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Transcript of 1 1 December 4-5, 2006 Sheraton Premiere at Tysons Corner Vienna, VA NCMA 25th Annual Government...
1NCMA 25th Annual Government Contract Management Conference21st Century Federal Contract Management: Challenges and Opportunities 1
December 4-5, 2006Sheraton Premiere at Tysons CornerVienna, VA
Perils of the Client-Contractor Relationship in a Performance-Based Cleaning Contract
Perils of the Client-Contractor Relationship in a Performance-Based Cleaning
ContractPresented by: Vince Elliott, President - Elliott Affiliates, Ltd.
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Presentation OutlineI. Background
I. Industry Experience II. A National Study
II. Buying Mistakes to Avoid I. PreparationII. SelectionIII. ContractsIV. MeasurementV. Management
III. Best Practice Model I. Best Practice ActivitiesII. Perils to Best Practices
IV. Conclusion
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
I. Background
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
The # 1 reason for failure:“It just wasn’t what we expected”
•13% to 25% of outsourcing contracts are brought in-house within the first two years.
•Buyers replace 80% of their service contractors in the first three years.
•Contractors turn over 40% of their contracts each year, on average.
Industry Experience
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Overall Satisfaction vs. Quality Relationship
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
40.0 50.0 60.0 70.0 80.0 90.0 100.0
Percent Cleanliness Quality
Pe
rce
nt
Sa
tis
fac
tio
n
Not Clean - Happy Clean - Happy
Not Clean - Unhappy Clean - Unhappy
National Study Portfolio
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
A National StudyMetric Average High Low YouCleanliness 71.2% 95.7% 44.5%
Satisfaction 76.3% 90.9% 48.0%
Operations
Night Productivity 5,516 SFPPPH 8,557 SFPPPH 1,059 SFPPPH
Day Productivity 200,879 Per FTE 641,743 Per FTE 134,928 Per FTE
Supvr. Min/empl 36.8 Min. per Empl. 61.9 Min. per Empl. 5.9 Min. per Empl.
Supvr/Empl. Ratio 15.8 Empl. 81.1 Empl. 2.9 Empl.
Financial
Building $681,635 $4,903,000 $30,089
$/SF $1.06 $1.85 $ .43
$/hr $4,567 $10,385 $1,006
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Best-in-ClassSatisfaction vs. Quality Relationship
40.0
50.0
60.0
70.0
80.0
90.0
100.0
40.0 50.0 60.0 70.0 80.0 90.0 100.0
Percent Cleanliness Quality
Per
cen
t S
atis
fact
ion
Best in Class Procurement – Satisfaction vs. Quality Relationship
>80% + >80% @ $.80
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Best in Class Performance Portfolio Performance
Cleanliness 83.9% 70.0%
Satisfaction 86.3% 75.4%
Productivity 5,945 sfppph 5,472 sfppph
Price $.80 per SF $1.06 per SF
Best Practice Performance vs. Portfolio Performance
0
20
40
60
80
100
120
Per
cent
Cleanliness Satisfaction Productivity Price
Key Indicator
Measured Performance
Best
Typical
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
II. Buying Mistakes to Avoid
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Areas of Failure
• Inadequate Preparation (Savings Start Here)
• Flawed Contractor Selection (Project Failure Starts Here)
• Unclear Contract (Conflict Begins Here)
• Wrong Performance Measurement (Management Failure Starts Here)
• Ineffective On-going Management (Performance Improvement Rests Here)
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Preparation: No Checklist
• STOP Goals• Business Case• Staff-to-Strategic Metrics• Internal Capability• Market (contractor) Capability• The Contract
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Preparation: Typical STOP Goals
Goal Examples
StrategicMarket Change business focus
Increase current business market share
Increase shareholder value
Protect current market share
TacticalMoney Cut operating costs
Seek Joint venture-partnership opportunities
Find cash/capital Infusion
Get control of operation/function
OperationalCustomer Reduce services
Increase quality
Price cuts from suppliers
Reduce complaints
ProcessMechanism Acquire effective-efficient systems & software
Use “best practice” processes
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Preparation: Inadequate Property Information
More data, more savings
Less data, less savings
Less Data
Less Savings
More Data
More Savings
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Preparation: Inadequate Benchmarking
• Internal vs. Market– Scope of Work– Quality– Satisfaction– Operations & Processes– Financials – Management & Systems
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Preparation: Inadequate Needs AnalysisPortfolio physical characteristics
What are you paying per square foot? • How are you calculating? Net or Gross?
