Transcript Commercial Masterclasses Content

Commercial Masterclasses
Day One
Presented by John Gillespie (ACEVO) and David MacDougal
AVANTA
Written by ACEVO, AVANTA, Capita, Ingeus, NAVCA, NCVO, Serco
and Social Enterprise UK
With additional support from Aylesbury Partnerships and James
Barrett Consulting
Introductions
The trainers
Housekeeping
Introductory exercise
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Objectives
Confident knowledge on
- The emerging context for public service delivery
- The role and mission of your organisation within this context
- The emerging options for partnership
- The role and quality of governance
Skill competencies to
- Identify and build appropriate relationships
- Assess opportunities in supply chains
- Manage efficient bidding processes
- Recognise and manage financial risks
- Negotiate effectively
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Style of training
What do we mean by a masterclass?
‒ Commercial sector case studies – testing translation of process
‒ Discussion-based learning – making the most of delegates
‒ Emphasis on delegate questions
What additional support is there?
‒ Toolkit
‒ Website materials
How do we put this into practice?
‒ Discussion and exercises
‒ Competencies to measure progress
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Timetable
Day one
Introductions and objectives
Policy and procurement context
Understanding supply chains and the commercial sector
Exercises 1 and 2
Lunch
Exercise 3
Building relationships
Exercise 4
Bid or no bid
Exercise 5
Summary and reflections
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Timetable
Day two
Recap
Governance and performance management
Exercise 6
Modelling financial risk
Exercise 7
Managing bid effectively
Exercise 8
Negotiation
Exercise 9
Summary and reflections
Competencies and evaluation
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Agreements for working together
Confidentiality: Chatham House rules
The masterclass format means everyone has something to contribute
Respectful challenge
Respect for diversity of needs
Allow the facilitator to move discussion on
Time given to reflect and test learning
Phones turned off
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Context:
Policy and Procurement
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Policy Context (I)
Changing funding environment
Big society agenda
Open Public Services
• Increasing opportunities for VCSE in public service delivery
• Plurality (eg. mutuals, NHS restructure)
• Continuation of commissioning
Localism – new commissioners (eg. PCCs, CCGs, HWBs)
New investors
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Policy Context (II)
New funding structures
Payment by Results
Personalisation and choice
Integration of budgets
Outcomes focus
• Social value
Information and accountability
UNCLASSIFIED
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Procurement context
Now
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Evolving
Examples of Different Contracting Structures
Work
Programme
Justice
Sector
(e.g. Ingeus
(e.g. Serco, Doncaster)
(e.g. Capita)
Prime
Prime
End to end Sub-contractors
Direct
Delivery
Sub-contractors
Direct
Delivery
Area 2
S1
Catch 22
S2
S3
Advisory Board
Prime
Personal Independence
Payments
Specialist sub-contractors
S1
S2
S3
S4
S5
S6
Primes bring:
• Scale (able to carry risk)
• Governance
• Service integration &
delivery skills
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Area based subcontractors bring:
• Geographical
presence/knowledge
• End to end capability
Specialist sub-contractors
bring:
• Specialist capability
• Proven track record
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Local commissioning context
Content to be added from host
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Understanding Supply Chains
(& the commercial sector)
Commissioning system model
Commissioner
VCSE Prime
Commercial Prime
VCSE
Specialist
VCSE
Specialist
VCSE
Specialist
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VCSE
Specialist
VCSE
Specialist
VCSE
Specialist
Exercise one: perceptions and motivations
As a group, in your role discuss and write down:
1. How do you see yourselves? (Your culture, values, concerns,
attitude towards getting involved?)
2. How do you see the other groups? (Their culture, values, concerns,
attitude towards getting involved?)
Be prepared to feed back to the whole group
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Private Sector Expectations
Why they are involved
What they want from the VCSE
1.
Shareholder value
1.Able to bring insight and expertise
2.
Deliver quality and value
2.Evidence competence and
achievement
3.
Outcomes
4.
End to end oversight
4.Commercially attuned
5.
Risk placement
6.
Commercial best practice ie
communications, performance
management
5.Able to help us to help you (and vice
versa)
7.
Meet CSR objectives
8.
Mission ie find employment for
people
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3.Open, realistic and motivated
6.Aligned governance/decision making
7.People who are easy to work with
Selling: the negative connotations
Cold calling
Hard selling
“Selling is the process by
which you persuade people
to buy things they don’t
want or need”
Win at all costs
Loss leader
Selling short
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….a more positive view of selling
Insight
Relationship
“Selling is the way that
you help customers to
buy products or services
from your organisation”
Consultative
Solution
Customer-centric
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20
LUNCH
Exercise thwo: making it work
As a group, in your role discuss and write down:
1. What do you need most from the other groups to make this model
work?
