Fact-Based Negotiations PP Final file5/7/18 1 Fact-Based Negotiations Presented by: Lourdes Coss,...

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5/7/18 1 Fact-Based Negotiations Presented by: Lourdes Coss, MPA, CPPO Learning objective Ê Learn to prepare for fact-based contract negotiations Ê Gain understanding of the information components needed in fact-based negotiations Ê Develop models to quickly evaluate counter offers Fact-Based Negotiations Overview Ê A Process for Defining Objectives & Requirements Ê Principles of Collaboration and Leverage Bargaining Ê Knowledge Ê Understanding & Quantification of Expectations Ê Understanding of the product/industry/market Ê Model Ê Identification of components and “Should Cost” Ê Development of three approaches MSS, LAS, and BATNA

Transcript of Fact-Based Negotiations PP Final file5/7/18 1 Fact-Based Negotiations Presented by: Lourdes Coss,...

Page 1: Fact-Based Negotiations PP Final file5/7/18 1 Fact-Based Negotiations Presented by: Lourdes Coss, MPA, CPPO Learning objective Ê Learn to prepare for fact-based contract negotiations

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Fact-BasedNegotiationsPresentedby:LourdesCoss,MPA,CPPO

Learningobjective

Ê  Learntoprepareforfact-basedcontractnegotiations

Ê  Gainunderstandingoftheinformationcomponentsneededinfact-basednegotiations

Ê  Developmodelstoquicklyevaluatecounteroffers

Fact-BasedNegotiationsOverview

Ê  AProcessforDefiningObjectives&Requirements

Ê  PrinciplesofCollaborationandLeverageBargaining

Ê  KnowledgeÊ  Understanding&QuantificationofExpectations

Ê  Understandingoftheproduct/industry/market

Ê  ModelÊ  Identificationofcomponentsand“ShouldCost”

Ê  DevelopmentofthreeapproachesMSS,LAS,andBATNA

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TheJengaEffect

Process

Ê  HighLevelIdentification

Ê  Research

Ê  Analyses

Ê  Modeling

Ê  StrategyDevelopment

Ê  Implementation

Savingsinitiativesprogresstodate

Source: Team analysis; SIELs

PRELIMINARY

Savings impact breakdown and progress through realization stages

$M1

Key developments

1 Showing top end of the range for all initiatives with ranged savings estimates

July 16, 2014 Updatedinitiatives:•  SIELPart2for#2LEDStreetlightstobesubmitted•  SIELPart2for#3FleetDisposaltobesubmitted

17.023.9 24.9 24.9 24.2 25.2 23.8

6.9

17.0

Today

30.1

2.42.4

1.5

Mid-April

29.3

2.4 1.0

0.7

Mid-March

27.1

1.4 1.0

0.5

Mid-Feb

25.9

1.0

Mid-Jan

25.9

1.0

Mid-Dec

25.92.0

Mid-Nov

23.9

Mid-Oct

17.0

Target : $50M

RS1 (SIEL1) RS2 RS3 (SIEL2) RS4 Implemented ▪  LED agreement with XXXXXXXX: Savings model has been updated with terms of the agreement, ready for SIEL Part 2 approval

▪  Fleet disposal sales as of June 30, 2014 totaled $2.2 million, for $1,030,968 in savings over baseline

▪  More initiatives needed to reach the Mayor’s $50M/yr target

RS5 Realized

SAMPLE

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SpendAnalysis:StrategicWavePlan

Wave 1 = $16M - $28M

Wave 2 = $4M - $7M

Wave 3 = $1M - $2M

A recommended wave plan was developed based on savings opportunity estimates, ease of implementation elements, and the typical number of categories included in a strategic sourcing Wave.

Ease of Implementation Factors

• Category Complexity• Entity Distribution• Market Conditions• Ordinance Regulations

Recommended Sourcing Waves

HighLow

Low

High

HUMANRESOURCES

HIGHWAY&ROAD

TECH & COMM

SizeofO

pportunity

EaseofImplementation

LOGISTICS&SHIPPING

FUEL

ROADSALT

PROFESSIONALSERVICES

FACILITIES

SYSTEMSOLUTIONS

OTHER

UTILITIES

TRAVEL&ENTERTAINMENT

GENERAL&ADMINISTRATIVE

SCIENCE&HEALTHCARE

MARKETING&PRINTFOOD&FOODSERVICES

VendorD

Vendor B

VendorC

Vendor A

Annual Savings

Vendor E

SpendAnalysis&CostSavingsOpportunitiesSAMPLE

Source:CityofHoustonspenddata;interviews;teamanalysis

47

8292

229

39

157

51

54

81

NonITprofessionalservices

Roadways,paving&drainage

84

Fleet&fuel Maintenanceservices&supplies

129 Electricity

General&buildingconstrx.&repair

Water&sewerconstrx.&maint.

