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Using Project Management Techniques to Be a Better Contract Manager Don Shannon PMP, Lifetime CPCM and CFCM

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Presentation on theme: "Using Project Management Techniques to Be a Better Contract Manager Don Shannon PMP, Lifetime CPCM and CFCM"— Presentation transcript:

1 Using Project Management Techniques to Be a Better Contract Manager Don Shannon PMP, Lifetime CPCM and CFCM don@contract-coach.com

2 Overview Project / CM Project / CM Roles and responsibilities Roles and responsibilities Integrated Project Teams Integrated Project Teams Program Management Techniques Program Management Techniques Chartering Chartering Planning Planning Program Management Plan Program Management Plan Program Schedule Program Schedule Program Budget Program Budget Communications Plan Communications Plan Scope Management Plan Scope Management Plan Change Management Plan Change Management Plan Subcontracting Plan Subcontracting Plan Funds Management Funds Management Sub-supplier Management Sub-supplier Management Deliverable Management Deliverable Management Risk Management Risk Management Program Management / Baseline Reviews Program Management / Baseline Reviews

3 Project / Contract Management Which are you? Which do you choose to be?

4 Project, Program, Contract The Project is a defined set of tasks leading to a desired end result. The Project is a defined set of tasks leading to a desired end result. A Program is a collection of projects or a single large project comprised of smaller units of work which could be called projects. A Program is a collection of projects or a single large project comprised of smaller units of work which could be called projects. A contract is a legal agreement that enables a project or a program to be performed for the benefit of another. A contract is a legal agreement that enables a project or a program to be performed for the benefit of another. Today I will mix these terms together but understand they are actually different facets of the same entity. Today I will mix these terms together but understand they are actually different facets of the same entity. If I wish to differentiate between the contract (as a legal construct) and the work to be done I may use the terms “Technical” “Program” or “Project” interchangeably to describe the work If I wish to differentiate between the contract (as a legal construct) and the work to be done I may use the terms “Technical” “Program” or “Project” interchangeably to describe the work

5 PM/CM Roles and Responsibilities PM/CM Roles and Responsibilities PM Exclusive roles PM Exclusive roles Technical management of program Technical management of program Technical documentation Technical documentation Represents upper management with respect to the project Represents upper management with respect to the project Profitability Profitability CM Exclusive roles CM Exclusive roles Contractual Management of program Contractual Management of program Scope Scope Cost Cost Compliance with terms and conditions Compliance with terms and conditions Advocate for company or agency Advocate for company or agency Lead negotiator Lead negotiator Contract documentation Contract documentation

6 Project Team PM/CM Shared roles PM/CM Shared roles Customer interface and communication Customer interface and communication Financial management Financial management How/where funds are spent How/where funds are spent Staying within budget Staying within budget Customer satisfaction Customer satisfaction Team management approach Team management approach Sometimes called “Integrated Project Team” (IPT) Sometimes called “Integrated Project Team” (IPT) Led by technical PM Led by technical PM CM is advisor on areas of expertise CM is advisor on areas of expertise

7 IPT Membership PM1 PM1 Contracts1 Contracts1 Safety Safety Quality Quality Accounting / Finance Accounting / Finance Engineering Engineering Mechanical Mechanical Electrical Electrical Software Software Logistics Logistics Training Training Spares Spares Documentation Documentation Manufacturing Manufacturing Key Subcontractors / Suppliers Key Subcontractors / Suppliers Others as required Others as required 1. PM and Contracts are the “Voice of the Customer”

8 IPT Best Practices Meet often Meet often Frequently in early phases where impact is greatest Frequently in early phases where impact is greatest Adjust frequency as program evolves Adjust frequency as program evolves “Concurrent engineering” “Concurrent engineering” Allows interaction among disciplines to identify and resolve issues up front Allows interaction among disciplines to identify and resolve issues up front Reduces cost impact of design changes Reduces cost impact of design changes Why is this important to CM? Why is this important to CM? Co-locate team members if possible Co-locate team members if possible Conduct team building exercises Conduct team building exercises