2. What might they need most from you?
Be prepared to feed back to the whole group
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Building Relationships
Why do relationships matter?
Indicative Timeline
-Y3
-Y2
-Y1
Go live
Commissioner/Client
Recognising
needs
Formulating
strategy
Evaluating
options
Procurement
strategy
Procuring
Private Sector
Horizon Scanning
Shaping
Pre-bid Engagement
Bidding
Go-live
Ongoing Qualification
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Steps to build relationships
Understand
customer needs
Measure impact
Build reputation
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Assess
opportunities
against mission
Manage
relationships
Principles to building relationships
• Plan ahead before making contacts
• Saves time
• Leads to better outcomes
• Enables you to measure success
• Be realistic about what you can achieve
• Be clear about the reputation you want to project
• Involve staff, trustees and engaged stakeholders
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Relationship Managing
Relationship Manager: challenges of the role
The ‘shop front’, the brand, the access point
Expectations are high, and not achievable
Prioritising the long-term over the short-term
Reactive, hard to size portfolio
New or existing customers?
Demanding or deserving customer?
… you will never get all this right: be realistic
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TACT: ‘customer’ concepts in practice
Understand your customer
needs
Manage your
relationships
Good
relations
Build your reputation
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Assess
opportunities
against
mission
Drawn from a case
study of the VCSE
fostering agency,
TACT
How to map Stakeholders…
NG
John Smith
Sales Lead
TH
TH
NG
Tom Jones
Supply Chain
Mgr
Mandhese Patel
Solutions
Lead
Mary James
Commercial
Lead
Supporter
SR
Jean Smith
Financial
Modeller
?
TH
Undecided
Tommy Steel
Risk Analyst
Negative
?
NG
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Don’t know
Our relationship owner
Exercise four: valuing relationships
Positive perception
Sales Lead
Solutions Lead
Risk Analyst
Influence
on appointment
Supply Chain Manager
Commercial Lead
Financial
Modeller
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Negative perception
To bid or not to bid?
Mission-Money Matrix
on mission
majority activity
prime target
(love it here)
stay out!
less money
off mission
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proceed with caution
more money
What opportunities are available?
Grants
Block Contracts
Preferred Provider Frameworks
Spot purchasing (eg Individual service Funds)
Payment by Results (inc Bonds)
Prime / sub models (often private – VCS)
Consortia (SPV, hub and spoke)
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To bid or not to bid?
1. Suitability of contract terms, specification and payment
• Supply chain conditions
2. Market positioning (relationship building)
•
Future opportunities
•
Practice in the new market
•
Competition and partnership options?
•
Viability next time round?
•
Provider and/or influencer
•
On-going suitability for mission and business
3. Portfolio (cross-subsidy; core funding)
•
Sustainable funding (non-statutory options)
•
Investment
– Sufficiency and suitability of funding
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Suitability of contract terms, specification
and payment
Consider:
Contract terms (*we cover this more, later)
Mission fit
Likelihood of a win (SWOT)
Competitor analysis
What value you bring
Business viability (financial risk) (*we cover this more, later)
Risks that you own and variables you don’t
– i.e. contract volumes
– Supply chain make up
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Control over Success Factors
Many risks within PbR contracts are inevitably outside your control
Understanding their likelihood and impact is crucial
Understanding incentives helps predict your partners’ focus areas
Influence / Control
Project Management
In-House Intervention A
In-House Intervention B
Governance
Great
delivery
Key:
Internal
Information Management
External
Programme Management
Partner Intervention
Referral numbers
Referral quality
Impact on Outcomes
Risk
assessment
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Exercise: assessing opportunities
In pairs, discuss
-
What are the variable factors in a supply chain?
-
Given limited resources, which factors do you prioritise learning
about before you commit to a contract?
Be prepared to feed back to the group
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Working with a prim: things to consider
Relationship: values fit?
What role do you want to (& can you) play?
• Can you meet the requirements of the Commissioner?
• Can you meet the specific requirements of the Prime Contractor?
Review all the terms
• Minimum delivery & performance expectations
• Financial modelling
• Key contractual requirements
• Information Security
• TUPE
• Implementation timescale
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Don’t be afraid to ask questions!
Summary and reflections
Today’s modules
Policy and procurement context
Understanding supply chains and the commercial sector
Building relationships
Bid or no bid
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Tomorrow’s modules
Governance and performance management
Modelling financial risk
Managing bid effectively
Negotiation
Competencies and evaluation
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Day one reflections
Discuss in pairs
-
What went well for you?
