I AM A LOCAL GOVERNMENT CONTRACTS PROFESSIONAL IN MASSACHUSETTS. THERE IS TREMENDOUS OPPORTUNITY PROVIDED BY A VARIETY OF SCENARIOS TO APPLY QUALITY CONTRACT MANAGEMENT PRINCIPLES TO CREATE DESIRED OUTCOMES. ALTHOUGH CONTRACT DOLLAR VOLUMES ARE TYPICALLY LOWER THAN IN OTHER FIELDS OF CONTRACT MANAGEMENT, PROGRAMS MAY BE LESS COMPLEX, AND THERE MAY NOT BE AS MUCH AT STAKE (E.G., NATIONAL SECURITY, WARFIGHTER CAPABILITY, INTERNATIONAL IMPACT, ETC.) THAN THOSE OF OUR FEDERAL AND DEPARTMENT OF DEFENSE COUNTERPARTS, THE PRINCIPLES AND CONCEPTS OF QUALITY CONTRACT MANAGEMENT STILL REMAIN THE SAME.
As my martial art instructor used to say about the self-defense system we trained in: “It's not that the system is sophisticated. Sophistication is nothing more than simplicity compounded.” He meant that basic moves put together into a sequential flow produced the desired effect on an opponent while at the same time appear advanced. The same could be said about the contract management field. It appears incredibly daunting and advanced, especially to an outsider. However, when basics are utilized and put together in a sequential flow (i.e., the contract life cycle), positive outcomes are typically produced for both parties.
The unprecedented, record-breaking 2014-2015 winter season in Massachusetts certainly presented operational difficulties for all who resided in the area, including individuals, businesses, and all government agencies alike. Many people not from this area seem to think that those who live and do business in Massachusetts are conditioned and not fazed by even the nastiest of storms. We can usually trudge along just fine through a blizzard or two, but this winter weather was especially challenging. Like the famous cliché goes, “the show must go on,” and this is exactly what the team in the City of Woburn, Massachusetts, did on one crucial contract that opened many eyes to the importance and leadership of the contract management profession and team effort.
The City of Woburn, a robust city eight miles north of Boston, was faced with a challenge. The challenge was to complete its Phase II of LED streetlight upgrades (1,800 lights) within a severely compressed deadline predicated by the late-in-the-construction-season notification of a substantial grant. In essence, in order for the city to be eligible for $250,000 of funding in the summer of 2015, Phase II had to be operationally and administratively completed by December 31, 2014. This looked virtually impossible at first glance, as the grant notification was officially provided in mid-September when construction season was rapidly coming to a halt. The other time restraints were solicitation development and project planning, which would take a few weeks; procurement and contract execution, which would take roughly one month; LED lights, which had a six-week delivery time; and actual installation work, which was estimated to take many weeks, but could be delayed by weather and holiday vacations. Not to mention that the previous contract, Phase I, had horrendous schedule overruns and administrative hiccups. Regardless, the city did not want to miss out on an award opportunity of $250,000 in grant funding, so what was it to do? Were we set up for failure? Let's examine the different phases of the life cycle.
The day the city received grant notification, a mad dash request hit the procurement office to procure service immediately backed with pressure of missing out on a future $250,000. I know this happens a lot in industry, where a requestor hits the contracts office stating they need something yesterday. Knowing that this project had many considerations, components, and potential complications, I recommended that we take a deep breath, and that a brief initial meeting with all involved internal parties should take place first. All internal parties needed to get on the same page before my office conducted any procurement action. At least on the local government side, there may be a tendency for each department to work in a vacuum and to act prematurely before developing a formal game plan. Bringing people together compelled communication with one another, which was a critical first step into identifying next steps, decisions, and accountability.
Immediately after receiving the premature request to bid, I circled back to the requesting department and asked them to complete a formal purchase request so more project details could be somewhat defined before the initial meeting. While that was occurring, both internal and external research was being conducted by my office before the initial meeting date.
Some of the main internal market research items included, but certainly weren't limited to:
- What were Phase I's issues and why did they happen? This way we could prevent it.
- How was the contract to be operationally managed, and did the city have the manpower to accomplish this?
- What was the budget, and was there an initial estimate of Phase II?
- Did the city appropriate enough money to be obligated onto this contract?
- What did Phase I's contract look like and what were the areas to improve upon in Phase II?
The next task was to conduct external market research and conduct discussions with the contractor community to accomplish the following:
- See if this endeavor was even possible in the timeframe estimated,
- Identify potential sources,
- Identify current contractor workloads,
- Discuss any logistical concerns, and
- Note all items that were of importance/benefit to contractors in a future statement of work if we pursued.
One item of significance was the ordering of 1,800 specified LED lights. To keep uniformity with Phase I, only one particular brand of light was specified with no “as equal clause.” This is obviously risky, as you put all eggs in one basket. It was required, though, from both a maintenance and administrative grant aspect. All potential contractors we spoke with said that the lights would take six weeks to be delivered from the placing of the order.
