1. Getting the most out of your contracts Gary Traynor 11 th July 2013 Performance Monitoring Contractor

2. Outline Maximising performance through contract structure What to manage Key metrics Reporting: achieving a balance 2

3. What is a Contract? A valid contract is an agreement made between two or more parties whereby legal rights and obligations are created which the law will enforce 3 What to manage ?

4. Contractor Performance Cycle 4 Setting Performance Objectives Quality of Service Total Cost Management Reporting & Administration Relationship Management Risk & Compliance Innovation Energy & Sustainability

5. Governance structure Monitor performance against the KPIs Drive continuous improvement in service delivery Compliance Approve budgets Manage change control process & escalations Monitor operational deliverables Resolve delivery issues Review monthly scorecard Innovate service delivery Monthly Quarterly Semi-Annual/ Annually Strategic alignment and overall direction Innovation Approve annual strategic plan Review financial and operational objectives Baseline Review Operational Management Strategic 5

6. What to manage 1.Service requirements 2.Service quality 3.Value for money and price creep 4.Innovation and continuous improvement 5.Vendor management & vendor development 6.Performance management frameworks 7.Effective KPI measurement 8.Technology & reporting 6

7. 1 - Service Requirements 7 receiving less than what is in scope vendor disputing what is in scope vendor providing more than scope and claiming additional fees understand the scope for the contracts you are managing manage disputes quickly and seek advice from your Contract Manager adjust scope if required with a contract change notice Things to look out for What to do

8. 2 - Service Quality number of complaints received time for vendor to respond number of repeat complaints subjective or objective situations 8 raise during the contract management meetings reflect in KPI scoring escalate if there is an ongoing problem Things to look out for What to do

9. Things to look out for What to do 3 - Value for Money and Price Creep requests for additional fees large ad hoc spend requests for change monitor regularly 9 request quote and check it against the contract rates review volume of adhoc services for the vendor and assess the level of ad hoc spend make vendor accountable for recommendation to control

10. 3 - Example A – Low Value Opex spend Situation National office portfolio with filtered water taps on adhoc reactive call outs 933 works orders issued in 1 year total approx. cost $317K (aver $347) Excessive call out costs and repair costs Scope Review of adhoc spend identified and analysed Consultation with vendor to agree solution Results Planned maintenance activity agreed with vendor accountable 40% savings made in first year Filter change programme agreed with minor repairs Cost creep contained and managed

11. 3 - Example B – High Customer Visibility Situation New cleaning company introduced for national commercial portfolio 3 month into contract variation requested for scope and shift changes An additional shift was requested to cover the gap between 2pm and 5pm Scope Service specification review identified changes could be made to scope and alteration to shifts Changes jointly agreed with no negative impact Results Shift planning adjusted 10% Supervision variation rejected Quality of day cleaning improved

12. 3 - Example C – Mechanical Reactive Spend Situation Client historical spend review completed 12 months of incumbent HVAC reactive spend analysed: - 2,885 work orders - total additional cost of $833,000 (aver $288) No accountability for reactive spend Scope Review too hot / too cold reporting Adjust frequency of maintenance activity Quality of the maintenance received? Results 30% reduction in reactive calls Improved customer satisfaction Lifespan of equipment improved

13. 4 - Innovation and Continuous Improvement 13 Business Benefit identify new opportunity for ways to benefit your business 2 13 new skills, methodologies and capabilities in service delivery better, more efficient and cheaper services through economy of scale, process improvement or rationalisation Capacity / CapabilityEconomy

14. What are the new technologies available in the market? 4 - Innovation and Continuous Improvement 14 What upcoming legislative or Australian Standard changes should you be aware of? Are there any trends in ad hoc issues and how can these better be addressed? Are there any potential savings? What recommendations does the vendor have for how to better deliver the service? Does the vendor have any new additional service offerings ?

15. 15 Value Time Contract Signed 1. Without active management 2.Vendor Management to maintain and gradually improve value 3. Vendor Development To create new value from vendors beyond that which is in the contract Vendor Development Additional Value Vendor Management Expected Value Time to Contracts 5 - Vendor Management & Development

16. 6 - Performance Management Frameworks 16 Refine KPIs & Reports Undertake Improvement Opportunities Establish Dashboard and Reports Finalise the tools and templates Agree on KPI sets / Groupings for Operational Measures Confirm Strategic Principles / Measures

17. 7 - Effective KPI measurement Set KPIs collaboratively Create realistic and effective KPIs Ensure clear categorisation of KPIs Measure correctly Address problems early Open and honest Goal is joint 17

18. 18 8 - Technology & Reporting What is the correct level of reporting? Achieving a balance on reporting frameworks Demonstrate the value of your metrics Be fair and reasonable with your expectations Develop correct level for contract size Ensure quality of reporting within your KPIs Understand time required by both parties Do not report for reporting sake…it costs you $

19. Tier I: Executive Dashboards Tier II: Performance Reports Tier III: Detailed Scorecards incorporating the performance plans 19 8 - Technology & Reporting

20. Wrapping Up – Key things to remember 20 Structured engagement and reporting is baseline for success No Surprises manage contractual changes Innovate and always looks to raise benchmark Contract Management takes time and effort Its all about building relationships KPIS are reflection of how contracts working

21. Wrapping Up – Key things to remember 21 Celebrate Success its a Long Term Relationship

22. Questions? Copyright © Jones Lang LaSalle, 2013