify content
and frequency, by whom to whom.
 Contract Manager’s Record: What
degree of detail is required? E.g., use
spreadsheet or special software if
category 3 ($50,000) or more and 12
months or more
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What is involved in contract
management (continued):
 Make Sure It Gets Done: The contract
manager is the agency’s front line
resource for seeing that what is
supposed to happen, actually happens.
 Closeout: Evaluation, Payment, Analysis
and Lessons for the future, Future use in
selecting contractors and crafting
contracts
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Five ways of monitoring
performance:
1. Contractor’s reports
2. Scheduled samples (at quantity
intervals or temporal intervals)
3. Exceptions (complaints)
4. Surveys
5. Direct 100% monitoring
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Problem resolution:
 Lowest level and least formality necessary
 Liquidated Damages
 Complaints to Vendor. Copy State Purchasing
with complaints, and enter resolution in SP database.
 Requests for Assistance. Send to State
Purchasing.
 Default, Cancellation and Suspension. Copy State
Purchasing.
 Reimbursement and cure of deficiencies,
Reinstatement. Notify State Purchasing.
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PART II
Collecting, Compiling and
Sharing Contractor Performance
Records, and Using for
Contracting Decisions.
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DOCUMENTS, FORMS AND
TOOLS YOU CAN USE:
 What to do before, during and after
the contract performance period
 Contract files, spreadsheets,
contract management software,
linked documents
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Contract files, spreadsheets,
linked documents
A contract manager’s file should
contain the contract, and reports,
complaints, and correspondence
materially related to the contract
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Contract files, spreadsheets,
linked documents (continued)
Recommendation: Contract Manager maintain
A spreadsheet, or other contract monitoring
software, documenting contract performance.
The contract administrator should collect and
electronically file all contract management
spreadsheets or other reports.
The spreadsheet or other application will
provide a single master document covering the
life of the contract, and can link to other
documents as needed.
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COLLECTION OF
PERFORMANCE DATA
The contract closeout evaluation
component of the spreadsheet should be
provided to State Purchasing, for all
contracts meeting a defined threshold,
for example, dollar amount in excess of
Category 3 or 4, and term equal to or
greater than 12 months. Or maybe all…
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DEMONSTRATE
SPREADSHEET
CONTRACT MANAGER
Maintain a contract management spreadsheet. Include
links to supporting documents.
CONTRACT ADMINISTRATOR
Maintain master file, and contract closeout spreadsheets
submitted by contract managers. Update State
Purchasing file with closeout information. Act as a
resource for state personnel needing contractor
performance information.
RECOGNIZE superior performance by contractors
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POSSIBLE MFMP CONTRACTOR PERFORMANCE
RATING TOOL IN THE WORKFLOW AS
APPROPRIATE
DEMONSTRATE
TABLE
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WHERE WE NEED TO GO
State Purchasing needs to create on-line files
Contract Manager/Administrator Input:
-Vendor ratings (most important)
-Superior performance
-Complaints
-Requests for Assistance
-Agency Suspensions
State Purchasing Input:
-State Suspensions.
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WHERE WE NEED TO GO
(continued)
State Purchasing should plan to suspend
a vendor, for example, when the vendor
has three (3) ratings of overall poor
performance within 36 months, and/or
three continuing suspensions by three
state agencies.
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WHERE WE NEED TO GO
(continued)
Agency purchasing staffs should:
Provide the info to State Purchasing,
and update it as new contracts close or
complaints, etc, arise, old complaints and
suspensions are resolved, etc.
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WHERE WE NEED TO GO
(continued)
Agency purchasing staffs should consider
associating vendor ratings and complaints with
the determination of responsibility or scoring
on their solicitations.
Simple examples for determining responsibility:
Vendor suspended by two agencies within the
last twelve months will not be considered, or
vendor with two or more unresolved vendor
complaints will not be considered.
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WHERE WE NEED TO GO
(continued)
Simple example for scoring: Average of final scores on all
state contracts completed last 12 months (24? 36?) and
in the SP database will be added as bonus points to
proposal score (1 to 5 points). No state contracts last 12
months, 3 points will be added. I.e. new vendors will be
presumed “satisfactory” until proven otherwise.
You are your agency’s critical resource for
contracting. Step up to your responsibility of
assuring that the agency’s requirements are
met.
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WE NEED THE ADVICE AND
CONSENT OF PURCHASING
PROFESSIONALS
PLEASE VOLUNTEER FOR A WORKING
COMMITTEE ON THIS ISSUE, AND/OR LET
FLORIDA STATE PURCHASING HAVE YOUR
COMMENTS, QUESTIONS AND SUGGESTIONS:
RUSS ROTHMAN, CPPO, CHIEF PURCHASING
OPERATIONS OFFICER
(850) 487-8778
[email protected]
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