Breakout Session # 404

1. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

2. Contracting Professionals as Business Managers or Advisors Breakout Session # 404 W. Gregor Macfarlan, CPCMSenior Research FellowLogistics Management Institute April 26, 2004 4:30-5:30 p.m. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

3. The Music and Lyrics of the 1990s • Let’s reminisce about acquisition reform • On everyone’s lips … Whistle While You Streamline • Song of the decade … Praise Reform and Pass the New Conditions • And the background chorus of millions … Acq … uis … ition • A decade to remember … and then some! NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

4. And What Were the Results? • Business initiatives galore in both the public and private sectors. • Revolution in business media – e-commerce and the Internet. • Downsizing, acquisitions, mergers, and globalization. • Instabilities in the buyer-seller community – everywhere. • The need for a wider focus (business leadership) among buyers. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

5. In the Real World – What’s Really Changed? • Customer relationships and trust through partnering – a major emphasis. • Building long-term supplier relationships – supply chain management. • E-commerce – speed is the mantra of the e-business age. • E-business digital nervous systems – the calling card of successful enterprise. • Moving from traditional to best-value buying strategies – a major redirection. • Integrated teaming to leverage talents – an old but critical focus. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

6. Where’s the Evidence of Change(Right in Front of Us … But Can we See It?) “You’re in Paris and decided to use your credit card. Approval involves a 46,000 mile journey over phones and computers. The job can be completed in 5 seconds.” (Peter Large – the Micro Revolution Revisited) “In the 1990s, for the first time ever, companies spent more money on computing and communications gear than the combined monies spent on industrial, mining, farm, and construction equipment.” (Putnam Investments) “Already an estimated two-thirds of U.S. employees work in the services sector, and ‘knowledge’ is becoming our most important ‘product’.” (Peter F. Drucker) NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

7. Look at the E-Procurement World(Exponential Changes with Huge Dollar Impacts) • Some practical cost-effective buyer-seller benefits • Reduced acquisition cycle times. • Fewer people to undertake front-end marketing and sales. • Instant use of digitized planning, development, and administration. • Negotiated deals handled by virtually all parties thousands of miles apart. • Performance environments using fewer high-cost resources. • It’s like “business at the speed of thought” (Bill Gates, Microsoft) NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

8. The Procurement Community of Practice(The Knowledge Worker’s World) • The manualworker and the knowledge worker • Manual worker: performs tasks comprised of separate pieces and repetition. Quality of outcome mirrors a defined process, not innovative alternatives to achieve a result. • Knowledge worker: performs tasks for which judgment applied to a process provides results. Quality of outcome mirrors the effectiveness of judgment, not the mere application of a process. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

9. Okay … So What’s the Point? • An immense increase in knowledge workers and a decrease in manual workers. • Procurement professionals are knowledge workers. Effectiveness and growth require: • Reasonable empowerment (autonomy to act is essential). • Opportunities to apply innovative judgment (strive to improve the deal). • Continuous learning for growth (staying ahead not just even). • Our biggest mistake: treating knowledge workers as a cost rather than as an asset. (Knowledge-worker environment: skills are portable, multiple jobs over a career) NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

10. So Who Cares About All This? • Do you? Does your boss? Does your organization? Does NCMA, ISM, and other associations? Do you see evidence of change for the better? • The need: a construct for “human capital” (people as assets whose value can be enhanced through investment) that recognizes that an organization’s value is dependent on the value of its people. • The General Accounting Office (GAO) provides a helpful construct for any organization – public or private sector. (GAO Exposure Draft – An Evaluation Framework For Improving the Procurement Function – October 2003) NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

11. The GAO Framework NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

12. Frameworks Require Filling(Documented Procurement Human Capital Factors) • Across the public sector, the procurement function within the acquisition workforce has decreased by thousands over the past seven years. • The private sector has remained fairly stable. • Workloads in both sectors have not decreased. • The public-sector buyer requires greater knowledge of market conditions, industry trends, technical details of commodities and services. • The procurement function is an integral part of the acquisition process. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

13. Contracting/Purchasing Professionals(What Recent Research Tells Us) • 1999-2001 CMI and ISM* research studies relate that for every 100 surveyed concerning their roles: • 90 indicated “more time sensitive.” • 85 indicated “more responsibility.” • 85 indicated “more team-oriented.” • 85 indicated “more strategic.” • 60 indicated “less clerical.” • Performance metrics are increasingly tied to strategic rather than transactional business measures. _________________________ *The Contract Management Institute (CMI) is the research arm of the National Contract Management Association (NCMA). The Institute for Supply Management (ISM) was formerly the National Association of Purchasing Management (NAPM). NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

14. Responses from Senior Contract Managers(Both Public and Private Sectors) • Which metrics are currently used by your organization to evaluate contracting/purchasing personnel? • Top 10 choices • Responsiveness. • Integrity/ethical standards. • Timeliness. • Written communication. • Oral communication. • Human/interpersonal relations. • Process focus. • Education. • Customer service (internal). • Accountability. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

15. Same Senior Contract Managers(Looking Forward) • Which metrics will be used within the next 3 to 5 years? • Top 10 choices • Business judgment. • Decision making. • Problem-solving ability. • Negotiation skills. • Customer service (external). • Integrity/ethical standards. • Education. • Human/interpersonal relations. • Responsiveness. • Communications. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