-
What was less helpful (and how could we change it)?
-
What do you need to get the most out of the next day’s programme?
-
What has this inspired you to explore further after the Masterclass
programme?
If you wish, you can feed back key points to the whole group.
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Thank you from:
And to the Office for Civil Society, Cabinet Office for funding this
Programme.
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Commercial Masterclasses
Day Two
8th May 2013, London
Presented by John Gillespie, ACEVO and AVANTA
Written by ACEVO, AVANTA, Capita, Ingeus, NAVCA, NCVO, Serco
and Social Enterprise UK
With additional support from Aylesbury Partnerships and James
Barrett Consulting
Objectives
Confident and knowledgeable on
- The emerging context for public service delivery
- The role and mission of your organisation within this context
- The emerging options for partnership
- The role and quality of governance
Skilled and competent to
- Identify and build appropriate relationships
- Assess opportunities in supply chains
- Manage efficient bidding processes
- Recognise and manage financial risks
- Negotiate effectively
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Introductions
Welcome back!
Recap on yesterday
Policy and procurement context
Understanding supply chains and the commercial sector
Building relationships
Bid or no bid
Introductory exercise
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Timetable
Day two
Recap
Governance and performance management
Exercise six
Modelling financial risk
Exercise seven
Lunch
Managing bid effectively
Exercise eight
Negotiation
Exercise nine
Summary and reflections
Competencies and evaluation
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Governance and Performance
Management
What is performance management?
• In competitive markets performance is crucial
• In publicly-funded markets performance is crucial
• In outcomes markets performance is crucial
• What drives the need for performance management?
• Performance management is:
•
•
•
•
•
Monitoring against contract terms
The systems / information required to prove your work
The corrective steps taken
The rewards offered
The comparison with other providers / the wider market
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Good Governance
What systems and information do you need?
Principles from code of good governance
1.
2.
3.
4.
5.
6.
Understanding the board’s role
Doing what the organisation was set up to do
Working effectively
Effective control
Behaving with integrity
Openness and accountability
http://www.governancecode.org
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Governance exercise
Get into groups of similar organisation size
Imagine you are considering entry to the example supply chain.
Consider the implications for your governance. Discuss:
- What governance procedures would you want in place to
manage performance risk in this regime?
- How would you need to reconfigure your resources (skills,
capacity, information) to implement this governance approach?
Be ready to feedback
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Complexities for Performance
•
If it isn’t proven, it doesn’t count
•
Move to results oriented monitoring
•
Tools to capture and analyse outcomes / rather than outputs
•
Performance managing staff
•
Aligning systems e.g.
•
‘data capture’ with prime/contractor
•
IT systems
•
Governance decision timetable
•
Performance management
•
Build in flexibility (e.g. staff) to deal with fluctuating demand
•
Maximise performance by utilising the full portfolio of contracts you deliver
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‘Mobilization’ – from winning to delivery
•
Often an afterthought
•
Consequences of not getting ready
•
What needs to happen and when
•
Exercise in groups to identify the different aspects of delivery readiness you
would consider important
•
What good mobilisation looks like
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Example Gantt Chart
To come from AVANTA
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Adjusting Delivery Capabilities
Have you got what’s needed?
Step up from grants to contracts?
Exercise in groups to brainstorm what capabilities organisations might need
to develop in order to meet their obligations to deliver and manage
contracts….
Would it depend on their particular role – subcontractor or prime contractor?
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e.g.
•
Move to results oriented monitoring
•
Capturing of outcomes/ rather than outputs
•
Performance managing staff
•
Aligning systems e.g. ‘data capture’ with prime/contractor
•
Build in flexibility (e.g. staff) to deal with fluctuating demand.
•
Maximise performance by utilising the full portfolio of contracts you deliver
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Modelling Financial Risk
Financial Risk: the impact of payment-byresults
•
Scenario Analysis and cash-flow modelling helps identify pinch-points
•
At what point do you breach your reserve policy? Is that a problem?
