Solicitation and Supplier Agreement Development: A Project Management Process Area at Maturity Level 2
Purpose
The purpose of Solicitation and Supplier Agreement Development (SSAD) is to prepare a solicitation package, select one or more suppliers to deliver the product or service, and establish and maintain the supplier agreement.
Hint
SSAD helps you prevent problems such as suppliers that fail to meet requirements, supplier agreements that prevent a proactive approach to supplier management, and suppliers that provide poor visibility into their activities.
Introductory Notes
The Solicitation and Supplier Agreement Development process area provides a set of practices that enables the acquirer to initialize and formalize a relationship with the supplier for the successful execution of the project. A supplier agreement is an agreement between the acquirer and supplier. This agreement can be a contract, license, or memorandum of agreement. The acquired product or service is delivered to the acquirer from the supplier according to the supplier agreement.
A supplier agreement created using these practices enables the acquirer to monitor and control supplier activities using other processes, such as the Project Monitoring and Control and Agreement Management processes.
The activities described in Solicitation and Supplier Agreement Development apply equally to initial supplier agreements and to subsequent change orders, task orders, or amendments related to those agreements.
Tip
Maturing the approach to SSAD ensures that agreements can be reached more quickly. Uniform selection approaches and standardized agreements benefit both the acquisition organization and its suppliers. Effective emphasis on SSAD ensures that AM processes flow more easily.
The acquirer is responsible for establishing and maintaining ground rules for communicating with the supplier, documenting decisions, and resolving conflict through the life of the agreement. The acquirer facilitates these activities with relevant stakeholders. Roles and responsibilities of relevant stakeholders during the interaction with suppliers are defined, coordinated, and adhered to.
Hint
Taking a broad view when applying SSAD can help reduce business-critical risks in obtaining products and services from suppliers.
The specific goals and specific practices of this process area build on each other. The Prepare for Solicitation and Supplier Agreement Development specific goal and its associated specific practices identify potential suppliers and develop and distribute the solicitation package, including evaluation criteria and the statement of work. The solicitation package is developed using work products from other processes (e.g., requirements and design constraints from Acquisition Requirements Development processes, supplier project and technical measures and objectives from Project Planning and Measurement and Analysis processes).
The Select Suppliers specific goal and its associated specific practices use work products from the preparation of the solicitation to solicit responses from potential suppliers, evaluate these responses, negotiate with potential suppliers, and select a supplier who can best deliver. Subsequently, the Establish Supplier Agreements specific goal and its associated specific practices are used to establish and maintain the supplier agreement. In turn, data provided by the supplier and documented in the supplier agreement (e.g., cost, schedule, risks) are used by Project Planning processes to update the project plan.
This process area contains many lists of examples to include in work products. As in other process areas, these lists are not all-inclusive and the acquirer should rely on other related lists when building work products. Considerations for supplier agreement content are described throughout the process areas.
Tip
In some cases, agreements with the customer may also be necessary—particularly when the customer organization is significantly different from the acquisition organization. If a customer agreement is useful, the practices in SSAD can be tailored to facilitate the creation of these agreements as well. The acquirer, in these cases, may be viewed as the supplier to the ultimate customer.
Although this process area describes acquisition practices for a project, an acquirer would use the same practices in establishing a supplier agreement for multiple projects. The requirements included in the solicitation package and the supplier agreement would reflect a broader scope, and the evaluation and selection process would require an appropriate level of review before a selection is made.
Related Process Areas
Refer to the Agreement Management process area for more information about ensuring that the supplier and the acquirer perform according to the terms of the supplier agreement.
Refer to the Acquisition Requirements Development process area for more information about developing and analyzing customer and contractual requirements.
Refer to the Decision Analysis and Resolution process area for more information about analyzing possible decisions using a formal evaluation process that evaluates identified alternatives against established criteria.
Refer to the Measurement and Analysis process area for more information about aligning measurement and analysis activities.
Refer to the Project Planning process area for more information about establishing estimates, developing a project plan, and obtaining commitment to the plan.
Refer to the Requirements Management process area for more information about managing requirements of the project’s products and product components and identifying inconsistencies between those requirements and the project’s plans and work products.
Specific Practices by Goal
SG 1 Prepare for Solicitation and Supplier Agreement Development
Preparation for solicitation and supplier agreement development is performed.
