Assignment 2: Plan for Contracting
P R O F E S S IO N A L S T A N D A R D S CORNER
THE ROLE OF THE “ CONTRACT MANAGEMENT STANDARD” IN BUSINESS PROCESS TRANSFORMATION BY RONALD FALCONE
FOR DECADES, MANY ORGANIZATIONS HAVE UTILIZED SOME FORM OF BUSINESS PROCESS STANDARDIZATION IN ORDER TO IMPROVE FINANCIAL AND OPERATIONAL PERFORMANCE BY YIELDING EFFICIENCIES AND EFFECTIVENESS THAT RESULT IN REDUCED COSTS AND CYCLE TIMES.
The success of such process improvement initiatives is greatly enhanced using various build ing blocks (i.e., concepts, tools, and methodologies) such as:
• Process standards and disciplines,
■ Process capability maturity models, and
■ Process management approaches.
For the past several months in this column, much has been discussed about NCMA's "Con tract Management Standard" (CMS)1 and the emphasis and reinforcement that contract man agement is an essential business management function. This article explores these building blocks, including the CMS' integral role in facilitating a holistic approach to business process transformation.
BUSINESS PROCESS TRANSFORMATION There are numerous definitions of business process transformation, which invoke terms such as "business process reengineering" and "change management," but the common definition is:
[A]n examination of the steps required to achieve a specific goal in an effort to remove duplicate or unneces
sary steps and automate as many actions as possible. Compliance regulations, as well as changes in the
economy, often drive business process transformation.2
RONALD FALCONE, CPCM, CFCM, NCMA FELLOW
► Executive vice president, Distributed Solutions, Inc.
► Adjunct faculty member, University of Virginia.
► Member, NCMA Board of Directors.
St ronf@distributedinc.com
19 /in/ronald-falcone-74565b23
® Tysons Chapter
No matter what the definition, however, the common denominator is always people. Success ful business process transformation is the result of an optimal balance o f people, processes, and technology.
The bedrock for successful business process transformation in the public and private sector is achieved by using effective business processes based on consistent standards. (See FIGURE 1 on page 84.)
WHAT IS A STANDARD? The foundation for developing effective business processes relies on sound standards. Suc cessful organizations adopt some type of standard. For example, Fortune 500 companies have adopted standards developed by the International Organization for Standardization (ISO). Most of us are familiar with the ISO 9000 standards, which involve quality management and quality assurance:
ISO 9000 is a set of international standards on quality management and quality assurance developed to help
companies effectively document the quality system elements to be implemented to maintain an efficient
quality system. They are not specific to any one industry and can be applied to organizations of any size.3 Continued on page 84.
18 Contract Management July 2017
P R O F E S S IO N A L S T A N D A R D S CORNER
CONTINUED FR O M PAG E 18.
The Am erican National Standards Institute (ANSI) serves as c o o rd in a to r o f th e U.S. private sector's volun ta ry standardization
systems.4 Any U.S.-based organization can pa rticip a te in th e d e ve lo p m e n t o f ISO stan dards, b u t m ust p a rticip a te th ro u g h ANSI. The National Institute o f Standards (NIST)
also recognizes ANSI as th e representative o f U.S. interests at the in ternational level.5
ANSI defines a standard as:
[A] document, established by consen
sus, that provides rules, guidelines, or
characteristics for activities ortheir results.
Standards play an important role in every
day life. They may establish size or shape or
capacity of a product, process, or system.
ANSI requires ASDs to m aintain a continual consensus-based review b o d y to provide access fo r p e rio d ic p u b lic c o m m e n t/in p u t/ fe e d b a ck to a specific standard.
The role o f ANSI is to pro vid e a structure d fram ew ork o f procedures fo r standards d e
ve lo p m e n t organizations, such as NCMA. These procedures m ust be adhered to on an o n g o in g basis and encompass rigorous requirem ents fo r which ANSI accredits organizations th a t fu lly m eet those re q u ire
m ents.7 NC M A is n o t only a standards developer, b u t is also curre ntly pursuing an ANSI a ccre dita tion as an ASD fo r the CMS and th e Contract Management Body o f Knowledge (CMBOK).
They can specify performance of products
or personnel. They also can define terms
so thatthere is no misunderstanding
among those using the standard.6
It is im p o rta n t to note tha t ANSI does not d e ve lo p standards, b u t instead is a standards accre dita tion b o d y for U.S.-based standards de velopers. Through ANSI, an organiza- j tio n can apply to A receive desig- J g j nation as an A
"A ccredited
Standards
Devel- MA op er (ASD).
