際際滷

際際滷Share a Scribd company logo

Dover performance contracts 2015

Download as PPTX, PDF
Jerry Dover
Jerry Dover

An experienced-based argument for the consideration of Performance Based Contracting as an option to improve outcomes. Simply put, moving from "paying contractors for goods and services", to "rewarding partners for measured outcomes".

1 of 21
Downloaded 15 times
Making the leap from paying for goods and services to rewarding for desired outcomes! Presented by: Jerry Dover, P.Eng. Director Engineering Give and Go Prepared Foods Corp.
Engineer and Maintainer Project Engineer Maintenance Manager Infantry and engineering officer Introduction 2 Several blows to the head
Definitions* Contract: a legally binding, voluntary agreement between parties 3 *from an engineer not a lawyer typically defines the provision of goods or services
4 Definitions Defined Outcomes Measured Performance Linked Compensation PERFORMANCE BASED CONTRACT
5 Learning From Experience: A Story* * About how I learned to use PBCs through trial and error and mistakes and failures and blows to the head and so forth
6 Life as a Manager of Contracts Seemed Stable and Unchanging Dont worry, if it doesnt work, well take it back Our Standard Terms are: 50% downpayment 40% due on notice to ship 10% due on delivery net 30 days We have a great Service Agreement for 12 Maintenance visits per year, unplanned parts and labour extra This is all very normal crazy talk!
7 We Want: Predictability - PM contracts Reliability - new capital assets Productivity automation We get: Emergency outages Unexpected expenses Performance below expectations My happy life as an engineer was much like your happy life:
8 I had to supply some unique, older rebuilt equipment to a German integrator who was building a showpiece production line One day, things changed They did not want our old equipment to risk their delivery and payments, so they asked us to sign a Performance Contract
9 What is the underlying purpose of this type of contract? How will it shift the balance of risk and reward? Can we use this type of contract to our benefit? This Started a Learning Quest
10 So I tried it on other suppliers, and got ANGER CONFUSION DELAYS LEGAL REVIEWS (GOOD) REFUSALS (NOT GOOD)
11 A key supplier of critical equipment simply refused to accept it First contract after 20 years serving your company! No customer of ours has ever asked for this! Your performance demands are too stringent and unfair!
12 Given this resistance, do we proceed? Why the resistance? (Is it worth the fighting) What are the true risks and benefits? (Will it really help) How exactly do you implement & enforce? (Can we make it work)
13 overcome the fear of change trust: it must be a mutually-beneficial agreement understanding the risks and costs of failure collaborate on defining the service levels be VERY clear on how the outcomes will be measured, and by whom agree on your dispute resolution mechanisms Do we go back to the status quo, or press on with this new way?
14 The PBC Framework
15 The PBC Framework Table of Contents 1. COMPONENTS OF THIS AGREEMENT ................................... 2 2. SCOPE OF SUPPLY AND PRICE ........................................... 2 3. DELIVERY DATES AND CONDITIONS ................................... 4 4. PERFORMANCE SPECIFICATIONS ........................................ 5 5. TECHNICAL SPECIFICATIONS ............................................ 5 6. INTERFACES ................................................................ 6 7. SHIPPING METHODS AND CONDITIONS ............................... 6 8. INSTALLATION AND COMMISSIONING .................................. 7 9. EQUIPMENT DOCUMENTATION .......................................... 8 11. SPARE PARTS AGREEMENTS ............................................. 10 12. COMMERCIAL AGREEMENTS ............................................. 10 13. CONFIRMATION OF THE AGREEMENT ................................. 13
16 The Supplier has a financial inventive to beat the targets Both parties could track progress clearly I could focus on other aspects of the project The End Results Our management was more confident When a spec was not met, the vendor fixed it without complaint Both parties got what they wanted!
17 Our teams attitude evolved from What Did We Learn? How Are Things Better? Passive acceptance of goods/services Deeper understanding of apportioning risk Proactive, mature approach to link rewards with outcomes
The Moral of the Story 18 Speak in terms of performance. Mutually agree to acquire: specific capabilities desired ranges of availability defined standards of build, finish, and maintainability
19 Focus on: true partnering a mature, non-adversarial approach to assigning incentives and damages work hard to determine capabilities and how to measure them The Moral of the Story
They make sense They improve on the status quo They help BOTH parties succeed I welcome your comments and feedback! jerry_dover@hotmail.com
Additional Resources 21