Easetocapture(includingtiming)

Low Medium High

PreliminaryopportunityAssessment ($MM)

High

Medium

Low

Watersupply&treatment 31

Wastemgmt.&disposal

Facilities

Telecom

IT

Size of bubble = FY2013 spend $MM

1SIELswilladdressspecificopportunitieswithinactionablespendareasandmaynotaddresstheentirescopeofeachspendarea

Spendinallcategories:$1.1BN

Third-partyspendprioritizationmatrix

Identified Launched SIELP1Long-termtransformativecategory

PRELIMINARY

-Existingfleetoptimization-Fleetpurchaseoptimization

-Watertreatmentchemicalscontractrenegotiation

DescriptionofongoingSIELs1

FORDISCUSSION

-LEDstreetlightretrofit

Currentfocus

SAMPLE

Pre-SolicitationMarket,Industry,andProduct/ServiceResearch

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IndustryandMarketResearch

Ê  IndustryÊ  Definition–Numberoffirmsprovidingaparticulartypeof

goodsorservices

Ê  Example:Construction,OfficeEquipment,Automobiles,Technology

Ê  MarketÊ  Definition–Thecustomersbeingserved

Ê  Example:Government,Education,Non-Profit,Fortune1000,Healthcare,etc.

Product/ServiceResearch

Ê  What’savailable?

Ê  Howmanyfirmsplayinyourmarket?

Ê  Whatarethefeaturesand/orspecifications?

Ê  Suitabilityforyourneeds?

Ê  AlignmentwithyourorganizationÊ  Traditional–lesstoleranceforchangeÊ  Strategic/Traditional–somealignment,buttraditionaltendenciesÊ  InnovativeValueadd–seekingtoalignwithindustry

Ê  PriceandQuality

Industry/Market/ProductResearch

Ê  IndustryResearchÊ  ListofcompaniesthatprovidethegoodsandservicesbeingsoughtÊ  Whatportionofthemarketdotheyserve?

Ê  MarketResearchÊ  GovernmentMarketÊ  OtherVerticalMarkets(public&privatesector)

Ê  Productand/orServiceResearchÊ  Features/SpecificationsÊ  PriceÊ  SupplyandDemandÊ  AvailabilityandConditions

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IndustryResearch

Ê  AreasofconsiderationÊ  KeyPlayersÊ  Historicalinformation

Ê  IndustryGrowth

Ê  SizeofIndustryÊ  TrendsÊ  MajororNotableChangesintheIndustry

MarketResearch&ProcurementMethodSelection

Ê  Product/ServiceAvailability

Ê  MarketSegmentation

Ê  Supplyanddemand

Ê  PricingStructure

Ê  RegulatoryRequirements

ComponentsofIndustryAnalysis

Ê  Reportsavailable

Ê  Approachthecorrectindustry

Ê  Supplyanddemandscenario

Ê  Competitivescenario

Ê  Recentdevelopments

Ê  Industrydynamics

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MarketResearch

Ê  AreasofConsiderationÊ  Competitors(listoffirmscompetinginaspecificmarket)

Ê  MarketShare

Ê  Demographics,Psychographics&Geographic

Ê  Behaviors&TrendsÊ  Numberofagenciescompetingfortheservicesofthepoolof

firmsavailable

MarketResearch

Ê  Establishrealisticminimumrequirements

Ê  Identifypotentialsources

Ê  Determineavailability

Ê  Identifynewproducts,innovativeapproaches,andpotentialchallenges

AgencyProfile

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AgencyAssessment

Ê  LevelofMaturityoftheOrganizationÊ  TraditionalÊ  StrategicÊ  Value-Add,Innovative

Ê  PaymentPolicyÊ  AccountsPayableCycleÊ  ApprovalProcess

Ê  OtherAgenciesintheMarketÊ  SupplyandDemand

ProcurementCategories,Methods,andMarketResearch

No Yes

Critical Strategic

Low

High

GoalQuickturnaroundwithminimaldisruptionofoperations

GoalMaximizevalue

GoalCompliantandefficientprocesswithlowerprice

GoalLowestTCOandcontrolleddemand

Commodity(Low-touch) Leverage

Valuecreatedbyaggregation

Item

com

plex

ity/criticality

~$650M ~$300M

~$50M ~$200M

RFP

Bid

MarketResearchprovideinsightintohowprocurementsshouldbestructured(i.e.paymentterm,valueadd,scope/specdevelopmentOrganizationalmaturityandstructurehasanimpactonhowgoodsandservicesareprocured

