The Vendor Management Office

Software as a Service (SaaS) Contract Template (FREE!)

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2012-05-17T19:44:48Z

We surfed the Internet until there was nothing left but ripples. We scoured hundreds of pages of cloud computing best practices until our eyes bled. We spent countless hours word-smithing, debating “wills” and “shalls.” As a culmination of our brave efforts, we developed the single-most awe-inspiring software as a service (SaaS) contract template in the universe. It will melt your brain! And—steel yourself for this next revelation—it’s FREE!

All joking aside, my colleague, Naoina Gartee, Contracts Counsel at NRECA, and I spent a considerable amount of time developing a comprehensive SaaS contract template that considers all of the best cloud computing contracting practices that Gartner, Forrester, and others recommend. We literally read hundreds of pages of materials and cloud computing contracts that state and local governments posted on the Internet (none of which we could use as a base template for one reason or another). We also spent hours in training on cloud computing negotiation techniques and practices. I’ve included a picture (below) of only some of the many materials that we considered when developing our SaaS contract template from “scratch.”

Feel free to use the SaaS Contract Template provided that you understand and agree to the Free License contained in the contract template. As further described in the Free License, the contract template does not constitute, or substitute for, legal advice and none of the Authors are offering or purporting to offer legal advice. Also, if you find any errors (doubtful) in the contract template or would like to suggest any improvements, please let me (Stephen Guth) know.

Free Policy Handbook for Contractors (without the Hazards of Co-employment)

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2012-02-29T16:53:21Z

So you have contractors working on-site for your company and you want them to follow certain workplace standards for performing the contracted services like inclement weather, holidays, data security, travel expenses, dress code, email use, and so on. You'd love to just have the contractors follow your employee policies, but you know that would create a co-employment problem. Wouldn't it be great if someone already did the work for you and came up with a set of guidelines for contractors to follow that wouldn't create a co-employment mess? Well, here's a free (use at your own risk) document that you can adapt for your own company's use: Contingent Worker Guidelines. You're welcome!

Tempus Fugit, So You Better Carpe Diem (contractually, that is...)

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2012-02-21T15:35:35Z

This article was contributed by Naoina Gartee, Contracts Counsel (and Contractus Maximus), NRECA Vendor Management Office.

I have reviewed thousands of agreements. Still, to this day, it does not surprise me to see one item that often gets overlooked and can have a major impact on the overall agreement with respect to timing of events taking place, when a party is to deliver an item, when a party may be in breach or when payment is due — specifying the difference between a "calendar day" and a "business day" in the agreement. Mostly, I see a sentence in an agreement that reads something to the effect of, "Supplier will deliver the widget to Company in six days." So what does six days actually mean? If I placed my order on Monday of this week, will I receive the widget on Saturday, or does it actually mean that I will not receive the widget until the following Monday? It is not clear in this proposed sentence.

The generally accepted practice is that if the parties do not specify in the agreement whether the parties meant a "calendar day" or a "business day," then it is understood that the parties were referencing straight calendar days. So what is a calendar day? A calendar day is every day of the week in a calendar month, even if there is a holiday in that month. This is opposed to a business day — usually Monday through Friday, excluding weekends and holidays. However, in order to avoid a dispute at a later date, I strongly recommend that the parties actually make business day a defined term, such as, "A Business Day shall mean Monday thru Friday from 8:00 a.m. EST until 5:00 p.m. EST." As you will note, in the preceding example, I went ahead and defined hours just taking an extra step to make sure that the parties are on the same page with respect to their expectations of when work will be performed.

In addition to ambiguity over "days," I have often found that taking the time to define what a "holiday" means is also another step to avoiding further confusion in an agreement. For example, you may see in an agreement, "Supplier agrees to provide customer support Monday through Friday, excluding holidays." What does this mean, especially given the ever growing population in the United States, with many religions and ethnicities? Should we just assume the parties meant all recognized federal holidays? We could, but that may lead to issues down the road; thus, I strongly encourage parties to take an extra few minutes and specify what they mean when they use the word holiday.

