Project Management Institute

Benchmarking contract management process maturity

a case study of the U. S. Army

Associate Professor Graduate School of Business and Public Policy U.S. Naval Postgraduate School

Abstract

Contract management continues to be an increasingly important function in the U.S. Department of Defense (DoD), specifically in the U.S. Army. Both the DoD Inspector General (DoD IG) and the Government Accountability Office (GAO) have issued multiple reports on deficiencies in the DoD contract management processes, identifying poor contract planning, contract administration, and contractor oversight as just some of the critically deficient areas in DoD contract management. In response to these contract management deficiencies, the DoD is increasing its emphasis in the area of workforce competence, such as education and training. However, the DoD is focusing very little attention on organizational process maturity. The purpose of this research is to explore the use of process capability maturity models in benchmarking DoD contracting processes. This paper analyzes the results of contract management maturity model (CMMM) assessments on five major U.S. Army contracting agencies. This research summarizes the benchmarking assessments, analyzes the assessment results in terms of contract management process maturity, and discusses the implications of these assessment results for process improvement and knowledge management opportunities. The research findings can guide the Army, as well as the DoD, in developing a road map for increasing contract management process maturity.

Keywords: contract management; process maturity; procurement; maturity model

Introduction

Contract management continues to be an increasingly important function in the U.S. Department of Defense (DoD), specifically in the U.S. Army. The DoD, which is the federal government’s largest contracting agency, continues to increase its level of public spending for goods and services. In fiscal year 2013, the DoD obligated approximately $258 billion in contracts for major systems, supplies, and services (USA Spending, 2013). The DoD procurement workforce professionals are responsible for managing millions of contract actions for the procurement of critical supplies and services, ranging from commercial-type supplies, professional and administrative services, highly complex information technology systems, and major defense weapon systems (FPDS-NG, 2013). The combination of the increasing defense contracting workload and the decreasing size of the defense procurement workforce, along with the complexities of an arcane and convoluted government contracting process, have created the perfect storm—an environment in which complying with government contracting policies and adopting contract management best practices has not always been feasible. Both the DoD Inspector General (DoD IG) and the Government Accountability Office (GAO) have issued multiple reports on deficiencies in the DoD contract management processes, identifying poor contract planning, contract administration, and contractor oversight as just some of the critically deficient areas in DoD contract management (DoD IG, 2009; GAO, 2005, 2006a, 2006b, 2007a). Because of these deficiencies, the GAO has identified contract management as a “high-risk” area for the federal government since 1990 and continues to identify it as high-risk today (GAO, 2013). In response to these contract management deficiencies, the DoD is increasing its emphasis on the area of workforce competence, such as education and training (GAO, 2007b; Newell, 2007). However, the DoD is focusing very little attention on organizational process maturity. Just as individual competence will lead to greater success in performing contracting tasks, organizational process maturity will ensure consistent and superior results for the agency (Frame, 1999; Kerzner, 2001, 2013).

Given this backdrop, the purpose of this research is to explore the use of process maturity models in benchmarking U.S. Army contracting processes. This paper analyzes the results of contract management process maturity benchmarking in the Army using the Contract Management Maturity Model (CMMM). The CMMM is used to benchmark an organization’s contract management process maturity and to develop a road map for implementing improvement initiatives for contract management processes (Garrett & Rendon, 2005; Rendon, 2008). Using the web-based survey assessment tool, the CMMM was applied to five Army contracting centers: the Tank-Automotive and Armaments Command (TACOM), the Research, Development and Engineering Command (RDECOM), the Aviation and Missile Command (AMCOM), the Joint Munitions and Lethality (JM&L) contracting center, and the National Capital Region (NCR) contracting center. This research summarizes the benchmarking assessments, analyzes the assessment results in terms of contract management process maturity, and discusses the implications of these assessment results for process improvement and knowledge management opportunities. The research findings can guide the Army in developing a road map for increasing contract management process capability.

This paper is divided into four sections. First, a brief literature review covering contract management is presented, with a specific focus on the use of maturity models for assessing contract management process maturity. Also included in the literature review is past research on benchmarking contracting and procurement processes. The second section discusses the research methodology in this case study, and also includes a discussion of the maturity model and a profile of the assessed Army contracting centers. An analysis of the assessment findings and implications for process improvement opportunities is then discussed. Finally, the paper presents a conclusion and implications for further research.

Literature Review

Academic research in contract management is founded on several economic and management theories; the one most often referred to is agency theory (Eisenhardt, 1989; Tate, Ellram, Bals, Hartmann, & van der Valk, 2010). A contract between the government and a contractor reflects a principal-agent relationship. The principal (government) contracts with the agent (contractor) to perform a specified task, such as developing and manufacturing a product or providing a service. In this relationship, the government’s objectives include obtaining the product or service at the right quality, quantity, source, time, and price (Lee & Dobler, 1971). The federal government also has the additional objective of ensuring that the product or service is procured in accordance with public policy and statutory requirements (Cohen & Eimicke, 2008; Cooper, 2003; Thai, 2004). Contractors, on the other hand, pursue the objectives of earning profit, insuring company growth, maintaining or increasing market share, and improving cash flow, to name just a few.

