Using Project Management Techniques to Be a Better Contract Manager

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 • Roles and responsibilities • Integrated Project Teams • Program Management Techniques • Chartering • Planning • Program Management Plan • Program Schedule • Program Budget • Communications Plan • Scope Management Plan • Change Management Plan • Subcontracting Plan • Funds Management • Sub-supplier Management • Deliverable Management • Risk Management • 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. • 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. • 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

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

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

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

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

9. Contract Manager Competencies1 • Using effective communications • Attend contract kick-off meetings • Conducting periodic status reviews • Preparing written status reports • Observe and monitor performance • Document performance 1. Contract Management Body of Knowledge, 4th Edition

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

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

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

13. Program Management Techniques • Chartering • Project Planning • Program Management Plan • Program Schedule • Program Budget • Communications Plan • Scope Management Plan • Change Management Plan • Subcontracting Plan • Funds Management • Sub-supplier Management • Deliverable Management • Risk Management • 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.) • CM needs similar charter to empower them to bind the company • signature authority for contract documents • 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) • Identification of stakeholders • Project roles and responsibility matrix • Schedule baseline • Technical • Work Breakdown Schedule • Program tasks • Time phased actions • Resources • Contract Management • Required reports/meetings • Project milestones • CM’s should review and offer appropriate input to these plans • Conformance to contract and SOW

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

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

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

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

22. Change Order Processing

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

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

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

26. Subcontracting • Contracts Manager • Responsible for ‘flow-down’ requirements • Creates and negotiates agreement1 • Monitors subcontractor performance1 • Coordinates funding requirements1 • Coordinates payment issues1 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? • When do you need funding? • How much funding remains? • Can you complete the contract effort with the allotted funds?

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

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

31. Sample Project Schedule

32. Sample Project Cost

33. Sample Project Funds Planning LOC LOF1 LOC1 Notice LOF1 Notice 1Assumes FAR 52.232-20 & -22 parameters are 60 days and 75%

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

35. Adding Commitments to Cost LOF Notice

36. Cost Performance Monitoring Sample 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 • Usually reserved for large programs (> $20M – $50M) • Usually reserved for programs > 1 year • ANSI Standard 748 requires compliance with 32 separate guidelines • Oftentimes the processes needed are in place – especially in ISO 9000 organizations • Full implementation is not needed unless required by the contract • Significant benefit can be derived by simply using EVMS techniques to monitor performance • Tracking cost performance • 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 • Assume future costs or performance will mimic past performance • Any anomalies were ‘bumps in the road’ • Straight line projection based on known spend rates. • “Political” Pressures • Must finish within budget • Advocacy by Program staff

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

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

44. Three Categories of EAC • EVM Performance Factor Based EAC • Easiest to do re: previous example on slide 42 • Use Cumulative CPI to adjust estimated cost of work remaining • Several techniques possible - provides a range of values rather than single point • Regression Analysis • Fit a curve to project cost based on historic data • Extrapolation errors possible when estimating outside the data’s range • Risk Based – Forward Looking • Uses Monte Carlo simulation tool to estimate remaining risks • Best when combined with a Program Evaluation and Review Technique Schedule • Uses range of data for task duration rather than single estimate • Optimistic, pessimistic, and most likely • 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 • Schedule of deliveries • Soon to come due listing • Memory ‘ticklers’ • Transmittal documents  • DD250 • Letter of transmittal • 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 • Risks include opportunities as well as negative events • Perform a qualitative risk assessment for each risk • Likelihood of occurrence • Consequences • Prioritize risks based on composite score • Develop mitigation, transference, or avoidance strategies for top scoring risks

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