Finally, I feel I should mention that sometimes in an agreement, you may come across a "work day." I find this word to be the most problematic of them all. I would say that generally, in the past, a work day meant every day but Sundays and federally recognized holidays and included the company's standard hours of business operations. However, given where we are today with the ability to work from home and remotely access systems at work from almost anywhere in the world, I feel that this concept is quickly morphing into whatever day(s) your supplier may be working, which could literally mean any day and at any given hour. More than any of the other terms that were previously discussed herein, I feel the term "work day" in particular, if it is going to be used, is the most important to define.

One additional item to note is that this article was written from a domestic agreement point-of-view, but the same concepts should be applied even if you are negotiating an international agreement. In fact, one may argue that when contracting internationally, these concepts may be more important and vital to the agreement given the fact that most countries have different concepts of business days, business hours and holidays.

HELPFUL HINT: A simple Internet search such as "calendar days vs. business days" will result in many websites on the Internet that have calculators that will convert calendar days into business days for you. While I do not recommend including the website's address in your agreement, it is a handy tool to have to double-check yourself.

Hotel Contract Negotiations Book Now Available for the Kindle

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2012-02-09T10:39:24Z

My book, Hotel Contract Negotiation Tips, Tricks, and Traps, is now available for the Kindle for only $9.99!

I wrote this book to equip meeting planners and representatives of groups (such as third parties and intermediaries) with the information and tools necessary to negotiate a fair and reasonable hotel contract. Too often, the focus of a hotel contract negotiation is on "dates, rates, and space" and there's less attention paid to the contract terms and conditions. The fine print and legalese of a hotel contract isn't nearly as interesting as booking the room block--until it comes around to bite someone (usually not the hotel).

In the book, I dissect an example hotel contract template (which has seen years of actual use for booking tens of thousands of room nights along with F&B, A/V, and other hotel services) and I explain each key provision in the contract. For each provision that I explain, I include the excerpt of the provision from the contract, I describe the provision in detail, I describe what issues, if any, that a hotel may have with the contract language, and, where appropriate, I include alternative contract language or I describe what's a reasonably acceptable compromise. The contract that I dissect and explain in the book can be downloaded in electronic format, free-of-charge, here on the Vendor Management Office blog.

The book is really meant to be a practical training and learning tool as well as a reference guide that you can use on a room block-by-room block basis. I wanted to avail people with a hotel contract that I have used with much success and I wanted to make sure that they really, really understood how to negotiate the terms and conditions. I do describe in the book about how to negotiate room rates and other concessions, but the focus of the book and the bulk of the pages are dedicated to examining a hotel contract provision-by-provision.

Over the years, I've been involved in horrible attrition situations, hotels walking numerous guests from my room block, unexpected construction during the middle of my group's meeting, deterioration in hotel quality, labor disputes--among many other things. All of those experiences have gone into this book and the hotel contract template that is explained in the book. Whether you're new to meeting planning or a seasoned meeting planner, I believe that you'll be able to pay for this book with your very next hotel contract negotiation by getting a better deal for your group based on what you've learned.

Spend Visibility? Get the How-To Guide from Sourcing Innovation!

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2012-02-04T19:35:03Z

Visibility into spend is a critical part of strategic sourcing. The discipline of spend visibility is a great example of the saying "you can manage what you don't measure." As a procurement professional, if you don't know what your organization is spending, you're missing out on a huge savings potential. With direct spend, it's a little easier to get your arms around because all of that contract spend typically flows through the procurement organization. With indirect spend, which is notorious for maverick spending, spend visibility is a different ball game altogether: What do you even look for? What's the best way to get the information? What do I do with the information?

Well, today is your luck day (as it relates to learning more about spend visibility)! The Doctor over at the Sourcing Innovation blog (one of my must-read blogs) posted a great blog article about spend visibility where you can download--for FREE--a comprehensive document entitled Spend Visibility: An Implementation Guide. This how-to guide describes what spend visibility really is, getting executive buy-in to do it, what traps to avoid, getting at the low-hanging fruit and then doing a deep dive, and best practices. The guide is well thought-out, practical, and well-written. Here's an excellent quote from the guide that sums up the reason for doing spend visibility right: "The reality is that if spend visibility is not approached in a strategic and methodical manner, then the resulting implementation will likely be only tactical in nature, with just a short term benefit."

So what are you waiting for? Head on over to Sourcing Innovation and get your spend visibility on!

