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Breakout Session # 1703

James Bogush, CPCM, C.P.M., NCMA Fellow

Senior Managing Consultant, IBM Global Business Services

Brian Corry, C.P.M., PMP

Service Area Manager, IBM Global Business ServicesApril 23, 2007

2:50 pm

Enabling Strategic Sourcing through Project Management to Deliver Measured Business Results

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Strategic Sourcing Process: 5 Stages

Drive Continual Improvement

1. Organize and Launch Council

2. Develop Charter and

Goals

3. Conduct Analysis

4. DevelopCategory

Management Plan (CMP)

5. Implement and Manage

1. Organize and Launch Council

2. Develop Charter and

Goals

3. Conduct Analysis

4. DevelopCategory

Management Plan (CMP)

5. Implement and Manage

Analyze and understand Commodity specific acquisition process Collect, analyze, and document Commodity spending Review bypass spend Collect enterprise-wide requirements Identify and understand Components-level requirements and demand Develop process for forecasting demand Benchmark against Industry and Federal Best Practices Identify and analyze supplier base

Implement CMPs Drive activities to achieve goals Develop Marketing Plan Implement Governance Process

Stand Up Council including key Commodity Stakeholders Schedule Standing Meetings

Develop Category Management Plan (CMP) for each Category Develop individual sourcing strategies for each Category Develop specific sourcing methodologies Include metrics and performance measures Perform SWOT Analysis to understand strengths and weaknesses of Plan

Conduct opportunity assessment Develop Council Charter and Goals Confirm Departmental and Components Spend Review council responsibilities

CMP Review and Approval

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Enabling Strategic Sourcing

• Today’s contracting professionals are expected to lead their organization’s initiatives in the arena of strategic sourcing.

• Executive Managers characterize this initiative as having great promise but difficult to implement

• In this role, the contracting professional transitions from a key team member in a conventional procurement into a leader of a commodity focused team.

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From Theory to Results

• To ensure practical results from the theory of strategic sourcing; it is possible to fuse this theory with principles of Earned Value (EV) project management.

• Use of EV is a clear trend, required for DoD major programs over $20M and included in many OMB public management program requirements.

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Tools to deliver dramatic results

• To enable this transition and achieve measurable business results, certain project management techniques become powerful tools for today’s contracting professional.

• Strategic Sourcing delivers dramatic cost savings and has been promulgated by OMB as a best-practice for government procurement.

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Overlay Project Management to the Strategic Sourcing Process

Utilizing their organization’s unique strategic sourcing process as a framework, procurement leaders may benefit by overlaying the Project Management Institute’s concepts of: Initiating, Planning, Executing, Controlling, and

Closing (IPECC). This approach yields benefits such as delivering

desired results for a particular commodity and laying the groundwork for a repeatable strategic sourcing process.

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The Intersection of Project Management Principles and the

Strategic Sourcing Process

1. Organize and Launch Council

2. Develop Charter and

Goals

3. Conduct Analysis

4. DevelopCategory

Management Plan (CMP)

5. Implement and Manage

Initiating

PlanningCon

trollin

g

ExecutingDrive

Continual Improvement

Closing

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Simplified EV

To measure progress within each phase of the strategic sourcing process, a greatly simplified form of earned value management may be utilized.

The simplest way to think of Earned Value is to equate it with physical progress.

It is something that is gained through some effort with value being earned as activities are completed.

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Simplified EV: What it’s not !

Some misperceptions concerning Earned Value EV is meant to be used only on large government or

aerospace/defense type of projects. EV is a cost-based performance measurement

system. If cost data is not collected, then EV is of no use.

EV is a very sophisticated process, requiring a laborious implementation by dedicated project management experts.

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Simplified EV: The good news!

While these attributes may apply when utilizing “full blown” Earned Value, the simplified tool gives contracting professionals a chance to easily track and manage the progress of a commodity council’s initiatives.

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Simplified EV: what it is!

A uniform unit of measure for total project progress

A consistent method for analysis of progress and performance for project sub-elements.

Simplified EV

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Simplified EV: How Simple is Simple?

