commodity contract and deal negotiation-1

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I’m a fan of shared services – they are just logical. Collaborate and save. Unfortunately, the pathway is littered with multiple examples of failed attempts. The 1990’s saw a Federal Government initiative for commercially outsourced shared IT services. Driven by cost savings, run by a central agency – it was a costly debacle that hung millstones around the necks of agencies for nearly a decade.

Internally shared services are also quite common – but they seem to struggle, some spectacularly such as the one that led to the Rizzo Review – the review of the failed support relationship between Navy and the, then, DMO (now CASG). A significant recommendation was “more commercial like agreement between Navy and DMO”.

We are used to building commercial agreements and SLAs within and between agencies. Some tips on creating meaningful agreements that go beyond “we provide best efforts”:

Clarity of the mutual obligations. How will this actually work, who will do what, by when? Don’t fluff with platitudes – add some hard-line deliverables and standards. You require them of your contractors, why not agree them internally? Not meeting agreed standards is an issue, not having such standards is simply avoidance.

Link demand with cost. Unlimited delivery creates unlimited demand. It’s unaffordable; consequence that leads to failure be clear on what is being delivered at what price, and the cost of “more”. Particularly in Government where funding is limited by budgets there is always the temptation to pursue the free.

Clear, honest reporting. If you are going to have standards, then measure them properly and report on them honestly. If you can’t meet the standard then either agree it’s a failure in performance and fix it, or it’s an unachievable standard under current conditions and accept a lesser standard or invest to fix it. It works for both parties – either you find a happy medium, the issue is resolved or you have proof and support for additional resources and funding.

Escalation. Problems fester, they don’t go away. If you can’t resolve it, then escalate it. It’s the job of a boss to fix things you can’t – and avoidance is a failure of leadership, which is much worse than failure of a service level.

Like consultants, shared services are here to stay. We have to learn how to make them work!