Buy Lines: You can't manage a contract if its objectives aren't clear
- By Steve Charles
- May 08, 2005
No contract can save a bad business relationship.
But contracts can destroy a good business relationship. This was one of the key points I took away from the National Contract Management Association's World Congress: "Prime Time: Contract Management at the Core of the Enterprise."
Don Peterson, chairman and CEO of Avaya Inc., in his keynote address, described how Avaya turned itself around by restructuring its business and labor relationships based on a commitment to mutual prosperity.
He believes that the complexity of these relationships, typically operating on a global scale, has forced contract formation and management front and center.
"Everything in business is now a partnership," he said.
The challenge is creating contracts that reflect new ways of working together instead of contracts formed by tried and true boilerplate, or in the case of the federal contracting, Federal Acquisition Regulation clauses written decades ago when the world was a simpler place.
A recurring theme at the conference was that a business and its customer should focus first on defining the business objective.
Unless and until the business objective is clearly defined and accepted by all parties, there is no point in negotiating terms and conditions.
Come to think of it, this is exactly the premise of performance-based contracting: The buyer develops a set of objectives with the level of precision necessary for the seller to be able to commit to fulfilling those objectives. This is not about FAR clauses, it's about being specific.
Here in the world of federal contracting, Congress has mandated that this year, 2005, 50 percent of contracts are to be performance-based; by 2011, the goal is 80 percent.
At the current pace, we won't make this year's goal, even though many contracts and task orders being counted as performance-based are really time-and-materials or labor-hour contract engagements.
Despite continued training and leadership from organizations like the NCMA, our acquisition workforce still has much to learn about how to effectively translate the mission objectives of our program managers into contracting documents.
In fairness, the program side needs to carry its part by articulating requirements more specifically, and fully representing the details relevant to performance in its acquisition plans, market surveys and requirements documents.
This is truly a multi-discipline profession. This is why the Office of Federal Procurement Policy, in a recent policy letter, expanded the definition of the acquisition workforce to include people on the program side -- so they, too, would be required to receive training in acquisition.
Federal contract management can take five to 10 years to master, but we expect people right out of school to understand complex technical processes, intellectual property licensing arrangements, teaming and subcontractor relationships.
On top of that, there are new outsourcing models that even those of us with 20 years experience need to study constantly to fully understand.
The answer is not adding more clauses to the FAR but teaching the next generation of the acquisition workforce to use the process to define the business objectives of a program's mission.
They need to use unambiguous terms to define results and take into account the risks carried by all the parties involved. The result should be a commitment to success for everyone involved and transparency of the process for the taxpayer.
Big job? You bet.
Steve Charles is cofounder of immixGroup, a government business-consulting company in McLean, Va. He welcomes your comments at Steve_Charles@immixgroup.com.