Because of the principal’s and agent’s different and conflicting objectives, each party is motivated and incentivized to behave in a specific manner. This behavior includes either withholding or sharing information. In principal-agent relationships that involve higher levels of uncertainty, which result in higher risk (such as developing an advanced technology weapon system), the information available to the government and contractor is typically asymmetrical. Agency theory is concerned with the principal’s and agent’s conflicting goals of obtaining their respective objectives and is focused on mechanisms related to obtaining information (for example, about the marketplace, the supply or service, or the contractor), selecting the agent (to counter the problem of adverse selection), and monitoring the agent’s performance (to counter the effects of moral hazard) (Eisenhardt, 1989).

Thus, how contracts are planned, structured, awarded, administered, and closed out (the contract management process) has its basis in agency theory and the principal-agent problem. Since contracts are the results of the processes that developed them, process maturity has a direct relationship to an organization’s contract management processes and resulting outcomes. Therefore, contract management process maturity is crucial to an organization’s mission success as well as process improvement efforts (Foti, 2002; Jugdev & Thomas, 2002). The next section discusses recent research on benchmarking contracting process maturity.

Benchmarking Contracting Processes

Although research on project procurement and contracting is not very extensive (for example, see Macbeth, Williams, Humby, & James, 2012), there is a growing stream of research in the area of benchmarking contracting processes. The need for measuring procurement processes and outcomes has been documented, as have the challenges in developing such procurement metrics. Hong and Kwon (2012) found that public procurement policies and processes affect broad patterns of practices and play a key role in improving manufacturing and services as well as organizational financial performance. Raymond (2008) suggested that the need for public procurement best practices is increasing, especially in the areas of value for money, ethics, competition, transparency, and accountability. Sánchez-Rodríguez, Martínez-Lorente, and Clavel (2003) used structural equation modeling in their empirical study, showing significant positive impact of benchmarking on procurement performance and an indirect positive impact on business performance. In survey-based research, Brandmeier and Rupp (2010) identified procurement success factors, including the use of cross-functional teams, cooperation with other functional offices, high organizational position of the procurement function, and training and development. Empirical research on defense procurement identified critical success factors such as workforce, relationships, processes, resources, polices, and requirements (Rendon, 2012).

Just as maturity models have been used in benchmarking project management processes and practices (Crawford, 2001; Hillson, 2003; Ibbs & Kwak, 2000; Levene, Bentley, & Jarvis, 1995; Pennypacker & Grant, 2003), maturity models have also been developed for use in assessing organizational procurement and contracting process capability and maturity. Process capability is defined as “the inherent ability of a process to produce planned results” (Ahern, Clouse, & Turner, 2001, p. 4). As the capability of a process increases, it becomes predictable and measurable. As the organization steadily improves its process capability, organizational competence increases and organizational processes become more mature (Ahern et al., 2001).

Competence, in this case, is defined as "an underlying characteristic that is causally related to effective or superior performance, as determined by measurable, objective criteria, in a job or in a situation" (Curtis, Hefley, & Miller, 2001, p. 577). Maturity can be defined as “a measure of effectiveness in any specific process” (Dinsmore, 1999, p.169). It is important to note that process maturity is not related to the passage of time. Process maturity is more reflective of how far an organization has progressed toward continuously improving its process capability in any specific area. Different organizations mature at different rates, depending on the nature of the business and the emphasis placed on process improvement. Waterman and Knight (2010) explored this using a capability maturity model for conducting self-assessments in a case study on United Kingdom government procurement departments. Bemelmans, Voordijk, and Vos (2013) developed a purchasing maturity tool and applied it to construction projects and found that the maturity tool provides the organization with insight on purchasing process maturity as well as process improvement opportunities. Finally, Rendon (2008) applied a contracting maturity model to assess and measure a U.S. Air Force contracting agency’s procurement processes and identified process improvement initiatives.

Thus, the literature on contract management process benchmarking reflects the challenges and benefits of assessing organizational contracting capability. The next section of this paper discusses the research methodology used in this benchmarking case study.

Methodology

The methodology used in this case study involved the deployment of an assessment tool associated with the CMMM. The CMMM assessment tool is a web-based survey comprised of over 60 items related to each of the six contract management key processes: procurement planning, solicitation planning, solicitation, source selection, contract administration, and contract closeout (Garrett, 1997). Appendix A provides a description of each contract management process area. The survey items are related to the organization’s use of specific contract management best practices within each contract management process area. Each survey item is associated with a specific capability enabler and best practice related to process strength, process results, management support, process integration, and process measurement.

