Category Archives: When to Collaborate

Early Supplier Engagement

“When you talk, you are only repeating what you already know. But if you listen, you may learn something new.”- 14th Dalai Llama.

Group Collection by Justin Blake (Creative Commons)

Introduction

In the procurement lifecycle many organisations engage with their suppliers to seek information on the supplier’s ability to deliver and at what cost.  This is normally achieved with the release of a request for tender or request for quote.  Such strategies may be suitable where the customer has a very clear idea of what is needed, what market conditions are like, and where procurement risks are modest. When we move to more complex and riskier procurement activities, early supplier engagement is vital. This month’s blog explores why we need to engage early with industry and how to do so.

Smart Buyer Perspectives

A ‘smart buyer’ recognises that they will not always have all the answers. Vann’s framework explores the following questions that should always be asked from a smart buyer:

  • Why buy,
  • What to buy,
  • When is it needed,
  • How much should we pay,
  • How to buy,
  • Who to buy from, and
  • What was bought?[1]

Even for the most mature organisations with substantial internal capability and capacity, these critical questions cannot be effectively answered without engaging with the market.  At what stage though should we engage with industry? The Canadian Government Smart Buyer Procurement framework lists early engagement as one of their four essential pillars or procurement and recognises that early engagement ‘should begin as early as the needs identification stage.’[2] A smart buyer recognises that early engagement can reap benefits but what are these benefits?

Benefits of Early Engagement

Early engagement offers immense opportunities to explore the art of possible, ensure expectations are realistic, motivate[3] and prepare suppliers, and ensure business cases are credible.  The following list (though not exhaustive) explores these themes:

  1. Reduce asymmetry of Information.  Customers are not omnipotent and do not have a complete understanding of what the market can or cannot provide.  Early engagement allows for industry to inform requirements, identify opportunities, and validate critical assumptions.
  2. Promote realistic expectations. Optimism bias is rife in complex projects.[4] Unless we engage early with our suppliers then our initial business cases will be devoid of realistic cost, schedule and performance estimates.
  3. Reduce Bid Preparation Effort.  Transactional approaches to procurement often involve the release of a request for tender (typically the week before Christmas) that invariable comes as a complete surprise to industry.  Early engagement allows industry to inform the customer, prepare and respond faster to the RFT, and with more credibility.
  4. Reduced negotiation effort. Where contract requirements and conditions are developed unilaterally, with no industry engagement, expect negotiations to be protracted and adversarial.  Ensuring industry can provide feedback on requirements and commercial terms will take a substantial amount of pain out of negotiations.

Pursuing early engagement with industry also sets the tone of the future relationship. In such circumstances, the customer is highlighting that they value industry input, are seeking reciprocity, and are focused on delivering value rather than seeking the lowest price.  This is far more likely to promote the collaborative behaviours we need for successful delivery.

Strategies for Early Engagement

The Canadian government offers some useful examples of early engagement, including:

  1. Requests For information (RFIs);
  2. industry days;
  3. informal discussions;
  4. online questionnaires;
  5. online collaboration tools;
  6. focus groups; and
  7. one-on-one supplier consultations.[5]

More resource intensive and interactive strategies include:

  1. Design Competitions,
  2. Exploring and trading off requirements through Cost as an Independent Variable (CAIV),
  3. Funding rapid prototypes, and
  4. Engaging in collaborative project definition studies

These latter approaches normally require engagement with industry through some form of contract prior to entry into a head contract once requirements, budgets and schedules have been set. There are no limitations on who can be engaged here and funding multiple suppliers in a competitive early development phase may be valid.  

We are not limited to just selecting one of the above strategies.  We can choose more than one to help us converge on a solution. We need to remind ourselves that the solution is not just based on requirements but also the, “terms and conditions, pricing structure, performance metrics, evaluation criteria, and contract administration matters”. [6]  For example, we may exploit design competitions, CAIV, and rapid prototypes to define requirements, then use one-on-one discussions, questionnaires and industry days to refine commercial terms. 

Challenges with Early Engagement

Early engagement can introduce probity risks, resource challenges, and competition risks.  Probity risks arise where we are dealing with multiple suppliers and there is a great risk of ‘bid contamination’.  Similarly, customers need to be wary of adopting proprietary solutions that can hinder future competition.  Resource challenges arise as funds need to be available very early in the procurement lifecycle. The UK Government makes this point clear, “with early engagement though comes the requirement for early investment.”[7] There must be a compelling argument for engaging resources early in a program.  Competition issues may arise where we need to focus our efforts on a small cadre of suppliers rather than every participant in the market.  Where we are investing in rapid prototypes, CAIV approaches, or project definition studies a decision must be made as to who will be invited to participate. This will likely involve selection on ‘non-price’ criteria which opens the selection process up to criticism. 

Conclusions

Early engagement will pay substantial dividends if managed correctly.  Suppliers are far more likely to have a thorough understanding of business practices, technologies, and market trends in their core business when compared to customers.  Early engagement allows for early adoption of innovative solutions and value creation.  Developing a suite of contracts, commercial models, specifications, and requirements in isolation to your strategic suppliers will only erode value.


