Assignment 2: Plan for Contracting

Assignment 2: Plan for Contracting

PROFESSIONAL STANDARDS CORNER

THE ROLE OF THE “CONTRACT MANAGEMENT STANDARD” IN BUSINESS PROCESS TRANSFORMATION BY RONALD FALCONE

FOR DECADES, MANY ORGANIZATIONS HAVE UTILIZED SOME FORM OF BUSINESS PROCESS STANDARDIZATION IN ORDER TO IMPROVE FINANCIAL AND OPERATIONAL PERFORMANCE BY YIELDING EFFICIENCIES AND EFFECTIVENESS THAT RESULT IN REDUCED COSTS AND CYCLE TIMES.

The success of such process improvement initiatives is greatly enhanced using various build­ ing blocks (i.e., concepts, tools, and methodologies) such as:

• Process standards and disciplines,

■ Process capability maturity models, and

■ Process management approaches.

For the past several months in this column, much has been discussed about NCMA’s “Con­ tract Management Standard” (CMS)1 and the emphasis and reinforcement that contract man­ agement is an essential business management function. This article explores these building blocks, including the CMS’ integral role in facilitating a holistic approach to business process transformation.

BUSINESS PROCESS TRANSFORMATION There are numerous definitions of business process transformation, which invoke terms such as “business process reengineering” and “change management,” but the common definition is:

[A]n examination of the steps required to achieve a specific goal in an effort to remove duplicate or unneces­

sary steps and automate as many actions as possible. Compliance regulations, as well as changes in the

economy, often drive business process transformation.2

RONALD FALCONE, CPCM, CFCM, NCMA FELLOW

► Executive vice president, Distributed Solutions, Inc.

► Adjunct faculty member, University of Virginia.

► Member, NCMA Board of Directors.

St ronf@distributedinc.com

19 /in/ronald-falcone-74565b23

® Tysons Chapter

No matter what the definition, however, the common denominator is always people. Success­ ful business process transformation is the result of an optimal balance of people, processes, and technology.

The bedrock for successful business process transformation in the public and private sector is achieved by using effective business processes based on consistent standards. (See FIGURE 1 on page 84.)

WHAT IS A STANDARD? The foundation for developing effective business processes relies on sound standards. Suc­ cessful organizations adopt some type of standard. For example, Fortune 500 companies have adopted standards developed by the International Organization for Standardization (ISO). Most of us are familiar with the ISO 9000 standards, which involve quality management and quality assurance:

ISO 9000 is a set of international standards on quality management and quality assurance developed to help

companies effectively document the quality system elements to be implemented to maintain an efficient

quality system. They are not specific to any one industry and can be applied to organizations of any size.3 Continued on page 84.

18 Contract Management July 2017

PROFESSIONAL STANDARDS CORNER

CONTINUED FROM PAGE 18.

The American National Standards Institute (ANSI) serves as coordinator of the U.S. private sector’s voluntary standardization

systems.4 Any U.S.-based organization can participate in the development of ISO stan­ dards, but must participate through ANSI. The National Institute of Standards (NIST)

also recognizes ANSI as the representative of U.S. interests at the international level.5

ANSI defines a standard as:

[A] document, established by consen­

sus, that provides rules, guidelines, or

characteristics for activities ortheir results.

Standards play an important role in every­

day life. They may establish size or shape or

capacity of a product, process, or system.

ANSI requires ASDs to maintain a continual consensus-based review body to provide access for periodic public com m ent/input/ feedback to a specific standard.

The role of ANSI is to provide a structured framework of procedures for standards de­

velopment organizations, such as NCMA. These procedures must be adhered to on an ongoing basis and encompass rigorous requirements for which ANSI accredits organizations that fully meet those require­

ments.7 NCMA is not only a standards developer, but is also currently pursuing an ANSI accreditation as an ASD for the CMS and the Contract Management Body of Knowledge (CMBOK).

They can specify performance of products

or personnel. They also can define terms

so thatthere is no misunderstanding

among those using the standard.6

It is im portant to note that ANSI does not develop standards, but instead is a standards accreditation body for U.S.-based standards developers. Through ANSI, an organiza- j tion can apply to A receive desig- J g j nation as an A

“Accredited

Standards

Devel- MA oper (ASD).