Worker Misclassification and Co-Employment

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2012-02-04T16:03:17Z

SPOILER ALERT. For those of you who want a quick synopsis of this longish blog post, here it is... What worker misclassification and co-employment boils down to is that our Federal and state governments don't like it when employers treat contractors like employees, and, if you do, these government entities and the contractors want to "get paid." And that liability can be huge in terms of back taxes and employee benefits levied against your company. So, if you don't want to be that company, then don't treat your contractors like employees. It's that simple. END OF SPOILER ALERT.

Worker misclassification is a hot topic for procurement professionals (and human resources folks) and it has also stirred up the co-employment spectre of yore (remember the $97 million Vizcaino v. Microsoft case?). Oh yeah, before I get too far ahead of myself, if you want more information on the subtleties between worker misclassification and co-employment--as well as to get a better understanding of all of those crazy tests that different government agencies and regulations apply--download my article on Worker Misclassification and Co-Employment.

The aforementioned article is a little lengthy, so here's a quick description / differentiation of worker misclassification and co-employment... Co-employment is where a Contingent Worker is "treated" like an employee and it arises when two separate entities manage / control some aspect of one individual's employment relationship (so, two "employers" and one worker). (P.S. Wherever I use the term "Contingent Worker" in this blog post it means a worker who is NOT on your payroll.) Misclassification is where an individual is classified as an independent individual contractor (1099) but should be classified as an employee (W2) because of how the contractor is treated. In other words, co-employment can arise when you have a direct contractual relationship with an individual contractor or when you have a contractor through, for example, a "staff aug" agency. Misclassification can only occur in the former instance, i.e., a direct contractual relationship with an individual. One of the reasons for the distinction (and another reason why misclassification is so hot), is that 1099s make it easy for Federal and state governments to go after employers. It's an easy identifier for auditors, enforcement staff, and investigators: if your company issued a 1099, it's easy to spot and easy to ask questions about. Co-employment, on the other hand, usually only arises when the workers themselves complain to a government agency and / or files suit. Now, with misclassification, it's the government agencies on the prowl.

Like I mentioned in the Spoiler Alert, governments and individuals want to get paid when it comes to misclassification and co-employment. It's not illegal (yet), but, for example, the IRS wants the withholding taxes, the DOL wants to make sure overtime wages were paid, Unemployment and Workers’ Compensation entities want taxes and payments, and workers want back benefits. When it does become "illegal"--and that's likely--you'll have to pay civil penalties on top of everything else you have to pay.

There are two major thoughts around why misclassification and co-employment is "bad" for everyone. The first is public policy and here are some applicable quotes to give you a sense of the thinking that's out there:

“Independent contractors do not receive overtime and are ineligible to receive unemployment benefits. That's not fair.”
“Honest businesses—who are trying to comply with state and federal labor and employment laws—are forced to compete with ones that don’t pay their fair share”
“Employers will not have to make contributions to Social Security, unemployment insurance, workers’ compensation, and health insurance, will save the administrative expense of withholding, and will be relieved of responsibility to the worker under labor and employment laws."
"We don't want workers to become wards of the state because they didn't receive benefits that they were rightly entitled to but for an employer trying to skirt the law."

The other rationale is--and this is the real reason in my mind--tax revenue. In a bummer economy, that's what Federal and state governments are dying for. Here are some applicable quotes to help frame the rationale:

“It's cheating the government and affected employees.”
“Reduces receipts in Treasury and the Social Security, Medicare and Unemployment Insurance Trust Funds.”
“In 2009, GAO reported that misclassification has cost the U.S. government $2.72 billion.”

So why the big push for companies to get their act together? Because all signs point to serious:

2010: “The 2011 Budget for DOL includes an additional $25 million to target misclassification with 100 additional enforcement personnel and competitive grants to boost States’ incentives and capacity to address this problem.”
2011: “$8 billion over five-years in the Internal Revenue Service’s enforcement and modernization programs…will target critical areas of non-compliance.”
2011: Departments of Labor and Treasury pursuing joint proposal that eliminates incentives in law for employers to misclassify their employees.
4/2011: House introduces “Payroll Fraud Prevention Act.” System of record keeping and notice requirements, backed by fines and penalties, to compel compliance with classification requirements.
9/2011: IRS announces Voluntary Classification Settlement Program, allowing employers to voluntarily reclassify (as employees) workers that have been incorrectly treated as independent contractors for employment tax purposes, with partial relief from back federal employment taxes.
9/2011: DOL and IRS entered into MOU with eleven states (VA not included) where DOL will share information with IRS derived from investigations by its Wage and Hours Division into worker classification issues that may relate to payroll tax compliance. The IRS, in turn, will share that information with participating states.
10/2011: Senate introduces “Employee Misclassification Prevention Act.” Similar to bill introduced by House.
10/2011: California passes broad sweeping law requiring notice, reporting, and significant penalties (other states expected to follow).