SP 1.1 Identify Potential Suppliers
Identify and qualify potential suppliers.
Consistent with internal organizational policy, the acquisition strategy, and project scope and requirements, the acquirer identifies potential suppliers to receive the solicitation. The acquirer can identify suppliers from a variety of sources (e.g., staff, international seminars, market analysis reports, pre-established schedules).
In some organizations, acquirers may solicit proposals from a limited number of suppliers to reduce their cost and efforts for the solicitation. Acquirers should, however, ensure that they include suppliers who are capable of meeting the requirements and that a sufficient number of suppliers are included to provide a competitive environment. This competition enhances the leverage of the acquirer in achieving its objectives (e.g., providing different approaches to meeting requirements). In some cases, the organization prequalifies preferred suppliers from which an acquirer can choose provided the preferred suppliers meet the specific needs of the project. Choosing from preferred suppliers can greatly reduce the effort and time required for solicitation.
Tip
Preferred supplier lists may exist within the organization that reduce the scope of the needed selection activities and the risks associated with unknown suppliers.
Depending on applicable regulations and project characteristics, the acquirer can determine to pursue a sole-source acquisition rather than a competitive bid. Acquirers should document the rationale for determining potential suppliers, particularly in the case of sole-source selection.
X-Ref
The use of preferred suppliers is discussed further in “An Industry Perspective on CMMI-ACQ” in Chapter 6.
Example Work Products
1. List of potential suppliers prepared to respond to the solicitation
Subpractices
1. Develop a list of potential suppliers.
To develop a list of potential suppliers, the acquirer considers which suppliers have experience with similar systems or projects, the performance the acquirer has experienced with suppliers on previous projects, which suppliers are likely to provide the capabilities needed for the project, and the availability of critical resources to staff and support the project. In addition to assessing supplier capabilities, a risk assessment is prepared on the suppliers’ financial capabilities (e.g., credit worthiness, financial stability, and access to capital and the impact to the supplier of a successful bid).
2. Communicate with potential suppliers concerning the forthcoming solicitation.
The acquirer contacts suppliers to outline plans for the solicitation, including the projected schedule for releasing the solicitation package and expected dates for responses from suppliers. If a supplier expresses interest in responding to the solicitation, the appropriate confidentiality agreements are put in place.
3. Verify participants who will evaluate supplier proposals.
4. Verify participants in supplier negotiations.
SP 1.2 Establish a Solicitation Package
Establish and maintain a solicitation package that includes the requirements and proposal evaluation criteria.
Solicitation packages are used to seek proposals from potential suppliers. The acquirer structures the solicitation package to facilitate an accurate and complete response from each potential supplier and to enable an effective comparison and evaluation of proposals.
The solicitation package includes a description of the desired form of the response, the relevant statement of work for the supplier, and required provisions in the supplier agreement (e.g., a copy of the standard supplier agreement or non-disclosure provisions). In government acquisitions, some or all of the content and structure of the solicitation package can be defined by regulation.
The solicitation package is rigorous enough to ensure consistent and comparable responses but flexible enough to allow consideration of supplier suggestions for better ways to satisfy requirements. The acquirer can invite suppliers to submit a proposal that is wholly responsive to the request for proposal and to provide a proposed alternative solution in a separate proposal.
The complexity and level of detail of the solicitation package should be consistent with the value of, and risk associated with, the planned acquisition. In some cases, the solicitation may not include detailed requirements (e.g., it may be a solicitation for development of detailed requirements or it may include a statement of objectives to provide the supplier greater flexibility in addressing the scope of the project).
Proposal and supplier evaluation criteria are identified and documented.
Example Work Products
1. Solicitation package
2. Supplier and proposal evaluation criteria
Subpractices
1. Develop the statement of work for the supplier.
The statement of work for the supplier defines, for those items being acquired, the portion of the project scope that is included in the related supplier agreement. The statement of work for a supplier is developed from the project scope, the work breakdown structure, and the task dictionary.
The statement of work for the supplier is written to be clear, complete, and concise. It describes the acquired product or service in sufficient detail to allow prospective suppliers to determine if they are capable of providing the product or service.
The statement of work for the supplier can be revised and refined as it moves through the solicitation, negotiation, and supplier agreement development processes until it is incorporated into a signed supplier agreement. For example, a prospective supplier can suggest a more efficient approach or a less costly product than what was originally specified.
