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I used to think Contract Management was almost entirely risk mitigation. How do you ensure you don’t miss your obligations? Contract Management. How do you ensure good supplier performance? Contract Management. How do you maintain compliance? Contract Management. 

Now this is clearly not right, but it was borne of my experience at the time which was public procurement. The nature of the beast is just overwhelmingly about fire-fighting – contract expiries, poor performance, ad hoc change, disputes etc etc. The scope for adding value almost didn’t really occur to me as a key part of it. I’d never had the chance to consider it. 

But even beyond adding value, I see CM completely differently now. I see it as control. From my perspective, the job breaks down into three parts: fire-fighting, routine (reporting etc) and adding value. Depending on your organisation, your portfolio, your priorities and to an extent your skillset, the percentage of time you spend in each area could vary substantially. 

It’s not particularly mind blowing to say that we should all be looking for ways to spend more of our time adding value than in the other two. The key question is how do we do that? The eagle-eyed among you may recall I posted a proposed workshop to take a look at the activities that fall into these categories and estimate a percentage workload. That’s still a key activity in my view but the overarching solution will always be control. 

It’s a bit ethereal to just say ‘get control’ and doesn’t sound particularly practical. Like shouting at a football team to score more goals, it’s not like they weren’t trying to do that in the first place. 

So, what does control mean in CM? It’s the collective act of putting in the right tools and right processes to give you the best possible view of the status of your portfolio in any given moment. It also means discipline – unfortunately, you’re going to need to enforce some discipline too. CM is a team sport and you can’t single handedly change your organisation’s approach to change and reporting for example. 

Look, we all have that board member who wants a different cut of the monthly reports every time it gets produced. But it’s a great example of friction and the need for discipline. 

So what do we do, we start by planning. Contract Management Planning is so underrated as an exercise. If done as a collaborative exercise, it enables you to determine how you’re going to manage your contract, prioritise your resources and critically in my view, document that approach for the next person. This is key for big organisations with a lot of churn. 

Within your plan you cover the key elements of CM as they pertain to your organisation – obligations management, dependencies, performance, spend management, relationship management, assurance. Set it up proportionately and you have a powerful document. 

Implement the right tools to deliver on your plan. If you’re fortunate, your organisation has a good ERM system, implements Power BI and is starting to implement AI. The rest of us can make do with excel and some conditional formatting. 

This isn’t an insignificant amount of work. In fact it’s an ache. But now you’re set up, you’ve got a plan, you’ve got a process, you’ve got the tools and you have control. You’re not being blindsided, there’s fewer surprises and a lot less friction. 

So what’s that sound you can hear? It’s opportunity knocking. Every hour of fire-fighting and frictional activity you have removed can now be used to add value. 

We’ll return to adding value another time and what it looks like but for now, take this away. 

TAKE BACK CONTROL

Be fiendish about it. It is your contract, it’s yours to operate smoothly. Nobody needs the chaos of fire-fighting, life is too short. If you have control, you can begin to really demonstrate the value of the procurement/contract management department and put your skillset to use in the most rewarding of ways. 

Kevin Smith
Managing Director 

For the majority of my career I have worked in complex procurement. That is a combination of highly regulated environments, bureaucratic organisations and challenging requirements. What has amplified that complexity is the assumption of simplicity from stakeholders. 

I have seen this borne out two ways, assuming a simple process or perceiving the requirement to be simple because they see the solution as simple. Danger lurks here. 

I’m going to talk about requirements and solutions this time around but I’m definitely coming back to process. 

To bring this to life a bit, consider Steve Jobs. He was well known for his ‘rule of three’ mantra. I have seen this written up in different ways but the one that stuck with me was the ipod – he wanted to be able to do anything on the ipod in a maximum of 3 clicks. Find a song, play a song, etc. 3… clicks. 

Sounds very simple, but the simplicity is at the user interface. Most of us can only imagine the complexity of engineering that went into creating that. It was groundbreaking for a reason. 