More Related Content

Dover performance contracts 2015

  • 1. Making the leap from paying for goods and services to rewarding for desired outcomes! Presented by: Jerry Dover, P.Eng. Director Engineering Give and Go Prepared Foods Corp.
  • 2. Engineer and Maintainer Project Engineer Maintenance Manager Infantry and engineering officer Introduction 2 Several blows to the head
  • 3. Definitions* Contract: a legally binding, voluntary agreement between parties 3 *from an engineer not a lawyer typically defines the provision of goods or services
  • 5. 5 Learning From Experience: A Story* * About how I learned to use PBCs through trial and error and mistakes and failures and blows to the head and so forth
  • 6. 6 Life as a Manager of Contracts Seemed Stable and Unchanging Dont worry, if it doesnt work, well take it back Our Standard Terms are: 50% downpayment 40% due on notice to ship 10% due on delivery net 30 days We have a great Service Agreement for 12 Maintenance visits per year, unplanned parts and labour extra This is all very normal crazy talk!
  • 7. 7 We Want: Predictability - PM contracts Reliability - new capital assets Productivity automation We get: Emergency outages Unexpected expenses Performance below expectations My happy life as an engineer was much like your happy life:
  • 8. 8 I had to supply some unique, older rebuilt equipment to a German integrator who was building a showpiece production line One day, things changed They did not want our old equipment to risk their delivery and payments, so they asked us to sign a Performance Contract
  • 9. 9 What is the underlying purpose of this type of contract? How will it shift the balance of risk and reward? Can we use this type of contract to our benefit? This Started a Learning Quest
  • 10. 10 So I tried it on other suppliers, and got ANGER CONFUSION DELAYS LEGAL REVIEWS (GOOD) REFUSALS (NOT GOOD)
  • 11. 11 A key supplier of critical equipment simply refused to accept it First contract after 20 years serving your company! No customer of ours has ever asked for this! Your performance demands are too stringent and unfair!
  • 12. 12 Given this resistance, do we proceed? Why the resistance? (Is it worth the fighting) What are the true risks and benefits? (Will it really help) How exactly do you implement & enforce? (Can we make it work)
  • 13. 13 overcome the fear of change trust: it must be a mutually-beneficial agreement understanding the risks and costs of failure collaborate on defining the service levels be VERY clear on how the outcomes will be measured, and by whom agree on your dispute resolution mechanisms Do we go back to the status quo, or press on with this new way?
  • 15. 15 The PBC Framework Table of Contents 1. COMPONENTS OF THIS AGREEMENT ................................... 2 2. SCOPE OF SUPPLY AND PRICE ........................................... 2 3. DELIVERY DATES AND CONDITIONS ................................... 4 4. PERFORMANCE SPECIFICATIONS ........................................ 5 5. TECHNICAL SPECIFICATIONS ............................................ 5 6. INTERFACES ................................................................ 6 7. SHIPPING METHODS AND CONDITIONS ............................... 6 8. INSTALLATION AND COMMISSIONING .................................. 7 9. EQUIPMENT DOCUMENTATION .......................................... 8 11. SPARE PARTS AGREEMENTS ............................................. 10 12. COMMERCIAL AGREEMENTS ............................................. 10 13. CONFIRMATION OF THE AGREEMENT ................................. 13
  • 16. 16 The Supplier has a financial inventive to beat the targets Both parties could track progress clearly I could focus on other aspects of the project The End Results Our management was more confident When a spec was not met, the vendor fixed it without complaint Both parties got what they wanted!
  • 17. 17 Our teams attitude evolved from What Did We Learn? How Are Things Better? Passive acceptance of goods/services Deeper understanding of apportioning risk Proactive, mature approach to link rewards with outcomes
  • 18. The Moral of the Story 18 Speak in terms of performance. Mutually agree to acquire: specific capabilities desired ranges of availability defined standards of build, finish, and maintainability
  • 19. 19 Focus on: true partnering a mature, non-adversarial approach to assigning incentives and damages work hard to determine capabilities and how to measure them The Moral of the Story
  • 20. They make sense They improve on the status quo They help BOTH parties succeed I welcome your comments and feedback! jerry_dover@hotmail.com

Editor's Notes