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Contracting Excellence The Key to Program Success

Contracting Excellence The Key to Program Success. January 13, 2010. TIM MALISHENKO. Mission/ Program Success. RFP Win Criteria Fastest Delivery of Lumber Lowest Price Funding Limit-$75. Bid. BID A Same Day $ 75. BID B Next Day $150. Contractor A Wins.

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Contracting Excellence The Key to Program Success

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  1. Contracting ExcellenceThe Key to Program Success January 13, 2010 TIM MALISHENKO

  2. Mission/ Program Success • RFP Win Criteria • Fastest Delivery of Lumber • Lowest Price • Funding Limit-$75 Bid • BID A • Same Day • $ 75 • BID B • Next Day • $150 Contractor A Wins SOME THINGS ARE TOO GOOD TO BE TRUE

  3. Mission/Program Success

  4. Risk: Management and Mitigation • Technical • Achievable KPP’s • (contract to Threshold) • Incentives for Performance • Objectives • Pass Operational Testing • Schedule • Achievable • Margin • Integrated with all Suppliers • On time • 3.Cost • High confidence target cost • Allow for Risk/mgt. reserve • Appropriate Contract Type • 4. Risk Management • Plan • Assess • Analyze • Handle • 5.Manage to Baseline • Adjust for changes • No constructive changes APPROPRIATE BALANCE BETWEEN TECHNICAL/ SCHEDULE/ COST

  5. Elements of Program Success- Risk Analysis Process RISK RATING 5 - Low - Medium - High T/S/C Technical Schedule Cost 4 LIKELIHOOD 3 T/S/C 2 Objective 1 1 2 3 4 5 Threshold CONSEQUENCE Margin in Technical, Schedule, & Cost Will Increase Probability of Program Success

  6. Frame Acquisition Strategy to Risk Environment User Needs & Technology Opportunities TYPICAL CONTRACT TYPE CHANNEL Pre-Systems Systems Acquisition Sustainment Acquisitions B A C CPFF FFP (LOE) FPI FFP FPI FFP CPFF CPAF CPIF FOC IOC Concept Refinement Technology Development System Development & Demonstration Production and Deployment Operations & Support Concept Decision Design Readiness Review FRP Decision Review LRIP/IOT&E ILL DEFINED RQMT ... WELL ... DEFINED RQMT CE PDRR EMD PRODUCTION or DEPLOYMENT WORK STATEMENT TYPE CHANNEL

  7. Execute on Programs Industry Perspective: Mission/ Program Success • Right Strategy, Good Business Deal, & Great Execution • A good estimate that identifies & quantifies risk • Contract terms and conditions that bound risk • Payment provisions that provide neutral cash flow cash flow • Disciplined baseline management - is it in or out of scope • C&P team members that are engaged to find solutions when performance problems arise

  8. Estimating – Can we execute? Mission/ Program Success • Data Driven using relevant data • Early involvement with the Proposal Team • Feed the Estimating WBS to the EV WBS • Establish the baseline-include MR SUCCESS STARTS WITH A GOOD ESTIMATE

  9. Pricing - Proposal & Negotiations Mission/ Program Success “BASELINE” THE PROGRAM VIA THE PROPOSAL & NEGOTIATIONS • Understand the requirements • Ensure that risks are priced and/or bounded via terms and conditions • Ensure proposal fully and accurately reflects the deal and the commitment • YOU CAN’T MANAGE YOUR WAY OUT OF A BAD DEAL

  10. Contracts – Program Execution Mission/ Program Success • Proposal Phase – Mitigate Risk • Price it, or “T&C” it • Knowingly accept risk, communicate it & include impact in financial commitment • Performance Phase – Baseline Mgt • Mitigate risk & hold the EAC • Quantify risk - Use MR or increase EAC • Disciplined Change Control NEED TO ESTABLISH A GOOD CONTRACT BASELINE

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