2. Specify the process, product, and service level measures for acceptance.
The measures specify customer expectations and threshold values and are used to monitor the supplier and gauge the supplier’s adherence to requirements.
Service levels are an indicator of service delivery performance relative to an agreed-on service level measure. Service levels are designed to support the acquisition strategy. (See the definitions of “service level” and “measure” in the glossary.)
3. Develop supplier evaluation and proposal evaluation criteria.
Evaluation criteria are developed and used to rate or score proposals. Evaluation criteria are included in the solicitation package. Evaluation criteria can be limited to purchase price if the acquisition item is readily available from a number of acceptable suppliers. Purchase price in this context includes both the cost of the item and ancillary expenses such as delivery. Other selection criteria can be identified and documented to support an evaluation of a more complex product or service (e.g., the individuals identified in the Project Planning resource plan develop and document criteria for evaluating potential suppliers and their proposals).
Tip
The criteria used to select a supplier depend on the project, its requirements, and other factors. If you enter “supplier selection criteria” into your favorite search engine, you will be amazed by both the commonality and the variety of supplier selection criteria used in different industries.
Tip
Risks are typically included as criteria in a formal evaluation.
4. Document the proposal content that suppliers must submit with their response.
5. Incorporate the acquirer’s (standard) supplier agreement, terms and conditions, and additional information into the solicitation package.
SP 1.3 Review the Solicitation Package
Review the solicitation package with relevant stakeholders to obtain commitment to the approach.
The solicitation package is reviewed with stakeholders to ensure requirements have been accurately and sufficiently stated so that the solicitation can lead to a manageable agreement. The acquirer establishes traceability between requirements and the solicitation package. Suppliers can be included as stakeholders in the review of the solicitation package. The acquirer wants the solicitation package to attract a variety of responses and encourage competition. The acquirer also wants the solicitation package to be legally inclusive of all qualified suppliers.
Refer to the Perform Peer Reviews specific goal in the Acquisition Verification process area for more information about conducting peer reviews.
The acquirer can use standard templates and checklists to verify that the necessary components (e.g., skills, standards, verification and validation methods, measures, acceptance criteria) are covered in the solicitation package.
Refer to the Organizational Process Definition process area for more information about establishing organizational process assets.
The independent cost and schedule estimates for the supplier’s project work are reviewed.
Example Work Products
1. Record of the reviews of the solicitation package
SP 1.4 Distribute and Maintain the Solicitation Package
Distribute the solicitation package to potential suppliers for their response and maintain the package throughout the solicitation.
The solicitation package is distributed to potential suppliers in accordance with approved acquirer solicitation policies and procedures.
Refer to the Project Monitoring and Control process area for more information about monitoring the project against the plan.
Refer to the Project Planning process area for more information about establishing and maintaining plans that define project activities.
Example Work Products
1. Responses to supplier questions
2. Amendments to the solicitation package
Example Supplier Deliverables
1. Supplier proposals
2. Supplier questions and requests for clarification
Subpractices
1. Finalize a list of potential suppliers.
2. Distribute the solicitation package to potential suppliers.
3. Document and respond to supplier questions according to the instructions in the solicitation package.
Verify that all potential suppliers have equal access and opportunity to provide feedback on the solicitation package. Provide the opportunity for selected potential suppliers and stakeholders to clarify points of ambiguity in requirements as well as disconnects or concerns with requirements.
4. Acknowledge the receipt of supplier proposals according to the schedule identified in the solicitation package.
5. Verify conformance to requirements and completeness of supplier responses.
The suppliers should be contacted for corrective action if the response is non-conforming or incomplete.
6. Issue amendments to the solicitation package when changes are made to the solicitation.
SG 2 Select Suppliers
Suppliers are selected using a formal evaluation.
Suppliers are selected according to approved acquirer selection policies and procedures.
Refer to the Decision Analysis and Resolution process area for more information about analyzing possible decisions using a formal evaluation process that evaluates identified alternatives against established criteria.
X-Ref
If a supplier is using CMMI-DEV, supplier capability evaluations can be aided by the types of activities outlined in the technical report “Understanding and Leveraging a Supplier’s CMMI Efforts: A Guidebook for Acquirers” (CMU/SEI-2007-TR-004).
