Private sector can learn from government — really!
by ASHIF MAWJI Upside Software
Automation in contract management is not just a task tackled by the private sector. More government agencies are embracing technology to help automate and streamline their contract management processes — to the point where these public sector entities are serving as best practice case studies for others, including the private sector. Main Points:
Governments and publicly funded agencies typically have more scrutiny, processes and governance for contract management, including complex rules for approvals, than the private sector. As such, the public sector is a prime candidate for automation, especially given the increased workload of personnel and reduced staffing levels.
Keep the initial scope small: in many government departments, there are a number of stakeholders with competing interests, so it's important to identify the initial pilot scope. Decision by committee: 'the old saying' - too many cooks in the kitchen...' holds true for projects as well - it's a must to have one decision maker who will strike the hammer when needed.
Always re-invent: automating your existing processes may be the wrong thing to do. It's important to take the opportunity to streamline existing processes and rekindle the stupid rules committee'.
Brag and be proud: celebrating and showcasing wins is important - it will help to inspire other groups and gain momentum and support.
Customization is a bad word in software and, unfortunately, public and private sector organizations typically tend to want to customize the packaged software they buy. Most software vendors also offer professional services, so they are not quick to discourage customization, since it adds to their revenues. In the two case studies discussed in this article, the respective government agencies were smarter and decided to take the packaged software as provided and leverage the built-in configuration capabilities of the software to meet 80 percent or more of their needs. They were willing to sacrifice some requirements as long as 80 percent or more were successfully met by the packaged software. This strategy allowed them to not only implement quicker, but do it under budget and, more importantly, lower the total cost of ownership. They had been burned with past customizations of their other back-end systems and continued to pay the price, upgrade after upgrade — so with this undertaking, there was an oath taken to forbid any customizations.
Case study: Canadian government agency
In this example, the impetus for a Canadian Provincial Government department to look at automating their contract management was because they were inheriting the contracts governed by another agency, but no additional staff. As such, being efficient and having as much automation as possible was not a luxury, but a necessity.
The agency, under NAFTA (North American Free Trade Agreement) rules had to issue a RFP (request for proposal) to fairly select the best solution for their needs. They scoured the global market and short-listed three vendors after a rigorous process; and after further due diligence, including financial viability, reference checking and other important elements, they selected the vendor. They had been very careful in ensuring that their requirements were well-defined and each vendor had to follow detailed scripts to prove that it could indeed meet the needed functionality.
Although the agency processed a large volume of contracts, the project team left their egos at the door and asked the vendor to help by providing known best practices and advice on what the agency should do in terms of streamlining processes. There were boundaries that had to be respected, since public funds were being used and certain elements pertaining to approvals, governance and accountability could not be compromised.
One big area of inefficiency was issuing RFPs, then conducting the evaluations and finally going through the contracting process, not to mention the post contract signing management activities (for example, performance and compliance management). Fortunately, the vendor this agency had selected offered an integrated sourcing and procurement solution that tied seamlessly into the contract lifecycle management, as well as a billing module that processed the contract-based invoices. The full suite integrated fully with the agency’s ERP (enterprise resource planning) system, which happened to be SAP. So with the new system, the agency could electronically issue an RFI, which could automatically lead to an RFP using sanctioned templates and processes. The system also enabled online evaluations and scoring, and this helped to capture the right level of detail as to why an award was made, who scored what, and so on. With a click of a button, all the relevant data transferred in real time into the contract management module, which then took over and worked through the negotiation and finalization process. Throughout this process, there were numerous touch points and dynamic rules since, depending on the monetary values and other elements, different people were needed in the approval workflow.
Having an accurate and complete audit trail was a key requirement, and the system the agency deployed provided extensive tracking and reporting. The agency had to deal with numerous public information requests that would involve them in gathering and searching for information across different locations and sometimes unsuccessful attempts to find the right information. With the new system, a formatted report with the right level of detail which was 100 percent accurate with supporting audit data, was available within seconds. This in itself gave huge time savings.
The agency had a pilot group using the software in about four months, with full integration to their ERP system and other line of business systems, as well as legacy data conversion. They were able to successfully process their contract workload in addition to the group’s contracts they inherited with their same level of staffing. More importantly, they were able to shave 40 percent off the cycle time using the automation and streamlined workflow. Automation helped the agency not only to keep up with the workload without increasing staffing costs, but enabled them to provide better service levels and accountability to the public.
Case study: US municipal agency
Like its Canadian counterpart, this US municipal agency created and managed tens of thousands of contracts using manual tools and processes. The increasing burdens of compliance and governance were taking a toll on the morale of the staff, as they did not have the tools to do the job to their satisfaction. As a result, the agency issued an RFP to procure off-the-shelf contract management software.
All the typical processes and approaches this agency had taken in the past were fair game for revamping. They had a ‘eradicate stupid rules’ committee that, like a two-year old, constantly asked ‘Why?’. Every rule and process was challenged. An answer of ‘… because we have always done it this way’ guaranteed that the process would be eradicated in lieu of a new and improved one.
Like several other organizations, this agency had extensive experience in building software solutions as opposed to buying packaged solutions — and so coming in under budget, let alone within the allotted time, was unheard off. A recent audit had shown that the agency’s contract management processes were poor at best, and the stress levels were increasing due to demands from senior management for improved compliance and accountability. This time the agency listened to reputable analyst firms who advised a contract management software package that would best serve their specific needs.
The agency also operated by committee, and decisions on requirements or prioritization took longer than they should have. For this project, they selected a chair of the steering committee and respected the chairs’ decision on the various aspects of the project.
The deployment was completed successfully within three months. Going from a manual process to an automated one was welcomed by many, but it had its share of friction. Doing things manually meant that there was a lot of flexibility (less controls), for certain items, one could bypass the rules to get things done quicker. The new automated system would not let such things happen, and so if there were rules that did not make sense, the system did not know better and would follow them (as directed). The ‘—eradicate stupid rules’ team had a full-time job and worked overtime to ensure processes that were implemented did in fact make sense and were needed. The project team also provided time saving reports to offer ‘carrots’ to those who were not 100 percent converted, since those same people had to spend countless hours in manually creating reports. Overall, the project was a great success, and it helped the agency cope with the contract workload while providing higher levels of governance and accountability. Morale also improved, as the staff now had time to strategize and further improve processes.
Lessons learned
While the government agencies discussed in this article are based in two different countries and provide different services to their stakeholders, the challenges of automating their existing contract management processes were quite similar. One of the key factors in their respective successes was their attitude and desire to be the best, and to do what it takes to streamline processes. Automation is an element to overall contract management excellence and does require the people and the desire to ensure an organization can attain better control while providing best-in-class service levels.
Ashif Mawji,
President and CEO, Upside Software Inc,
Provider of contract lifecycle management software,
Upside Software is the ‘2007 Supply and Demand Chain Executive Top 100 Company and 2006 Deloitte Fast 50 Company’. Ashif was named the Entrepreneur Year by the Business Development Bank of Canada in 2007 and also the 2002 Ernst and Young Entrepreneur of the Year® recipient (Prairies Region — Young Entrepreneur), ranked as Canada’s Top 40 under 40TM (2004),he is a member of the Financial Executives International and was recently awarded the Queen’s Golden Jubilee Medal.
