Time, Value and Opportunities

Steve Jobs said “…It’s really clear that the most precious resource we all have is time…”
This statement rings true within the realm of Defence capability delivery, where time is the most valuable of commodities.

by Peter Phillips, National Defence Program Lead, ArcBlue

As we embrace a post-COVID-normal approach to business and operations, the imperative to review strategic sourcing arrangements and invest in engagement strategies which posture for shared success is becoming increasingly prevalent for Defence and Defence Industry.

Understanding the pipeline of work, knowing when to commence action on expiring commercial arrangements and/or extensions can reduce significant system risks. These include escalating pricing structures, immature service level agreements and key performance indicators that may not align to actual needs, loss of innovation opportunities, Defence supply chain redundancy, social and sustainable procurement opportunities, and strategic relationships.

The lack of contract renewal or a rushed process to enable capability delivery in replacing an expiring contract attracts a premium. Research shows that price increases can range from 5% to 20% when a category or multiple categories spend is unmanaged due to time constraints. Across Defence and Defence Industry, shared accountability exists for the prudent management of funds and effort, spend increases of up to 20% more for a capability or service immediately post commercial arrangement expiry is less than prudent.

Hastily establish commercial arrangements can also lead to injudicious and poor outcomes which may impact overall Defence capability delivery across the life of an arrangement – potentially generating platform undermatch and lacking adequate iterative enhancement opportunities. Within this context, the just-in-time approach is less than ideal, and it is not conducive to an environment of team motivation based on Herzberg’s Motivator and Hygiene Factors.

Plan to Plan:

Pre-planning and engaging stakeholders early can mitigate against poor performance. Significant planning goes into the ‘front end’ of the Defence capability lifecycle delivery process; however once commercial arrangement(s) have been established, it is easy to become distracted by daily activities and forego the ongoing planning process.

Establishing a deliberate and staggered approach to mapping forward requirements, identifying future expiry and review dates as part of good commercial governance, will ensure that staged reviews can occur throughout the year, and not need to be clustered together or rushed through.

Understanding your market can also lead to releasing market approaches when you will get the most value through competitive tension. Do your due diligence on what outcomes are driving industry at that stage of financial year and what else is being released at similar intervals. Ask yourself whether you will get the best service offering, and if timing influences your willingness to negotiate terms.

Lead times to complete a process ahead of contract expiry will vary depending on factors such as the effort required to transition between suppliers, your organisations approval pathways, and how long they take to navigate and maturity and structure of the supplier market. Allow for that in your planning.

Earmarking sufficient planning time enables the fullness of consideration regarding potential market approach and enhanced opportunities within future agreement(s). This can encompass elements around:

  • Duration: What is the best approach based on organisational need and the market, i.e. fixed term, rolling wave, etc.
  • Performance: Establishing performance based metrics that are of real purpose, utility and meaning to the stakeholder community.
  • Added Value: Identifying opportunities for forward innovation and iterative enhancement, bringing greater system value to the offering.

The Role of Technology:
Technology has a major role in facilitating and managing your commercial arrangements. A good system will keep track of expiry dates, automate the approval and renewal process, and provides clarity of task responsibility across your organisation.

A traditional spreadsheet approach has utility in providing a simplistic overview of list management, however it can lack the robust insights that come from a truly integrated systems approach; that draws upon past lessons and brings visibility to pain points of prior year(s). Establishing a consolidated view is vital in having all available information at hand and in using data to make the right decision at the right time.

Key components of sound information management require the inclusion of elements encompassing spend analysis, commercial data (such as key dates), performance measures, and due diligence information (such as ownership, prior commercial success and financial stability).

Using technology to provide category spend analytics enables spend consolidation across related categories which can in turn reduce the number of arrangements requiring management and deliver volume efficiencies.

It is important to choose technology support that is responsive to your industry factors. Many systems are now modularised and can be flexible to your desired approach of business operations. Even with the best planning and systems to manage contracts and contract expiry, resourcing can be a challenge. As part of your planning, you should consider peaks and troughs in throughput that will impact your team’s capacity to deliver at optimal standards.

Should this be an issue, deploying experienced procurement resources in a targeted way can be an effective solution to rapidly address any workload imbalance. Another option is to engage a short term resources to work through low to medium risk contracts and free up your internal resources to focus on those elements considered as high complexity. Alternatively, for contracts requiring a high degree of technical knowledge, engaging external support through a subject matter expert in the form of an integrated work package is likely to not only save time in completing the activity but also deliver improved commercial outcome(s).

There are options available for teams in managing the risk of impending commercial arrangement expiry.

“The greatest thing is when you do put your heart and soul into something over an extended period of time, and it is worth it”. Steve Jobs.

Good luck with your planning!

If the cost of time is a factor in your organisation, please view the suite of support tools available at www.arcblue.com.au, and to connect with us peter.phillips@arcblue.com.au

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