In other words, when you see government agencies investing in enforcement staff, the Federal government sharing information with states, bills being introduced, and voluntary correction programs being implemented, it's time for you to take things seriously. I mean, if you can't spot what's coming from all of the foregoing, then hitting you in the head with it probably wouldn't work. So what do you do? Well, that's the real thrust of this article... Here's a list of some (not all) actions that you can take to help mitigate worker misclassification and co-employment at your company. Some of these actions may not seem intuitive (they do correlate / counteract elements of the "tests") and will make better sense if you read the article that I link to earlier in this blog post.

Use "Professional Employer Organizations" wherever possible and avoid contracting directly with individuals, sole proprietors, and one-member LLCs (just this action alone will go far in protecting you from worker misclassification). There are also other practical reasons to do this such as insurance issues and supplier rationalization.
Require maximum service durations (limiting workers to a max of 1,000 hours is helpful to avoid "substantially full-time" categorization) and require breaks in service (usually 30-days).
Enter into fixed-fee arrangements and avoid the use of time and materials contracts--you should be buying a product or service, not a person (this helps to avoid some of the financial control elements used in many co-employment tests).
Don’t permit Contingent Workers access to company amenities that are made available to employees.
Differentiate Contingent Workers from employees wherever possible. Some examples: use different security badges (a red color badge is common), different cube / office nameplates (like using red lettering), different email addresses (e.g., betty.sue-contractor@yourcompany.com instead of betty.sue@yourcompany.com), mandatory email signature blocks (e.g., including "Contractor to YourCompany"). Some of these actions also help to avoid "apparent" and "implied" agency issues.
Don’t include Contingent Workers in company events (such as social events and potlucks), staff meetings, company directories, company org charts, and rewards / awards / recognition.
Don't allow Contingent Workers access to any thing or program that is subsidized or sponsored for employees such as parking, cafeteria meals, membership in company-related organizations (e.g., Toastmasters), or a discount program (like movie tickets).
Minimize Contingent Worker use of company assets such as, for example, cellphones and tools. By the way, it's better if Contingent Workers don't use company email at all and have their own addresses.
Don't provide business cards to Contingent Workers.
Don't permit the use of company letterhead by Contingent Workers (unless an employee is going to sign the letter).
Don't require Contingent Workers to work on company premises.
Don't monopolize Contingent Workers by requiring set hours (e.g., 9 to 5), requiring full-time work, or mandating an exclusive relationship (in other words, allow Contingent Workers to have other customers). Never require a non-competition agreement.
Don't require that Contingent Workers seek approval for "time off" and vacations.
Don’t interview, counsel, or terminate Contingent Workers (do that through their agency).
Don't reimburse Contingent Workers directly for anything (e.g., travel)--only reimburse through their agency.
Don't allow Contingent Workers to manage employees.
Don't provide company training.
Avoid giving large deposits or pre-payments to Contingent Workers (they start looking like wage advances).
Don't require that Contingent Workers abide by company policy and don't require them to sign a company policy handbook. Do create Contingent Worker guidelines for Contingent Workers and employees responsible for Contingent Workers to document all of the above and to make it clear that there is no intent to create an employer / employee relationship.

Meat and Taters: How to Minimize the Work in Writing Statements of Work

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-08-18T15:58:36Z

The following article was contributed by Naoina Gartee, who works in NRECA's Vendor Management Office. She's found it to be a little, well, let's say, "challenging" to get her internal IT customers to develop good statements of work. Her article is a concise and informative guide to help customers in getting comfortable with better defining their requirements, not from a traditional IT perspective, but from a business perspective. Feel free to leave the article anonymously on the chair of any of your customers who could use a little help in this area. Enjoy.

