Breakout session 207 steven w barclay sr manager contracts training the boeing company
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Awareness of Constructive Changes in a Contractual Environment. Breakout Session # 207 Steven W. Barclay, Sr. Manager Contracts Training - The Boeing Company Javier E. Porras, Contracts Instructor - The Boeing Company James M. Unland, Contracts Management - The Boeing Company

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Breakout session 207 steven w barclay sr manager contracts training the boeing company

Awareness of Constructive Changes in a Contractual Environment

  • Breakout Session #207

  • Steven W. Barclay, Sr. Manager Contracts Training - The Boeing Company

  • Javier E. Porras, Contracts Instructor - The Boeing Company

  • James M. Unland, Contracts Management - The Boeing Company

  • Date: April 24, 2007

  • Time: 4:30 PM - 5:30 PM


Agenda
Agenda Environment

The nature of constructive changes

Scope Creep

Implementation Creep

Recognizing and managing the “creeps”

Question & Answer


Why is awareness of constructive change necessary
Why is awareness of constructive change necessary? Environment

  • Let’s answer this question by looking at a few recent examples…

    • You decide:Change or No Change?


Recent examples
Recent Examples Environment

  • 50 Hour Rule

    • Verbal agreement with the Customer to perform change activity up to 50 hours without requesting additional funding.

  • Trade Studies

    • E-mail request to continue work on trade studies even though the authority had expired, but pending final approval by management.


Recent examples1
Recent Examples Environment

Other examples…

  • Control Panel

    • Requirement is for control panel with 36 switches

    • Contractor proposed legacy panel with 36 hardwired switches – awarded contract

    • In execution, Government wants 36 pushbutton switches with two levels


Recent examples2
Recent Examples Environment

Other examples…

  • Aircraft fuel tanks

    • Requirement is for fuel tanks that hold “X” quantity of fuel

    • Contractor proposed heritage design of welded tanks with seams

    • Inspector believes they will leak and is requiring tanks with smooth welds


Contract changes

Focus of this Environment

briefing

Contract Changes

  • Contract changes come in two flavors

    • Formal changes:

      • Unilateral Changes

      • Bilateral Changes

    • Informal changes:*

      • Scope Creep

      • Implementation Creep

*Aka: Constructive Changes


Scope creep
Scope Creep Environment

Changes to what a contractor does…

  • Changes to the contract’s baseline requirements

    • Statement of Work, Schedule, Specs, Clauses

  • Made informally

  • Initially appear as minor and insignificant

  • Generally does not seem necessary to document at that time

Customer’s technical representative requesting workthat’s beyond the scope of the contract


Scope creep1
Scope Creep Environment

Who is responsible for identifying scope creep?

  • Responsibility*…

    “Contracts has a fiduciary responsibility when attending program reviews, configuration management, or control change board meetings, etc. to assist the programs with identifying scope creep, managing changes to contractual requirements, and translating those changes into contract modification.”

  • *Typical contractor training manual


Scope creep2
Scope Creep Environment

Why Does Scope Creep Occur?

  • Disagreement over contractual requirements…

    • Over-inspection or unreasonable rejection of work

    • Discounting reasonable contractor interpretation of requirements

  • Defective or late Customer-furnished data or property

  • Delay or disruption of work

  • Acceleration of delivery and/or test schedules

  • Requesting or expecting tougher specification

  • Directing the use of different processes or materials

Goal: Identify constructive changes and address them immediately!


Scope creep3
Scope Creep Environment

Analysis of recent examples presented earlier

  • 50 Hour Rule

    • Verbal agreement to perform change activity

      Analysis: Constructive Change = performing work without adequate compensation

  • Trade Studies

    • Request to continue work with expired authority

      Analysis: Constructive Change = performing work without proper authority

Performing work without equitable adjustment to the contract


Breakout session 207 steven w barclay sr manager contracts training the boeing company

Implementation Creep Environment

  • Changes to “how” a contractor will implement requirements

  • No change in contract requirements


Breakout session 207 steven w barclay sr manager contracts training the boeing company

Implementation Creep Environment

  • Changes during contract implementation can bea constructive change

    For Example:

    • Customer demanding a more costly implementation than bid

    • Customer’s unreasonable interpretations result in more costly implementation than bid

    • Customer hindering performance by demanding unreasonable tasks

      • Active interference


Breakout session 207 steven w barclay sr manager contracts training the boeing company

Implementation Creep Environment

Analysis of recent examples presented earlier

  • Control Panel

    • Difference in types of switches

      Analysis: Constructive Change = changing negotiated requirements during contract implementation

  • Aircraft Fuel Tanks

    • Smooth vs. welded seams

      Analysis: Constructive Change = negotiatedrequirements should prevail; unless the contractor is not meeting contractual requirements


Effect of constructive changes
Effect of Constructive Changes Environment

  • They are known as “Changes that Bite” because...

    • They destroy a contract’s baseline

    • They are time consuming to prove

    • They result in overruns

    • They result in negative past performance


Breakout session 207 steven w barclay sr manager contracts training the boeing company

Con’t. Environment

Why Do Constructive Changes Occur?

  • Due to…

    • Failure to recognize them when they are happening

    • Not understand the impact they’ll have on the program’s budget and/or overall schedule requirements

    • Justify performing the additional work in order to keep the customer satisfied/happy

    • Obtain higher award fees, and


Breakout session 207 steven w barclay sr manager contracts training the boeing company

Why Do Constructive Changes Occur? Environment

  • Avoid negative past performance evaluations

    • However, the BESTway to obtain positive past performance evaluations is to do…

      Guess What?

Satisfy all contractual requirements

ON TIME

and

WITHIN BUDGET!


What does the contract say

Preventative Maintenance Environment

What DoesThe Contract Say?

  • Scope Creep…

    • Understand the contractual requirements pursuant to the Statement of Work or Statement of Objectives

    • Clarify assumptions and/or expectations that may exceed the scope of the contract

    • Establish a baseline of the requirements

      • How the program was bid is part of the baseline

    • Above all, we must always know…


Breakout session 207 steven w barclay sr manager contracts training the boeing company

Preventative Maintenance Environment

  • Implementation Creep…

    Focus on implementation issues during the business development phase of the program

    • Rough Order of Magnitude(ROM) – identify ground rules and assumptions

    • Basis of Estimate(BOE) – focus not only on tasks and hours but on implementation approach

    • Fact-finding entrance briefings

    • Integrated Baseline Review(IBR) – gain mutual understanding of the baseline, including implementation approach

    • Program Change Control Board(PCCB) – visibility of every contract change

    • Program Execution Plan(PEP) – establish how the contract will be executed


Breakout session 207 steven w barclay sr manager contracts training the boeing company

Managing Contract Changes Environment

  • Change is inevitable– be prepared to deal with unexpected events

  • Encourage creativity– Government and contractor integrated process team (IPT) members have good ideas - manage them

  • Be aware of contract baseline– recognize when the baseline is perceived to be lost

  • Establish a change process– instill discipline for stakeholders to follow the formal change process


Summary
Summary Environment

  • Clearly understand all contractual requirements

  • Implement changes ONLY upon receipt of a written work authorization from an authorized Contracts representative

  • Notify Contracts for interpretations and/or clarification of the contractual requirements

  • Above all, remember the GOLDEN RULE…

What Does the

Contract Say?


Breakout session 207 steven w barclay sr manager contracts training the boeing company

Questions & Answers Environment