The results of conducting both internal and external research provided necessary insight to determine the best method of the following:
- Method of acquisition;
- Contract type;
- Invoicing instructions and frequency;
- Responsibility of product ordering (i.e., city or contractor); and
- Logistic concerns (i.e., delivery, storage, and security).
Initial Meeting and Method of Acquisition
The initial meeting was led by procurement and attended by the mayor, energy consultant, operations manager, planning/economic development, and (very important) the note taker, who memorialized all that was discussed and agreed upon. The meeting was structured according to an agenda, relaxed, positive in nature, and took an hour or so to review all aspects of the project. Quite astonishingly (and not surprisingly at all), all topics brought up related directly back to items in NCMA's Contract Management Body of Knowledge, including statement of work development, contract type, method of acquisition, project oversight, measuring, logistical considerations, closeout, etc. Due to market research already conducted, procurement was able to provide solid recommendations to address virtually every item.
One major theme worth highlighting is being creative enough to work within the statute regulations to get things done. This is tough to do in the government world, but it was very evident in deciding the method of acquisition in this case. Under Massachusetts statutes that govern procurement (a good resemblance of the Federal Acquisition Regulation actually), this project could have been procured in two different ways. One method was via request for qualifications,1 narrowing contractors down into a competitive range, then negotiating price with the most qualified. This method comes with additional administrative requirements—approvals and reviews from the state; therefore, it would require more acquisition time. However, the big positive for procuring under this method is that if the contractor's installed system does not produce the stated money incentive estimated to be paid by the utility company, the contractor shall cover the difference. This could be tens of thousands of dollars. The other method was utilizing a sealed bid,2which comes with only a two-week minimal public notice time and no approval from the state. The only negative is that the city would not have the luxury of the contractor coming up with the difference if the utility incentive was less than stated. However, the city can still protect itself by contractor bonds, solid terms and conditions, and a tight statement of work.
At the end of the meeting, the mayor said that regardless of whether we get the grant by finishing the project according to the deadline, he still wanted to move forward. This took the pressure off a bit and the team could work relaxed, but focused. Having that leadership support behind the team made everyone feel like attaining the deadline even more so. As the project team leader, I did make it a point to state that it's going to take everyone's best effort to have a shot at this.
Last, the note taker's records on the meeting discussions, decisions, and accountable parties transformed into a formal action item list with deadlines. The method of acquisition decided was sealed bid, as the city was willing to take on the financial incentive risk. The request for qualifications process, with all its administrative requirements, would have taken too long and the sealed bid would likely drive prices down anyway, therefore making up any financial risk. The contract type was firm-fixed-price, as the project could be defined enough to be a fair deal for the contractor.
Being Proactive Assists in Obtaining Optimal Bid Results
What may be different on the local government level versus the federal level is leverage. Leverage, in a sense, that on the federal level there are thousands of potential companies competing daily on hundreds of acquisitions. If the requirements are not unduly restrictive for whatever reason, there are usually contractors beating down the door to win. It is not the case on the local government level except for a few large infrastructure projects that come around every couple of years. So, in a case like this, where the budget estimate of the Phase II LED project was only $430,000, it required some proactive energy on our part to promote the opportunity. Before the sealed bid hit the street, the energy consultant and I went on a mission promoting the opportunity to the contractor community. This resulted in numerous companies pulling the solicitation and five fully qualified contractors submitting.
The apparent low bidder submitted $340,000 ($43,000 lower than the second competitor and $90,000 below budget), who was an outstanding company and just starting to diversify into larger light retrofit projects. The company's past performance checked out well, and although the past performance involved smaller projects than this, we knew a good portion of the total project cost was the lights themselves. It all weighed out in evaluating the size, scope, and complexity of the project.
Before awarding the contract, some of the project team members were concerned that the company may not have the bandwidth to handle the project capacity, under deadline, with a looming winter ahead. My response to them was to write down a list of questions and/or concerns and submit them to me. I would then have a detailed conversation with the contractor, document the contractor's responses, and provide answers to the team for final review. Items reviewed with the contractor were, but not limited to:
- What is your labor staffing plan?
- Credit line capabilities—can you float the light purchase?
- Do you have enough equipment to fulfill requirements?
- Where are you ordering LED lights from and what is your timeline?
The results of the lengthy conversation were positive. They were distributed to team members and they agreed to move forward and award the contract.
Here was the general project timeline to keep in mind:
- Initial meeting: September 15, 2014.
- Bid hits the street: October 8, 2014.
- Bid due: October 23, 2014.
- Contract awarded: October 24, 2014.
- Contract executed and project begins: November 6, 2014.
- State of Massachusetts grant walk-through inspection/substantial completion: December 23, 2014.
