Developing Strategic Supplier Strategies: Applying Disciplined Strategic Thinking to Building your Team

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2 Developing Strategic Supplier Strategies: Applying Disciplined Strategic Thinking to Building your Team Breakout Session # D04 Date: Friday, March 31, 2017 Time: 3:30pm 5:00pm DEDICATED TO REDUCING PERFORMANCE RISK IN THE EXECUTION OF PUBLICLY-FUNDED CONTRACTS Combines Certification with Qualification 2

3 Developing Strategic Supplier Strategies: Applying Disciplined Strategic Thinking to Building your Team ScMI CHARTER The purpose of The Subcontract Management Institute (ScMI ), a non-profit organization, 501c(3), is to: 1.Establish and maintain the Global Standard for Subcontract Management and Administration to include the Subcontract Management Body of Knowledge (ScMBOK ); 2.Provide the contractor with knowledge, skills, competencies, tools and techniques to execute subcontracts more effectively, reduce performance risk and deliver value to company shareholders and taxpayers; and 3.Provide organizations and individuals the opportunity to become certified to enhance profitability and their value proposition. productivity, ScMI provides prime and subcontractor personnel with the knowledge, skills, tools and techniques to deliver best value supplies, services and data and reduce performance risk in the execution of publicly-funded contracts. Integrates certification standards with qualification standards. 3

4 Developing Strategic Supplier Strategies: Applying Disciplined Strategic Thinking to Building your Team PANEL MEMBERS Tom Reid, President ScMI President, Certified Contracting Solutions; Former Navy and NASA Contracts Attorney; Former General Counsel (Subsidiary), Lockheed Martin; Former Director, Business Operations and VP, Finance and Administration; Member, Fellow, and award winner with NCMA; former member, Board of Directors, NCMA Lenn Vincent, Vice Chairman - RADM USN (RET); Former Industry Chair, DAU; Past National President NCMA; Director, Procurement Round Table (PRT); Former Commander, Defense Contract Management Command (DCMC); Former Commandant, Defense Systems Management College (DSMC); NCMA Board of Advisors 4

5 Agenda Thinking Critically and Strategically about Subcontracting The project team must act as a team Selection and management are equally important A strategy for the team A strategy for each member of the team Developing a proper management and strategic plan Proactive management disciplines 5

6 Strategic Planning is a Direct Application of Critical Thinking What is critical thinking? Involves consideration of substance and context Critical thinking is a mode of thinking in which the thinker improves the quality of his or her thinking by applying discipline and skill to the task of analyzing, assessing, deconstructing and reconstructing the thought process. It applies rigorous discipline to ascertaining facts and avoiding unsupported opinion. Strategic planning applies critical thinking to answer the questions: Where are we? Where do we want to be? How will we get there? Who must do what? How are we doing? 6

7 Strategic Planning Questionnaire 1. What are the most serious environmental factors (economic, political, social, technological) that will affect future plans? 2. What are the most serious competitive threats facing the Team? 3. What are the Team s primary strengths/weaknesses? 4. Who are the major/critical subcontractors on the Team? 5. What are the key performance factors for the Team? 6. What are the Team s major opportunities? FMG Used with permission 7

8 CHOOSING the Right Team Member and MANAGING the Team are Equally Important The selection process must consider all aspects of the relationship and the expected outcomes Once selected, the agreement must reflect the salient issues that derive from the strategic plan Where are we? Where do we want to be? How will we get there? Who must do what? How are we doing? EVERY SUBCONTRACT DOCUMENT MUST REFLECT THESE ELEMENTS FOR EFFECTIVE SUBCONTRACT EXECUTION 8

9 Strategic Subcontract Management Planning A. WHERE ARE WE NOW? B. WHERE DO WE WANT TO BE? C. HOW DO WE GET THERE? 1. Charter 2. Boundary Conditions 3. Work Breakdown Structure D. WHO WILL TAKE US THERE? 1. Key Personnel & Stakeholders 2. Most Effective Organization (MEO) 3. Win-Win Performance Agreements Definition of Success 1. Vision 2. Mission 3. Metrics 4. Deliverables 5.Schedule E. HOW ARE WE DOING? 1. Monitoring 2. Consistency 3. Discipline 1. Project Execution Planning 2. Decision Quality 3. Leadership 4. Organizational Effectiveness 5. Team Building FMG Used with permission 9

