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Evaluating and Managing Performance …..it’s not just about Vendors Yukon Procurement Conference February 16, 2015
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Provide an overview of: what “Vendor Performance Management” is, and is not Some examples from public sector agencies in Canada (and their different objectives) Purpose
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It is: about improving success in meeting contract outcomes one element of “Vendor Management” Aligning procurement, contract terms, project management to meet organizational objectives Monitoring/mitigating vendor risks as well as Aggregating, assessing and communicating vendor performance information and Actively managing relationships It is NOT : code for simply increasing criticism of suppliers Surprise report cards Only about ‘bidder barring’ What is “Vendor Performance Management”?
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Increase accountability Help achieve best value for taxpayers Office of the Procurement Ombudsman, 2010 Increase competitive advantage Improve stakeholder satisfaction Increase performance visibility Survey Analytics, 2011 Benefits
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Most effective approaches integrate tools across all phases of the procurement and contract lifecycle For example, buyers can: Ensure clear statement of functional and performance requirements Establish key performance indicators Use in-contract evaluations, monitoring procedures, and measurement of performance against KPIs Evaluate and maintain records on supplier performance Provide feedback to suppliers How is it done?
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Each tool: Has different advantages/disadvantages Requires a different level of investment to implement and maintain Has a different likelihood of success, depending on: Market characteristics (e.g. market size and health, maturity of vendors) Capacity/maturity of an organization to properly implement and support Which tool(s) to pick?
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Recent Survey (Ontario)* 92% of suppliers and buyers think VPM is an important activity 25% of organizations have VPM activities Becoming increasingly common across Canada, some examples include: PWGSC Canada Revenue Agency Correctional Service of Canada Nfld Department of Transportation and Works Infrastructure Ontario Defence Construction Canada Province of BC Ministry of Government Services (Ontario) *Malatest & Assoc. (2012), Vendor Performance Management Study Public Sector Activity
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Driver: “train (not penalize) contractors/consultants to meet expectations of DCC” Overall rating = sum of points from equally weighted criteria Administration / Contract Management Execution / Project Management Quality of Workmanship Completion / Close Out / Time Health & Safety Scale of Unacceptable (0-5), Not satisfactory (6-10); Satisfactory (11-16) and Superior (17-20) Defence Construction Canada (DCC)
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Bidding privileges suspended for any score of 5 or less in one category, or a second occurrence of a total score less than 50% “failures” are relatively rare Heavy reliance on documentation – require clear evidence DCC’s own practices didn’t contribute Generally considered by staff and suppliers to be successful Staff believe contributes to their ability to be an attractive client in a competitive market DCC - continued
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Driven in part by desire to reduce time spent evaluating high volume of responses to RFPs/tenders Required for all contracts >$100,000 Vendor Performance Rating = average of that vendor’s Scorecards over a three year period Vendor performance is rated as : 1 – Consistently falls far below expectations (< 25% of expectations met) 2 – Frequently misses expectations (<50%) 3 – Mostly meets expectations but sometimes misses (<75%) 4 – Consistently meets expectations (100% of requirements) 5 – Exceeds expectations Ratings applied during final evaluation, worth minimum of 10% excellent service can lead to extended time on prequalified list Infrastructure Ontario
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Required for services contracts >$10M Conducted at beginning of a prequalification process, result in pass/fail Common indicators include: Performance - contractual standards & service target levels Cost performance Schedule performance Team BC – Internal Reference Check (2011)
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Two new tools: one for “strategic deals”, one for the consultants that support them Driver – recognition that improving performance requires clear and ongoing communication concerning performance expectations Rating carried out by both parties and aims to foster discussion about areas needing improvement or differences of opinion For consultants: If more than 2 of 8 questions unsatisfactory = 1 demerit 3 demerits = potential removal from RFQ BC – Vendor Scorecard (2014)
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Questions?
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