However, a number of times in my career I have come across customers operating like the late Mr Jobs but without appreciating the scale of challenge that simplicity creates. So, how does this play out in procurement?

The customer (internal stakeholder) is aware of and has probably seen a system elsewhere that meets our needs and understandably gets very excited. Just go out and buy that, it’s readily available, easy. At this point I put my head in my hands and prepare for the challenge ahead. 

Because underneath that simple, available solution is a huge amount of intelligence in the form of engineering, design and a whole bunch of other expertise beyond my reach. But the key element from a procurement perspective is that somewhere along the line, there has been a specification (or many specifications) written which communicates what that solution is intended to be. 

Even if it is output-based you need to put thought into a number of things; integration with existing systems, compliance with existing policies and standards, maintenance, resourcing, training to name but a few. The UK MOD has the Defence Lines of Development to provide structure to these considerations – I recommend taking a look.

A huge proportion of procurements are dogged by this lack of strategic thinking up front. It might manifest in failed integration, failure to meet dependencies, staff not being trained to use the new solution, it can be many things. 

So when you want a simple solution for your end user, you are taking on a substantial challenge to manage the complexity underneath. 

Before going to market with an ITT/RFP, you need to work through the interfaces, the training requirements, the environmental requirements, safety etc etc to understand what you really want. You need to set the parameters for the solution. It’s not an easy task and it is absolutely a team sport but it is fundamental to the success of any procurement. 

So my advice… when someone says they want something simple, start asking questions. 

• How will it be used?
• What will it need to integrate with?
• What about safety, security, other standards?
• Will our staff require training? Who is going to provide that?
• What levels of performance do we expect?
• What about maintenance and through-life costs? 

Get as much information as you can, you’re going to need it. 

Kevin Smith 
Managing Director 

What makes the difference between a straightforward procurement or purchase and a complex one? 

Consider a procurement as an envelope but bear with me, there’s more than four sides! I’m not quite talking about the usual PCT envelope, but an envelope constructed of many moving or ‘wobbly’ parts. 

Any procurement is a composition of things that enable you to define the procurement ‘envelope’ such as:

• Specification
• Budget
• Market information (pricing, competition and capabilities) 
• Contract terms
• Quantities required
• Risks

and there’s probably more. 

This is why buying a pen is relatively easy. You know it’s costing a couple of quid, you’re fairly confident in the specification and that there’s loads of competition with a rough idea of the difference between a Bic and Mont Blanc or a Parker. You know you only need one for work and so your risk is pretty low. 

Compare that to buying a new software package to enable a government policy which was announced yesterday. What do you have?

Maybe you have a budget, you don’t have a spec, you don’t know what the market can do, you’re not sure how long you need it for etc etc. By comparison to the pen you bought from WH Smith that morning for work, you know very little which enables you to proceed. 

Not a huge surprise, we all have to start somewhere. But here’s the kicker, some of these things are interdependent. 

How much will it cost? Depends what the spec is.

What is the required budget? Depends how long we need it for? 

So what is the spec? Depends what we can afford really, don’t want to gold plate it. 

And here is where I’ve found a number of teams in my career. Caught in a knot of these questions. 

What is the solution? Stop the moving parts – one by one. 

Start building the spec. Start with something output based but get it down on paper. Give the market something to consider and engage with.

Don’t hesitate, get an RFI out into the market. What can it provide? What capabilities are out there? Does our spec make sense and is it deliverable?

Start cost modelling. Get the best cost information together that you can and build a logical budget. 

Do your risk analysis. Don’t sit worrying about it, get the risks out in the open and work the mitigations. 

Better information might not get you certainty, but it will get you much closer and with an effective procurement process (use the cycle!) you can get to a place where you can conduct a viable procurement with a firm envelope. 

You’ll still have some wobbly bits but that’s where your skill and experience comes in. The fewer wobbly sides, the greater your chance of success. 