10 A Strategy for EACH Team Member The contract strategic plan must be incorporated, to the degree it applies, into EVERY subcontract With proper allocation of scope (via a WBS), cost (via a budget), and schedule (via a viable and well maintained project plan), the triple constraints are addressed, expectations set, and WELL MANAGED All of this must be reflected in the contract document 10

11 Overcoming Barriers and Risks Prime Contractors pay very close attention to the selection of subcontractors from management, technical, execution and risk perspectives The prime contractor accepts the total contract risk, but must design business arrangements where the risk for subcontracted work is further allocated to the subcontractor Just as negotiations occur between government and the prime contractor on risk, liabilities, and warranties, there are also vigorous negotiations among teammates and subcontractors on the degree of risk that will be accepted at each level Administration includes risk management and mitigation strategies that will be employed to reduce risks for the customer and the contract team 11

12 Requirement & Schedule Compatibility Can operational requirements be harmonized? Can differences be accommodated as a partner-unique development? Are operational need dates compatible? Is there trade space in the customer requirements and need dates vice potential reduced funding requirements?

13 Partner Contributions and Commitment What can the partner bring to the program? Critical technology to fill a gap or reduce risk? Industrial base prowess? How strong is potential partner s commitment? Where is it in their priority list? Do they have funding to reduce financial risk to the program?

14 Technology Transfer Considerations Are you dealing with Crown Jewel technology? Can you black box or control technology transfer through work scope/assignments? Does time-phasing technology release commensurate with commitment help?

15 Why Supplier Strategic Thinking is an Imperative for Effective Subcontract Management THE SUBCONTRACT MANAGEMENT ICEBERG EFFECT The majority of activities occur at the Subcontract level Public, Private, Commercial, Large, Medium, Small, and Foreign Companies Copyright The Subcontract Management Institute 15

16 The Prime s Subcontract Management Team Marketing & Business Development Financial Contracts Program Manager Government Customer Material Manager Global Business Manager Manufacturing Legal Subcontract Management a Team Effort Rick Manager Project Planning And Scheduling Personnel Estimating Subcontract Manager Engineering Process Design Technical Representatives Subcontractors Purchasing 16

17 Strategic Planning Critical Success Factors Align to Over-all Business Goals Leadership Alignment & Commitment Manage the Enterprise and Cascade through the Organization to each Individual 17

18 Strategies for Communications and Relationship Management Find innovative ways to link the subcontractors and suppliers throughout the value chain. Adopt relationship management principles to foster collaboration, and encourage long-term relationships where possible. Share information, knowledge, and innovations up and down the value chain. Communicate so everyone involved in the program has the big picture. Include critical subcontractors / suppliers in regular meetings as well as technical and programmatic reviews. Determine how you are going to measure performance against a baseline. Establish, in advance, how you and your team should react when subcontractor / supplier problems arise. 18

19 The Subcontract Management Plan The subcontract management plan must be more than a set of goals established to meet socioeconomic objectives. The management plan must constantly assess progress across the triple constraints for each subcontractor The plan to effectively integrate all aspects of contract performance as provided by the subcontractors must be clear and understood by everyone technical compliance budget maintenance schedule impacts 19

20 Questions That Should Be Answered for Successful Strategic Supplier Planning Who is responsible within the program s IPTs for the subs performance? (IPTL? Subcontractor / supplier manager? Purchasing department?) What are the actual and projected award dates for major subcontracts. What communication methods exist between prime and sub? How are requirements flowed down to the subs? What process will be used to control program changes? How will the prime evaluate subcontractor performance? What metrics are used? What is the drumbeat/frequency of communication? What plans or reports will be required? Are the subcontractor IMS and the prime IMS integrated? How are sub risks incorporated in the program risk management process? 20

