Agreement Management: A Project Management Process Area at Maturity Level 2
Purpose
The purpose of Agreement Management (AM) is to ensure that the supplier and the acquirer perform according to the terms of the supplier agreement.
Tip
AM helps to prevent problems, such as suppliers that cannot meet requirements, by providing a proactive approach to supplier management and visibility into supplier activities. Well-executed SSAD processes provide significant leverage to success in AM.
Introductory Notes
The Agreement Management process area involves the following activities:
• Executing the supplier agreement
• Monitoring supplier processes
• Accepting the delivery of acquired products
• Managing supplier invoices
The legal nature of many acquirer–supplier agreements makes it imperative that the project management team is acutely aware of the legal implications of actions taken when managing the acquisition of products or services.
The supplier agreement is the basis for managing the relationship with the supplier, including resolving issues. It defines the mechanisms that allow the acquirer to oversee the supplier’s activities and evolving products and to verify compliance with supplier agreement requirements. It is also the vehicle for a mutual understanding between the acquirer and supplier. When the supplier’s performance, processes, or products fail to satisfy established criteria as outlined in the supplier agreement, the acquirer may take corrective action.
Related Process Areas
Refer to the Acquisition Technical Management process area for more information about evaluating technical solutions.
Refer to the Acquisition Validation process area for more information about validating selected products and product components.
Refer to the Measurement and Analysis process area for more information about specifying measures and communicating results.
Refer to the Project Monitoring and Control process area for more information about monitoring the project against the plan and taking corrective action.
Refer to the Solicitation and Supplier Agreement Development process area for more information about establishing supplier agreements.
Specific Practices by Goal
SG 1 Satisfy Supplier Agreements
The terms of the supplier agreement are met by both the acquirer and the supplier.
Tip
Although the goal of AM is effective performance by both parties to the agreement, acquirers will be successful in satisfying the goal if they perform all of the elements for which they are accountable and take appropriate corrective actions if the supplier fails to meet the terms of the agreement.
SP 1.1 Execute the Supplier Agreement
Perform activities with the supplier as specified in the supplier agreement.
This specific practice covers internal and external communication as well as the use of information by the acquirer and supplier regarding the relationship, performance, results, and impact to the business. The acquirer manages the relationship with the supplier to maintain effective communication on key issues (e.g., changes in the acquirer’s business), new supplier products and technologies, and changes in the organizational structure.
Tip
Often, suppliers have “capture teams” that are different from the team actually assigned to perform the work. As a consequence, AM activities may involve different supplier personnel than SSAD activities, which necessitates reestablishing the acquirer–supplier relationship.
Refer to the Project Monitoring and Control process area for more information about monitoring the project against the plan and taking corrective action.
Example Work Products
1. Integrated list of issues
2. Acquisition project progress and performance reports
3. Supplier review materials and reports
4. Action items tracked to closure
5. Records of product and document deliveries
Example Supplier Deliverables
1. Supplier project progress and performance reports
2. Corrective action results for supplier issues
3. Correspondence with the acquirer
Subpractices
1. Monitor supplier project progress and performance (e.g., schedule, effort, cost) as defined in the supplier agreement.
2. Conduct management reviews with the supplier as specified in the supplier agreement.
Reviews cover both formal and informal reviews and include the following steps:
• Preparing for the review
• Ensuring that relevant stakeholders participate
• Conducting the review
• Identifying, documenting, and tracking all action items to closure
• Preparing and distributing to the relevant stakeholders a summary report of the review
Tip
The purpose of a management review is to monitor the supplier’s progress against the project plans and identify and resolve potentially problematic issues (usually programmatic risks).
X-Ref
Reviews for technical risks are covered in ATM.
Refer to the Acquisition Technical Management process area for more information about conducting technical reviews.
Refer to the Project Monitoring and Control process area for more information about conducting milestone reviews.
3. Identify issues and determine corrective actions necessary to resolve and track them to closure.
Refer to the Manage Corrective Action to Closure specific goal in the Project Monitoring and Control process area for more information about tracking corrective actions to closure.
Unresolved issues escalate through the appropriate management chain according to the organization’s issue resolution process.
4. Use the results of reviews to improve the supplier’s performance and to establish and nurture long-term relationships with preferred suppliers.
Tip
Just as peer reviews provide secondary benefits, so do reviews conducted with the supplier.
5. Monitor risks involving the supplier and take corrective action as necessary.
Refer to the Project Monitoring and Control process area for more information about monitoring project risks.
SP 1.2 Monitor Selected Supplier Processes
Select, monitor, and analyze supplier processes.
When there must be tight alignment between supplier and acquirer processes, the acquirer should monitor these processes to help prevent interface problems.
Hint
Select the processes that will be monitored and evaluated to obtain visibility into supplier progress and performance and to identify and mitigate risks.
Selecting processes for monitoring involves considering the impact of the supplier’s processes on the project. On larger projects with significant subcontracts for development of critical components, monitoring key processes is expected. For less critical components, the selection process can determine that monitoring is not appropriate. Between these extremes, the overall risk should be considered when selecting processes to be monitored.
