Human Resouces: Large Scale Contracts

For this month's column, I thought it might be interesting to look at a common set of business processes, with which many readers will be familiar – contracting for services.

To be specific, I will look at large scale, high value contracts, such as those issued by public sector organizations for outsourcing of services over a long period (often 20 to 30 years). Contracts such as these are highly complex since they need to take into account a great many factors affecting delivery and the associated costs. As a result, they are not only expensive to bid for (it may cost millions just to bid for such a contract) but also very risky. It is quite common for contracts to run to hundreds or even thousands of pages, including payments, penalties and rebates based on multi-level formulae that are challenging for anyone to fully understand.

To develop, start, manage and end such contracts it is necessary to form collaborative teams in which each member brings to the table specific expertise. Such teams typically include a mixture of company staff from multiple departments, external consultants to provide specialist advice, and subcontractors to provide key operational services. Should a bid be successful, the contract team will not be the same as the bid team, but may include some of the same members and will certainly need to liaise with the bid team for handover at the start of the contract.

In other words, large-scale service contracting is done by virtual teams, and falls into the domain of Virtual Team Planning (VTP). VTP is an approach to process description, management and re-use that is specifically designed for collaborative work spanning multiple organizations. The relationship of VTP to other work management techniques is shown in Table 1.

Table 1: Work Management Techniques

Large-Scale-Contracts_fig1

To see why VTP is more appropriate for contracting of large scale services than other work management techniques, consider what is involved in each of the 4 critical processes Bid Contract, Start Contract, Manage Contract and End Contract. For simplicity, I will exclude here work that runs parallel to specific contracts, such as information sharing, management improvement, competitive analysis, marketing, customer relationship building, opportunity management, and so on.

It is unhelpful to try and model the activities of large contract management in BPM style as workflows with gateways and conditions, since the work is too collaborative and adaptive to fit such a scheme. Similarly, Cases based on document sets or Projects based on work breakdown structures fail to capture the common sense understanding possessed by the business people involved. The people who operate contract management processes know that in practice each process is made up of a set of concurrent work streams, such as those shown below:

  • Bid Contract
    • Assess Eligibility
    • Approve bid
    • Manage Team
    • Prepare Documents
    • Manage Tasks
    • Obtain Information
    • Design (Financial) Model
    • Create (Legal) Structure
    • Submit (Tender) Responses
    • Use Feedback
    • Manage Cost
    • Manage Resources
    • Manage Risk
  • Start Contract
    • Agree Contract
    • Commit Finance
    • Form Team
    • Plan Operations
    • Establish Interfaces
    • Engage Subcontractors
    • Define (ERP) Coding
    • Define Processes
    • Automate Invoicing
    • Implement Systems
    • Share Success
  • Manage Contract
    • Handover Contract
    • Engage Client
    • Invoice Client
    • Provide Reports
    • Vary Contract
    • Manage Issues
    • Maintain Assets
    • Review Progress
    • Assess Sites
    • Conduct Meetings
    • Manage Profitability
    • Manage Risk
    • Manage Relationships
  • End Contract
    • Review Contract
    • Record Contract
    • Plan Exit
    • Rebid Contract

To capture the essential nature of these work streams, the first step is to describe their stakeholders, many of which will be common across multiple streams. This results in a matrix looking something like Figure 1:

Figure 1: Process Stakeholder Matrix


Figure 1: Process Stakeholder Matrix

The next step is to understand what each stakeholder contributes to each work stream – the outputs they produce, and the inputs they use in order to do so. It is possible to continue with a spreadsheet based approach for this, but it may be more effective to use a dedicated VTP tool, that supports you in recording and displaying additional information such as the lead Role for each stream, and information associated with the outputs such as formats, scheduling, benefits, risks, effort, costs, revenues, non-financial impacts, and so on. This level of detail is critical to effective process management, but beyond the scope of this column.

Conclusion

Management of large scale, high value contracts is a key strategic activity for businesses that supply the public sector, or that work in industries such as engineering, oil & gas, defense, transport, and so on. Yet, by and large, the processes of contract management are handled using inappropriate techniques. Virtual Team Planning (VTP) is the natural means of defining and managing these critical processes, on which depend not only the success of the organizations involved, but public safety and the infrastructure of society generally.

Keith Harrison-Broninski

Keith Harrison-Broninski

Keith Harrison-Broninski is a consultant, writer, researcher and software developer working at the forefront of the IT and business worlds. Keith wrote the landmark book "Human Interactions: The Heart And Soul Of Business Process Management", described by reviewers as "the overarching framework for 21st century business technology" and "a must read for Process Professionals and Systems Analysts alike". Keith founded Role Modellers, whose company mission is to develop understanding and software support of collaborative human work processes, the field Keith pioneered with his work on Human Interaction Management. For more information about Keith, see http://keith.harrison-broninski.info.
Keith Harrison-Broninski

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