9 Contract Manager Competencies 1 Using effective communications Using effective communications Attend contract kick-off meetings Attend contract kick-off meetings Conducting periodic status reviews Conducting periodic status reviews Preparing written status reports Preparing written status reports Observe and monitor performance Observe and monitor performance Document performance Document performance 1. Contract Management Body of Knowledge, 4 th Edition

10 Active vs. Passive Management Active management means: Active management means: Getting out from behind your desk Getting out from behind your desk Meeting with stakeholders to discuss requirements and performance Meeting with stakeholders to discuss requirements and performance Taking the lead on addressing contract issues Taking the lead on addressing contract issues Being informed Being informed

11 Contract Management as a Customer Service Discipline CM supports PM CM supports PM Advisor for contractual matters Advisor for contractual matters Acquisition strategist Acquisition strategist Contract/subcontract type Contract/subcontract type Competition Competition Manages business matters for subcontracts and consultants Manages business matters for subcontracts and consultants Agreements/subcontracts Agreements/subcontracts Payment Payment Non-disclosure Non-disclosure

12 General Techniques to Improve Customer Service Go on “walkabouts” (Management by Wandering Around aka “gemba walk”) Go on “walkabouts” (Management by Wandering Around aka “gemba walk”) Promotes informal communications with PMs and team Promotes informal communications with PMs and team Improves understanding of technology and potential issues Improves understanding of technology and potential issues Demonstrates approachability and willingness to be a team player Demonstrates approachability and willingness to be a team player “Own” the contract / procurement process “Own” the contract / procurement process Be accountable for meeting schedules / deadlines Be accountable for meeting schedules / deadlines Represent Contracting at team meetings Represent Contracting at team meetings Offer solutions not roadblocks when problems arise Offer solutions not roadblocks when problems arise

13 Program Management Techniques Chartering Chartering Project Planning Project Planning Program Management Plan Program Management Plan Program Schedule Program Schedule Program Budget Program Budget Communications Plan Communications Plan Scope Management Plan Scope Management Plan Change Management Plan Change Management Plan Subcontracting Plan Subcontracting Plan Funds Management Funds Management Sub-supplier Management Sub-supplier Management Deliverable Management Deliverable Management Risk Management Risk Management Program Management / Baseline Reviews Program Management / Baseline Reviews

14 Chartering Give me a clear statement of what to do and the authority to do it …

15 Chartering Official management statement empowering PM (e.g., letter of appointment etc.) Official management statement empowering PM (e.g., letter of appointment etc.) CM needs similar charter to empower them to bind the company CM needs similar charter to empower them to bind the company signature authority for contract documents signature authority for contract documents negotiation authority negotiation authority

16 Program/Project Planning Plan it like you will do it; do it like you planned it ….

17 Program Management Planning as Applied to Contract Management Management Plan (from PM) Management Plan (from PM) Identification of stakeholders Identification of stakeholders Project roles and responsibility matrix Project roles and responsibility matrix Schedule baseline Schedule baseline Technical Technical Work Breakdown Schedule Work Breakdown Schedule Program tasks Program tasks Time phased actions Time phased actions Resources Resources Contract Management Contract Management Required reports/meetings Required reports/meetings Project milestones Project milestones CM’s should review and offer appropriate input to these plans CM’s should review and offer appropriate input to these plans Conformance to contract and SOW Conformance to contract and SOW

18 Program Management Planning as Applied to Contract Management Project budget/spend plan Project budget/spend plan Time phased budget Time phased budget Funding requirements Funding requirements Project team Project team Roles and responsibilities Roles and responsibilities Communications Management Communications Management Who says what to whom and when? Who says what to whom and when? Quality management (see subordinate plan) Quality management (see subordinate plan) Does it follow contractual requirements Does it follow contractual requirements Requirements Management / Scope Management (see subordinate plan) Requirements Management / Scope Management (see subordinate plan) Is there a change management plan in place Is there a change management plan in place Who is authorized to direct changes Who is authorized to direct changes What is the change process What is the change process

