Monitoring Contractor Performance Graham Constable P496 Rev 0
Questions • What systems deliver good monitoring of contractor performance? • What are the key metrics? • How is the contract structured to maximise performance outcomes? • How do clients ensure the contractor is reporting the correct level of details (not too much/too little)?
Why Contracts Fail • Interests Become Misaligned Over Time (15%) • Buyer’s Unclear Expectations Up Front (23%) • Buyer’s Multi-Supplier Environment (3%) • Poor Cultural Fit (5%) • Provider’s Poor Performance (8%) • Poor Communication (11%) • Not Mutually Beneficial (11%) • Other (11%) • Poor Governance (13%)
Buyer – Provider Disconnects • Unclear Expectations from both clients and contractor; • Perceptions vs Reality: • relationship – behaviours; • performance; • Divergent views on savings: • contractors believe savings occur more often than clients; • New Ideas: • have clients asked for innovation; • Communication & inconsideration of each other; and • Behaviours. Source: Outsourcing Centre
Buyer – Provider Connects • Relying on relationship than on performance indicators; • Protecting trust and the Buyer’s proprietary information; • Understanding and living selection and retention criteria of the Buyer; • Create Value and move on from BAU; • Set and agree joint expectations; and • Govern well and aim for longevity. Source: Outsourcing Centre
What would add more value • Better Communication (40%) • Better Governance (14%) • Clearer Expectations (21%) • Better Contracts/SLAs (8%) • Cultural Fit (1%) • Additional Scope of Services (5%) • Better Commitment (4%) • Longer Term Contracts (4%) • Flexibility (3%) Source: Outsourcing Centre
What Buyers expect of Incumbents Source: Nigel Thacker “Rebid Team”
What really matters? • Demonstrating you have had an impact on things that are really important to the client (operationally & strategically); • Reviewing the performance measures; mix of input, output and outcome based; • Knowing, understanding and mapping your client’s business priorities; • Linking your activities to the client’s goals; • Finding a way to measure your work in ways which show the impact you have; and • Focusing, changing & improving. Source: Nigel Thacker “Rebid Team”
1. What systems deliver good monitoring of Provider performance? • Specification – define deliverables; • Select provider with partner mentality – key site personnel; • CMMS – Buyer internal processes and procedures; • Monthly reporting; and • Direct Buyer monitoring, contractor ‘self monitoring’, joint monitoring via an alliance board, client random auditing (financial) and customer surveys.
2. What are the key metrics? • Monitored through monthly report; • Aligned with specification/deliverables; • Balance scorecard, lead & lag indicators – technical PMs, CMs & minor works; • Data must be easily available and KPIs able to be objectively measured; • Select what is KEY and mandatory rather than extensive list of performance measures; and • WH&S, response & job completion times, financial, invoicing, etc...
3. How is the contract structured to maximise performance outcomes? Specification – define deliverables – PM, CM & minor works; Contract Model - specialist contactors, managing agent, head contactor or hybrid Relationship – traditional or collaborative (partner); Pricing structure – comprehensive, management fee, schedule of rates, target cost/GMP; KPIs and risk/reward; Duration (3+1+1) and CPI increases linked to performance; and Communication – kick off workshop, team building, monthly operational, quarterly management and annual executive meetings – issue resolution.
4. How do clients ensure the contractor is reporting the correct level of details? • Every Buyer is different and it’s tied to the contract model; • May vary depending on performance – Contract Governance; • Enough information – what is minimum level required; • Structure report around KPIs & deliverables; • Establish what and how many reports are actually required; and • Executive Summary – traffic light (red, amber & green). In addition what level of technical reporting is required.
Summary Proactive contract management Right relationship Reporting, KPIs & incentives Specification & deliverables
What’s the Buyer want? • Performance Management Company – ‘Square Wheels’
What is the Provider doing? • Performance Management Company – ‘Square Wheels’
Buyer Vision Performance Management Company – ‘Square Wheels’
Provider’s Vision Performance Management Company – ‘Square Wheels’
Joint Vision • Performance Management Company – ‘Square Wheels’