Subcontract Management & Administration

Subcontract Management & Administration Breakout Session # 205 Name: The Federal Market Group Daniel M. Jacobs, CPCM, CMC Chairman/CEO www.fmg-ltd.com Date: Monday, July 19 Time: 2:30 – 3:45 1

Subcontract Management & Administration Session Objectives: Provide a Proven Proactive, Problem Avoidance Approach to Subcontract Management & Administration 2 © The Federal Market Group

Subcontract Management & Administration WHAT IS A SUBCONTRACT? • Broadly Defined . . . Any Contract or Agreement To Perform Work or Provide Material in Support of A Prime Contract. • Far Part 44.101 . . . Any Contract (Including Purchase Orders) by a Subcontractor (I.E.. Supplier, Distributor, Vendor, or Firm) to Furnish Supplies or Services for Performance of a Prime Contract or a Subcontract. © The Federal Market Group

Subcontract Management & Administration CURRENT BUSINESS ENVIRONMENT Old Government Business Paradigm: ZERO DEFECT - RISK AVERSION New Government Business Paradigm: RISK MANAGEMENT! © The Federal Market Group

Subcontract Management & Administration • The Government’s Role is to Hold a Prime Accountable for the Performance of its Subs. • The Principle of “Privity of Contract” : the Government has no Relationship (Unless it is set forth) with a Prime’s Subs. • How Does the Government Demonstrate Interest in Subcontract Management Practices? 1) Pre-award Surveys. 2) Advance Notifications/Consent-to Determinations. 3) Periodic Contractor Purchasing System Reviews. 4) Reviews of Purchasing/Contracting Procedures and Manuals. © The Federal Market Group

Subcontract Management & Administration PRIVITY BUYER YES SELLER NO! YES SUBS Privity (Contractual Relationship) exists only between the Buyer & Seller - Privity does not exist between Buyer and the Seller’s Subcontractors © The Federal Market Group

Subcontract Management & Administration 1. The Prime Contractor Rules 2. The Prime Contract is a Federal Procurement Contract 3. The Subcontract is a Commercial Contract 4. Their are very few mandatory flow down clauses 5. Primes tend to flow down all Federal Procurement Clauses 6. The Subcontractor has no legal standing with the government 7. The government is very concerned about how primes manage subcontracts 8. The government can partially terminate a contract 9. No one reads the contract 10. Most contracts (prime and sub) fail because they do not properly plan and in particular, they fail to baseline the contract from the outset 11. Primes and subs must perform as partners, with the sub totally integrated into the effort -- a seamless solution. 12. Prime and subcontractor must be a high-performance team! F A C T S 0 F L I F E 60-80% Of U.S. Procurement $ are Spent On Subs © The Federal Market Group

Subcontract Management & Administration Take a Proactive, Problem Avoidance Approach Establish a Community of Practice and Hold People Accountable © The Federal Market Group

Subcontract Management & Administration SIX STEPS TO CREATING A SUBCONTRACT MANAGEMENT COMMUNITY OF PRACTICE STEP 1 – Standardize Subcontract Management Body of Knowledge and the Subcontract Procurement Process STEP 2 – Establish Subcontract Manager/Subcontract Administrator Performance Standards and Formally Appoint Technical Representatives from Using Organizations STEP 3 – Establish Internal Certification, Train Personnel and Hold Them Accountable STEP 4 – Create Community of Practice (PM, Contracts, Finance, HR, Quality/Safety, Subcontracts) – Breakdown the Stovepipes STEP 5 – Establish and Maintain a Toolbox of Checklists and Performance Support Tools STEP 6 – Institutionalize Succession Planning & Mentoring © The Federal Market Group

Subcontract Management & Administration STEP 1 – Standardize Subcontract Management Body of Knowledge and the Subcontract Procurement Process © The Federal Market Group