19 Communications Plan – What’s in it? What will be communicated What will be communicated Status Reports Status Reports CDRL Requirements CDRL Requirements Event driven communications (LOF/LOC) Event driven communications (LOF/LOC) Technical communications Technical communications Who will (is authorized to) communicate Who will (is authorized to) communicate When will information be communicated When will information be communicated Where (or to whom) will communications be transmitted Where (or to whom) will communications be transmitted

20 Communications Planning Develop mailing/distribution list Develop mailing/distribution list To primary individual(s) e.g., PCO etc. as per CDRL or other guidance To primary individual(s) e.g., PCO etc. as per CDRL or other guidance Copy to your PM Copy to your PM Update these lists as appropriate Update these lists as appropriate Pre-print labels Pre-print labels CD Labels, address labels etc. CD Labels, address labels etc. Create boilerplate letters Create boilerplate letters Transmittal of periodic reports Transmittal of periodic reports Limitation of Funds Limitation of Funds Set-up reminders in Outlook or other program. Set-up reminders in Outlook or other program.

21 Change Control Plan Technical Changes Technical Changes Design changes must be processed by Engineering / Configuration Control function and approved by customer Design changes must be processed by Engineering / Configuration Control function and approved by customer In-scope In-scope Generally to address performance or reliability issues Generally to address performance or reliability issues May reflect value engineering or address obsolescence May reflect value engineering or address obsolescence Paid for by contractor Paid for by contractor Out of scope Out of scope Adding functions or features Adding functions or features Revising requirements Revising requirements Changes to delivery location or date Changes to delivery location or date Generally paid for by customer Generally paid for by customer Generally results in a contract modification Generally results in a contract modification Administrative Changes Administrative Changes Appointing officials such as COR Appointing officials such as COR Address changes Address changes Incremental funding Incremental funding

22 Change Order Processing

23 Configuration Management Product oriented change management Product oriented change management Configuration Control Board Configuration Control Board Establish engineering baseline Establish engineering baseline Once baseline is established CCB must approve all changes to engineering baseline Once baseline is established CCB must approve all changes to engineering baseline Identify and quantify change impacts Identify and quantify change impacts Is Contracts a member of your configuration management team? Is Contracts a member of your configuration management team? DEMAND a seat at the table! DEMAND a seat at the table!

24 Change Management Change order request/proposal Change order request/proposal Capture costs of change Capture costs of change Identify ‘who pays’ Identify ‘who pays’ Unique job number for each change Unique job number for each change Track incurred costs for change Track incurred costs for change Ensure proper accounting of costs Ensure proper accounting of costs

25 Subcontracting Plan Not to be confused with small business subcontracting plan Not to be confused with small business subcontracting plan Part of “make/buy” determination Part of “make/buy” determination What work will be subcontracted and by what basis What work will be subcontracted and by what basis Teaming agreements Teaming agreements Small business set-asides Small business set-asides Competitive subcontracting Competitive subcontracting Procurement of materials Procurement of materials

26 Subcontracting Contracts Manager Contracts Manager Responsible for ‘flow-down’ requirements Responsible for ‘flow-down’ requirements Creates and negotiates agreement 1 Creates and negotiates agreement 1 Monitors subcontractor performance 1 Monitors subcontractor performance 1 Coordinates funding requirements 1 Coordinates funding requirements 1 Coordinates payment issues 1 Coordinates payment issues 1 1. This function may be delegated to a sub-contracts or supply chain management function

27 Funds Management Money is the lifeblood of a project: the Contract Manager’s job is to keep the arteries full and monitor the blood pressure...

