Creating unexpected value through outcome-based procurement webinar, 4 May 2017

The APM Benefits Management SIG and Contract and Procurement SIG held a joint webinar on Thursday 4 May. The contents explored the purpose of projects to enable or deliver Benefits. The measure of Benefits is Value they confirmed. So shouldn’t Project Managers, the Procurement function and the market (bidders) be partners in a process whose objective is to identify, quantify, and maximize Value? But how can this work?

The Key Learning Points from the webinar
Outcomes-based procurement is increasingly used, especially in the Public Sector, and can deliver superior value compared with traditional approaches. It does however require more resource from both buyers and sellers especially in the pre-procurement phase. Project managers, used to controlling time, cost and quality, must learn to take decisions with the end-result in mind and not just the next milestone or planned deliverables. Not all organisations are culturally ready for this step.

Definition:
DEFINITION of Outcomes Based Procurement: “selecting a Provider on their capability to deliver against defined outcomes (success criteria) and rewarding them in part or whole on the delivery of those outcomes”.

Pre-procurement
Investing additional time and effort during the pre-procurement or market consultation phase is crucial. Use this phase to take advantage of the market’s creativity and ability to identify alternate solutions and areas of additional or unexpected value.
Be clear in defining the Success Factors by which you will define achievement of desired outcomes.
Be open from the start about how you will approach both procurement and contract phases.
Work with the market on refining and agreeing KPIs that are relevant, measurable and achievable. Bidders must be confident from the outset that proposed KPIs are achievable and a basis on which they would be willing to contract.
Project managers should identify both leading and lagging indicators that benefits are being or likely to be achieved. Leading indicators inform project decisions; leading and lagging indicators can be used post project to monitor delivery performance.

Procurement Phase
Once the procurement phase is entered the commitment to compliance, fairness and openness restricts the ability to change or consider new options.
Additional investment pre-procurement can reduce the resource required during the procurement phase and offer the opportunity to shorten the duration of this phase.
The major benefit however should be looked for in the additional value of the outcomes.
Don’t try to run before you can walk. The market needs to have confidence in your capability as a commissioning organisation before they can commit the time and effort to engage.

Delivery or Contract Phase
Expect to commit more resource to monitoring providers’ performance under contract. Avoid a ‘let and forget’ approach to contracts.
Relationship management is key during the delivery phase and builds the basis for future engagement.
Be prepared to train staff in contract management and commit more time and strategic resource to benefit delivery.

This panel-based webinar explored how a collaborative approach to procurement based on contracting for outcomes, can deliver and quantify value. The three protagonists represent:

Project managers who are now measured just as much on the value they deliver, as well as against the traditional time, cost and quality.
The Procurement function, who have to demonstrate value and compliance. This becomes harder when using outcome based procurement approaches instead of just best economic value (lowest cost) for a given specification.
Business development who need to demonstrate value in proposals. Winning bidders are those who show superior value and can quantify the benefits supported by proofs.

The four panellists Dr Jon Broome, Darren Knowd, Tony Birch and Hugo Minney are all experienced practitioners and thought leaders in their field.

The interactive agenda also included time for questions on topics raised. The speakers have been diligently answering the questions raised during the recording and these are now available for viewing.