Subcontract Management & Administration SUBCONTRACT MANAGEMENT BODY O F KNOWLEDGE (SCMBOK) 1.0 Contracts 2.0 Regulatory/ Statutory Foundation 3.0 Program Management 4.0 Subcontract Process 5.0 Subcontract Administration 6.0 Contingency Contracting 7.0 Policies & Procedures 1.1 Formation Of Contracts 1.2 Types of Contracts 1.3 Federal Procurement Contracts 1.4 Subcontracts/ Commercial Contracts 1.5 International Subcontracts 1.6 Contract Pricing 1.7 Negotiations 1.8 Ethics & Integrity 2.1 Federal Procurement Law 2.2 Federal Acquisition Regulation System 2.3 Uniform Commercial Code (UCC) 2.4 Cost Accounting Standards (CAS) 2.5 Intellectual Property Rights 2.6 International Procurement Law 2.7 Disputes/Claims 2.8 Standards of Conduct 3.1 Integration 3.2 Scope Mgmt. 3.3 Schedule Mgmt. 3.4 Cost Mgmt. 3.5 Quality Mgmt. 3.6 HR Mgmt. 3.7 Risk Mgmt. 3.8 Comm. Mgmt. 3.9 Procurement Mgmt. 4.1 Planning 4.2 Solicitation 4.3 Evaluation & Award 4.4 Subcontract Administration 5.1 Assignment 5.2 System Compliance 5.3 Performance Monitoring 5.4 Change Mgmt. 5.5 Disputes/Claims 5.6 Closeout 5.7 Subcontract Files & Documentation 6.1 Contracting Methods and Instruments 62 Funding Considerations 6.3 Administration of Contingency Contracts 6.4 Ethics & Integrity 6.5 Other Considerations 7.1 Operating System 7.2 Subcontracting Policies 7.3 Performance Support Tools & Techniques 7.4 Standards of Conduct © The Federal Market Group

Subcontract Management & Administration SUBCONTRACT PROCUREMENT PROCESS PROCUREMENT PLANNING SOLICITATION SELECTION AND AWARD Requirement Determination Requirement Specification Requirement Authorization Solicitation Evaluation Negotiation Selection Award CONTRACT MANAGEMENT and ADMINISTRATION Assignment System Compliance Performance Measurement Contract Modification Completion & Payment Closeout © The Federal Market Group

Subcontract Management & Administration SUBCONTRACT PLANNING – A CRITICAL PHASE Best practices clearly indicate that the most critical phase of the Subcontracting Process is the Planning Phase Cost overruns, schedule delays, technical failures, regulatory and statutory noncompliance, product substitution, legal disputes, termination, claims, and customer dissatisfaction are but a few of the results of poor planning. It is important to accurately and thoroughly define your requirements early, then communicate them to all the players throughout the entire Subcontracting Process – from requirements determination to closeout. © The Federal Market Group

Subcontract Management & Administration STEP 2 – Establish Subcontract Manager/ Subcontract Administrator Performance Standards and Formally Appoint Technical Representatives from Using Organizations STEP 3 – Establish Internal Certification Program, Train Personnel and Hold Them Accountable © The Federal Market Group

Subcontract Management & Administration FORMALIZE ASSIGNMENT PROCESS The Subcontract Manager’s Technical Representatives (TR) perform critical acquisition and technical functions, and SCMs rely on them to ensure that subcontracts are managed properly to meet mission needs. It is essential that the TR Letter of Appointment clearly set forth the responsibilities and what the TR can and cannot do. Sample TR Responsibilities: 1. Read the subcontract and be thoroughly familiar with company and Subcontractor obligations set forth in that document. 2. Develop and execute a Subcontract Quality Assurance Surveillance Plan (QASP). Review subcontractor Quality Control procedures. 3. Monitor subcontractor performance and document acceptance of deliverables. 4. Verify subcontractor invoice amounts against actual performance. 5. Validate subcontractor requests for change orders. 6. Facilitate contract closeout. 7. Not authorized to modify the subcontract. © The Federal Market Group

Subcontract Management & Administration STEP 4 – Create Community of Practice (PM, Contracts, Finance, HR, Quality/Safety, Subcontracts) – Breakdown the Stovepipes STEP 5 – Establish and Maintain a Toolbox of Checklists and Performance Support Tools STEP 6 – Institutionalize Succession Planning & Mentoring © The Federal Market Group