21 Subcontractor Management Plan Takeaways A SMP (and Make/Buy Plan) should be included in major contracts. SMP define the prime s organization, process, procedures, and management of subcontracts. Make sure the prime follows their processes during program execution. Understand how a major/critical sub is defined and focus management attention on those. 21

22 Measures of Effectiveness Tables 1. Accounting, Finance, Estimating 2. Program/Project Management 3. Quality Control, Quality Assurance 4. Contract Administration/Subcontract Administration, Purchasing 5. Information Technology Standards 6. Human Resources 7. Risk Management 8. Communications Management 9. Ethics and Self-Governance 10. Business Development and Marketing Measures of Effectiveness Tables facilitate assessment of supplier critical processes and systems. FMG Used (c) ScMI (c) FMG Used with permission 22 with permission

23 An Example of Measures of Effectiveness Table Critical Process Area: Quality Control, Quality Assurance Principal Risk Areas 1. Are there written policies and procedures in place for Quality Control? 2. Is the company or specific programs certified? 3. Are there written policies and procedures in place for Quality Assurance of subcontractors? Measure of Effectiveness a. Written standard internal quality processes and procedures. b. Policies and procedures applied on a consistent basis. c. Documentation and forms for QC. d. Files complete and current. a. ISO certifications. b. ISE CMMA certifications. c. Other certifications. a. Written standard quality assurance processes and procedures. b. Policies and procedures applied on a consistent basis. c. Documentation and forms for QC. d. Quality Assurance Surveillance Plans (QASP) for each program. d. Files complete and current. Program Data Sources: FMG Used (c) ScMI (c) FMG Used with permission 23 with permission

24 An Example of Measures of Effectiveness Table Critical Process Area: Quality Control, Quality Assurance Principal Risk Areas 4. Are there written policies and procedures in place addressing environmental requirements? 5. Are there written policies and procedures in place addressing employee health requirements? 6. Are there written policies and procedures in place addressing workplace safety? 7. Are there program metrics and performance assessment requirements for every contract/program? Measure of Effectiveness a. Written standard processes and procedures. b. Policies and procedures applied on a consistent basis. c. Documentation and forms for environmental compliance. d. Files complete and current. a. Written standard processes and procedures. b. Policies and procedures applied on a consistent basis. c. Documentation and forms. d. Files complete and current. a. Written standard processes and procedures. b. Policies and procedures applied on a consistent basis. c. Documentation and forms. d. Files complete and current. a. Success defined for each program/contract. b. Accountability assigned and personnel held accountable for performance. Program Data Sources: FMG Used (c) ScMI (c) FMG Used with permission 24 with permission

25 SUCCESSFUL SUPPLIER MANAGEMENT PLANNING Whether you are building a team of individuals or a team of subcontractors, the process of strategically selecting them and motivating them is the same. Without great clarity in the roles, responsibilities, obligations, penalties, priorities, metrics, resources, accountability, continuous improvement, and TRUST, the team will fail to achieve the stated desired objectives. BEGIN WITH THE END IN MIND Dr. Stephen Covey 25

26 The Bottom Line to High-Performance Team Building WHAT TO EXPECT FROM TEAM MEMBERS: 1. Commitment -- created through involvement. 2. Cooperation -- share sense of mutual purpose. 3. Communication -- strategic resource is information. 4. Contribution -- must carry own weight (coach problems and correct quickly or terminate-remove from team.) FMG Used with permission 26

27 Project Management Execution PROJECT Requirements & Objectives WORK BREAKDOWN STRUCTURE What must be done? Deliverables? Metrics? Who? When? Where? ORGANIZATION SCHEDULE RESOURCES MATRIX MATERIALS FACILITIES EQUIPMENT DATA RESOURCES? Work and Resource Plan Sequence? How Much? BUDGET FMG Used with permission REPORTS 27 How is it Going? Risks?

28 DEDICATED TO REDUCING PERFORMANCE RISK IN THE EXECUTION OF PUBLICLY-FUNDED CONTRACTS Combines Certification with Qualification Lenn Vincent Cell Points of Contact: Tom Reid Cell