Kevin Smith
Managing Director

My career has been littered with enormous procurement contracts. Massive contracts totalling thousands of pages (including schedules) that are almost impossible for any one human to fully absorb or understand. I like big contracts because I don’t like uncertainty but there is a certain inefficiency to them and I understand why some people hate them. 

Fortunately, my first experience of this was on a project that had a Deal Structure Paper (thank you Tracy) that sat alongside the Contract to communicate the principles of the monstrous document. 

I have taken the concept of the ‘deal’ and used it throughout my career as a mechanism to focus my teams and develop my staff. On many occasions I have used the example of a phone contract purchase to make my ramblings relatable. 

When we purchase a new phone contract we all look at the poster in the window which tells you the handset, how many minutes, texts and how much data for your 30 quid or whatever it may be. We never look at the contract. A substantial proportion of any contract is there to deal with process details and the remedies, it’s not where our focus needs to be. 

So “summarise the deal” has been a request I have made of many junior members of my team to help them learn the skills to distil what is important. Where is the value? What are we supposed to be getting for our money? And I usually pin this to the front of Contract Management Plans to be kept at the forefront of our minds in how we manage the contract. It can then be communicated to stakeholders or handed over when team members move on too. 

I’m not one for putting the contract in the drawer and forgetting about it, far from it but if we focus on the deal first and not the minutiae, we stand a great chance of achieving what we set out to do. 

Let’s start talking about the deal, not the contract. 

Kevin Smith
Managing Director 

Procurement is never easy, but it is substantially more efficient if the decisions are made in the right order. That doesn’t mean we don’t go back and change things when we have better information but if you start with the small(er) decisions, you create problems for the big decisions and build a whole load of friction into your process.

Things like contract durations, limits of liability, KPIs etc are all too variable at the outset, you need to build up to those tactical decisions and make them on the basis of good strategic level decisions. 

Organisational strategy, requirements development, procurement strategy, then commercial strategy for simplicity. Each will have other components but that’s broadly the approach I would recommend. Each decision along the way helping to shape and benefit the next. 

Yet, I have spent an inordinate amount of time in the last few years in projects where the first decision to come down the chain is akin to ‘we want a 7-year contract’. How has anyone made that commercial decision before we have developed the requirement, procurement strategy, tested the market and even started thinking about the commercial strategy? Or worse, being required to develop a procurement strategy with no form of requirement and then going blue in the face explaining why that is futile. 

Let’s look at a couple of examples of what I’m talking about:

Example 1: The 7-year contract

Let’s start with my ‘7-year contract’ example. This ‘direction’ was given before the requirements work was complete and the market hadn’t been tested. So off we went, developing the business case for a 7-year contract – huge amounts of underlying work for the finance team. We developed our requirement and we tested the market for procurement routes and supplier capability. Inevitably, the best procurement route available was a framework that allowed a maximum of 4-year contracts. Back to the drawing board. Back to the decision makers. Time and effort wasted. 

Example 2: “Get us a price”

Another example that I see in construction regularly is the cart before the horse approach of “get a price and we’ll figure out the Ts&Cs later”. If you haven’t drafted a set of Ts&Cs to a reasonably mature state which underpins your RFP then there are still plenty of decisions left that you probably haven’t made (limits of liability, pricing terms etc). This is a complete absence of strategy and so the order of things is askew. So now you’re in a negotiation on commercial terms with a price on the table which is arguably meaningless but the board likes it and you have little or no leverage. Critically, it is not faster this way! If you had laid out all of those things in the RFP, you would have a price that reflects your terms. 

Where we have to be strong as procurement professionals is ensuring good process. That’s not to say we follow the process to the letter every time, but get the overall sequencing right. Follow the established cycle – it is built on decades of experience and wisdom. The process inherently guides you to take the right decisions in the right order and when you have the right information. 

Don’t rush, don’t short cut, it only creates friction and potentially weakens your position. The right way is the fastest way. 

Kevin Smith 

Managing Director