•
What if your organisation’s other contracts perform worse than expected
Shows example working capital requirements & break even point by month
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The Work Programme payment structure
Payment
(£)
Y weeks
Attachment Fee
Job Outcome Payment
X weeks
Sustainment payments
Time on Programme
(Weeks)
Start on
Programme
Job Start
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Payment trigger point
Payment Groups on the Work Programme
Payment Group
Year 1
Attachment Fee*
Maximum Job Outcome
Fee**
Sustainment
Payment (per 4
week)***
Maximum Total
Outcome Payment
JSA 18-24
£400
£1,200
£170 x 13
£3,410
JSA 25+
£400
£1,200
£215 x 13
£3,995
JSA Early Access
£400
£1,200
£250 x 20
£6,200
JSA Ex-IB
£400
£1,200
£250 x 20
£6,200
ESA Volunteers (all
groups)
£400
£1,000
£115 x 20
£3,300
ESA Flow
£600
£1,200
£235 x 20
£5,900
ESA Ex IB
£600
£3,500
£370 x 26
£13,120
IB/IS Volunteers
£400
£1,000
£145 x 13
£2,885
Prison Leavers
£400
£1,200
£200 x 20
£5,200
* Reduces year by year; £0 in years 4 & 5
** Price competition element – discount expected by the Commissioner
*** Number represents maximum amount of sustainment payments which can be claimed
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‘Qualification’: Selecting the right opportunities
Strategic
Alignment
Measurable
results
Risk profile
Deal or
No
Deal?
Rate of
Return
Sponsorship
Commercial Masterclasses May 2013
Procurement
process
Governance
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Quantifying the opportunity
Parameter
Bid Target range
Red zone (re-qualify now)
Total value of all contracts of
this type
x% of f’cast turnover
x% of f’cast turnover
Bid costs
x% of target gross profit
x% of target gross profit
Target profit margins
Gross Profit > £y (%)
Net profit
> £y(%)
Gross Profit > £y (%)
Net profit
> £y(%)
Working Capital
Worst position no more than
x% of revenue
Cap at £x
Max exposure under worst
case scenario modelling
Gross Profit > £y (%)
Net profit
> £y(%)
Gross Profit > £y (%)
Net profit
> £y(%)
Revenue at risk from penalty
regime
£x
£y
Max exposure if we have to exit
the contract early
£x
£y
Win probability
<20%
>10%
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Risk Categories
Volume/Demand
Specification (completeness and accuracy)
Service transfer or implementation
Cost overrun
Timescale overrun
Obsolescence
Termination and Exit
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Managing individual risks
Risk
Initial
RAG
Dip in service performance during
transfer and transition period
Red
Number of transactions may be
higher than forecast
Red
Cost of solution higher than
anticipated
Red
Sub-contractor fails to meet
milestones/service performance
targets
Red
Contract may be terminated
before natural expiry
Red
Commercial Masterclasses May 2013
Post
Mitigation
Mitigation
RAG
Commercial Treatment
Due diligence. Detailed planning of
Set out in
transition. Consultation and
transition/implementation
communication with stakeholders Green
schedule
Agree price bandings for additional
volumes and trigger for change
control
Green
Bandings in Pricing Schedule
Due diligence and review of design.
Seek to agree acceptable
Limited protection on Due
assumptions
Amber
Diligence through a 'True Up'
Flow down key contractual terms.
Ensure liabilities are broad enough
to include losses suffered due to
failure. Establish performance mgt
Sub-contract and management
process
Green
arrangements
Agree termination triggers. Ensure
clarity on costs that can be
Specify termination provisions in
recovered in diferent scenarios.
Green
main contract
Financial risk modelling exercise
In pairs consider the three opportunities listed in the
exercise pack.
Discuss the options and decide which opportunity you
would choose.
Be prepared to feedback and discuss your reasoning for
and against each option.
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Financial risk modelling – best practice (I)
Risk framework
 Content
 management
Information:
 Check quality and gaps
 Check veracity
 Remember predictions are no guarantee
Variables:
 What factors can vary
 What do you control
 What is the range of variation, and what can you bear
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Financial risk modelling – best practice (II)
Risk in the supply chain
 Where is risk sitting?
 What motivations (gaming) might this produce?
Governance:
 Checks and decision processes around variations
 Capacity to negotiate
 Accessibility of information; ability to analyse
 Exit plan: ‘red lines’
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LUNCH
Negotiation
Negotiation
You can negotiate on:
1. Contract terms i.e. IP rights, performance
2. Aspects of the specification i.e. quality, demographic
3. Payment terms and mechanisms i.e. payment schedule
Negotiation should aim to achieve:
- Consensus of purpose and approach to the contract
- Proportionate, relevant and sustainable terms of delivery and
management
- Flexible and transparency review, management and resolution
processes
- Synchronicity between contract, specification and payment
schedule
- A good foundation for future communications and partnership
Principles of negotiation
Be prepared
Know what you want to achieve
Know your absolutes: when will you walk away
Know points you can vary on
Know how this fits with / subsidises the rest of your portfolio of work
Know what the other party wishes to achieve
The same questions as for yourself
Understand the power balance
Is any imbalance real or perceived?