SP 2.1 Evaluate Proposed Solutions
Evaluate proposed solutions according to documented proposal evaluation criteria.
Proposals submitted in response to solicitation packages are evaluated in accordance with an overall established timeline, preliminary project plans, and proposal evaluation criteria. Proposal evaluation criteria are used to evaluate potential supplier responses to the solicitation. Evaluation results and decision-making notes (e.g., advantages and disadvantages of potential suppliers, scoring against criteria) should be documented and maintained.
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Capability evaluation methods associated with CMMI include the SCAMPI B and C appraisal methods. See www.sei.cmu.edu/cmmi/tools/appraisals/index.cfm for more information.
For task orders or changes in the terms of an existing supplier agreement, the acquirer uses documented evaluation criteria to evaluate task order responses or proposed changes to terms of the agreement. In a sole-source or change order environment, this practice is critical to enable relevant stakeholder understanding of the intent of the effort or changes before placing additional work against the supplier agreement.
Tip
Some organizations hire a cadre of supplier selection personnel to facilitate these processes. Selection personnel are most effective when teamed with acquisition personnel who manage the agreement responsibly.
Example Work Products
1. Clarification correspondence between the acquirer and potential suppliers
2. Evaluation results and rationale
3. List of candidate suppliers
Example Supplier Deliverables
1. Proposal revisions based on clarifications
2. Supplier documentation of their approach to the project work, their capabilities, and a preliminary technical solution
Subpractices
1. Distribute supplier proposals to individuals identified by the acquirer to perform the evaluation.
2. Schedule an acquirer evaluation review of supplier proposals to consolidate questions, concerns, and issues.
3. Schedule supplier presentations.
4. Confirm the mutual understanding of the statement of work.
A good practice is to compare the supplier’s estimates to the estimates developed in project planning; this comparison provides a means to determine if there is a mutual understanding of requirements and the associated work to fulfill them.
5. Evaluate supplier proposals and document findings.
6. Execute due diligence.
Due diligence provides an opportunity for the acquirer to further clarify requirements, particularly the ones related to the acquirer’s existing environment and products in use. Potential suppliers ask questions and gain understanding, which enables them to make realistic proposals. It also enables the acquirer to gain insight into the capability of the potential suppliers’ proposed solutions to meet requirements.
Due diligence helps to eliminate assumptions and replace them with facts, to identify and document risks and their mitigation plans or effect on the agreement, and to list issues and dependencies between the acquirer and supplier to include in the agreement.
7. Document candidate supplier recommendations based on the proposal evaluation.
SP 2.2 Establish Negotiation Plans
Establish and maintain negotiation plans to use in completing a supplier agreement.
The acquirer develops and refines a negotiation plan for each of the candidate suppliers based on the evaluation of the suppliers and their proposals.
The proposal evaluation and negotiations with suppliers provide the basis for selecting the supplier best able to meet the requirements of the solicitation.
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Establishing (and revising) an agreement often requires negotiation skills. See Getting to Yes: Negotiating Agreement Without Giving In, revised second edition, by William Ury, Roger Fisher, and Bruce Patton (Penguin USA).
The size of a negotiation team depends on the size and complexity of the project. Typically, the team is led by acquirer management and includes individuals who have detailed knowledge of the statement of work documented in the solicitation package. The negotiation team is typically supported by a legal staff, a financial analyst, purchasing, and the project manager.
Negotiations between acquirers and suppliers can be restricted by regulation. Review all regulations affecting negotiations before entering into them with a supplier.
Example Work Products
1. Negotiation plan for each candidate supplier
SP 2.3 Select Suppliers
Select suppliers based on an evaluation of their ability to meet specified requirements and established criteria.
Proposal evaluation results are used to finalize a supplier selection based on the outcome of negotiations or responses to acquirer questions provided by potential suppliers. Negotiations enable the acquirer to select the best supplier for the project. In some cases, the acquirer can take the top two proposals and use negotiations to make the final selection decision.
Evaluation results and negotiation results support the selection decision or cause the acquirer to take other action as appropriate. If the return on investment is not sufficient, the acquirer can decide to defer or cancel the project.
Example Work Products
1. Revisions due to negotiations
2. Supplier selection decision
3. Evaluation reports
Subpractices
1. Evaluate supplier proposals.
The evaluation of supplier proposals includes an evaluation of past performance. The acquirer’s evaluation of past supplier performance is carried out primarily to document the supplier’s competency relative to performing similar work on the project or other projects.