Subcontract Management & Administration WORK BREAKDOWN STRUCTURE (WBS) What must be done? CONTRACT Requirements & Objectives Deliverables? Metrics? Costs? MOST EFFECTIVE ORGANIZATION (MEO) RESOURCES Who? Materials Facilities Equipment Data Resources Requirements? Work and Resource Plan When? Where? SCHEDULE Sequence? Risks? BUDGET How is it Going? Metrics? REPORTS How Much? © The Federal Market Group

Subcontract Management & Administration THE SURVEILLANCE PLAN The Surveillance Planis a proven performance support tool. It sets forth the Prime’s plan to monitor subcontractor compliance with contract provisions. It identifies the critical work processes, the delivery schedule, deliverables, costs for the effort and assists in identifying the risks inherent in the contract performance. Best practices clearly indicate that proper planning, selection of a reputable subcontractor, and appropriate oversight of subcontractor performance, will most likely result in best value for your organization and the USG. You should rely upon the subcontractor for Quality Control – your responsibility is Quality Assurance! © The Federal Market Group

Subcontract Management & Administration SUBCONTRACTING IN TODAY’S ENVIRONMENT 1. Primes and Subs must place more emphasis on planning and processes 2. Past Performance is a mandatory source selection evaluation factor 3. Customer focus is essential 4. Primes and subs must perform as a high-performance team 5. Strategic Partnering is good business 6. Validate your partner’s management processes and capability to succeed in government contracting 7. Management of government contracts must be proactive (not reactive) © The Federal Market Group

Daniel M. Jacobs, CPCM, CMC Chairman/CEO, The Federal Market Group Recognized as one of the nation’s leading authorities on public contracting, Daniel M. Jacobs is Chairman/CEO of The Federal Market Group (FMG), a veteran owned company, that includes Government Business Solutions (GBS), Federal Market Publishing (FMP), and The Federal Market Institute (FMI), Washington, D. C. based organizations providing professional training, research, publishing and consulting services to government and industry in public contracts management. FMG also includes The EuroMarket Group based in Brussels, Belgium and FMG Middle East in Tel Aviv. He is a Fellow, past National President (1987-88), recipient of The Charles A. Dana Distinguished Service Award, the Honorary Life Member Award and a member of the Executive Advisory Council of the National Contract Management Association (NCMA). He is Chairman Emeritus, Board of Trustees, of the non-profit foundation, Contract Management Institute (CMI) and Chairman, Board of Advisors of Excel Institute. He is a member of the Project Management Institute (PMI), a member of the Institute of Management Consultants (IMC), a member of the Professional Services Council (PSC) and he is a Life Member of The American Legion. Mr. Jacobs holds a bachelors degree from North Carolina Wesleyan College, a Masters in Government Contracts from George Washington University School of Government and Business Administration. He has completed additional graduate work in engineering, business and contracts at Old Dominion University, The College of William and Mary and George Washington University. In addition, through examination, he earned the designation of Certified Professional Contracts Manager (CPCM) and Certified Management Consultant (CMC). He served three years active duty with the U. S. Army and attained the rank of Captain. Mr. Jacobs is the subject-matter-expert for the General Services Administration Federal Acquisition Institute (GSA/FAI) government-wide training program on Source Selection and is a consultant to the President’s Committee for Purchases From People Who Are Blind Or Severely Disabled. He is a recipient of the “Hammer Award” for contributions to the National Partnership for Reinventing Government (NPR). He is co-director of training for the FAI FAC-C VA Intern Development Program and adjunct faculty at the George Mason University School of Public Policy. Widely published, he co-authored the acclaimed series of contracts-business perspective articles on the Strategic Defense Initiative (SDI) appearing in Contract Management magazine. He is principal author of Building a Contract: Solicitations/Bids and Proposals - A Team Effort?, NCMA, 1990. He is the author of, Federal Government Contracting: The System/The Process, FMP, 1989; The Integrated Project/Team (IPT), FMP, 2000; The Desktop Reference Guide for Contract Management, FMP, 2001 and The Art of the Possible: Create and Organization with No Limitations, FMP/Amazon.com, 2010. © The Federal Market Group

Subcontract Management & Administration