28 Funds Management How much funding do you need? How much funding do you need? When do you need funding? When do you need funding? How much funding remains? How much funding remains? Can you complete the contract effort with the allotted funds? Can you complete the contract effort with the allotted funds?

29 Cost / Funds Management Consequences rely on contract type Consequences rely on contract type Cost contract Cost contract Overrun Overrun Stop work Stop work Incomplete effort Incomplete effort Fixed Price Fixed Price Profit/loss Profit/loss Long term future of the enterprise Long term future of the enterprise CM must provide appropriate notices CM must provide appropriate notices Limitation of Funds Limitation of Funds Limitation of Cost Limitation of Cost Special requirements Special requirements Guaranteed Final Report clause Guaranteed Final Report clause

30 Sample Project 4 Primary Tasks 4 Primary Tasks System design System design Hardware Design Hardware Design Software Design Software Design Functional Prototype Functional Prototype 12 Month Duration 12 Month Duration Approximate $4,000,000 total cost Approximate $4,000,000 total cost Incrementally funded CPFF Contract Incrementally funded CPFF Contract

31 Sample Project Schedule

32 Sample Project Cost

33 Sample Project Funds Planning LOF1 LOC LOF 1 Notice LOC 1 Notice 1 Assumes FAR 52.232-20 & -22 parameters are 60 days and 75%

34 Commitments Commitments = Commitments = Purchase Orders Purchase Orders Materials Materials Components Components Subcontracts Subcontracts Incremental funding Incremental funding Termination costs Termination costs Can not commit in excess of funding Can not commit in excess of funding “Spent = actual + commitments” “Spent = actual + commitments”

35 Adding Commitments to Cost LOF Notice

36 Cost Performance Monitoring May be required for contracts > 1 Million and > 6 Months. Contractor format is acceptable. DID- DI-MGT-81468 provides for tailoring requirements to ensure only minimum information required for effective management control is obtained from contractor. Generally N/A to FFP contracts

37 Schedule Performance Monitoring

38 Earned Value Management System Implementation (e.g., FAR 52.234-2 or DFAR 252.234-7001 or -7002) can be expensive Implementation (e.g., FAR 52.234-2 or DFAR 252.234-7001 or -7002) can be expensive Usually reserved for large programs (> $20M – $50M) Usually reserved for large programs (> $20M – $50M) Usually reserved for programs > 1 year Usually reserved for programs > 1 year ANSI Standard 748 requires compliance with 32 separate guidelines ANSI Standard 748 requires compliance with 32 separate guidelines Oftentimes the processes needed are in place – especially in ISO 9000 organizations Oftentimes the processes needed are in place – especially in ISO 9000 organizations Full implementation is not needed unless required by the contract Full implementation is not needed unless required by the contract Significant benefit can be derived by simply using EVMS techniques to monitor performance Significant benefit can be derived by simply using EVMS techniques to monitor performance Tracking cost performance Tracking cost performance Projecting Estimate at Completion Projecting Estimate at Completion

39 EVMS = Cost + Schedule Monitoring

40 Variance Analysis On/Slightly Behind Schedule. Why? $21,000 Under Cost. Why?

41 Why Costs Never Meet Projections Driving by rear-view mirror Driving by rear-view mirror Assume future costs or performance will mimic past performance Assume future costs or performance will mimic past performance Any anomalies were ‘bumps in the road’ Any anomalies were ‘bumps in the road’ Straight line projection based on known spend rates. Straight line projection based on known spend rates. “Political” Pressures “Political” Pressures Must finish within budget Must finish within budget Advocacy by Program staff Advocacy by Program staff

