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.
® 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.
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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
Devel- MA oper (ASD).
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
profession als with a
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
NCMA defines the purpose of the CMS as
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 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
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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
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-
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PROFESSIONAL STANDARDS CORNER
FIGURE 3. THE CONTRACT MANAGEMENT MATURITY MODEL (CMMM)
LEVEL 1 AD HOC
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
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