The purpose of Agreement Management (AM) is to ensure that the supplier and the acquirer perform according to the terms of the supplier agreement.
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
Tip
AM helps to prevent problems, such as suppliers that can’t meet requirements, by providing a proactive approach to supplier management and visibility into supplier activities.
Although the goal of AM is effective performance by both parties to the agreement, acquirers will be successful in satisfying the goal by performing all of the elements for which they are accountable and taking appropriate corrective actions if the supplier fails to meet the terms of the agreement.
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.
Tip
Well-executed SSAD processes provide significant leverage to success in AM.
Often, suppliers have “capture teams” that are different from the team actually assigned to perform the work. So AM may involve different personnel than SSAD and have unique challenges for the acquirer—supplier relationship.
Refer to the Project Monitoring and Control process area for more information about monitoring projects and taking corrective action.
Refer to the Measurement and Analysis process area for more information about specifying, analyzing, and reporting measures and how measurement data are analyzed and reported.
Refer to the Solicitation and Supplier Agreement Development process area for more information about establishing and maintaining the supplier agreement.
Refer to the Acquisition Validation process area for more information about validating products.
Refer to the Acquisition Technical Management process area for more information about evaluating supplier deliverables.
The terms of the supplier agreement are met by both the acquirer and the supplier.
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.
Refer to the Project Monitoring and Control process area for more information about monitoring projects and taking corrective action.
- Integrated list of issues
- Supplier project progress and performance reports
- Supplier review materials and reports
- Action items tracked to closure
- Records of product and document deliveries
Typical Supplier Deliverables
- Supplier project progress and performance reports
- Corrective action results for supplier issues
- Correspondence with the acquirer
Subpractices
- Monitor supplier project progress and performance (e.g., schedule, effort, and cost) as defined in the supplier agreement.
- 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
Refer to the Project Monitoring and Control process area for more information about conducting project milestone reviews.
Refer to the Acquisition Technical Management process area for more information about conducting technical reviews.
- 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.
- Use the results of reviews to improve the supplier’s performance and to establish and nurture long-term relationships with preferred suppliers.
The acquirer’s evaluation of supplier performance is carried out primarily to confirm the supplier’s competency or lack of competency relative to performing similar work on the project or other projects.
- 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.
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.
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 may determine that monitoring is not appropriate. Between these extremes, the overall risk should be considered when selecting processes to be monitored.
Hint
Select the processes in which work products will be monitored and evaluated to obtain visibility into supplier progress and performance and to identify and mitigate risks.
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. Monitoring activities can range from reviewing supplier-supplied process data to on-site appraisals of the supplier’s processes [SEI 2007].
Tip
Monitoring is a cost to both parties, so which processes to monitor depends on which ones provide the most insight into supplier activities, pose the most risk, and provide an early indication of problems. In cases of 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.
Typical Work Products
- List of processes selected for monitoring or rationale for nonselection
- Activity reports
- Performance reports
- Performance curves
- Discrepancy reports
- Supplier process quality assurance reports
Subpractices
- Identify supplier processes critical to the success of the project.
- Monitor selected supplier processes for compliance with requirements of the agreement.
- 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.
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 nonconforming 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.
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 performance of the supplier agreement.
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 satisfied.
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 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.
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.
- Stakeholder approval reports
- Discrepancy reports
- Product acceptance review report with approval signatures
Typical Supplier Deliverables
- Work products as defined in the supplier agreement
- Services as defined in the supplier agreement
Subpractices
- Review the validation results, reports, logs, and issues for the acquired product.
Refer to the Acquisition Validation process area for more information about validating products.
- Review supplier verification results, reports, logs, and issues for the acquired product.
- Confirm that all contractual requirements for the acquired product are satisfied.
This subpractice may include confirming that appropriate license, warranty, ownership, usage, and support or maintenance agreements are in place and all supporting materials are received.
- Confirm that all discrepancies have been corrected and all acceptance criteria have been satisfied.
- Communicate to appropriate 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.
- Communicate to relevant stakeholders the product’s readiness for transition to operations and support.
Manage invoices submitted by the supplier.
X-Ref
This practice may be executed by a support function outside the control of the project team. However, slow or missed payments pose a risk to the project and must be on the project’s radar screen.
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 must also ensure that appropriate financial and invoice management controls are in place.
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 may be exercised.
Typical Work Products
- Invoices approved for payment
Typical Supplier Deliverables
- Invoices
Subpractices
- Receive invoices.
- Review invoices and related supporting material.
- Resolve errors and manage issues with the supplier as required.
- Approve invoices.