[1] Vann ‘Institutional Dimensions of the Government’s “Smart Buyer” Problem: Pillars, Carriers, and Organizational Structure in Federal Acquisition Management’ (2011).

[2] Canadian Government, Public Services and Procurement Canada ‘Smart Procurement’  https://buyandsell.gc.ca/initiatives-and-programs/smart-procurement/about-smart-procurement#Engagement

[3] UK Defence Procurement Policy Research paper 03/78 (2003).

[4] Bent Flyvbjerg, Nils Bruzelius, and Werner Rothengatter “Megaprojects and Risk: An Anatomy of Ambition” (2003).

[5] Canadian Government Opcit.

[6] Cohee, et al ‘Early Supplier Integration in the US Defense Industry’ Journal of Defense Analytics and Logistics Vol. 3 No. 1, (2019).

[7] Gansler et al ‘UMD FINAL Report LMCO An Analysis of Through-Life Support – Capability Management at the UK’s Ministry of Defense’ June 2012.

Collaboration? What’s in it for me? (Part 2)

In the previous article I described the benefits and the challenges of being collaborative including the effect of Collaborative Overload described by Rob Cross, Reb Rebele and Adam Grant in their 2016 HBR Article Collaborative Overload.  The question is what do we do about it?

Unfortunately, in the unusual times we live in require all of us to be more collaborative through familiar and established means (e.g. phone calls and emails) to newer means (e.g. videoconferencing such as  Zoom, WebEx, Microsoft Teams, etc. and collaboration tools such as Google G Suite, Slack, Atlassian Jira, Microsoft SharePoint/Teams, etc.).  While many of us collaborate in order to achieve the outcomes expected of us, this is underpinned by the fear of “I have so much of my own work to do but what if I don’t collaborate?”.  With global unemployment leaving entire market sectors and economies in ruin is now really the time to be seen as “uncollaborative” and “not a team player”?  With many working from home and increased availability for ‘catching-up’ increases the likelihood and severity of collaborative overload.  So what is the solution?

As with many things it is about balance.  Balancing the need of the individual to complete their own work (their output) with the collective need to collaborate to achieve the organisational outcome.  It is about setting both individual and collective objectives.  In a previous article (see Inputs, Outputs and Outcomes – Part 1 and Part 2) I discussed the differences between being individually accountability for an output while being collectively responsible for an (enterprise) outcome as one method for distinguishing between these two perspectives.  Here “Enterprise” refers to the collection of organisations and individuals that are collectively responsible for delivering the enterprise outcome.  The enterprise may be tightly defined and managed through commercial documentation, or loosely organised through an unwritten understanding of individual roles and responsibilities in delivering the enterprise outcome.

Just as important as setting and reporting on individual and collective performance is organisations and managers publicly encouraging, rewarding and celebrating those who achieve this balance.  

As way of a sporting example, Article VI(E)(10)(a) of the Collective Bargaining Agree (CBA) between the United States Major Baseball League (MBL) and the player’s union outlines 6 factors that may be considered in making a determination of the player’s value as follows:

  1. the player’s “contribution to his Club (including but not limited to his overall performance, special qualities of leadership and public appeal)” in the preceding season (often called the platform year);
  2. the player’s “career contribution”;
  3. the player’s past compensation;
  4. the salaries of comparable players;
  5. any “physical or mental defects” of the player; and
  6. the Club’s recent performance, which can include “[l]eague standing and attendance as an indication of public acceptance.”

As you can see value here is a balance of individual (player) and collective (Club) performance and over the longer term recognising there may be short-term ups and downs.

Unfortunately, for many organisations, this is rarely the case.

So my suggestion for those wanting to incentivise collaboration is to encourage, reward and celebrate those who achieve this balance by assessing value as both individual and collective contributions. By highlighting both requirements we are making it clear that individual success is not enough; rather success is defined as a combination of both individual and collective success.

To finish my story I started with, the person from my former company was fortunately very collaborative.  He not only succeeded personally but helped others in the company succeed regardless of location or position resulting in a “champion team”; and who doesn’t want to be a part of that!

When to Use Collaborative Contracts

In this blog we will explore when we should, and should not, pursue collaborative contracts.  We must remind ourselves that collaborative contracts are not binary structures involving either zero collaboration at one of the spectrum, versus an incorporated joint venture or alliance at the other end.  Collaboration can take many forms and is a scalable concept that must be tailored to the activity at hand.

Motivation

“Virtually all of the collaborative projects out-performed most defence projects” – UK NAO Good Governance ‘Measuring Success Through Collaborative Working Relationships’ (2006).