Often I find clients struggling to write their statement of work, not knowing really where to start. While I am a firm believer that writing a good statement of work does not happen overnight, through practice our skills become stronger. Simply put, writing a statement of work does not have to be as challenging as some believe it to be.

NRECA uses a parent-child relationship (as some call it) when it comes to contracting. There is the master agreement that is more or less an administrative document and that sets forth the terms and conditions of the relationship: how are the parties going to act over the life of the agreement when it comes to items such as terminating the contract, breaches and indemnification obligations. Then there is the statement of work that sits below the master agreement — this is what I like to call the meat and potatoes of the deal: what services is the vendor going to do or perform for the organization in a particular instance. A statement of work is the place where the business gets to document their story of why they are hiring a particular vendor and what the vendor is going to do. In other words, it is the formal way of documenting what the obligations are of the parties around a particular delivery of a product or service.

When broken down, a statement of work can be viewed no differently from writing a story consisting of the five Ws (who, what, when, where and why, and sometimes how) we all learned in school. A statement of work usually consists of the following pieces to make up the business story, which can essentially become a working template for any organization:

Introduction/Project Description – What is this project about? Why is the organization doing this project now? While the drafters of the statement of work may be very familiar with the project, others may not; this first item in a statement of work does not have to be very long and should tell the reader what the project is about and why there is a need for the project to be outsourced to a vendor.
Description of Vendor's Services/Scope Statement – Who is the vendor with which the organization is engaging? What is the vendor going to do for the organization in this particular statement of work? This should be a clearly written concise statement that tells the reader that vendor "x" is going to do "y" for the organization and nothing else.
Vendor's Responsibilities – What are the ongoing responsibilities of the vendor over the term of the statement of work? This section of the statement of work may tell the reader if the vendor is to provide its own equipment, where the vendor will be completing its work, meetings the vendor is required to attend and status reports the vendor is expected to deliver.
Description of Milestones and Deliverables – Tying back to number two above, what is the vendor going to do for the organization? In addition, this section should include when the vendor is expected to deliver the services/products to the organization. A reader of the statement of work should clearly be able to determine if there is one big deliverable or many deliverables. Do milestone need to be included to track the performance of the vendor along the way to ensure they are/will meet their deliverable(s) deadline(s)? The timeline as to when deliverables are due often reflects the overall project plan. (A note with respect to project plans — unless incorporated, the project plan does not become part of the statement of work contractually obligating the parties to each other, so writing a good milestone and deliverable section will become critical to the success of the project.)
Payment Terms – How much is the organization going to pay the vendor? This section of the statement of work tells the reader how much the project cost and whether or not it is a fixed-price engagement or a time and materials engagement. Does the vendor get payment at the end of the statement of work, or does the vendor get paid over the term of the statement of work, as they deliver deliverable(s) or meet milestone(s)?
Acceptance Criteria for Deliverables – What does the deliverable need to look like or do in order for the organization to say to the vendor, "yes, this is what we asked you to do and now we will pay you?" I have even heard some people ask, "How do we know when the vendor is done with the statement of work." This section of the statement of work, will tell a reader what the deliverable must look like or do to tell the vendor they have delivered successfully. Delivery of a product or services does not mean the statement of work is done. The buyer should always be given a chance to inspect a deliverable for conformance to the standards they have engaged and contracted for with the vendor.
Buyer's Responsibilities – What are the buyer's responsibilities during the statement of work, if any? This section will tell the reader what the buyer is responsible for over the term of the statement of work (e.g. provide work space, laptops, access to systems, etc.).
Key Assumptions – What are the key assumptions? In this section, the statement of work is telling the reader about any unknowns when the statement of work was drafted. Additionally, this section could alert the reader to potential issues known when the statement of work was drafted, add support to the scope statement or may contain any assumptions around the vendor or buyer responsibilities.
Billing Contact and Address – Who and where should the invoice be sent to? This section of the statement of work will tell the reader who the invoice should be address to and where it should be sent. (The master agreement may contain a general clause as to payment address, but a statement of work can be more specific in the case where a particular business unit with the organization should be receiving the invoice.)
Term - When should this work be done? This section will tell the reader the start and end for the overall project. While not mandatory, some drafters of a statement of work choose to capture the start and end date of the project in the milestone and deliverable table.