The CMMM uses a purposeful sampling method designed to acquire data on organizational contract management processes and best practices (Creswell, 2003; McMillan & Schumacher, 2001). Thus, the assessment survey is only administered to fully qualified contracting officers who are authorized to enter into, administer, or terminate contracts and make related determinations and findings on behalf of the United States Government. DoD contracting officers are required to meet specific education, training, and experience requirements before being given contracting authority as specified in the Defense Acquisition Workforce Improvement Act (DAWIA, 2003). The survey items use a Likert scale option response with associated numerical values from 0 to 5. The total numerical scores for the survey items are calculated for each of the contract management process areas and then converted to a maturity level. The CMMM consists of five levels of maturity: ad hoc, basic, structured, integrated, and optimized (Garrett & Rendon, 2005). Appendix B provides a description of each contract management maturity level.

The survey link was e-mailed to the Army contracting agency directors and then forwarded to the eligible contracting officers. Reminder e-mails were sent approximately two weeks into the survey period. The survey instrument included the appropriate provisions for confidentiality and the protection of human subjects. Of the 1,100 eligible survey participants, 540 completed the survey, yielding a response rate of approximately 49%. The following are the profiles of the Army contracting agencies that participated in the CMMM assessment.

Army Contracting Agencies

The CMMM assessments were conducted at five specific Army contracting agencies: the Tank-Automotive and Armaments Command (TACOM), the Research, Development and Engineering Command (RDECOM), the Aviation and Missile Command (AMCOM), the Joint Munitions and Lethality (JM&L) contracting center, and the National Capital Region (NCR) contracting center.

The TACOM provides acquisition and contracting support to the U.S. Army TACOM Life Cycle Management Command for the procurement of ground combat vehicles, tactical vehicles, small arms, chemical/biological systems, targetry, supporting services, and associated consumable parts. The TACOM’s total estimated contract obligations are approximately $15 billion (Rendon, 2011).

The RDECOM provides innovative acquisition and contracting support to U.S. Army Research, Development, and Engineering Command elements and a broad, diverse customer base to equip the soldier with the latest technology, goods, and services on time and at a reasonable cost. The RDECOM’s total estimated contract obligations are approximately $6.9 billion (Rendon, 2011).

The AMCOM is responsible for life-cycle management of army missile, helicopter, unmanned ground vehicle, and unmanned aerial vehicle weapon systems. These weapon systems include the Patriot air defense missile system, Hellfire and Javelin missile systems, and Apache, Black Hawk, and Chinook helicopters. The AMCOM obligates approximately $20.6 billion in contracts (Rendon, 2010).

The JM&L contracting center is responsible for providing procurement support for life-cycle program management of armaments and munitions. Some of the systems procured by the JM&L contracting center include research and development prototypes to major weapon systems, such as the Army’s 155mm Precision Guided Extended Range Artillery Projectile, known as the Excalibur XM982. The JM&L contracting center obligates approximately $3.5 billion in contracts (Rendon, 2010).

The NCR contracting center provides contracting support for the procurement of telecommunication equipment and services, advertising, training, and studies. It also provides worldwide information technology contracting support and procures enterprise information technology support and equipment for the Army and other DoD activities. The NCR contracting center awards approximately $3.7 billion in contracts (Rendon, 2010).

Although the TACOM, the RDECOM, the AMCOM, the JM&L contracting center, and the NCR contracting center acquire and procure different types of systems, supplies, and services, the contract management processes used are common to all organizations (Rendon & Snider, 2008). Additionally, the contract management processes used at these contracting centers are also common to other Army, DoD, and U.S. Federal Government agencies for the procurement of systems, supplies, and services. Thus, the conclusions based on the analysis of these contract management process assessments may be applicable to other U.S. Federal Government agencies. The CMMM assessment results are discussed in the next section.

Results

The CMMM assessment results for each agency can be compared across the five contracting agencies to identify any consistencies in maturity ratings for each of the contract management process areas. My purpose is to attempt to identify consistencies in contract management process maturity as reflected in the maturity levels for each process area, characterize the state of contract management process capability within the Army, and identify opportunities for contract management process improvement.

The results of the CMMM assessments at the five contracting agencies are reflected in Tables 1 and 2. Table 1 lists the contract management process area, survey item number, and item description. As previously stated, each survey item is associated with a specific maturity enabler and best practice related to process strength, process results, management support, process integration, and process measurement. Also reflected in Table 1 are the mean responses for each survey item for each contracting agency and the total number of responses for each survey item. The mean responses—based on the Likert scale’s numerical value range from 5 (Always) to 1 (Never) and 0 (I Don’t Know)—for each item in each contract management process area are totaled, and the resulting score is converted to its associated process maturity level using the CMMM conversion table. Table 2 reflects the maturity level for each contract management process area for each Army contracting agency.

