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The New World For Contracting Professionals

January 18, 2010

For several years, IACCM has been promoting the idea that a networked world will transform the way that trading relationships are formed and managed. Events are proving that true (see, for example, my blog last week on Risk Management and the effects of the recession).

As with all change, there is an impact on the skills and knowledge that are required and last week, I discussed this with Harry Dunstall, who is Chief Counsel to the CEO of the Australian Department of Defence. Harry took up his current post (in which he oversees contracting and legal affairs for an A$12 billion budget) about 2 years ago – and quickly recognized a need for fundamental overhaul of the way that contracting was undertaken.

As in many organizations, contracts and commercial staff were scattered across the various divisions and operating entities. “They received little attention, their skills were varied and inconsistent. Recruitment and retention were a problem because there was no professional standard and no clear career path.”

This environment created problems for trading relationships. Suppliers complained about the inconsistency they found in the positions taken by different groups, the procedures they followed and the way that rules were interpreted and applied.  This caused delay, increased costs and created risk.

Harry knew that the answer was not simply to create standards and impose compliance. “Of course we needed clearer rules and procedures,” he said. “But rules and policies quickly become an impediment if you don’t have people who understand when and how they need to be varied.”

So he quickly consolidated the contracting officers and built a central Contracting Service, which today has about 250 dedicated staff.  Like many of today’s commercial leaders, he then undertook an assessment of training availability and gaps – and discovered a highly fragmented picture. One major problem was that trainign was not directed at any consistent set of goals. “In looking at the value from contracts staff, we had to move away from endless arguments over things that may be unimportant or inappropriate to the deal in hand. My goals were to get into contracts quicker, based on reasonable positions, and to drive greater savings through improved outcomes. These benefits depended on improving organizational and individual skills and in ensuring their consistency.”

An early initiative was to undertake a more thorough assessment of the relationship types that were being contracted. With 112,000 contracts last year, it was essential to ensure resources are deployed effectively. Procedures, tools and support models differ depending on the type of agreement to be formed. This segmentation is also enabling ‘broad-based agreement with industry on the methods that will be used – for example on how risk assessments should be undertaken’. This, Harry believes, changes the nature and duration of negotiations and helps ‘reduce recurrent conversations’.

 Harry agrees with the position taken by IACCM – that real progress and real value depends on both sides of the table talking the same language and having similar goals and aspirations from a professional perspective.  Key to real progress, in Harry’s view, is the development of greater contract and commercial skills in both suppliers and buyers.

“I need to be sure that we are spending our dollars on building the Australian defence capability, not on paying for an inappropriate risk allocation. So our strategy has been to simplify through consistent templates, policy framework and basic training. We monitor compliance while ensuring regular update to the standards. And we are doing this by driving professional status and ensuring the right skill sets are available.”

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