Monitoring Contractor Performance GRAHAM CONSTABLE P496 Rev 0

2 Questions 1.What systems deliver good monitoring of contractor performance? 2.What are the key metrics? 3.How is the contract structured to maximise performance outcomes? 4.How do clients ensure the contractor is reporting the correct level of details (not too much/too little)?

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4 Provider’s Poor Performance (8%) Poor Communication (11%) Not Mutually Beneficial (11%) Other (11%) Poor Governance (13%) Interests Become Misaligned Over Time (15%) Buyer’s Unclear Expectations Up Front (23%) Buyer’s Multi-Supplier Environment (3%) Poor Cultural Fit (5%) Why Contracts Fail

5 Buyer – Provider Disconnects Unclear Expectations from both clients and contractor; Perceptions vs Reality: relationship – behaviours; performance; Divergent views on savings: contractors believe savings occur more often than clients; New Ideas: have clients asked for innovation; Communication & inconsideration of each other; and Behaviours. Source: Outsourcing Centre

6 Relying on relationship than on performance indicators; Protecting trust and the Buyer’s proprietary information; Understanding and living selection and retention criteria of the Buyer; Create Value and move on from BAU; Set and agree joint expectations; and Govern well and aim for longevity. Buyer – Provider Connects Source: Outsourcing Centre

7 Better Communication (40%) Better Governance (14%) Clearer Expectations (21%) Better Contracts/SLAs (8%) Cultural Fit (1%) Additional Scope of Services (5%) Better Commitment (4%) Longer Term Contracts (4%) Flexibility (3%) What would add more value Source: Outsourcing Centre

8 What Buyers expect of Incumbents Source: Nigel Thacker “Rebid Team”

9 What really matters? Demonstrating you have had an impact on things that are really important to the client (operationally & strategically); Reviewing the performance measures; mix of input, output and outcome based; Knowing, understanding and mapping your client’s business priorities; Linking your activities to the client’s goals; Finding a way to measure your work in ways which show the impact you have; and Focusing, changing & improving. Source: Nigel Thacker “Rebid Team”

10 1. What systems deliver good monitoring of Provider performance? Specification – define deliverables; Select provider with partner mentality – key site personnel; CMMS – Buyer internal processes and procedures; Monthly reporting; and Direct Buyer monitoring, contractor ‘self monitoring’, joint monitoring via an alliance board, client random auditing (financial) and customer surveys.

11 2. What are the key metrics? Monitored through monthly report; Aligned with specification/deliverables; Balance scorecard, lead & lag indicators – technical PMs, CMs & minor works; Data must be easily available and KPIs able to be objectively measured; Select what is KEY and mandatory rather than extensive list of performance measures; and WH&S, response & job completion times, financial, invoicing, etc...

3. How is the contract structured to maximise performance outcomes? Specification – define deliverables – PM, CM & minor works; Contract Model - specialist contactors, managing agent, head contactor or hybrid Relationship – traditional or collaborative (partner); Pricing structure – comprehensive, management fee, schedule of rates, target cost/GMP; KPIs and risk/reward; Duration (3+1+1) and CPI increases linked to performance; and Communication – kick off workshop, team building, monthly operational, quarterly management and annual executive meetings – issue resolution. 12

13 4. How do clients ensure the contractor is reporting the correct level of details? Every Buyer is different and it’s tied to the contract model; May vary depending on performance – Contract Governance; Enough information – what is minimum level required; Structure report around KPIs & deliverables; Establish what and how many reports are actually required; and Executive Summary – traffic light (red, amber & green). In addition what level of technical reporting is required.

14 Summary Specification & deliverables Right relationship Reporting, KPIs & incentives Proactive contract management

15 Performance Management Company – ‘Square Wheels’ What’s the Buyer want?

16 Performance Management Company – ‘Square Wheels’ What is the Provider doing?

17 Buyer Vision Performance Management Company – ‘Square Wheels’

18 Provider’s Vision Performance Management Company – ‘Square Wheels’

19 Performance Management Company – ‘Square Wheels’ Joint Vision

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