Module 2

Shift #1: Ensure Spec & SOW

Design for TCO

Shift #2: Structure the Solicitation for

Performance Results

TCO
Shift #3: Use Cost Modeling to
Select the Lowest TCO Supplier

Shift #4: Develop Supplier

Performance Agreements

Progression from Module 1 to Module 2

In Module 1, we covered how to take costs out of the
SOW/SPEC
In Module 2, we are going to cover how to make sure
you are using these modified SOW/Specs to buy
PERFORMANCE RESULTS
and not just goods and services

Stop For a Moment and Reflect

How much of your work time is spent in unplanned
activities?
How many of these unplanned activities are
customer or supplier related?
Have you done root cause analysis on these
fires..or are you just a really good firefighter?
What could you do differently with that time if you
could avoid predictable excursions?

Fundamental Premises Behind this Module:

1. Suppliers are in the business of making money
2. The best way for them to make money is to sell you
goods & services (resources) and move on. Next!
3. 75% or more of the customer and supplier
excursions you deal with are because you bought
resources instead of RESULTS
4. This misallocation of time impacts your results, your
career, your income, and most of all, your job
satisfaction.

Step 1 Cut the Fat

Step 2 Solicit Results

(Module 1)

(Module 2)

Key Decision Point Are You Buying

Resources or Results?

Benefits of Buying Results

Forces supplier innovation
Allows for harnessing of supplier industry benchmarking
knowledge
Holds supplier accountable to performance & results
Focuses on solving a problem or capturing an opportunity
Sets early expectations for performance
Aligns with both technical & business objectives
Allows for clear stakeholder alignment
Supplier management becomes easy

End
Result
Stakeholders offer little
resistance when buying

but will be the

source of endless
heartache when they dont
like the RESULTS
RESOURCES

How it will
be used

What they
want to
buy
8

Ensure Supplier Delivery of Results on the Backend

Requires Effort on the Front End!

the End

If you dont start the

procurement cycle with
a strategy to buy
results, you WILL buy
resources.

10

Blood, Sweat, & Tears

Blood, Sweat, & Tears

All of This is a Pay Now or Pay Later Process

SOW

RFX

Neg.
Plan

Time

Contract

Sup.
Perf.

SOW

RFX

Neg.
Plan

Time

Contract

Sup.
Perf.

11

Pre-solicitation preparation is critical to a

successful outcome
Pre-solicitation preparation means understanding what
you need, why you need it, exploring the market, and
taking the necessary steps that will allow you to get it
in the best way.
In order to buy PERFORMANCE
RESULTS, you need to first research
WHY the purchase needs to happen

The SOW Should

Be soliciting results & be performance oriented

Detail the WHAT is desired, not the HOW to do it
Encourage innovation
Have stringent success metrics
Buyoff from all key stakeholders regarding intended RESULTS
Getting buyoff on intended RESOURCES is a recipe for future
conflict
Be THE frontend mechanism that sets the stage for ensuring
results on the backend
Be a liberating vehicle to revamp your time allocation model
13

Back to the Future

Assume weve signed a contract with this supplier.

Given this assumption:

What is everything that could go wrong with this good

or service?
What kind of things frustrate you or take your time
unnecessarily with such goods or services?
What kind of problems or excursions have you seen
in the past?
In detail, what does success look like for you? How
would you measure that? Is there anything youve left
out?
For each of the areas that are important to you, how
would you want them fixed by the supplier if they fail
to perform?
14

What to Do With Customer Time Machine

Results
What results I
DO want to
experience

How would you

measure these
results?

Buyer turns these into

PERFORMANCE Metrics

Customer

What results I
DONT want to
experience

100% OTD as measured by

No inventory outages as measured by
Defect rate < .01%, as measured by
Customer service response time of 5 hours
Warranty breaches resolved in 24 hours
etc

Determine the solicitations objectives

VA expects to improve its current loan servicing
operations in several ways. Primary among these is to
increase the number and value of saleable loans. In
addition, VA wants to be assured that all payments for
such items as taxes and insurance are always paid on
time.
Suppliers will give you better solicitation
responses if you tell them what problem
you are trying to solve

Key Supplier Performance Actions in RFX

Specifically state in your RFX that you are soliciting an offer for performance and
results (not resources)
Indicate only suppliers willing to commit to deliver on performance promises need
submit a proposal.
By responding, supplier must be solving a problem or offering a solution
Salespersons job is to shift you to his/her solution Does it comply with your
solution?
By responding, supplier is giving a promise to perform
Must include stringent performance criteria that were defined in SOW (Success
Metrics)
State the problem as well as the solution, so that supplier innovation is harnessed
17

Evaluation Criteria
You can weigh each evaluation criteria, e.g.
On time deliveries -30%
Quality issues -50%
Overcharges -5%
Responsiveness 15%
Supporting the performance result metrics is not
optional by responding, they are agreeing to do so

Call to Action
1.
2.
3.
4.
5.

Remember: The supplier wants to sell you resources, and the customer will give
you a SOW/Spec for resources - but they will always complain about results.
Put your customers in a time machine and ask them what success looks like and
how they will measure it
Turn the customers vision of success into a set of measurable PERFORMANCE
RESULTS
Embed these measurable criteria in the solicitation and state that you are soliciting
PERFORMANCE RESULTS
Have the selection criteria includes both of these:
a)
Compliance to specs/SOW design criteria (what the customer wants today)
b)
Ability to perform to performance results criteria (what the customer wants
tomorrow)

Lets answer your questions!

&