16. Some Bottom Line Research Results • The contract and purchasing management function is evolving toward a strategic business management focus. • Performance evaluation metrics increasingly assess results not just activity. • Employees are motivated to perform when they are measured about things they have control over. • Performance evaluation systems should be pervasive across an employee’s career path (i.e., recruitment, hiring, placement, training, evaluation, promotion, rewards, and compensation). NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

17. Encouraging Public Sector Forward Movement(Progress Takes Time) • 1999 – Federal Acquisition Institute (FAI) initiated a competency-based career development program in association with the Federal Procurement Executives Council (now the Federal Acquisition Council). • Objectives • To develop a workforce of business brokers who provide strategic business advice for leaders. • To build and apply the most effective business practices. • To join industry in mission-oriented business partnerships. • To obtain best-value goods and services. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

18. The Heart of the Career Model(Nine Core Capabilities) • Develop, negotiate, and manage business deals. • Communicate effectively. • Manage and lead change. • Solve problems in an ambiguous environment. • Analyze and understand the marketplace. • Build and manage relationships across functions and organizations. • Understand and effectively operate in the customer environment. • Develop and implement outcome-oriented solutions. • Execute. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

19. Competencies Reflect Core Capabilities(Skills, Knowledge, Capacities) • Competencies (a common professional language) enhance human capital management and permit communication about • Job requirements to potential applicants. • Preferred course content to educational/training institutions. • Employee performance expectations. • Career development opportunities. • Competencies influence human capital planning • Position descriptions and selection instruments. • Structured interviews and situational testing. • Performance planning, promotions, and awards. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

20. Validated Competencies for the Contract Specialist(Reinforcing the Nine Core Capabilities) • 24 General Competencies (not technical requirements) • Oral Communication … Decision Making … Interpersonal Skills … Problem Solving … Teamwork … Reasoning … Customer Service … Reading … Attention to Detail … Contracting/Procurement … Influencing/Negotiating … Integrity/Honesty … Planning and Evaluating … Flexibility … Self-Management/Initiative … Stress Tolerance … Writing … Creative Thinking … Learning … Self-Esteem … Information Management … Memory … Arithmetic … Math Reasoning. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

21. Validated Competencies for the Contract Specialist(Reinforcing the Nine Core Capabilities) • 14 Technical Competencies (areas of technical expertise) • Strategic Planning … Understanding the Marketplace … Understanding Sourcing (Commercial/Government Practices) … Defining Government Requirements in Commercial and Non-Commercial Terms … Defining Business Relationships … Effective Communication … Detailed Evaluation Skills … Effective Negotiation Skills and Effective Analytical Skills … Effective Award Resolution … Effective Communication of Contract Requirements for Administration … Effective Performance Management … Effective Financial Management … Make Decisions Related to Allowability of Contract Costs … Effective Resolution of Contract Termination and/or Closeout. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

22. At NCMA’s World Congress 2000(And 2003/04 NES Sessions) • A long-shot prediction (made back in the mid-1990s) … over 5 to 10 years performance metrics for the buyer as a business leader. • Contributory team member across the acquisition process. • Innovative thinker for strategic decision making, alternatives, and partnering. • Useful knowledge of multiple markets and the use of market research. • Strong internal and external communication and facilitation skills. • Proven skills in computer-based programs and e-business media. • Staying connected through digital nervous systems. • Concern for quality whatever the assignment. • Continuous learning through professional certification. How would you be evaluated today given these metrics? NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

23. Are We Making Progress … Who’s in the Game? • Yes … on progress … every inch becomes a foot and more. • Some significant players and communities of interest: • Governmental institutions: Defense Acquisition University (DAU), FAI, OPM, and the FAC. • Academic institutions … nationwide. • Commercial consulting and training organizations … without a doubt. • Professional associations: NCMA, ISM, PMI, and others. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

24. A Final Word … Or More • If … senior leadership is committed to contracting as a critical aspect of integrated business management, and • If … the workforce is motivated to become buyers as business managers or advisors then your organization is “on the way”and moving forward. • If … there is no committed leadership and no motivation then your organization is “in the way”and running in place. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

25. Put Some Fun in Your Life … Read!(A Sampling) Federal Acquisition Institute (FAI) • Report on General Competencies for the Federal Acquisition Workforce. FAI (GSA), May 2003. General Accounting Office (GAO) • Human Resources Flexibilities and Authorities in the Federal Government. Washington, D.C., July 25, 2001. • A Model of Strategic Human Capital Management. GAO-032-373SP. Washington, D.C., March 2002. • Human Capital: Effective Use of Flexibilities Can Assist Agencies in Managing Their Workforces. GAO-032-2. Washington, D.C., December 2002. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

26. More Reading for Fun • Status of Agency Efforts to Address Future Needs. GAO-03-55. Washington, D.C., December 2002. • Federal Procurement: Spending and Workforce Trends. GAO-03-443. Washington, D.C., April 2003. • Human Capital: A Guide for Assessing Strategic Training and Development Efforts in the Federal Government. GAO-03-893G. Washington, D.C., July 2003. • Department of Defense’s Plans to Address Workforce Size and Structure Challenges. GAO-02-630. Washington, D.C., April 2002. • An Evaluation Framework for Improving the Procurement Function (A Guide for Assessing Strengths and Weaknesses of Federal Agencies’ Procurement Structures), Exposure Draft, October 2003. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”