Trade, don’t give
Wait til you have two points to discuss – and balance them out
Stay solution focused
It is sales, not funding
Remember your long-term relationship building objectives
If you do walk away, do so carefully
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Weighing up your negotiation approach
MOSCOW is a tool that enables you to determine in
advance priorities for negotiation – and your ‘red lines’
Must
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Should
Could
MoSCow example
Negotiating point
1. Dream
scenario
2. Outcome where 3. Outcome
you might
where you might
proceed
walk away
Payments terms, need money
up front for cash flow



Quantity



SHOUL Price
(you have some flexibility)
D



Monitoring



Approach















MUST
COULD Brand
Flow
(you would prefer a steady flow of demand
but could live with more in year 2 than year
1 of this contract)
Communications
IP
Negotiation exercise
In pairs use the scenario in the exercise packs to complete
the MOSCOW chart:
1. Your priorities – absolutes – that you must not negotiate on
2. Those terms you should be able to negotiate on
3. Those terms you could negotiate on
Be prepared to feedback and discuss your reasoning.
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How to negotiate
Prepare
•
Know your case
•
Your strengths, weaknesses, needs and flexibility
•
Your starting & exit points
•
Your authority and position of board
•
Know your enemy partner
•
What does the other party want?
•
Find the right person to negotiate with?
•
What are their priorities & pressures they face?
•
What are their exit points?
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Managing Bids Effectively
Bidding as a part of bigger strategy
Indicative Timeline
-Y3
-Y2
-Y1
Go live
Commissioner/Client
Recognising
needs
Formulating
strategy
Evaluating
options
Procurement
strategy
Procuring
Private Sector
Horizon Scanning
Shaping
Pre-bid Engagement
Bidding
Go-live
Ongoing Qualification
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The four elements of a good bid
Effective
sales campaign
Compelling
commercial
proposition
Strong
service
solution
Well managed
and executed bid
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Bid Roles
• Bid Director
• Bid Manager/Co-Ordinator
• Commercial Lead
• Financial Lead
• Operational Lead
• Bid Writer
• Subject Matter Expert
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Good bid management
• Designated roles co-ordinating and producing:
•
•
•
•
•
•
•
•
•
•
Data and evidence
Internal and external input and relationships (people)
Finances, budgets and projections
Competing offers
Risk assessment, value, and strategic suitability
Drafts and deadlines; review and sign off
Drawing on cross organisational strengths
Clear authority to make decisions
Proportionate system, suitable to your organisation
Critical appraisal – ‘black hat’
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The Importance of good Information
Centrally managed information
•
Held by the lead
•
Everyone feeds in and takes ownership (TACT)
Suitable formats
Different channels
•
Use third parties
Know it well
•
Mission driven
•
Key messages
•
Successes, not just activity
Quantitative evidence
•
SROI and other peer-assessed impact evidence
Do something different, that stands out
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Bid gates: the importance of critical review
Decision points – ‘gates’
Gate 0 – Internal qualification
Gate 1 – Go Get
Gate 2 – Bid/No Bid (PQQ Stage)
Gate 3 – Internal re-qualification (ITT Received)
Gate 4* – Approval to submit bid
Gate 5 – Contract Signature
Gate 6 – Contract Start-up
Gate 7 – Transition Close
Gate 8 – Service Delivery/Transformation
Gate 9 – Rebid/Contract Close Down
* Gate 4 approval is required every time a detailed solution design or
priced proposal is submitted to the client.
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PresentationMasterclass,
title - edit in Header
Day Twoand Footer
Bid gates exercise
Individually in your exercise packs create action-plans that
record:
• What the ‘gates’ are in your organisation
• Who is responsible at each gate
• What action / decision needs to be made
Be prepared to feedback to the group
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Summary and reflections
Competencies and evaluation
85
Today’s modules
Governance and performance management
Financial risk management
Bid management
Negotiation
Commercial Masterclass, Day Two
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Competencies
• Complete the competencies
• Reminder that we will contact delegates in 3-4 months to ask for
progress
Commercial Masterclass, Day Two
Review: our objectives
Rewrite!!!
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Day two reflections
Discuss in pairs
-
What has made the biggest impact on you?
-
What was less helpful (and how could we change it)?
-
What are you inspired to explore further?
-
What will you do differently as a result of the Masterclass?
If you wish, you can feed back key points to the whole group
Please fill in and leave the evaluation forms
Commercial Masterclass, Day Two
Thank you from:
And to the Office for Civil Society, Cabinet Office for funding this
Programme.
89 – Commercial Masterclass, Day Two