ABUSINESS TRANSFORMATION

BUSINESS PROCESS MANAGEMENT

Acquisition Management Systems

Contract Writing Systems

Financial Management Systems

Other Business Systems

WHAT IS THE “CONTRACT MANAGEMENT STANDARD”?

The CMS is the cornerstone for el­ evating NCMA’s stature among

its complementary professional

associations, such as the Project ^ Management Institute (PMI).

Furthermore, the CMS aligns our profession with other

higher-tier knowledge- based professions (such

as project manage- l ment, accounting,

PROCESS CAPABILITY MATURITY ■ (CMMMHCMMI-ACQ)

and engineering), and provides

contract management

profession­ als with a

similar

set of

STANDARDS ■ (CMS) (C M BO K)

FIGURE 1. FOUNDATION FOR BUSINESS PROCESS TRANSFORMATION

GOVERNANCE • Regulatory Policy (F/t/?, DFARS, UCC) ■ Procedures, Guidance & Information

(DFARS PGI) ■ Directives (DOD 5000 Series)

■ Guidebooks (FAI/DAG)

process disciplines based on rigorous standards that are em bodied in said p ro­

fessions.

NCMA defines the purpose of the CMS as

follows:

The purpose of the Contract Management

Standard is to describe the nature of con­

tract management in terms of the contract

management processes created through

the integration and interaction of job tasks

and competencies, and the purposes they

serve. The common and repeated use of

this standard will improve productivity,

increase efficiency, and reduce costs.8

The CMS defines job tasks as those tasks performed on a routine basis by contract managers who systematically process the job tasks to achieve the expected results of the competencies.9 (See FIGURE 2 on page 85.) For example, in the “Pre-Award” (2.0) phase, there is a “buyer” domain to

“Develop Solicitation” (2.1) along with its corresponding competencies of “Acqui­

sition Planning” (2.1.1) and “Requesting Offers” (2.1.2) from industry. The “Request­ ing Offers” competency involves a series of job tasks and subtasks. Similarly, there is also a “seller” domain to “Develop O ffer” (2.2) (e.g., proposal/bid response) along with its corresponding competencies of

“Business Development” (2.2.1) (e.g., b id /

no decision) and “Develop Win Strategy” (2.2.2) (e.g., pricing strategy). Each of these competencies has its own set of job tasks and subtasks. The job tasks identify the activities that need to be done (i.e., the

“what”10).

WHAT IS PROCESS CAPABILITY MATURITY? The CMS provides contract management professionals with a “process discipline”

based on a broad spectrum of domain expertise. A process discipline is an

organization’s capability to define, follow, and improve processes

within a practice area (i.e., con­ tract management); it not only

requires cross functional co­ operation, communication,

and collaboration, but

8 4 Contract Management July 2017

FIGURE 2.

PROFESSIONAL STANDARDS CORNER

also culture change in order for process improvement to resonate.”

While some organizations are satisfied with only implementing standards and processes, others have also taken the next step and implemented a “p’ocess maturity model” for assessing the capability and maturity of their business p’ocesses. There are several capability maturity models, and the Capability Maturity Model Integration (CMMI) Institute has developed several-in­ cluding one for the acquisition of products and services (CMMI-ACQ). The CMMI-ACQ is a collection of acquisition best practices from government and industry for acquir­ ing products and services.12

Process capability maturity models are useful assessment and investigatory tools for determining the effectiveness of an organization’s business processes. The

“Contract Management Maturity Model” (CMMM) was developed fcrthe purpose of assessing an organization’s contract management process capability and con­ tinuous improvement of those processes.13 (Refer to FIGURE 3 on page 86.)14

While the focal point of CMMI-AQC is on the overall acquisition process with a

greater emphasis on program manage­ ment processes, the CMMM is specific to contract management processes and pro­ vides more granularity than CMMI-ACQ15:

The CMMM consists of five levels of matu­

rity ranging from an ad hoc level (Level 1);

to a basic, disciplined process capabil­

ity (Level 2); to a fully established and

institutionalized process capability (Level

3); to a level characterized by processes

integrated with other corporate processes

resulting in synergistic corporate benefits

(Level 4); and finally, to a level in which

processes focused on continuous improve­

ment and adoption of lessons learned and

best practices (Level 5).16

For example, when assessing an organiza­ tion’s contract management maturity levels for process automation, the following characteristics may exist:

Ad Hoc (Level 7̂ —Lack of process auto­ mation without any future planning for automated processes.