The only user inputs required are:

Project Start & End DatesExpected tasks inside a predefined

frameworkExpected number of work days to accomplish

each taskPercent complete each week for these tasks

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Simplified EV Model for Procurement

To use the simplified model, the following assumptions are necessary:

• Planned work is assumed to be linear, not the traditional S-shaped curve

• No critical path schedule required from the user, order of execution for deliverables is flexible with work accomplished at an even pace.

• As cost is not tracked in the simplified model, the net work days serves as a "budget" for each deliverable identified.

By providing metrics and trending information, commodity councils can proactively achieve their goals.

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Standard Strategic Sourcing Tasks Populate the Simplified EV Tool

Only simple regular updates are required to realize the benefits!

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Overall Initiative Progress

Overall Initiative

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50.00

100.00

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200.00

250.00

300.00

Planned 12.18 22.69 34.03 45.38 56.72 68.07 79.41 90.76 102.1 113.4 124.7 136.1 147.4 158.8 170.1 181.5 192.8 204.2 215.5 226.8 238.2 249.5 260.9 272.2

Achieved 15.83 23.08 24.25 24.59 34.06

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

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Supporting Activities Detail Identify Organization “Burning Platforms”

0.00

20.00

40.00

60.00

80.00

100.00

120.00

Planned 4.29 8.57 12.8617.1421.4325.7130.0034.2938.5742.8647.1451.4355.7160.0064.2968.5772.8677.1481.4385.7190.0094.2998.57102.8

Achieved 8.05 9.87 9.17 9.29 18.16

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Organize and Launch Council

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

Planned 0.17 0.34 0.50 0.67 0.84 1.01 1.18 1.34 1.51 1.68 1.85 2.02 2.18 2.35 2.52 2.69 2.86 3.03 3.19 3.36 3.53 3.70 3.87 4.03

Achieved 0.21 0.32 0.48 0.48 1.00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Develop Charter and Goals

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10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

Planned 2.94 5.88 8.82 11.7614.7117.6520.5923.5326.4729.4132.3535.2938.2441.1844.1247.0650.0052.9455.8858.8261.7664.7167.6570.59

Achieved 2.20 4.90 5.20 5.20 5.20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Conduct Analysis

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1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Planned 0.38 0.76 1.13 1.51 1.89 2.27 2.65 3.03 3.40 3.78 4.16 4.54 4.92 5.29 5.67 6.05 6.43 6.81 7.18 7.56 7.94 8.32 8.70 9.08

Achieved 0.37 0.71 0.71 0.71 0.71

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Develop Initiative Management Plan

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10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

Planned 2.86 5.71 8.57 11.43 14.29 17.14 20.00 22.86 25.71 28.57 31.43 34.29 37.14 40.00 42.86 45.71 48.57 51.43 54.29 57.14 60.00 62.86 65.71 68.57

Achieved 3.26 5.16 6.27 6.49 6.49

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Implement and Manage

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Planned 0.42 0.84 1.26 1.68 2.10 2.52 2.94 3.36 3.78 4.20 4.62 5.04 5.46 5.88 6.30 6.72 7.14 7.56 7.98 8.40 8.82 9.24 9.66 10.08

Achieved 0.45 0.70 0.90 0.90 0.90

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Case Study with Commodity Councils: Fast, Effective Results with EV + Strategic Sourcing

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Case Study #1: >$1B Professional Services Strategic Sourcing Award for a Major Federal Client

• Cycle Time for Contract Award: 100% improvement

• Cost Reduction (was vs. now $): 22% average cost improvement

• Team tasking defined by Simplified EV• Change Management facilitated for >12

agency components

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Case Study #2: Dashboard Tracking to Highest Agency Management and Executive Branch

• Programs for >$1B in core agency operations identified as ‘Dashboard’ reportable

• Simplified EV used to define and track commodity council progress

• Council activities recognized by Federal Executives as well-managed and a ‘Leading Practice’

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Call to Action: Enable Strategic Sourcing through Project Management to Deliver Measured Business Results

• Complex Strategic Sourcing (s/s) programs need a way to simply and accurately track commodity council initiative progress to achieve real results.

• This tool should be used to provide metrics as well as to get advance warning of any issues so management can take preventative action.

• Achieve “Outstanding Results Through Effective Contract Management”

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Thank You for your participation in NCMA’s session today…