Hint
Strongly consider using DAR when evaluating potential suppliers. These subpractices describe some of what is involved in such an evaluation.
2. Negotiate with suppliers to determine the best fit for the project.
Negotiate with the selected supplier or candidate suppliers to resolve issues identified during due diligence and to address remaining issues with requirements. Revise requirements to be fulfilled by the supplier as appropriate.
3. Select a supplier to be awarded the supplier agreement.
Refer to the Decision Analysis and Resolution process area for more information about analyzing possible decisions using a formal evaluation process that evaluates identified alternatives against established criteria.
4. Document the selection.
Hint
Select a capable supplier that can meet your requirements with a quality product that is delivered on time and within budget.
SG 3 Establish Supplier Agreements
Supplier agreements are established and maintained.
A supplier agreement is established and maintained based on the supplier selection decision.
SP 3.1 Establish an Understanding of the Agreement
Establish and maintain a mutual understanding of the agreement with selected suppliers and end users based on acquisition needs and the suppliers’ proposed approaches.
Tip
A proactive approach provides benefits such as addressing the capability gap of the organization uniformly, reducing the time that projects take to select suppliers, establishing a more efficient umbrella agreement with a preferred supplier, and protecting core competencies.
To assist in establishing a mutual understanding of the agreement, the acquirer should review requirements of the agreement with the supplier and end user. Because points of clarification and ambiguities can arise after award of the supplier agreement, the acquirer should work with the supplier and end user to ensure that a mutual understanding is maintained through the life of the project (e.g., supplier workshops, executive meetings).
Example Work Products
1. Correspondence clarifying elements of the agreement
2. Frequently asked questions (for use with end users and other suppliers)
SP 3.2 Establish the Supplier Agreement
Establish and maintain the supplier agreement.
Hint
If it’s not documented in the supplier agreement, don’t count on it happening! Renegotiating an agreement can be expensive, so make sure the initial agreement covers everything that is important to you for managing the supplier and receiving the product that you are expecting.
The agreement can be either a stand-alone agreement or part of a master agreement. When part of a master agreement, the project agreement can be an addendum, work order, or service request to the master agreement.
Hint
The supplier agreement should be documented in a form suitable to the nature of the business transaction. The supplier agreement is the basis for monitoring your supplier and accepting the product—so make sure it covers all critical information.
Example Work Products
1. Supplier agreement (including terms and conditions)
Subpractices
1. Establish the supplier agreement.
2. Verify that all parties to the agreement understand and agree to all requirements by signing the supplier agreement.
The acquirer should ensure that the supplier makes a commitment in the agreement to execute its proposed processes.
Tip
The acquirer must engage the supplier in reviews, monitoring, and evaluations to a depth and breadth appropriate to the circumstances and risks. The supplier agreement must cover the details of these reviews.
3. Notify the suppliers not selected for the award.
4. Communicate the supplier agreement in the organization as required.
5. Maintain the supplier agreement as required.
After establishment of the supplier agreement, the acquirer can find requirements that are no longer optimal or applicable based on the supplier’s progress or environment changes. Examples include the availability of new technology, overly burdensome documentation, and reporting requirements. Changes to supplier agreements can also occur when the supplier’s processes or products fail to meet agreed-to criteria.
The supplier agreement and project documents should be revised to reflect changes in conditions as appropriate. This includes updating cost, schedule, and budget documents as needed.
X-Ref
The project’s progress and milestone reviews are covered in PMC SPs 1.6 and 1.7. Management reviews of the supplier are covered in AM SP 1.1, and technical reviews of the supplier’s technical solutions are covered in ATM SP 1.3.
All changes are formally documented and approved by both the acquirer and supplier before being implemented by this specific practice. Approved change requests can include modifications to terms and conditions of the supplier agreement, including the statement of work, pricing, and the descriptions of products, services, or results to be acquired.
Refer to the Configuration Management process area for more information about tracking and controlling changes.
Tip
Especially with long-term agreements (i.e., a duration of more than one year), technical and nontechnical requirements may change. It is necessary to document these changes in the supplier agreement because it is often the legal document that will make these significant changes binding.
6. Ensure that all records related to the supplier agreement are stored, managed, and controlled for future use.