Breakout Session # WC05-047 Gregory A. Garrett, CPCM, C.P.M., PMP

2. Performance-Based Acquisition “What Senior Executives Should Know & Do to Improve Buying & Selling Breakout Session # WC05-047 Gregory A. Garrett, CPCM, C.P.M., PMP Date: Tuesday, April 26, 2005 Time: 11:00 a.m. – 12:00 (noon) NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

3. What Senior Executives Should Know & Do to Improve Buying and Selling Key Itemsof Discussion: • Senior Executive Challenges • Common • Industry • U.S. Government • Performance-Based Acquisition: Essential Elements(The 4Ps) • Case Study: Dell • Case Study: Home Depot • Senior Executives: 7 Great Responsibilities to ImprovePerformance Results • Summary NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

4. Common - Senior Executive Challenges • Integrate business processes • Improve information technology infrastructure • Improve performance-based buying and/or selling • Build high performance teams • Develop future leaders NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

5. Industry – Senior Executive Challenges PWC8th AnnualCEO SurveyJanuary 2005Key Findings • 60% stated government overregulation is their major concern • 46% cited the rising cost of social welfare as a major business concern • 41% said they were confident in increasing revenues • 38% stated they needed to improve their integration of business processes • 25% said loss of key talent to competitors is a major concern • 25% feel they are managing governance, risk management, and compliance effectively NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

6. U.S. Government – Senior Executive Challenges • Aging workforce (critical skill gaps) • Lengthy procurement acquisition lead time • Privatization or competitive sourcing • Overly restrictive personnel policies, rules, and regulations • Closure of needed facilities • Political influence in critical decision making • Unstable funding • Poor asset identification and valuation • Lack of spend analysis NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

7. Performance-Based Acquisition (Essential Elements) Model NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

8. Performance-Based Acquisition: Essential Elements The 4Ps People: Quality & Quantity Processes: Well Defined, Documented, Integrated, Understood, & Consistently Implemented Performance: Cost, Schedule, Technical, Quality, Customer Satisfaction Metrics, Incentives, & Results Price: Strategies, Methods, Arrangements, & Analysis NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

9. Case Study: Dell At Dell the four P’s are demonstrated by the following actions: People - Dell only hires the best and brightest, and is continuously recruiting top-notch people. Dell has excellent training and employee development programs. Dell has very high management retention. Processes - Dell is highly process-oriented and customer focused. The key operating process is the supply chain, via a sophisticated extended-enterprise manufacturing system. Dell’s processes allow them to operate on very low inventory levels. Dell’s process for payment before shipment ensures high asset efficiency. NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

10. Case Study: Dell (continued) Performance –Dell’s organizational processes are highly customer focused and performance-based. Dell extensively uses performance-metrics, which are well documented, communicated, and understood, so people in the organization know where they are at any given time and can consistently execute. Price - At Dell, as a result of their people, processes, and performance they are able to sell computers at lower prices and still grow profitable revenue. NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

11. Case Study: Home Depot Home Depot now focuses on the four P’s People, Processes, Performance, and Price as explained by the following actions: People - Home Depot raised the education standards for store managers, encouraged the hiring of military veterans, especially officers, who had received leadership training during their military tours of duty, expanded company-wide training programs, and focused on employee accountability and customer service. Processes - Home Depot developed integrated business processes and instilled disciplined customer focused approaches to business activities. Home Depot dramatically accelerated investment in information technology, using enterprise resource planning tools, with SAP finance, and PeopleSoft in human resources. Further, Home Depot consolidated purchasing and marketing processes. NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

12. Case Study: Home Depot (continued) Performance –Home Depot improved their performance by returning to the basics: focusing on building leaders, providing more education, holding people accountable, developing organizational processes, executing in a highly disciplined manner, and extensive use of specific performance metrics. Home Depot focused on key performance areas including: productivity, customer satisfaction, inventory reduction, and cost efficiency. Price - Home Depot’s new strategies to improve their people, processes, and performance have allowed them to lower their prices and grow more profitable revenues. NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

13. The Need for Improved Contract Management NextanceIndustryStudy Findings • 81% of the companies surveyed said simply finding contracts was a concern. • 75% of the companies listed contractual risk as a major area of concern. • 54% of the companies surveyed found it difficult to access specific terms and clauses. • 40% of the companies surveyed felt they could achieve large savings in their procurement by practicing better contract management. • 31% of the companies surveyed felt they could achieve large revenue opportunities by managing sales contracts better. 100+CompaniesCM ProcessesSurveyed From: “Contract Management Is More Out of Control Than You Think,” by Kirk Krappe and Gopi Kallayil, Journal of Contract Management, NCMA, April 2003. NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

14. The Senior Executives – 7 Great ResponsibilitiesTo Improve Performance Results • Create and Communicate a Vision of High Performance • Develop Great Talent • Build a Performance-Based Culture • Create Customer-Focused Integrated Project Teams • Ensure Excellence in Execution • Hold Individuals and Teams Accountable for High Performance Results • Empower, Recognize, and Reward Individuals and Team Performance Results NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”

15. Question & Answers • Questions to Consider: • How well does your organization hire, train, and retain the best people? • Does your organization develop, document, and consistently execute their integrated business processes? • How effectively does your organization develop, implement, and track performance results? • What pricing strategy and pricing arrangements does your organization typically select? How well is it working? NCMA World Congress 2005 “Prime Time: Contract Management at the Core of the Enterprise”