The acquirer should also determine the levels to which the selected supplier processes should be monitored. Monitoring, if not performed with adequate care, can at one extreme be invasive and burdensome, or at the other extreme be uninformative and ineffective. The acquirer decides on the necessary level of monitoring depending on the level of risk if the supplier’s process is not performed correctly and the impact the monitoring activity will have (i.e., the value of information obtained and its cost to both parties). Monitoring activities can range from reviewing supplier supplied process data to on-site appraisals of the supplier’s processes.
Tip
Monitoring represents a cost for both parties, so which processes are monitored depends on which ones provide the greatest insight into supplier activities, pose the most risk, and provide an early indication of problems. In cases associated with low risk, process monitoring may be relatively informal.
Analyzing selected processes involves taking the data obtained from monitoring the processes and analyzing them to determine whether there are serious issues.
Example Work Products
1. List of processes selected for monitoring or rationale for non-selection
2. Activity reports
3. Process performance reports
4. Process performance curves
5. Discrepancy reports
Example Supplier Deliverables
1. Supplier process quality assurance reports
Subpractices
1. Identify supplier processes critical to the success of the project.
2. Monitor selected supplier processes for compliance with requirements of the agreement.
3. Analyze results of monitoring selected processes to detect issues as early as possible that may affect the supplier’s ability to satisfy requirements of the agreement.
Trend analysis can rely on internal and external data.
SP 1.3 Accept the Acquired Product
Ensure that the supplier agreement is satisfied before accepting the acquired product.
This practice involves ensuring that the acquired product meets all requirements and that customers concur before acceptance of the product. The acquirer ensures that all acceptance criteria have been satisfied and that all discrepancies have been corrected. Requirements for formal deliverable acceptance and how to address non-conforming deliverables are usually defined in the supplier agreement. The acquirer should be prepared to exercise all remedies if the supplier fails to perform.
The acquirer, usually through its authorized supplier agreement administrator, provides the supplier with formal written notice that supplier deliverables have been accepted or rejected.
Tip
Sometimes the operational need is so great that a conditional acceptance is granted before the supplier agreement is fully satisfied. In these cases, the acquirer must proactively manage the “punch list” of outstanding items or discrepancies to ensure that the agreement is fully satisfied.
Typically, an authorized representative of the acquirer assumes ownership of existing identified supplier products or deliverables tendered, or approves services rendered, as partial or complete satisfaction of the supplier agreement.
The acquirer has defined how this product or service will make the transition to operations and support in the transition to operations and support plan. Transition to operations and support activities are monitored by the acquirer.
Refer to the Monitor Transition to Operations and Support specific practice in the Project Monitoring and Control process area for more information about monitoring transition activities.
Refer to the Plan Transition to Operations and Support specific practice in the Project Planning process area for more information about planning for the transition of the accepted product or service.
Example Work Products
1. Stakeholder approval reports
2. Discrepancy reports
3. Product acceptance review report with approval signatures
Example Supplier Deliverables
1. Work products as defined in the supplier agreement
2. Services as defined in the supplier agreement
Subpractices
1. Review the validation results, reports, logs, and issues for the acquired product.
Refer to the Acquisition Validation process area for more information about validating selected products and product components.
2. Review supplier verification results, reports, logs, and issues for the acquired product.
3. Confirm that all contractual requirements for the acquired product are satisfied.
This subpractice can include confirming that appropriate license, warranty, ownership, usage, and support or maintenance agreements are in place and all supporting materials are received.
4. Confirm that all discrepancies have been corrected and all acceptance criteria have been satisfied.
5. Communicate to relevant stakeholders that the supplier agreement has been satisfied.
The acquirer, usually through its authorized supplier agreement or contract administrator, provides the supplier with formal written notice that the supplier agreement has been satisfied so the supplier can be paid and the supplier agreement closed.
6. Communicate to relevant stakeholders the product’s readiness for transition to operations and support.
X-Ref
Acceptance procedures, reviews, and tests are also covered in AVAL. Consult that process area’s practices for more information about establishing the appropriate environment, procedures, and criteria for validation (and, therefore, for accepting the acquired product).
Hint
Be sure to address proprietary issues related to the acquired product before accepting it.
SP 1.4 Manage Supplier Invoices
Manage invoices submitted by the supplier.
The intent of this practice is to ensure that payment terms defined in the supplier agreement are met and that supplier compensation is linked to supplier progress, as defined in the supplier agreement. This practice covers invoices for any type of charge (e.g., one-time, monthly, deliverable-based, pass-through). It covers invoice errors or issues, changes to invoices, billing errors, and withholding disputed charges consistent with the terms and conditions of the supplier agreement. The acquirer should also ensure that appropriate financial and invoice management controls are in place.
Tip
This practice may be executed by a support function outside the control of the project team. Even so, slow or missed payments pose a risk to the project and must be on the project’s radar screen.
When accepting supplier deliverables, final payment should not be made to the supplier until it has been certified that all supplier deliverables meet contractual requirements and all acceptance criteria have been satisfied. When acceptance criteria have not been satisfied, the provisions of the supplier agreement can be exercised.
Example Work Products
1. Invoices approved for payment
Example Supplier Deliverables
1. Invoices
Subpractices
1. Receive invoices.
2. Review invoices and related supporting material.
3. Resolve errors and manage issues with the supplier as required.
4. Approve invoices.