Key Process miteni Number and Description Agency
TACOM RDECOM AMCOM JM&L NCR
Mean Mean Mean Mean Mean n
Procurement Planning
1.1 Process Strength 4.36 4.05 4.53 4.63 3.68 591
1.2 Process Strength 364 3.57 3.89 4.28 3.17 591
1.3 Process Strength 3.68 3.43 3.97 4.20 3.00 591
1.4 Successful Results 3 84 3.66 3.89 4.07 3.30 591
1.5 Management 5upport 4.22 3.83 4.02 4.54 3.59 591
1.6 Process Integration 3.95 3.52 3.92 4.35 3.55 591
1.7 Process Integration 3.86 3.29 3.88 4.28 3.14 591
1.8 Process Integration 3.86 3.58 3.73 4.24 3.34 591
1.9 Process Measurement 2.94 2.68 3.12 3.57 2.25 591
1.10 Process Measurement 3.85 3.39 3.36 3.96 2.99 591
Total 38.20 35.00 38.31 42.12 32.01
Solicitation Planning
2.1 Process Strength 4.35 3.91 4.29 4.57 3.66 570
2.2 Process Strength 3.78 3.51 3.79 4.33 3.18 570
2.3 Process Strength 4.11 3.49 4.03 4.37 3.42 570
2.4 Successful Results 4.27 3.87 4.24 4.41 3.64 570
2.5 Management Support 4.10 3.8 3.84 4.41 3.50 570
2.6 Process Integration 3.88 3.43 3.87 4.30 3.52 570
2.7 Process Integration 3.90 3.39 3.84 4.28 3.22 570
2.8 Process Integration 3.74 3.52 3.75 4.11 3.48 570
2.9 Process Measurement 3.04 2.87 3.10 4.04 2.52 570
2.10 Process Measurement 3.76 3.30 3.57 4.04 3.12 570
Total 38.93 35.09 38.32 42.86 33.26
Solicitation
3.1 Process Strength 4.24 3.92 4.13 4.51 3.48 560
3.2 Process Strength 3.79 3.56 3.61 4.29 3.07 560
3.3 Process Strength 3.93 3.52 3.81 4.22 3.17 560
3.4 Successful Results 3.84 3.67 3.91 4.29 3.46 560
3.5 Management Support 3.88 3.61 3.83 4.33 3.46 560
3.6 Process Integration 3.76 3.48 3.84 4.22 3.50 560
3.7 Process Integration 3.75 3.42 3.77 4.22 3.28 560
3.8 Process Integration 3.23 3.00 3.08 3.71 3.25 560
3.9 Process Measurement 3.02 2.81 3.16 4.00 2.57 560
3.10 Process Measurement 3.75 3.26 3.53 4.02 3.10 560
Total 37.19 34.25 36.67 41.81 32.34
Source Selection
4.1 Process Strength 4.40 4.04 4.31 4.68 3.77 550
4.2 Process Strength 3.88 3.69 3.93 4.43 3.02 550
4.3 Process Strength 3.99 3.66 4.01 4.27 3.33 550
4.4 Successful Results 4.28 3.97 4.28 4.68 3.98 550
4.5 Management Support 4.17 3.83 4.02 4.43 3.68 550
4.6 Successful Results 3.69 3.69 4.03 4.34 3.56 550
4.7 Successful Results 4.18 4.18 4.11 4.73 3.98 550
4.8 Process Integration 3.95 3.79 3.91 4.48 3.77 550
4.9 Process Integr ation 3.93 3.60 3.93 4.43 3.27 550
4.10 Process Measurement 3.16 2.96 3.30 4.14 2.53 550
4.11 Process Measurement 3.73 3.33 3.57 4.20 3.12 550
Total 43.36 40.74 43.40 48.81 38.01
Contract Administration
5.1 Process Strength 3.90 3.55 3.78 4.11 3.38 543
5.2 Process Strength 3.54 3.45 3.38 3.98 3.04 543
5.3 Process Strength 3.46 3.55 3.64 3.95 3.20 543
5.4 Successful Results 3.73 3.59 3.58 4.09 3.37 543
5.5 Management Support 3.35 3.36 3.62 4.02 3.33 543
5.6 Process Integration 3.58 3.6 3.70 4.20 3.79 543
5.7 Process Integration 3.58 3.26 3.71 4.11 3.33 543
5.8 Process Integration 3.28 3.08 3.28 3.80 2.97 543
5.9 Process Integration 2.79 2.56 3.17 4.16 2.68 543
5.10 Process Measurement 2.77 2.7 3.05 3.57 2.51 543
5.11 Process Measurement 3.31 3.13 3.34 3.84 2.96 543
Total 37.29 35.83 38.25 43.83 34.56
Contract Closeout
6.1 Process Strength 3.36 3.75 3.77 3.66 3.32 540
6.2 Process Strength 3.08 3.56 3.37 3.61 2.99 540
6.3 Process Strength 3.19 3.54 3.48 3.39 3.12 540
6.4 Successful Results 3.21 3.85 3.97 3.84 3.46 540
6.5 Management Support 2.36 2.78 3.10 3.59 2.69 540
6.6 Process Integration 2.43 2.94 3.00 3.52 2.66 540
6.7 Process Integration 2.54 3.11 3.19 3.50 2.51 540
6.8 Process Measurement 2.01 2.7 2.79 3.07 2.16 540
6.9 Process Measurement 2.28 2.93 2.88 3.30 2.49 540
6.10 Process Measurement 2.12 2.39 2.42 2.95 2.26 540
Total 26.58 31.55 31.97 34.43 27.66