So the next time you are tasked with assisting in drafting a statement of work or take on the task by yourself, do not feel overwhelmed — take a deep breath and ask yourself, "what is this business story all about?"

NRECA's Tim Davis Finalizes $13.7M in Smart Grid Procurements

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-07-28T21:30:10Z

Tim Davis, who works in my Vendor Management Office at NRECA, is the procurement pro behind the following article. These are highly complex and competitively bid procurements that involve many stakeholders, including the Federal Government. Great job, Tim, on pulling these procurements off! Only $10 or so million to go...

NRECA’s Smart Grid Demo Project Finalizes $13.7 Million in Contracts

Contact:
Tracy Warren , NRECA
Phone: (703) 907-5746
Mobile: (703) 517-3411

WASHINGTON, DC; July 7, 2011 – By the end of July, 2011, the National Rural Electric Cooperative Association will close on contracts worth $13.7 million for smart grid components to be deployed at 23 cooperatives participating in the cooperatives’ regional Smart Grid Demonstration Project (SGDP).

Supported by a matching grant from the U.S. Department of Energy, over the course of the project, participating cooperatives will deploy more than 75 technologies and kinds of equipment in twelve states.

NRECA has made these purchases for research and evaluation of the following smart grid features:

Communications
AMI systems and digital communications software and infrastructure to enable smart grid features including demand response over AMI, load management, prepaid metering and in-home energy displays.

Efficiency and Demand Response
Software and equipment to improve efficiency both at the operational and end-user level, and enable automated demand response and load control. Components include load control switches, in-home displays, advanced Volt-Var control, demand response over AMI, meter disconnect collar sealing kits.

Reliability and power quality
Software and equipment to improve reliability by implementing SCADA, self-healing capability, power quality monitoring and regulation and improved conservation voltage regulation.

Distributed generation and renewable energy
Equipment to assist the integration of renewable energy and distributed generation resources.

NRECA has executed contracts with the following vendors: Cooper Power Systems, Inc., HD Supply Utilities, Ltd., Stuart C. Irby Company, Larson Communications, Inc., RFIP, Inc., Ruggedcom, Inc., and VFP, Inc.

Check Your Indemnification Provisions: Innovatio Asserts Patent Rights for WiFi and WLAN

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-06-23T14:08:00Z

Innovatio IP Ventures, LLC (a company formed in early 2011 for the purposes of acquiring, licensing, and litigating patents for royalties) purchased a number of patents that, according to Innovatio, encompass certain WiFi and WLAN technologies. Innovatio has been busy filing complaints against the likes of Cosi, Caribou Coffee, Panera, hotels, grocery stores and other entities that, for example, provide WiFi for their retail customers. Innovatio has also undertaken a broad letter-writing campaign, advising recipients that they may be infringing and inviting them to enter into a fee-based license (or potentially face a lawsuit). Cisco and Motorola have entered the fray, filing a lawsuit against Innovatio. Certain defendants have filed a stay while the Cisco / Motorola lawsuit is resolved. You can read more about that lawsuit in the motion to stay, which also gives a great overview of what Innovatio is asserting.

It might be a good time to check the indemnification provisions in your purchase agreements relating to WiFi and WLAN technologies. Here's an article that describes about how to contractually protect against patent trolls.

You Might Just Be a Fixed-Price Contract If...

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-06-15T19:58:47Z

My internal customers sometimes get confused with the major differences between a fixed-price contract type and a cost-reimbursement contract. For example, a customer may come to me with a contract that specifies a named resources, named skills, no truly tangible deliverables, and a monthly "fixed" fee (which is, in reality, the named resource's hourly rate multiplied by 160 hours)--and the customer argues that the contract is a fixed-price contract. Here's a chart I drafted to help eliminate confusion between what constitutes a fixed-price contract and what constitutes a cost-reimbursement contract.