Current delivery model • Labor type, shifts, quality control
Number of complaints
How do you measure/enforce performance?• In-house or contractor lead?
Time frame (Expiration and Flexibility)
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Selection: No Checklist
• Transparent Vendor Evaluation• Double-Blind Ranking• Financial Analysis• Risk Assessment• Reference Site Visits• Scripted Interview• Firm & Final Adjustments• Contract Validation
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Selection: Incomplete Vendor Capability Assessment
• Management & People• Operations & Processes• Performance Profile
Quality Satisfaction
• Financials• Training• Experience• Certifications
Are they capable of delivering value and service success?
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Contract: Often Used as a Defensive Roadblock
• No goal alignment• No specified results• No pays for performance• No defined metrics• No rewards for continuous
improvement• No risk/reward allocation• Does not reflect the
relationship
• No mutuality of benefits• No 3rd party measurement• No scorecard reporting• No contractor process
accountability• Few fact-based decisions• No long term operational
thinking• Does not document value
A ChecklistA Checklist
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Measurement: Wrong Metrics
For:• Contract Compliance • Cleanliness Performance• Customer Satisfaction• Process Improvement• Occupant Expectations
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Measurement: Poor Quality Assurance Program
• Using Quality Assurance as an Inspection System, a Customer Relations Program, or a Marketing Strategy.
• Failure to translate QA into a workplace culture, a way of thinking , a way of doing & managing things.
• No Focus on Process Improvement.
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Management: Ineffective On-Going Focus
• No Contract Compliance Mgmt.No Contract Compliance Mgmt.• No Performance MeasurementNo Performance Measurement• No Process ImprovementNo Process Improvement• Buyer Expectations UnclearBuyer Expectations Unclear• Fail to recognize cost to: Fail to recognize cost to:
manage, measure, & maintain manage, measure, & maintain relationshiprelationship
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
III. Best Practice Model
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Best Practices ActivitiesValue achieved by developing and
implementing Strategic Best Practices:
• Facility Benchmarking• Strategic Outsourcing• Quality Measurement & Management• Performance Based Relationships• Contract/Vendor consolidation• Process Improvement
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Preparation Transition On-going Mgmt.
Fine-tuneSystems
Pre-StartOrientation
Define Proj.Milestones
EstablishScorecard
DocumentAddendums
ManageCommitments
CallCenter
ProcessImprovement
Up-dateContract
Monitor SOWAchievement
ContractCompliance
Commitment& Follow-up
Work Orders& Requests
BudgetControl
MeasurePerformance
ImplementScorecard
Re-SourceAssessment
PerformanceReporting
Buying Life-Cycle Management
Mgt. TeamEvaluation
Selection
Recognize Need
PrepareRFP
DocumentBldg. Data
DefineT’s & C’s
ReceiveBids
EvaluateBids
Performance-Fin. Link
Site Tour
Scopeof Work
PrepareBid Forms
CertifyBidders
Bid Conference
Proof ofConcept
Internal Capability
Firm & FinalReview
ReferenceSite Visit
Short ListBidders
ExecuteContract
Set KPI’s &STOP Goals
BusinessCase
Get Approval
ScriptedInterview
Advertise/Post RFP
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Performance-Based Relationships
• Buying & Managing Results, rather than Processes
• In RFP, Contractor bids services against Results, rather than Task & Frequencies
• Ensures you get what you pay for!