Table 1: U.S. Army CMMM assessment results

Army Agency Contract Management Process Area
Procurement
Planning
Solicitation
Planning
Solicitation Source
Selection
Contract
Administration
Contract
Closeout
TACOM 3 3 3 3 2 2
RDECOM 2 2 2 3 2 2
AMCOM 3 3 3 3 2 2
JM&L 3 4 3 4 3 2
NCR 2 2 2 2 2 2

Table 2: U.S. Army CMMM maturity levels

TACOM

The assessment results for the TACOM reflect some consistencies in terms of maturity levels for each of the contract management process areas. For example, based on the survey responses, the TACOM achieved a level 3 structured maturity level for procurement planning, solicitation planning, solicitation, and source selection process areas. Additionally, the TACOM achieved a level 2 basic maturity level for the process areas of contract administration and contract closeout. Thus, the disparity between maturity levels for the TACOM ranged from basic to structured.

RDECOM

The assessment results for the RDECOM also reflect some consistencies in terms of maturity levels for each of the contract management process areas. For example, the RDECOM achieved a level 2 basic maturity level for all contract management process areas except for source selection. For the source selection process area, it received a level 3 structured maturity level.

AMCOM

We also see some consistencies in the AMCOM’s assessment results, which reflect level 3 structured maturity levels for all contract management processes except for contract administration and contract closeout. For these two process areas, it achieved a level 2 basic maturity level.

JM&L

The assessment results for the JM&L contracting center reflect the most variation in terms of process maturity levels for each of the contract management process areas. The JM&L contracting center achieved a level 3 structured maturity level for the procurement planning, solicitation, and contract administration process areas; a level 4 integrated for solicitation planning and source selection process areas; and a level 2 basic for contract closeout. Thus, the disparity between process maturity levels for the JM&L contracting center ranged from level 2 to level 4.

NCR

The NCR contracting center’s assessment results reflect the most consistency, as well as the lowest maturity levels for all of the contract management processes. It achieved level 2 basic maturity levels for all contract management processes.

Discussion

Figure 1 reflects the contract management maturity levels for each agency (as identified by the lettered circles) and for each contract management process area. With this figure, we can compare the maturity levels across the contract management processes and clearly identify consistencies and differences in maturity levels. My purpose for this analysis is to discuss the effects that these consistencies have on contract management process maturity within these five Army contracting agencies. The implications of these assessment results in the areas of contract management maturity levels, process improvement opportunities, training opportunities, and knowledge management opportunities are discussed following the figure.

U.S. Army CMMM summary comparison <b>Contract Management Maturity Levels</b>

Figure 1: U.S. Army CMMM summary comparison

Contract Management Maturity Levels

Figure 1 provides some interesting observations. First, we see that the majority of contracting agencies are assessed at either the basic or structured level for all of the contract management process areas. Only the JM&L contracting center achieved the integrated level for the solicitation planning and source selection processes. Second, we also see that the post-award process areas of contract administration and contract closeout attained lower maturity levels compared to the other contract management process areas. All of the contracting agencies except the JM&L contracting center attained basic maturity levels for contract administration. All of the contracting agencies attained basic maturity levels for contract closeout.

These maturity levels for all of the contracting agencies reflect differences in the implementation of contract management best practices. These best practices are related to process strength, process results, management support, process integration, and process measurement. Specifically for the contract administration and contract closeout process areas, because of the lower maturity levels, we can expect to see a lack of contract management best practices within all five of these contracting agencies.

Process Improvement Opportunities

The true value of the CMMM assessment is the use of the assessment results in developing a road map for implementing contract management process improvement initiatives (Garrett & Rendon, 2005). The following process improvement opportunities are discussed for each of the five contracting centers.

TACOM and AMCOM

Both the TACOM and the AMCOM were assessed at the same contract management maturity levels for their respective contracting processes. Therefore, these two contracting agencies will be discussed together. The TACOM and the AMCOM achieved a structured maturity level for procurement planning, solicitation planning, solicitation, and source selection. In order for these agencies to progress to the integrated maturity level, they should ensure that these process areas are integrated with other organizational core processes, such as requirements management, financial management, schedule management, performance management, and risk management. The procurement planning process activities that need to be integrated with other organizational core processes include requirements analysis, acquisition planning, and market research. For the solicitation planning process, the activities include determining procurement method, developing evaluation strategy, and developing solicitation documents. Solicitation process activities to be integrated with organizational core processes include advertising procurement opportunities, conducting solicitation and pre-proposal conferences, and amending solicitation documents as needed. The TACOM and the AMCOM should integrate source selection process activities including evaluating proposals, applying evaluation criteria, negotiating contract terms, and selecting contractors. In addition to integrating these key process areas with other organizational core processes, the TACOM and the AMCOM should also ensure that the procurement project’s end user and customer are included as integral members of the project procurement team and are engaged in providing input and recommendations for key contract management decisions and documents.