Contract Type	Fixed-Price (Using Firm-Fixed-Price Example)	Cost-Reimbursement (Using Time and Material Example)
Basic Description	A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the seller’s cost experience (other than buyer-initiated modifications such as change orders) in performing the contract. This contract type places upon the seller maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the seller to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties.	A cost-reimbursement contract type provide for payment of allowable incurred costs, to the extent prescribed in the contract.
Application	Use when requirements and acceptance criteria are known with sufficient accuracy.	Use when uncertainties involved in contract performance do not permit requirements, acceptance criteria, costs, etc. to be estimated with sufficient accuracy.
Performance	Deliverable	Effort
Level of Requirements Detail	Well-Defined	Unknown or Broad
Level of Acceptance Detail	Well-Defined	Unstated or Vague
Payments	On Delivery	As Incurred
Buyer-Specified Type of Resources (e.g., Skills)	No	Yes
Buyer-Specified Quantity of Resources (e.g., Headcount, Hours)	No	Yes
Contract Administration Effort	Low	High
Change Controls	As Needed	Primarily for Extensions
Risk to Buyer	Low	High
Risk to Seller	High	Low

And even if you say you're a "fixed-price" contract, you might just be a cost-reimbursement contract if...

The substance of work is research or investigatory
You don't contain tangible, detailed requirements
You don't contain tangible, detailed deliverables
You state quantity of resources
You state resource names
You describe resource skill sets (such as skills required or years of experience required)
You don't contain a deliverables schedule
You contain a milestone schedule (that is not deliverables-based)
You contain a payment schedule (such as a monthly “fixed-fee”)
You describe a “fixed-fee” that is in reality a resource hourly rate aggregated over the contract term and then is divided by some time period (such as a monthly “fixed-fee”)

Two Senior Buyers Needed in Arlington, VA

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-06-15T16:52:07Z

$100K base + pension plan + full relo. Send e-mail with resume to stephen@guthventures.com.

One position will focus on IT and the other will focus on hospitality (primarily hotels). 5-years experience w/ indirect spend in excess of $10M and bachelor degree required. Candidate must have a procurement certification (e.g., CPSM, CCCM) or be able to obtain one within the first year of employment (as a condition of continued employment).

Vendor Gifts: Another One Bites the Dust (Hey, Hey)

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-03-28T16:01:00Z

As most procurement professionals know, vendor gifts have been on a steep decline since the heady days of our once over-heated economy. That's a good thing from the perspective of ethics--now I don't have to worry about refusing vendor gifts because they're just not offered that often anymore. Unfortunately, there have been some unexpected negative consequences from the downward vendor gift-giving trend--there are companies that depend on vendor gift-giving for a large part of their revenue. This week, another one bites the dust. Harry & David, I hope that you make it through Chapter 11 because I love your pears!

Speed Dating for Supply Management Pros?

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-03-18T12:33:00Z

I typically get a lot out of going to my Institute for Supply Management local chapter's monthly meeting. The presenters usually have very practical information that I can put to use in my day-to-day job. Mostly, I can say the same for other meetings and conferences that I attend. But I'm missing out on something when I go to those events--and I'm missing out big-time.

So what am I missing out on? Expanding my professional network...

At my local ISM chapter meeting, I tend to congregate with the people I already know. When I'm at a conference, I'm busy running from session to session and I'm just not willing to make the effort to try and meet new people. Sure, there are the stuffy "networking" receptions at these events, but those require me to come up with something professionally witty and pithy to break the ice with so I don't come across like I'm trying to hit on someone. Sometimes, it's just too hard, so I tend to forgo receptions (plus I don't drink).

So, my professional network suffers...

I always thought that it would be great if there was some sort of "facilitated" networking session at these events, where my fellow attendees and I had some common objective to focus on and were sort-of forced (in a good way) out of our shells to network with other people who we don't know. About six-months ago, I heard about "speed networking ," which sounded interesting but was more oriented toward sales folks trying to meet new prospects. Speed networking is a lot like speed dating (in terms of the "speed" part).

After thinking more about it, it seemed to make sense to have a speed networking event for supply management pros. The concept is that attendees are paired together, introduce each other, and have only 5 minutes to discuss two interesting (and easy) supply management topics. When the 5 minutes are up, the attendees move on to meet someone new and to discuss other topics. I thought it would be a great and easy way to meet new people and learn something relevant to the supply management profession at the same time.

I put together a set of materials: a "Speed Networking for Supply Management Professionals" presentation containing instructions for speed networking (including the room set) as well as a list of speed networking topics specific to supply management. Here are two example topics:

Topic #7. What’s worse and why—stock outs or too much safety stock?
Topic #16. You have an old friend, Billie Jo, who works for vendor ABC, but you’ve lost touch with her. You recently issued an RFP and vendor ABC is a bidder. Out of the blue, you receive a call from Billie Jo, who says that her boss is giving her a trip for herself and one other person to Hawaii. She asks if you would like to join her. What do you say and why?