A BUSINESS
TRANSFORMATION
BUSINESS PROCESS MANAGEMENT
Acquisition Management Systems
Contract Writing Systems
Financial Management Systems
Other Business Systems
WHAT IS THE “CONTRACT MANAGEMENT STANDARD”?
The CMS is th e corn erston e fo r e l evating NCMA's stature am ong
its co m p le m e n ta ry professional
associations, such as th e Project ^ M anagem ent Institute (PMI).
Furtherm ore, th e CMS aligns o u r profession w ith o th e r
h igh er-tier kno w le dg e- based professions (such
as p ro je c t manage- l ment, accounting,
PROCESS CAPABILITY MATURITY ■ (CMMMHCMMI-ACQ)
and engineering), and provides
con tra ct m anagem ent
pro fe ssio n als w ith a
similar
set o f
STANDARDS ■ (C M S ) (C M B O K )
FIGURE 1. FOUNDATION FOR BUSINESS PROCESS TRANSFORMATION
GOVERNANCE • Regulatory Policy (F/t/?, DFARS, UCC) ■ Procedures, Guidance & Information
(D F AR S PG I) ■ Directives (DOD 5000 Series)
■ Guidebooks (FAI/DAG)
process disciplines based on rig orou s standards th a t are e m b o d ie d in said p ro
fessions.
NC M A defines th e purpose o f th e CMS as
follows:
The purpose of the Contract Management
Standard is to describe the nature of con
tract management in terms of the contract
management processes created through
the integration and interaction of job tasks
and competencies, and the purposes they
serve. The common and repeated use of
this standard will improve productivity,
increase efficiency, and reduce costs.8
The CMS defines jo b tasks as those tasks p e rfo rm e d on a rou tine basis by c o n tra ct managers who system atically process the jo b tasks to achieve th e exp e cte d results o f th e com petencies.9 (See FIGURE 2 on page 85.) For example, in th e "Pre-Award" (2.0) phase, the re is a "b u ye r" dom ain to
"D evelop S olicita tion" (2.1) along with its corre sp o n d in g com petencies o f "A cq u i
sition Planning" (2.1.1) and "R equesting O ffers" (2.1.2) from industry. The "R equest ing O ffe rs" com p eten cy involves a series o f jo b tasks and subtasks. Similarly, the re is also a "seller" dom ain to "D evelop O ffe r" (2.2) (e.g., p ro p o s a l/b id response) along w ith its co rre sp o n d in g com petencies o f
"Business D evelo pm e nt" (2.2.1) (e.g., b id /
no decision) and "D evelop W in Strategy" (2.2.2) (e.g., pricin g strategy). Each o f these com petencies has its own set o f jo b tasks and subtasks. The jo b tasks id e n tify the activities th a t need to be do ne (i.e., the
"w h a t"10).
WHAT IS PROCESS CAPABILITY MATURITY? The CMS provides co n tra ct m anagem ent professionals w ith a "process disciplin e"
based on a broad spectrum o f dom ain expertise. A process discipline is an
organization's ca p a b ility to define, follow , and im prove processes
w ith in a practice area (i.e., co n tra c t m anagem ent); it not only
requires cross fu n ctio n a l co op era tion, com m unication,
and collab ora tion , b u t
8 4 Contract Management July 2017
FIGURE 2.
P R O F E S S IO N A L S T A N D A R D S CORNER
also culture change in order for process improvement to resonate."
While some organizations are satisfied with only implementing standards and processes, others have also taken the next step and implemented a "p'ocess maturity model" for assessing the capability and maturity of their business p'ocesses. There are several capability maturity models, and the Capability Maturity Model Integration (CMMI) Institute has developed several-in cluding one for the acquisition of products and services (CMMI-ACQ). The CMMI-ACQ is a collection of acquisition best practices from government and industry for acquir ing products and services.12
Process capability maturity models are useful assessment and investigatory tools for determining the effectiveness of an organization's business processes. The
"Contract Management Maturity Model" (CMMM) was developed fc rth e purpose of assessing an organization's contract management process capability and con tinuous improvement of those processes.13 (Refer to FIGURE 3 on page 86.)14
While the focal point of CMMI-AQC is on the overall acquisition process with a
greater emphasis on program manage ment processes, the CMMM is specific to contract management processes and pro vides more granularity than CMMI-ACQ15:
The CMMM consists of five levels of matu
rity ranging from an ad hoc level (Level 1);
to a basic, disciplined process capabil
ity (Level 2); to a fully established and
institutionalized process capability (Level
3); to a level characterized by processes
integrated with other corporate processes
resulting in synergistic corporate benefits
(Level 4); and finally, to a level in which
processes focused on continuous improve
ment and adoption of lessons learned and
best practices (Level 5).16
For example, when assessing an organiza tion's contract management maturity levels for process automation, the following characteristics may exist:
A d Hoc (Level 7̂ —Lack of process auto mation w ithout any future planning for automated processes.