Additionally, the TACOM and the AMCOM both achieved a basic maturity level for the contract administration and contract closeout key process areas. To progress to the structured maturity level, these agencies should ensure that contract administration and contract closeout processes are fully established, institutionalized, and mandated throughout the organization. Formal documentation should be developed for the contract administration and contract closeout process activities. These contract administration activities include monitoring and measuring contractor performance, managing the contract change process, and managing the contractor payment process. The contract closeout activities include verifying contract completion, verifying contract compliance, and making final payment. Also, senior management should be involved in providing guidance, direction, and even approval of key contract administration and contract closeout strategy, decisions, related contract terms and conditions, and documents (Garrett & Rendon, 2005). Furthermore, the TACOM and the AMCOM should permit the tailoring of processes and documents, allowing consideration for the unique aspects of each contract, such as contracting strategy, contract type, terms and conditions, dollar value, and type of requirement.

RDECOM

The RDECOM was rated at the basic maturity level for all contract management process areas except source selection. The source selection process was rated at the structured maturity level. To progress to the structured maturity level for all of the process areas except source selection, the RDECOM should ensure that these processes are fully established, institutionalized, and mandated throughout the organization. Formal documentation should be developed for these contract management process activities. Also, senior management should be involved in providing guidance, direction, and even approval of key contract management strategy, decisions, related contract terms and conditions, and documents (Garrett & Rendon, 2005). Also, for these contract management process areas, RDECOM should permit the tailoring of processes and documents, allowing consideration for the unique aspects of each contract, such as contracting strategy, contract type, terms and conditions, dollar value, and type of requirement.

The RDECOM source selection process area was rated at the structured maturity level. To progress to the integrated maturity level, the RDECOM should ensure that the source selection process is integrated with other organizational core processes, such as requirements management, financial management, schedule management, performance management, and risk management. The source selection process activities that need to be integrated include evaluating proposals, applying evaluation criteria, negotiating contract terms, and selecting contractors. In addition to integrating the source selection process area with other organizational core processes, the RDECOM should also ensure that the procurement project’s end user and customer are included as integral members of the project procurement team and are engaged in providing input and recommendations for key contract management decisions and documents.

JM&L

The JM&L contracting center was rated at the structured maturity level for procurement planning, solicitation, and contract administration. To progress to the integrated maturity level, the JM&L contracting center should ensure that these contract management process areas are integrated with other organizational core processes, such as requirements management, financial management, schedule management, performance management, and risk management. The procurement planning process activities that need to be integrated with other organizational core processes include requirements analysis, acquisition planning, and market research. Solicitation key process areas should be integrated with other organizational core processes, such as customer service, financial management, schedule management, performance management, and risk management. These solicitation process activities include advertising procurement opportunities, conducting solicitation and pre-proposal conferences, and amending solicitation documents as needed. The contract administration activities include monitoring and measuring contractor performance, managing the contract change process, and managing the contractor payment process.

The JM&L contracting center achieved an integrated level for the solicitation planning and source selection process areas. To progress to the optimized maturity level, the JM&L contracting center should ensure that the solicitation planning and source selection activities are evaluated periodically using effectiveness and efficiency metrics, and ensure that continuous process improvement, such as process streamlining initiatives, are implemented to further develop these processes. The JM&L contracting center should also ensure that databases for lessons learned and best practices are established and used to improve the solicitation planning and source selection processes, standards, and documentation (Garrett & Rendon, 2005). The solicitation planning and source selection activities that should be evaluated periodically using metrics include determining the procurement method, determining the evaluation strategy, developing solicitation documents, evaluating proposals, applying evaluation criteria, negotiating contract terms, and selecting contractors.

The JM&L contracting center’s maturity level for the contract closeout process area was assessed at the basic level. The JM&L contracting center should dedicate its process improvement effort to raising its contract closeout maturity level to structured by ensuring that these processes are fully established, institutionalized, and mandated throughout the organization. Formal documentation should be developed for these contract closeout process activities, such as verifying contract completion, verifying contract compliance, and making final payment. Also, senior management should be involved in providing guidance, direction, and even approval of key contract closeout strategy, decisions, related contract terms and conditions, and documents (Garrett & Rendon, 2005).

NCR

The NCR contracting center was assessed at the basic maturity level for all contract management process areas. To reach the structured maturity level, the NCR contracting center should ensure that these processes are fully established, institutionalized, and mandated throughout the organization. Formal documentation should be developed for these contract management process activities. Also, senior management should be involved in providing guidance, direction, and even approval of key contract management strategy, decisions, related contract terms and conditions, and documents (Garrett & Rendon, 2005). Furthermore, for these contract management process areas, the NCR contracting center should permit the tailoring of processes and documents, allowing consideration for the unique aspects of each contract, such as contracting strategy, contract type, terms and conditions, dollar value, and type of requirement.