I first tried the concept out on the members of the ISM chapter in the DC area. It was a huge hit! A month or so later and after some tweaking, I tried it out on a group of supply management professionals at the TechAdvantage Conference. Another huge hit! Here's what attendees from those events had to say (taken from evaluation forms):

The speed networking class was really good – enjoyed getting to know a lot more people, for sure.
This was valuable. To meet people before I felt like I was being too forward. This made it easy to network.
Loved the event.
Excellent session!
This was great--especially for new members!
Very good session!
Great concept.
Good idea!
Enjoyed the interaction and format.
Met lots of people I didn't know before. Fun to discuss the topics / questions.
Definitely do this again!
The topics...provoked learning and thought.

Here's a picture of 28 supply management professionals meeting each other and talking about supply management topics during my speed networking event at the 2011 TechAdvantage in Orlando, Florida.

If you're interested in doing the same thing for your next chapter meeting or other supply management event, my step-by-step materials are available to you for free. I'd love to hear feedback from anyone else who tries the speed networking concept for his / her event.

Upcoming: Gartner Supply Chain Executive Conference 2011

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-03-17T20:25:00Z

Gartner Supply Chain Executive Conference 2011 is "The World's Most Important Gathering of Supply Chain Leaders."

The Gartner Supply Chain Executive Conference provides a unique opportunity to collaborate and connect with the world's leading supply chain executives, all in one place at one time. We'll also acknowledge the accomplishments of those organizations that have established a path toward a successful supply chain future. The conference combines strategic and tactical Gartner advice from industry analysts and thought leaders who collectively have over 150 years of supply chain and end-user experience. Plus, gain insight from peer exchanges and interactions with leading solution providers at the forefront of the supply chain market. Also, you'll be able to network with your peers to share insights on real-world strategies, implementations and best practices. Gain access to peers from leading global organizations at a variety of formal and informal networking opportunities, including end-user case studies, workshops and hospitality suites.

Upcoming: Gartner Outsourcing & Vendor Management Summit

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-03-17T20:14:00Z

Gartner Outsourcing & Vendor Management Summit 2011 (9/12 - 14, Orlando) provides an in-depth exploration of the significant developments and trends shaping vendor and strategic sourcing management practices, as well as the sourcing marketplace.

The Summit provides CIOs, IT Directors, Sourcing Executives, Procurement Managers & Vendor Managers with a useful set of best practices, frameworks and tools to create long-term impact back at the office.

Economic, business and technology changes demand innovative actions from both buyers and providers of IT services in how they form long-term sourcing relationships. In an environment in which consolidation, mergers and acquisitions, and new entrants are the norm, sourcing strategies must become more agile and responsive to change.

At the summit, you'll learn how to:

Navigate market forces and apply new approaches and objectives for successful outsourcing.
Establish the governance and strategic management disciplines that bring needed order to the many moving parts of your sourcing ecosystem
Uncover the disruptive trends that are reshaping the future of IT services
Move beyond cost take out to business results oriented outcomes
Learn how to improve control, reduce risk and drive more value from your vendors
Uncover efficiencies at a time when every budget dollar counts

Vetting Your Vendors: EPLS Isn't Just for Government Procurements

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-03-16T13:33:00Z

In my procurement organization, we're required by the Code of Federal Regulations (e.g., 10 CFR 600) to use the Excluded Parties List System ("EPLS") whenever we do a procurement that is funded by the Federal Government. EPLS includes information on vendors and individuals debarred, suspended, proposed for debarment, excluded or disqualified, or otherwise declared ineligible from receiving Federal contracts, certain subcontracts, and certain Federal assistance and benefits. In other words, if a vendor has done something "bad" (like fraud), the Federal Government disqualifies the vendor for purposes of doing business with the Federal Government and for procurements conducted by others (like my organization) that involve Federal funds.

The cool thing about EPLS is that it's open for everyone--meaning that you can use it as a tool for your commercial procurements. If you're considering doing business with a new vendor, EPLS serves as an important resource for doing your due diligence and research. If a vendor shows up on the list, ask why.