42 Estimate at Completion (EAC) EAC = Actual Costs to Date + Estimate to Complete (ETC) EAC = Actual Costs to Date + Estimate to Complete (ETC) Estimate to Complete = Budgeted Cost of All Work – Budgeted Cost of Work Performed adjusted for: Estimate to Complete = Budgeted Cost of All Work – Budgeted Cost of Work Performed adjusted for: Cost performance to date (CPI) Cost performance to date (CPI) CPI = Budgeted Cost of Work Performed ÷ Actual Cost CPI = Budgeted Cost of Work Performed ÷ Actual Cost.85M Budgeted ÷ 1.0 M Cost = CPI =.85.85M Budgeted ÷ 1.0 M Cost = CPI =.85 CPI > 1 is good CPI > 1 is good If CPI < 1.0 project is overrunning cost If CPI < 1.0 project is overrunning cost If 2M in work remains and CPI =.85 the cost to complete (ETC) is likely to be 2.35 M If 2M in work remains and CPI =.85 the cost to complete (ETC) is likely to be 2.35 M Cost at completion (EAC) would be 1M + 2.35M = 3.35M Cost at completion (EAC) would be 1M + 2.35M = 3.35M Risk assessment Risk assessment Risk events can impact costs and their impacts should be considered Risk events can impact costs and their impacts should be considered How? Stay tuned …. How? Stay tuned ….

43 Defense Acquisition University EAC Fundamentals Recurring Themes in EAC Research Recurring Themes in EAC Research PM’s are optimists PM’s are optimists Things will get better Things will get better Just a bump in the road Just a bump in the road Programs Do NOT improve over time Programs Do NOT improve over time EVM based EAC can provide insights EVM based EAC can provide insights

44 Three Categories of EAC EVM Performance Factor Based EAC EVM Performance Factor Based EAC Easiest to do re: previous example on slide 42 Easiest to do re: previous example on slide 42 Use Cumulative CPI to adjust estimated cost of work remaining Use Cumulative CPI to adjust estimated cost of work remaining Several techniques possible - provides a range of values rather than single point Several techniques possible - provides a range of values rather than single point Regression Analysis Regression Analysis Fit a curve to project cost based on historic data Fit a curve to project cost based on historic data Extrapolation errors possible when estimating outside the data’s range Extrapolation errors possible when estimating outside the data’s range Risk Based – Forward Looking Risk Based – Forward Looking Uses Monte Carlo simulation tool to estimate remaining risks Uses Monte Carlo simulation tool to estimate remaining risks Best when combined with a Program Evaluation and Review Technique Schedule Best when combined with a Program Evaluation and Review Technique Schedule Uses range of data for task duration rather than single estimate Uses range of data for task duration rather than single estimate Optimistic, pessimistic, and most likely Optimistic, pessimistic, and most likely Provides range of values and confidence intervals Provides range of values and confidence intervals

45 Deliverables Management Deliverables fulfill contract requirements. Make sure they are on time, conform to requirements, and that you document their delivery and acceptance.

46 Deliverables Management List of deliverable items List of deliverable items Schedule of deliveries Schedule of deliveries Soon to come due listing Soon to come due listing Memory ‘ticklers’ Memory ‘ticklers’ Transmittal documents Transmittal documents DD250 DD250 Letter of transmittal Letter of transmittal Notice to invoice Notice to invoice

47 Create and Maintain a Deliverable Item List / Schedule

48 Risk Management Murphy was an optimist ….

49 Implement a Risk Management Program Identify contract (program) risks and document them in a risk register Identify contract (program) risks and document them in a risk register Risks include opportunities as well as negative events Risks include opportunities as well as negative events Perform a qualitative risk assessment for each risk Perform a qualitative risk assessment for each risk Likelihood of occurrence Likelihood of occurrence Consequences Consequences Prioritize risks based on composite score Prioritize risks based on composite score Develop mitigation, transference, or avoidance strategies for top scoring risks Develop mitigation, transference, or avoidance strategies for top scoring risks

