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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.

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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 administration3
Subcontract Management & Administration

Session Objectives:

Provide a Proven Proactive,

Problem Avoidance Approach to

Subcontract Management & Administration

2

© The Federal Market Group

subcontract management administration4
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 administration5
Subcontract Management & Administration

CURRENT BUSINESS ENVIRONMENT

Old Government Business Paradigm:

ZERO DEFECT - RISK AVERSION

New Government Business Paradigm:

RISK MANAGEMENT!

© The Federal Market Group

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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

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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

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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 administration9
Subcontract Management & Administration

Take a Proactive, Problem Avoidance Approach

Establish a Community of Practice and Hold People

Accountable

© The Federal Market Group

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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 administration11
Subcontract Management & Administration

STEP 1 – Standardize Subcontract Management Body of Knowledge and the Subcontract Procurement Process

© The Federal Market Group

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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

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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

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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

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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

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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

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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

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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

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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

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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

slide21

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