Contracts and Managing Key Deliverables

1. Contracts and Managing Key Deliverables for Efficient and Effective Government Prepared by: Gregg Barrett Cylon Technology gregg.barrett@cylon.biz+27 11 662 1034www.cylon.co.za

2. Enterprise Contract Lifecycle Management (CLM)

3. Aberdeen Group Public Sector Study Contracts Pivotal in the Public Sector • “Creating, managing, and controlling compliance to supplier contracts are the greatest challenges faced by buying organizations in the public sector” • “Procurement is key to reducing the cost structures of government agencies, improving operating performance and service levels, and satisfying policies and regulations — without negatively impacting service to the public.”

4. Poor Contract Lifecycle Management Storing contracts in paper format limits the ability to: • Locate contracts • Manage contract versions and compliance • Identify specific terms and clauses • Analyze contract performance Limited visibility into contract and performance results in: • Inflated costs • Diminished negotiation leverage • Missed rebates and savings opportunities • Overcharging by suppliers • Low rates of compliance to non-price terms and conditions • Greater risk of regulatory violations

5. Challenges to Success • The Aberdeen-GCN study strongly suggests that public sector firms will most likely find the greatest opportunity for improvement in how they manage supplier contracts. Survey respondents from all public sector organizations identified the monitoring and enforcing of contract complianceas their most challenging supply management activity Conclusion • Regardless of jurisdiction, all government agencies would be well served to tackle the contract management challenge that they are facing. The reason: An organization’s ability to effectively create, manage, and control contracts is the primary driver of value.

6. So what needs to be done • Standardize contract procedures department wide • Develop a central repository for all contracts • “Activate” or “embed” contract terms within the software of online transaction systems • Track compliance more often • Devise performance metrics and, likewise, embed them in transaction systems • Improve automation of the contract management life cycle

7. The Result Employing such systematic and automated procedures for the management of supply contracts has: • Reduced material and administrative costs • Shortened contracting cycles, • Optimized contract usage and controls • Diminished operational and regulatory risk A sound contract management infrastructure can also improve the value and return on investment (ROI) for existing supply and IT initiatives, such as strategic sourcing, ERP, eProcurement, and eSourcing.

8. Case Study

9. Insight into Alberta

10. Insight into Alberta Albertans enjoy a very high quality of life • lowest overall taxes in Canada • highest level of services • highest disposable incomes in Canada • lowest unemployment rate in Canada.

11. Insight into Alberta Population:April 1, 2007, Alberta's population is estimated to be 3,455,062 (Source Alberta Finance) Government:Government of Alberta (GOA) • large regional government • over 25,000 employees • 24 distinct departments • known to be very progressive

12. Being Progressive How progressive • No provincial sales tax • GOA leads the public sector in Canada • Consistent year on year budget surplus • Lowest tax rates (for corporate and personal taxes) • Enacted a law that makes running a deficit a criminal offence First provincial/state government in North America to roll out a province/state-wide high speed internet infrastructure

13. Embrace Technology Objectives for embracing technology • Reduce operating costs • Increase service levels to constituents • Increase service levels from suppliers Needed to get a solid handle on: • Contractual obligations • Compliance • Performance measures • Risk management and • Governance

14. Business Situation and Major Goals • Bring purchasing and administrative costs in line • Manage contractual obligations • Compliance • Performance measures within each department and across departments • Replace and minimize the cost of managing thousands of vendor contracts Decided to Take Action • Identified Contract Management as a key area that impacted these areas and that needed to be addressed in order to drive improvement • Also noted the deployment of a CLM solution was fundamental to monitor the delivery performance of contracted services and products

15. The Requirements Contract creation Contract management • Infrastructure construction and maintenance, • Social services, • Information technology, • and all other types of contracts and business relationships Contract Reporting

16. The Process • Committee • identify and rationalize the requirements of all 24 departments • prioritize these into • mandatory and • desirable needs • Each department considered its’ requirements to be more important than the rest – so the rationalization task was tricky • The CIO for the GOA mandated • all departments were to use one centralized solution • would be one standard set of requirements for the entire GOA

17. Ingredients for Success • Senior level sponsorship and mandate • CIO of GOA • Deputy Minister • CFO • Well staffed project team • Members from all business areas • Ensure all scenarios were being analyzed and addressed • Minimal disruption to the organization • External Project Manager • Sole responsibility to manage the GOA project resources, the project plan and all deliverables • Pilot approach – One department at a time • Limited exposure to risk and substantially increased chances for success

18. Ingredients for Success cont.. • Detailed GAP Analysis and product walkthrough • 2 months conducting a detailed GAP Analysis • All departments were involved • felt that they were adding true value to the process - improved buy-in • Zero Product Customizations • Message from top management, based on lessons learned from past large-scale software implementations • Integration with Corporate ERP system • To leverage and enhance the large investment already made in the PeopleSoft ERP system • Full Fledged Training • Qualified trainers to address the needs of all departments

19. Challenges and more Challenges.. • 24 departments, 24 different ways • Harmonizing the requirement, based on a best practice approach • Paradigm shift – Old proven way vs new process • Change management was critical • Users played with the system early in the implementation phase • Able to see the benefits first hand • More willing to embrace the system • Sun-setting on existing systems • Identify these systems • Determine the data present • How to convert the valid and valuable data • Data conversation and cleansing

20. Scope of Deployment • 24 departments in a phased rollout • Range of hundreds to over one thousand users in each department • Different contract types and contracting processes in each department • Central management with widely distributed users in the field

21. Benefits • Improved contract efficiency and reduced operational costs • Streamlined operations, reduced and eliminated manual processes • Reduced contract lifecycle time by more then 30% • Reduced procurement costs of goods and services • Contract consolidation, contract compliance, leverage discounts properly, accurate billing and strategic sourcing • Regulate contract templates and enforce standardization • Reduced templates by more then 70% • Improved audit controls and compliance to legislation • Reduced ‘maverick’ contracts • Support for unique processes in different business units • Improved contract visibility and the related delivery of contracted goods and services • Consolidated contract repository • Increased visibility by 100%

22. Benefits cont… • Improved stakeholder involvement • Streamlined reporting time by more then 90% • Monitor and manage compliance, performance and risk more effectively and efficiently • Integrates with the government’s supply chain management strategy • Improved financial tracking of contract-based transactions • Staff redistributed to other much needed areas, making better use of their time • Provides faster more accurate response to stakeholders • staff, customers and suppliers • Integrates to Financial systems and processes • to ensure compliance of incoming and outgoing invoices • Streamlined contract request processing • automates the contract request process for field and non-contract savvy staff

23. Current Levels of Visibility You can’t change what you can’t manage You can’t manage what you can’t measure You can’t measure what you don’t know

24. Viewpoints Take action on Contract Lifecycle Management now…… “Contract management is where finance was 30 years ago”- Oracle “Organisations that don’t manage their contracts effectively will be at a tremendous competitive disadvantage.” -Tim Cummins, Director IACCM “In the business world, the rearview mirror is always clearer than the windshield.”- Warren Buffett “…the most concerning of all findings was the level of immaturity in the entire area of post-award contracts management, control and administration, arguably the highest risk area within contracting for most organizations” – Protiviti 2007 ….so start now by getting enterprise-wide visibility into your organisational contracts/agreements and commitments

25. Questions and Answers Questions? Websites: www.cylon.co.za www.upsidesoft.com www.iaccm.com Mail:gregg.barrett@cylon.biz