Basic (Level 2J-Lack of process automa­ tion with future planning for automated processes.

Structured (Level 3^-Some processes may be automated, such as a contract writing system.

Integrated (Level 4J-AII processes are fully automated within the contract manage­ ment organization, including solicitation/ contract writing, source selection, and post-award management.

Optimized (Level 5^—All processes are fully automated and integrated with other orga­ nizational core processes such as plan- ning/budgeting in the program office and funding/payments in the finance office.

Many organizations are quick to attribute contract management problems/issues/ failures to the individual competency level of their workforce without assessing other aspects. As Dr. Rene Rendon, associate professor at the U.S. Naval Postgraduate School, states:

[l]n addition to competent individuals,

organizations also need mature processes

and effective internal controls to ensure

organizational success.17

Additionally, government agencies are traditionally assessed only in terms of com­ pliance to statutes and regulations. This is especially true in the case of acquisi­ tion agencies. However, as Dr. Rendon observes:

[R]egulatory compliance does not equate

to an agency’s consistent use of acquisition

and contracting best practices, which is

one aspect of mature processes. Many

organizations also focus only on outcomes

and not on the processes that produce

those outcomes. Organizations require

competent people, mature processes, and

effective internal controls to collectively

ensure successful outcomes.18

WHAT IS BUSINESS PROCESS MANAGEMENT? Business process management (BPM) is defined as “the complete, end-to-end, dynamically coordinated set of collabora­ tive and transactional activities that deliver value to customers.”19 Like contract man-

Contract Management July 2017 8 5

PROFESSIONAL STANDARDS CORNER

FIGURE 3. THE CONTRACT MANAGEMENT MATURITY MODEL (CMMM)

LEVEL 1 AD HOC

EVEL2 ASIC

Organization acknowledges that some contract management processes exist and are accepted and practiced.

LEVEL 3 STRUCTURED

LEVEL 4 INTEGRATED

LEVEL 5 OPTIMIZED

Informal documentation exists.

■ Lack of accountability for adhering to and complying with processes and standards.

■ Lack of process automation without any future planning for automated processes.

Some basic contract management processes and standards are only required on selected complex, critical, or high-visibility contracts.

Some formal documentation exists.

■ Contract management processes and standards are not considered established or institutionalized throughout the organization.

■ Lack of policy requiring consistent use of contract management processes and standards.

■ Lack of process automation with future planning for automated processes.

Contract management processes are fully established, standardized, institutionalized, and mandated.

Formal documentation exists.

Flexibility exists for tailoring contract management processes and documents on a case-by-case basis.

Some processes may be automated, such as a contract writing system.

Contract management processes are fully integrated with other organizational core processes, such as financial management and program management.

Collaboration exists between the contracting office and its end-user customer, the program office.

The program office is also an integral member of the acquisition team.

Periodical use of metrics to measure various aspects of the contract management process and to make con- tracts-related decisions.

All processes are fully automated within the contract management organization, including solicitation/contract writing, source selection, and post-award management.

Systematic use of performance metrics to measure quality and evaluate efficiency and effectiveness of contract management processes.

Use of continuous process improvement efforts to improve contract management processes.

Lessons learned and best practices programs are established to improve contract management processes and standards.

Contract management process streamlining initiatives are implemented as part of its continuous process improvement program.

All processes are fully automated and integrated with other organizational core processes, such as planning/ budgeting in the program office and funding/payments in the finance office.

agement, BPM is a professional discipline performed by people. BPM is a formalized and structured business process method­ ology that helps organizations deliver or­ ganizational performance using systematic management, measurement, and improve­ ment of all company processes.20

According to the Business Process Man­ agement Institute (BMPI), the purpose

of BPM is “the definition, improvement, and management of a firm’s end-to-end enterprise business processes in order to achieve three outcomes crucial to a performance-based, customer-driven firm .”21 These three outcomes include:

* Clarity on strategic direction,

■ Alignment of the firm’s resources, and

■ Increased discipline in daily opera­ tions.22

BPM tools help to manage the intersection of people, processes, information/data, and technology23 by adding a governance layer on top of standards and processes. One example is the automation of busi­ ness processes using process automation and workflow tools.

86 Contract Management July 2017

Copyright of Contract Management is the property of National Contract Management Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder’s express written permission. However, users may print, download, or email articles for individual use.


Comments are closed.