Categorymanagerrolesincategoriesrequiringmainly“Strategic”skills

RationaleCategorytitle Categoriesincluded SpendCategorymanager

TOTAL $390M7FTE

Quadrant

Utilities Electricity,NaturalGasandwater $165M1 ▪  Highspendbutfewvendorsandcontracts

▪  Strategic▪  Low-touch

Fleet Vehicles,parts,fuels $95M2 ▪  Complexandstrategic▪  RequiresProcurementreviewof

businesscases

▪  Strategic

IT/Telecom 3 Network:hardware,software,servicesPersonal:hardware,software,peripheralsTelecom:personalandnetworkhardwareandservicesITstaffing

$79M ▪  Verycomplexcategory▪  RequiresProcurementreviewof

strategiccapitalprojectsbusinesscases

▪  Strategic▪  Leverage▪  Critical

Airportgoodsandservices

1 Healthinsurance,propertyandcasualtyinsurance

$51M ▪  Complexcontracts▪  Strategic

InareaswithmorethanoneFTE,differentskillsetsmaybeusedtocreatejuniorandseniorroles.Forexample,inIT,onecategorymanagercouldbestronglyqualifiedforthe“Strategic”rolewhiletheothertwocouldmeettheleverageandcriticalroledescriptions

SAMPLE

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RiskAssessment

Ê  AgencyRiskFactorÊ  ClarityÊ  RequirementsAlignmentwithIndustryPracticesÊ  BudgetÊ  Knowledge&ExperienceÊ  TimingÊ  CoordinationandDecision-Making

Ê  ContractPerformanceÊ  SupplierManagementÊ  PastContractVolumeÊ  MaverickSpend

Modeling

NegotiatedCategories

Ê  Architectural&Engineering

Ê  ConsultingServicesÊ  ManagementConsultingÊ  ITConsulting

Ê  TechnologyandEquipmentÊ  TelecommunicationsÊ  OfficeEquipment

Ê  EnergyManagementÊ  NaturalGas

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PricingComponents

Ê  ConsultingÊ  LaborÊ  Overhead+Burden

Ê  ProfitÊ  ReimbursableExpenses

Ê  ComplexityandSizeofProject

Ê  ITConsultingÊ  ConsultingComponents

Ê  SoftwareLicense

PricingComponents(cont.)

Ê  TelecommunicationsÊ  VolumeÊ  EquipmentÊ  Requirements/FeaturesÊ  LengthofContractÊ  BonusesandPromotionDiscounts

Ê  Energy(NaturalGasorElectricity)Ê  Tradedmarketprice+markup/discountÊ  DeliveryÊ  EnergyManagementFeeÊ  TariffsÊ  Volume

$M

Initiativeandsavingsownershipbyleaddepartment

Source: Team analysis; SIELs

PRELIMINARY

3.73

4.34

7.00

2.70

23.77

2.40

2.43

6.00

0.27

1.50

1.50

FMD

1.00

6.00

FIN

5.00

1.00

1.30

LGL

7.00

HITS

7.10

1.1

0.10

Total

30.1

OtherSWMHPDHCDGSDHAS1PWE

5.00July16,2014

Savings impact breakdown by lead department

Noinitiativescurrentlyledbythesedepartmentsunderthe

P2Pprocess

SCORECARD

RS5Realized

RS3(SIEL2)Approved

RS4Implemented

RS2Assessed

RS1(SIEL1)Identified

1 In progress

SAMPLE

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DevelopingtheModel

Ê  PricingResearchÊ  IndustryÊ  GovernmentMarket

Ê  AgencyPricingRiskandTolerances

Ê  EstablishPricingStructureÊ  Architectural&EngineeringServicesÊ  ITConsultingServicesÊ  ConsultingServicesÊ  NaturalGas

PreparationforPriceNegotiations

Ê  TeamÊ  Procurement

Ê  EnduserÊ  Legal

Ê  RolesÊ  PriceLeadÊ  Volume/Quantity/Quality/ValueAddTermsLead

Ê  LegalTerms

Ê  Pre-NegotiationMeetingandPreparation

NegotiationClassification

Ê  TypicalScenariosÊ  EngineeringContractÊ  ConsultingContract

Ê  ValueAddProcurementÊ  AutoPartsManagementÊ  ManagedOfficeSuppliesÊ  ManagedPrint

Ê  ComplexNegotiationsÊ  TelecommunicationsÊ  Energy

Ê  ElectricityÊ  NaturalGas

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Questions

ThankyouContactInformation

LourdesCoss,MPA,CPPO

[email protected]

(312)927-3490

www.lourdescoss.com