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Buying Price, Performance Productivity (labor)
What are you really buying?
Price
Performance
ProductivityManagement
Process
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Perils to Best Practices
• Loss of control• Sr. management
support• Cost creep• “Secret” info• Poor due diligence• One-sided relationship
• Disconnected buyer-seller goals
• NIH (not invented here) attitude poor scope of work
• Weak project management
• Price-driven decisions
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
More Perils:
• Inadequate documentation
• Poor project controls
• Poor outsourcing systems
• Buyer designs system
• No benchmarking
• No contract manager
• Unclear contract
• Failure to act on Project Resistance
• No performance metrics-scorecard
• No incentive-goal-fee link
• Mis-matched STOP expectations
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Unclear Buyer Expectations: A Checklist
• Before the deal • After the dealService guaranteeProven track recordProven domain skillsKeep company in “control”Experience in Buyer IndustrySavings guaranteeOngoing trainingConstant improvementBest practice Ctr. SystemsEffective HR strategiesCompatible cultureProprietary metricsOn-site management
Buyer-Contractor Relationship
ResponsivenessIntegrityTechnical competenceFlexibilityPersonal serviceValueProductivityCommunicationInnovationPolitically adeptBuyer personal successWIIFM-L (Lately)
Q u
a
l
i f
i
c a
t
i o
n
P
e r
f
o
r m
a
n
c e
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
IV. Conclusion
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Procurement’s Job: Value
It’s not about getting the best price,
it’s about getting the best people, with the best processes, from the best partner, at the
best price!
Price is a function of process best practices and a competitive market.
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
For Follow-up Questions
Contact Vince at:[email protected]
Elliott Affiliates Ltd.410-584-8560
www.ealtd.com
©2008 Elliott Affiliates, Ltd. and may not be duplicated by any means. CONFIDENTIAL & PROPRIETARY INFORMATION www.ealtd.com
Your Presenter: Vince Elliott, President Elliott Affiliates, Ltd.• Vince is the founder and current President and CEO of Elliott Affiliates, Ltd. of Hunt Valley, (Baltimore), Maryland. He is
widely recognized as the leading authority in the design and utilization of performance-based management techniques to establish continuous improvement systems for cleaning and facilities outsourcing. As one of the first to apply the concepts of performance based contracting in the Real Estate industry over 34years ago, Vince has a broad experience and insight into - and understanding of - the buyer's view of what “clean” means, how it is used in performance-based measurement, and on-going management of cleaning.
• Vince has represented buyers across the country in writing, modifying or updating over 500 performance-based building service contracts with an estimated market value of over a quarter of a billion dollars in contracted services.
• Drawing on the work of Dr. W. Edwards Deming, Joseph Juran, Phil Crosby, Yoji Akao and others, Vince has integrated the methodology of the Malcolm Baldrige National Quality Award process into a powerful strategy for cleaning system management. His work has been published in national magazines and he speaks frequently at national conventions. Vince has also been the recipient of a number of awards and commendations, including the prestigious Apgar Award for Excellence by the National Association of Corporate Real Estate Executives (NACORE) and Cleaning Management Magazine’s “Outstanding Service Award". He was recently the host on a weekly radio program called “Consulting Success: Key Strategies in Business Management” on which he interviewed leading business strategists, authors and experts. Vince is currently a regular contributing editor a national industry magazine.
• Vince is a member of the Association for Quality and Participation (AQP); the American Society for Quality (ASQ), where he is a past chairman of the Facilities Management Quality Control Committee; and a Charter Member of the Cleaning Management Institute (CMI). He is also a member of the International Facilities Management Association (IFMA), the Building Owners & Managers Association (BOMA), CoreNet Global, International Sanitary Supply Association (ISSA), and (NCMA) National Contract Management Association.
• Vincent Elliott has a bachelor’s degree in Economics from Towson University and a Master of Operation Research degree from Johns Hopkins University in Baltimore. Vince is also a past Associate Professor at a leading Maryland University teaching service management strategies.