Basic (Level 2J-Lack of process automa tion with future planning for automated processes.
Structured (Level 3^-Some processes may be automated, such as a contract writing system.
Integrated (Level 4J-AII processes are fully automated within the contract manage ment organization, including solicitation/ contract writing, source selection, and post-award management.
Optimized (Level 5^—All processes are fully automated and integrated with other orga nizational core processes such as plan- ning/budgeting in the program office and funding/payments in the finance office.
Many organizations are quick to attribute contract management problems/issues/ failures to the individual competency level of their workforce without assessing other aspects. As Dr. Rene Rendon, associate professor at the U.S. Naval Postgraduate School, states:
[l]n addition to competent individuals,
organizations also need mature processes
and effective internal controls to ensure
organizational success.17
Additionally, government agencies are traditionally assessed only in terms of com pliance to statutes and regulations. This is especially true in the case o f acquisi tion agencies. However, as Dr. Rendon observes:
[R]egulatory compliance does not equate
to an agency's consistent use of acquisition
and contracting best practices, which is
one aspect of mature processes. Many
organizations also focus only on outcomes
and not on the processes that produce
those outcomes. Organizations require
competent people, mature processes, and
effective internal controls to collectively
ensure successful outcomes.18
WHAT IS BUSINESS PROCESS MANAGEMENT? Business process management (BPM) is defined as "the complete, end-to-end, dynamically coordinated set of collabora tive and transactional activities that deliver value to customers."19 Like contract man-
Contract Management July 2017 8 5
P R O F E S S IO N A L S T A N D A R D S CORNER
FIGURE 3. THE CONTRACT MANAGEMENT MATURITY MODEL (C M M M )
LEVEL 1 AD HOC
EVEL2 ASIC
Organization acknowledges that some contract management processes exist and are accepted and practiced.
LEVEL 3 STRUCTURED
LEVEL 4 INTEGRATED
LEVEL 5 OPTIMIZED
Informal documentation exists.
■ Lack of accountability for adhering to and complying with processes and standards.
■ Lack of process automation without any future planning for automated processes.
Some basic contract management processes and standards are only required on selected complex, critical, or high-visibility contracts.
Some formal documentation exists.
■ Contract management processes and standards are not considered established or institutionalized throughout the organization.
■ Lack of policy requiring consistent use of contract management processes and standards.
■ Lack of process automation with future planning for automated processes.
Contract management processes are fully established, standardized, institutionalized, and mandated.
Formal documentation exists.
Flexibility exists for tailoring contract management processes and documents on a case-by-case basis.
Some processes may be automated, such as a contract writing system.
Contract management processes are fully integrated with other organizational core processes, such as financial management and program management.
Collaboration exists between the contracting office and its end-user customer, the program office.
The program office is also an integral member of the acquisition team.
Periodical use of metrics to measure various aspects of the contract management process and to make con- tracts-related decisions.
All processes are fully automated within the contract management organization, including solicitation/contract writing, source selection, and post-award management.
Systematic use of performance metrics to measure quality and evaluate efficiency and effectiveness of contract management processes.
Use of continuous process improvement efforts to improve contract management processes.
Lessons learned and best practices programs are established to improve contract management processes and standards.
Contract management process streamlining initiatives are implemented as part of its continuous process improvement program.
All processes are fully automated and integrated with other organizational core processes, such as planning/ budgeting in the program office and funding/payments in the finance office.
agement, BPM is a professional discipline performed by people. BPM is a formalized and structured business process method ology that helps organizations deliver or ganizational performance using systematic management, measurement, and improve ment of all company processes.20
According to the Business Process Man agement Institute (BMPI), the purpose
of BPM is “the definition, improvement, and management of a firm's end-to-end enterprise business processes in order to achieve three outcomes crucial to a performance-based, customer-driven firm ."21 These three outcomes include:
* Clarity on strategic direction,
■ Alignment of the firm's resources, and
■ Increased discipline in daily opera tions.22
BPM tools help to manage the intersection of people, processes, information/data, and technology23 by adding a governance layer on top of standards and processes. One example is the automation of busi ness processes using process automation and workflow tools.
86 Contract Management July 2017
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