50 Quantitative Risk Analysis Statistical techniques used to quantify risk Statistical techniques used to quantify risk Assign probability or confidence interval to events Assign probability or confidence interval to events Estimate cost or impact Estimate cost or impact Best when integrated with schedule Best when integrated with schedule Identify likely completion date(s) Identify likely completion date(s) Identify final cost Identify final cost Software based solution Software based solution May take special training to use or interpret results May take special training to use or interpret results Performs complex analysis including interaction and ‘what if’ scenarios Performs complex analysis including interaction and ‘what if’ scenarios

51 Risk Management is an Ongoing Effort Periodic meeting to review and reassess risks Periodic meeting to review and reassess risks Monthly during first stages of project Monthly during first stages of project At least quarterly thereafter At least quarterly thereafter Mitigation strategies should be reassessed over time Mitigation strategies should be reassessed over time Still viable Still viable Has risk changed Has risk changed Update the risk register to add new risks or retire risks that no longer threaten Update the risk register to add new risks or retire risks that no longer threaten

52 Program Reviews The program team must be accountable for the performance of their projects …

53 Program Reviews Coordinate actions and inform stakeholders Coordinate actions and inform stakeholders Monitor progress Monitor progress Identify / discuss program / contract issues Identify / discuss program / contract issues Approve decisions Approve decisions

54 Program Review Content Adjusted to fit the organization’s needs Adjusted to fit the organization’s needs Should Include Should Include Technical accomplishments Technical accomplishments Schedule update Schedule update Items completed since last review Items completed since last review Deliveries made Deliveries made Delays or issues requiring assistance Delays or issues requiring assistance Get well plan for late activities Get well plan for late activities Financials Financials Performance to date Performance to date Funds remaining Funds remaining Additional funds required Additional funds required May include May include Upcoming events Upcoming events Staffing Staffing Problems or solutions needing approval Problems or solutions needing approval Lessons learned Lessons learned

55 Summary What to take with you as you leave

56 Key Points Contract Management requires involvement Contract Management requires involvement Get out from behind your desk and talk to people Get out from behind your desk and talk to people Take responsibility for the contract Take responsibility for the contract Budget Budget Deliverables Deliverables Property management Property management Reports Reports Take the initiative to identify and resolve problems Take the initiative to identify and resolve problems

57 Key Points Contract Managers are team players Contract Managers are team players Get to know your teammates and learn how to work with them Get to know your teammates and learn how to work with them We’re not gatekeepers so our approach should be “Tell me what you want to do and I’ll tell you what we need to do that” We’re not gatekeepers so our approach should be “Tell me what you want to do and I’ll tell you what we need to do that” Be proactive Be proactive Don’t wait for a problem to bite you if you can head it off beforehand Don’t wait for a problem to bite you if you can head it off beforehand Offer solutions to perceived problems Offer solutions to perceived problems

58 Key Points Stealing from the other guy’s toolbox is OK Stealing from the other guy’s toolbox is OK Be sure you understand your charter Be sure you understand your charter Participate in project (program) planning and share input with the team Participate in project (program) planning and share input with the team Change Management Change Management Communications Management Communications Management Cost Management Cost Management Plan it like you’ll do it … Do it like you planned it. Plan it like you’ll do it … Do it like you planned it. Using advanced tools such as EVMS and Risk Management will enhance your ability to do your job Using advanced tools such as EVMS and Risk Management will enhance your ability to do your job Learn the basics Learn the basics Learn the lingo Learn the lingo Apply the techniques Apply the techniques

59 Key Points Program reviews are necessary Program reviews are necessary Be prepared to brief contract status Be prepared to brief contract status Funds issues such as LOF or LOC Funds issues such as LOF or LOC Payment or invoicing as required Payment or invoicing as required Period of Performance etc. Period of Performance etc. Reports and deliverables Reports and deliverables Be prepared to assist others Be prepared to assist others Notifying appropriate officials of issues or changes required Notifying appropriate officials of issues or changes required Offer strategies for success Offer strategies for success

60 That’s all folks! Don Shannon PMP, CPCM The Contract Coach don@contract-coach.com http://www.contract-coach.com


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