Training Opportunities

The Army CMMM assessment results also indicate a need for an increased emphasis on the Army’s contract management training program. Training in each of the contract management process areas should also be part of the Army’s process improvement initiatives. The following discussion provides an overview of the major activities, tools, techniques, and Federal Acquisition Regulation (FAR) topics related to each of the contract management process areas.

Training in procurement planning would include acquisition planning, publicizing contract actions, and market research. This training should focus on subjects such as determining the availability of funds, making preliminary cost and schedule estimates, assessing and managing risk, determining manpower resources, conducting assessments of market conditions, selecting the appropriate contract type, developing contract incentive plans, and developing standard and unique contract terms and conditions (Garrett & Rendon, 2005).

Training in solicitation planning should focus on subjects such as developing solicitations, assessing solicitation documents, and developing appropriate criteria for proposal evaluation (Garrett & Rendon, 2005). This training would include the acquisition of commercial items, simplified acquisition procedures, sealed bidding, and contracting by negotiation (with regard to developing solicitation documents and evaluation strategy).

Training in the solicitation process should include subjects such as developing an integrated approach to establishing qualified bidders’ lists, conducting market research, advertising procurement opportunities, and conducting pre-proposal conferences (Garrett & Rendon, 2005). Training related to this process area would include publicizing contract actions, acquiring commercial items, using simplified acquisition procedures, using sealed bidding, and contracting by negotiation (with regard to conducting pre-solicitation and pre-proposal conferences).

Source selection training should include subjects such as proposal evaluation and evaluation criteria, evaluation standards, estimating techniques and evaluation factor weighting systems, and negotiation techniques (Garrett & Rendon, 2005).

Contract administration training should focus on conducting integrated assessments of contractor performance, such as integrated cost, schedule, and performance evaluations. Specific topics should include managing contract changes, processing contractor invoices and payments, managing contractor incentives and award fees, and managing subcontractor performance (Garrett & Rendon, 2005). Additional training should include government property (for complying with terms and conditions) and quality assurance (for monitoring and measuring contractor performance).

Contract closeout training should focus on subjects such as contract termination, closeout planning and considerations, and closeout standards and documentation (Garrett & Rendon, 2005). Additional training should include verifying contract completion and contractor compliance and ensuring contract completion documentation.

A critical note concerning contract management training should be discussed at this point. It is important for contracting officers to receive the appropriate training to ensure sufficient competency in each of the contract management process areas. However, it is also important for senior organizational management (for example, supervisors, division chiefs, and higher-level executives) to understand their roles and responsibilities in the contract management process. This is especially true for senior executives who have specific authorities for making contracting-related decisions and approving contract management documents. These authorities include approval of sole source justifications, use of a high-risk contract type, or waiver of statutory contracting requirements. Senior executives should understand not only their roles and responsibilities in the contract management process, but also the implications of their decisions on public policy objectives such as integrity, accountability, and transparency in the contracting process. Past DoD IG reports and investigations have identified a number of instances in which senior management have made contracting-related decisions resulting in a negative impact on the contract management process, specifically in terms of achieving public policy objectives (DoD IG, 2007, 2009). A review of Table 1, specifically the agency mean scores of contract management process area survey items related to management support, indicates that senior managers may not understand their roles, responsibilities, and implications of their contracting decisions, specifically in the contract administration and contract closeout process areas.

Knowledge Management Opportunities

The Army CMMM assessment results identified a wide disparity in the agency contract management process maturity levels. As reflected in Figure 1, the maturity levels for solicitation planning and source selection ranged from level 2 basic (for the RDECOM and the NCR contracting center) to level 4 integrated (for the JM&L contracting center). These assessment results present an opportunity for knowledge sharing and knowledge transfer between these Army agencies for the purpose of increasing their contract management process maturity levels. The implementation of knowledge sharing and knowledge transfer had been previously identified as the number-one goal for the Department of Defense Acquisition, Technology and Logistics (AT&L) Human Capital Strategic Plan (HCSP). The overarching goal is to promote DoD-wide sharing of workforce best practices by the military department (DoD, 2007). It is also interesting to note that recent GAO reports have identified the need for improving the training management of the contracting workforce and for creating a culture for knowledge sharing in improving federal acquisition as an opportunity in federal contract management (GAO, 2002, 2006b). The Army CMMM assessment results can be used as the key driver in implementing the DoD’s training improvement and knowledge management initiatives. The opportunities for knowledge management initiatives in contract management will only increase in importance as the DoD contracting workforce continues to decline due to retirement and is replaced with more junior and less-experienced contracting professionals.