- Project deadline: December 31, 2014.
Again, the major concern was the lead time on the LED lights. We considered procuring the lights separately ahead of time, like a modular contract scenario. However, we were burned doing that on another grant-funded project in the past when install bids were very inflated and way over the appropriated budget. That project was cancelled, sadly, and the city returned equipment accompanied by a hefty restock fee.
Maybe this was luck on our part, with the manufacturer feeling generous; an excellent relationship that our contractor, distributor, and manufacturer all had together; or a combination of the three—but the lead time of six weeks was able to be compressed to two weeks to deliver 1,800 LED lights. This was huge. Additionally, our contractor offered to take the risk of ordering them after receipt of the formal award notice. I would never ask a contractor to do this, as the deal could technically go south before contract execution. However, they trusted the city to do right by them in executing the agreement and offered to do so to meet the project deadline. This project was also important to them too, because if they were successful, it would open doors to more related contract opportunities throughout New England. There was a trust between the parties.
Amazingly, the lights were delivered the very day the contract was executed and work began. When I look back on this project, I often think that if our contractor didn't hear about this project due to us being proactive in the contractor community, they might not have bid. Therefore, this amazing feat of delivery acceleration and the timing of it may have never happened.
Let's rewind a bit. A few days after contract award, I led a formal contract kickoff meeting that included all project team members and contractor representatives. An agenda was produced that reviewed such things as:
- Roles and responsibilities,
- Goals and objectives,
- Communication protocol,
- Contract particulars and implementation timeline,
- Invoicing, and
- Existing product disposition.
All items discussed were followed up with action items for all parties, deadlines, and (of course) the note taker, who memorialized everything. I truly believe that this one meeting was key to starting the project off right. I also know that all parties left feeling like this was a true team effort being played out to a tee. All left feeling confident, respected, trusted, and ready to attack the tasks at hand.
Let's fast forward now to November 6, 2014, as work begins. The contractor performed brilliantly and had some logistics support from the city. The city provided a secure area for the contractor to store materials, vehicles, and related items, so time wasn't wasted travelling back and forth to their headquarters every day. Every day the contractor communicated both formally and informally with the city operations manager on the project status. Our operations manager routinely inspected the contractor's work in the field, documented progress, and reported back to the project team. When needed, the contractor accelerated the pace due to weather or vacation delay by dedicating additional crews and equipment. Through diligent efforts by the contractor, the project was substantially complete by December 23, 2014. This translated into a pace of installing roughly 90 lights per day, compared to 45 lights per day in Phase I. The contract officially closed out in February 2015.
Key Project Successes
The project was successful in numerous ways, including, but not limited to, the following:
- The project was completed $90,000 (21 percent) under budget due to multiple reasons, such as the contract type, statement of work, competitive process, the promotion of the project to contractor community, etc.;
- The project was completed on a firm time deadline and became eligible for an additional $250,000 in energy project grant funding in the summer of 2015;
- There was a utility incentive rebate of $112,809.90 given directly back to city;
- There was a significant decrease in energy usage (i.e., 290,000 kilowatts per year); and
- There was a significant decrease in energy costs (i.e., $32,480 per year at the then current electricity rate).
The net result of the project is that the city spent $0.00 directly on this project. There was $430,000 budgeted ($250,000 existing grant funding, and $180,000 in city funds). The actual price was $340,000, and if you subtract the $227,190.10 in existing Phase II grant funding and the $112,809.90 from the utility incentive, the result is a $0.00 net cost to the city.
There were some items that happened to go our way on this contract. Not all projects work out like this. However, I strongly believe that the solid contract management principles and concepts utilized through all phases of the life cycle had a very big part of it happening. Contracts just do not manage themselves. Team effort was also a hugely crucial piece.
Having played in high-level college baseball year's back, I was fortunate to feel what it was like to be part of a close-knit team of players who sincerely cared about one another. I do not see this in the work/professional environment all too often, but on this particular project I happened to witness it. Leadership support is another important piece to ensure the “players” are mentally set to conduct their tasks.
To conclude, I will say this: NCMA is a great organization that provides solid tools, as well as knowledge and educational opportunities that directly apply to our jobs. Of course, in the end, it's really up to each individual person to use those tools, but as shown in this local government situation, applying what is learned from NCMA opportunities certainly is proof.
ABOUT THE AUTHOR
MIKE GAUTHIER, CPCM, MCPPO, is a purchasing agent for the City of Woburn, Massachusetts. He has been working in the contract management field for eight years for local government and previously as a contractor supporting various federal, state, and corporate agencies. He provides continuous beginner and advanced contracts training to hundreds of state and local personnel through the Massachusetts Office of the Inspector General's MCPPO program and through various regional associations. He is an active member of the Boston Chapter of NCMA.
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- M.G.L. c. 25A, §11I.
- M.G.L. c. 30, §39M.