By:
Maureen Sullivan, LLB, CTP
NECI President,
Legal Editor & Publisher
Facing today’s economic and political pressures to demonstrate how they are doing more with less, procurement professionals can find themselves pushed into giving short shrift to procurement planning. In a rush to get the RFx out the door and move on to the next drafting process, it can be tempting to give only cursory attention to the performance contract itself, and to lose sight of the main reason you are going to the market in the first place – to drive competitive tension and demonstrate transparency.
As we continually remind our learners, you will never have more leverage than you do before the competitive process starts, so take advantage of that by including clear, measurable performance requirements in the draft contract that is typically attached to or included with the procurement document. Not only will this help respondents provide their most accurate and competitive pricing – because they know exactly what is expected of them, and how it will be measured – but it will also be immensely helpful for keeping the contract deliverables on track and demonstrating that you have achieved value for money.
Most procurement professionals have had to deal with user dissatisfaction, delayed or deficient performance and reporting, and cost overruns (with the attendant political fallout). Only when stepping in to try and remedy such deficiencies does it become clear that the governing contract has no measurable, clearly defined performance expectations. A client recently advised that, when she stepped in to resolve a tense dispute over the performance of a landscaping contractor, the only reference in the contract to performance that she could find was a statement that “the lawns must look magnificent.” No wonder there was a dispute!
As procurement professionals should know, vague assurances about “high-quality goods” and “professional service delivery” don’t carry any weight in actually resolving a contract dispute. In fact, such statements work against the buying organization, under the principle of contra proferentum, in that ambiguity in a contract will be interpreted against the party that drafted it.
If you take the time to develop very precise, clearly defined performance standards and other contract requirements, you will avoid ambiguity that can lead to misunderstanding. Just as importantly, your contract managers will have the tools they need to work through the inevitable hiccups in performance, and, ultimately, to demonstrate that the organization realized its operational goals through the procurement and the resulting contract.
Clearly defined service levels or other key performance indicators can also be used as a powerful motivator for the contractor, by linking their measurement (good or bad) directly to the contractor’s ability to obtain more work – both for this contract and for future opportunities with your organization. Attaining specified performance levels can be tied, for example, to automatic extension or renewal rights, or adjusted volumes for the contractor, and can even feed into its ability to remain on your Standing Offer Agreements (SOAs), Master Services Agreements (MSAs) or other prequalified contractor list.
We have all heard the adage that “what gets measured gets managed.” We encourage you to take that to heart when drafting your next RFx and resulting contract, by spending adequate time setting up very clear, specific, and measurable performance expectations. The time, energy and credibility that this can save – both from deterring unqualified or incapable respondents, and in giving contract managers the tools they need to enforce the contract – will truly pay off tenfold for your organization.
National Education Consulting Inc.
Phone: (250) 370-0041 Toll Free: (888) 990-7267