Conclusion

This paper analyzed the results of contract management process maturity assessments conducted at five major Army contracting agencies: the TACOM, the RDECOM, the AMCOM, the JM&L contracting center, and the NCR contracting center. Although the CMMM assessment results indicated different contract management process maturity levels for each Army contracting center, ranging from level 2 basic to level 4 integrated, consistencies were identified for each of the contract management process areas: procurement planning, solicitation planning, solicitation, source selection, contract administration, and contract closeout. Generally, the assessment reflected higher maturity levels in the source selection process area, while lower maturity levels were indicated in the contract administration and contract closeout process areas. These maturity levels reflect the extent of the implementation of contracting best practices in the areas of process strength, process results, management support, process integration, and process measurement. The CMMM assessment results identified opportunities for increasing contract management process maturity, improving contract management training, and implementing knowledge management initiatives. The Army CMMM assessment results also identified consistencies in DoD and federal government contract management. These include problem areas within the contract administration and contract closeout process areas, procurement process integration issues, and contract management training and knowledge-sharing issues. As the body of knowledge on contract management process maturity continues to grow, the use of maturity models will continue to gain wider acceptance as a tool for assessing organizational contract management process maturity and for providing a road map for implementing process improvement initiatives.

Appendix A: Contract Management Processes

Procurement planning: The process of identifying which organizational needs can be best met by procuring products or services outside the organization. This process involves determining whether to procure, how to procure, what to procure, how much to procure, and when to procure.

Solicitation planning: The process of preparing the documents needed to support the solicitation. This process involves documenting program requirements and identifying potential sources.

Solicitation: The process of obtaining bids or proposals from prospective sellers on how organizational needs can be met.

Source selection: The process of receiving bids or proposals and applying evaluation criteria to select a contractor.

Contract administration: The process of ensuring that each contract party’s performance meets contractual requirements.

Contract closeout: The process of verifying that all administrative matters are concluded on a contract that is otherwise physically complete. This involves completing and settling the contract, including resolving any open items. Contract closeout also includes contract termination.

Appendix B: Contract Management Maturity Levels

Level 1 ad hoc: Organizations at this maturity level do not have established organization-wide contract management processes. Some established contract management processes do exist and are used within the organization, but these processes are applied only on an ad hoc and sporadic basis, and they are applied to contracts at random. Furthermore, there is informal documentation of contract management processes existing within the organization, but this documentation is used only on an ad hoc and sporadic basis on various contracts. Finally, organizational managers and contract management personnel are not held accountable for adhering to, or complying with, any basic contract management processes or standards.

Level 2 basic: Organizations at this level of maturity have established some basic contract management processes and standards within the organization, but these processes are required only on selected complex, critical, or high-visibility contracts, such as contracts meeting certain dollar thresholds or contracts with certain customers. Some formal documentation has been developed for these established contract management processes and standards. Furthermore, the organization does not consider these contract management processes or standards established or institutionalized throughout the entire organization. Finally, at this maturity level, there is no organizational policy requiring the consistent use of these contract management processes and standards on contracts other than the required contracts.

Level 3 structured: Organizations at this maturity level have contract management processes and standards that are fully established, institutionalized, and mandated throughout the entire organization. Formal documentation has been developed for these contract management processes and standards, and some processes may even be automated. Furthermore, since these contract management processes are mandated, the organization allows the tailoring of processes and documents in consideration of the unique aspects of each contract, such as contracting strategy, contract type, terms and conditions, dollar value, and type of requirement (product or service). Finally, senior organizational management is involved in providing guidance, direction, and even approval of key contracting strategy, decisions, related contract terms and conditions, and contract management documents.

Level 4 integrated: Organizations at this level of maturity have contract management processes that are fully integrated with other organizational core processes such as financial management, schedule management, performance management, and systems engineering. In addition to representatives from other organizational functional offices, the contract’s end-user customer is also an integral member of the buying or selling contracts team. Finally, the organization’s management periodically uses metrics to measure various aspects of the contract management process and to make contracts-related decisions.

Level 5 optimized: Organizations at this maturity level systematically use performance metrics to evaluate the quality, efficiency, and effectiveness of the contract management processes. At this maturity level, continuous process-improvement efforts are also implemented to improve the contract management processes. Furthermore, the organization has established programs for lessons learned and best practices in order to improve contract management processes, standards, and documentation. Finally, contract management process streamlining initiatives are implemented by the organization as part of its continuous process improvement program.

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Dr. Rene G. Rendon, DBA, PMP, is an associate professor at the U.S. Naval Postgraduate School in Monterey, California, where he teaches in the MBA program in acquisition and contract management. Prior to his appointment, he served for over twenty years as an acquisition and contracting officer in the United States Air Force, retiring at the rank of lieutenant colonel. Rene has published several books on defense acquisition management, including co-editing Management of Defense Acquisition Projects, and has also published articles in the Journal of Public Procurement, Journal of Contract Management, Journal of Purchasing and Supply Management, and Defense Acquisition Research Journal.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

©2014 Project Management Institute Research and Education Conference

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