Firstly, we only pursue collaborative relationships where the benefits outweigh the costs.  That is, we have a motive for collaboration.  Cost and benefits though need to be considered in as broad as terms as possible and not just in terms of contract price.  Collaborative benefits may include:

  • improved prospects for repeat business
  • continuous improvement and innovation opportunities
  • increased likelihood for supplier participation
  • enhanced satisfaction for all employees
  • improved flexibility
  • less time wasted on disputes and issues management

Similarly, we also need to explore the ‘hidden costs’ associated with collaboration, which may include:

  • increased time and effort in tender evaluation and tender development
  • increased efforts in relationship monitoring and cultural alignment
  • supplier lock-in
  • increased likelihood of opportunistic behaviours.[1]

In summary, we first need to craft a robust business case when considering collaborative endeavours and ensure this business case is continually evaluated.

Means

Where collaboration is able to realise superior benefits,  then we should explore whether we have the means to engage in collaborative ventures.  We should ask ourselves if we have the right culture, appetite to risk, and internal capabilities to realise collaborative benefits.  The United Kingdom National Audit Office offers the following ‘gold standard’ for enabling positive working relationships. 

UK National Audit Office Gold Standard for Sustaining the right Cultural Environment[2]

The Australian Department of Defence Capability Acquisition Sustainment Group, in their Collaborative Contracting Better Practice Guide, also provides guidance to help ‘buy-side’ organisations gain insight into their ability to pursue collaborative outcomes through the use of a contract maturity model, which asks the following questions:

  1. Suppliers favour your organisation because it “always keeps its promises”, treats suppliers fairly, promotes trust, and minimises the cost of doing business.
  2. Both parties openly discuss “interests and desired outcomes” throughout the procurement lifecycle commensurate with the strategic importance of the relationship.
  3. Each contracting party understands the other’s goals and how to help achieve and quantify them
  4. The contract is viewed as a tool to plan and track business relationships
  5. Procurement practitioners are viewed as valued facilitators and integrators of stakeholder interests

Asking yourself, ‘do I have the capacity and capability to achieve these gold standard or contract maturity model outcomes’ will help you understand whether collaboration is the right step for your organisation.  If the answer is no, then leaders can take remedial action. Future blogs in this series will explore strategies to shift organisation capabilities and culture to better enable collaborative outcomes.

Opportunity

With the means and motive for collaboration established we now explore whether the right opportunities exist for collaboration.  The opportunities for collaboration will be driven by the commercial model, geography, and market power of buyers and suppliers.  Collaboration will only work where both buyers and suppliers are committed.  Opportunities for collaboration may be limited in the following circumstances:

  • A transactional environment where buyers and suppliers operate on a ‘take it or leave it basis’.
  • Inflexible governance arrangements exist (especially in the public sector) which inhibit the full range of relational outcomes. This is especially the case where compulsory competitive tendering rules are too onerous.
  • Key leaders and managers are unavailable to support collaborative outcomes.
  • Pre-existing and inflexible contract structures prevent the full range of collaboration outcomes. An example of this would be ‘government to government’ contracts such as Foreign Military Sales.

Even where some of these adverse features exist, there still may be opportunities to engage in some level of collaboration. 

When not to use collaborative contracts

Collaborative contracts should never be used where an organisation lacks the means to effectively implement them.  This may stem from an inappropriate organisational culture or lack of commercial maturity.  If an organisation is mostly ‘transactionally’ based, where disputes and issues are normally resolved by resorting to ‘lawyers at twenty paces’, then that organisation will be unlikely to engage in effective collaborative relationships. 

As we previously discussed, we therefore need to ask ourselves some very hard questions about our internal capabilities and the means to engage in collaborative ventures.  This could involve benchmarking the commercial maturity of the organisation through tools such as the International Association of Contract and Commercial Management  (IACCM) Capability Maturity Model or undertake a collaborative contract skills assessment under Supplier Relationship Management processes.  Organisations may also rely on performance scorecards to benchmark their relationships and skills in collaboration.

There is also an overwhelming temptation to pursue collaborative contracts to mask systemic failures in an organisation. When facing failure, the allure of collaboration may be seen as a quick fix.  Simply sticking a partnering charter on an existing contract and hoping for the best will unlikely create value.  Positive relationships and collaboration are necessary but not sufficient for success. That is, organisations must still make sure they address the key hygiene factors before they attempt collaborative contracts. This includes ensuring the following are addressed:

  • A clear and shared organisational vision
  • Leadership commitment
  • robust commercial skills
  • A mature Project Management framework

The evidence is clear that collaboration can deliver fantastic benefits both between and within organisations.  We need to ensure we implement collaborative contracts for the right reasons and understand what barriers exist to successful implementation. Future blogs will explore collaborative contract case studies of where things have gone well and where things have failed.


[1] Hikan Hakansson and Ivan Snehota, ‘The burden of relationships or who’s next?’, (11th IMP Conference Proceedings, Manchester, 7-9 September 1995), 522-36.

[2] UK NAO “Driving the Successful Delivery of Major Defence Projects: Effective Project Control is a Key Factor in Successful Projects” HC 30 Session 2005-2006 p7.