Breakout Session # 309 Peter Graber Lipperman

2. “Applying Continuous Improvement Tools To Contract Management Processes” Breakout Session # 309 Peter Graber Lipperman Associate Counsel and Director, Contracts Management Pratt & Whitney Commercial Engines Date April 27, 2005 Time: 1:20PM NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

3. Outline • What is “Continuous Improvement”? • Case Study: Pratt & Whitney Commercial Engines • Process Mapping and Data Analysis • MasterText and Certification • Metrics and Results • Challenges and Benefits NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

4. Continuous Improvement In Contracts Management • Article by James Alstott in Summer 2004 Journal of Contract Management • Very little specific data on Continuous Improvement in the Contracts Managements Function • Call for further discussion on how Contracts profession can use to benefit client and customer NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

5. Case Study: Pratt & Whitney CMO • P&W Commercial Engines designs, develops, manufactures, overhauls and repairs gas turbine engines for Commercial Aircraft • CMO is responsible for the following: • Proposal Development • Sales Campaign Support • Contract Drafting and Execution • Technical Analysis • Post-Execution Contracts Management NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

6. Achieving Competitive Excellence (ACE) • UTC has development and implemented and proprietary continuous improvement program known as “ACE” to achieve world class quality in products and services • Increase efficiency and reduce waste • Improve quality and customer satisfaction while lowering cost • ACE is implemented at the “Cell” level (CMO is a cell within Legal Services) • CMO began its journey to ACE Gold in 1999 NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

7. Process Mapping • Before you start the journey, you need a map • Use quality system “tools” to make sure you are focused on high value improvement for your clients and customers • Involve all stakeholders in the process • Map the actual process, not the written policies or procedures NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

8. Data Collection • Collect turnback data for each step in your process • Key Actions: • Define “turnback” • Create process and tools for collecting and storing data • Charter and empower teams to analysis data • Challenges: • Reluctance to enter turnbacks • To little or too much data • Perception that nothing is being done NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

9. Tools For Analyzing Data • Pareto Analysis • Structured Analysis – DIVE • Define • Investigate (RC\CA) • Verify • Ensure (Mistake-proofing) • Charter Cross – Functional Teams empowered to Implement Findings NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

10. MasterText • Template Library for Product and Service Offerings • Client Feedback • Limited in scope • Not flexible • Not “Customer Friendly” • Improvements: • Expanded coverage to every type of offering • Built sample clause library to support alternate clauses in templates • Chartered cross-functional teams to own and improve text based on customer and marketplace feedback NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

11. Certification • Client Feedback: • Contract Managers were not empowered to make decisions • Lack of empowerment required increased attorney review • Not enough attorneys • Certification Program • Empower Contract Managers • Focus attorneys on “legal” issues • Improve on-time delivery and maintain quality NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

12. Certification (cont.) • Level I – Generation of MasterTextdocuments • Basic Classroom Training Program • 6 Months OJT • Review of work product by Supervisor and Attorney • Level II – Modifications to MasterText documents • Advanced classroom training • 1 year OJT • Review and Approval by CMO Director NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

13. Metrics • “What gets measured, gets results.” • Balanced Scorecard: • Quality • On-Time Delivery • Client and Customer Satisfaction • Employee Satisfaction • Financial Performance NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

14. Results • Proposals requiring legal review dropped from 57% to 26% over 3 years • Category I and II quality escapes were eliminated • On time delivery rose to 99.2% in 2004 • Client and customer satisfaction rose to “6” on 7- point scale • Employee satisfaction rose 13% over 2 years • Improved financial performance year-over-year NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

15. Challenges and Lessons Learned • Getting People Involved and Keeping Them Motivated • “I have a real job. This is extra work.” • “How will this help my career or increase my pay?” • “Nothing ever comes of these projects.” • Getting Clients and Customers Involved • Survey Fatigue • Process = Bureaucracy = Delay • “Just hire more people.” • Failure to Institutionalize Changes • “Special Projects” • Lack of Continuity in Leadership • Lack of Training NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

16. Benefits • More Efficient Allocation of Resources • Increased Employee Morale • Improved Financial Performance • Improved Perception of Contract Management function NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

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