Supplier Agreement Management
A Project Management Process Area at Maturity Level 2
Purpose
The purpose of Supplier Agreement Management (SAM) is to manage the acquisition of products and services from suppliers.
Introductory Notes
The scope of this process area addresses the acquisition of products, services, and product and service components that can be delivered to the project’s customer or included in a service system. This process area’s practices may also be used for other purposes that benefit the project (e.g., purchasing consumables).
Throughout the process areas, where the terms “product” and “product component” are used, their intended meanings also encompass services, service systems, and their components.
The Supplier Agreement Management process area involves the following activities:
• Determining the type of acquisition
• Selecting suppliers
• Establishing and maintaining agreements with suppliers
• Executing supplier agreements
• Monitoring selected supplier processes
• Evaluating selected supplier work products
• Accepting delivery of acquired products
• Ensuring successful transition of acquired products to the project
Examples of both tangible and intangible products that may be acquired by the project to become part of a service delivered to the customer or to become part of the service system include the following:
• Maintenance of a specialized piece of equipment through a service level agreement with an external supplier as part of a facility maintenance service
• User training for a service, where the training is performed by an internal supplier as part of an operating level agreement (OLA)
• Nursing services at a hospital supplied through an outsourcing agreement
• Meals and refreshments at a conference supplied through a catering contract
• Communications equipment that is purchased and delivered by a purchasing agent on receipt of an order
• Gasoline to be sold at a gas station
• Automobiles to be delivered by a delivery service as ordered
• Automated teller machines at a bank
• Components of a Web-based search engine
• Airplanes at an airline
• Automobiles at a car rental outlet
Typically, the products to be acquired by the project are determined during the early stages of planning and development of the service system.
This process area does not directly address arrangements in which the supplier is integrated into the project team and uses the same processes and reports to the same management as the project team members (e.g., integrated teams). Typically, these situations are handled by other processes or functions (e.g., project management processes, processes or functions external to the project), though some of the specific practices of this process area may be useful in managing the supplier agreement.
This process area typically is not implemented to address arrangements in which the supplier is also the project’s customer. These situations usually are handled by either informal agreements with the customer or by specification of the customer-furnished items in the overall service agreement that the project has with the customer. In the latter case, some of the specific practices of this process area may be useful in managing the service agreement, although others may not, due to the fundamentally different relationship that exists with a customer as opposed to an ordinary supplier.
Suppliers may take many forms depending on business needs, including in-house vendors (i.e., vendors that are in the same organization but are external to the project), fabrication departments, and commercial vendors. (See the definition of “supplier” in the glossary.)
A supplier agreement is established to manage the relationship between the organization and the supplier. A supplier agreement is any written agreement between the organization (representing the project) and the supplier. This agreement may be a contract, license, service level agreement, or memorandum of agreement. The acquired product is delivered to the project from the supplier according to the supplier agreement. (See the definition of “supplier agreement” in the glossary.)
Related Process Areas
Refer to the Project Monitoring and Control process area for more information about monitoring the project against the plan and managing corrective action to closure.
Refer to the Requirements Management process area for more information about maintaining bidirectional traceability of requirements.
Specific Practices by Goal
SG 1 Establish Supplier Agreements
Agreements with the suppliers are established and maintained.
SP 1.1 Determine Acquisition Type
Determine the type of acquisition for each product or product component to be acquired.
Many different types of acquisitions can be used to acquire products and product components that can be used by the project.
Examples of types of acquisitions include the following:
• Purchasing COTS products
• Obtaining products through a supplier agreement
• Obtaining products from an in-house vendor
• Obtaining services from another part of the business enterprise
• Obtaining products from the customer
• Combining some of the above (e.g., contracting for a modification to a COTS product, having another part of the business enterprise co-develop products with an external supplier)
If acquiring COTS products, care in evaluating and selecting these products and the supplier may be critical to the project. Aspects to consider in the selection decision include proprietary issues and the availability of the products.
Typical Work Products
1. List of the acquisition types that will be used for all products and product components to be acquired
SP 1.2 Select Suppliers
Select suppliers based on an evaluation of their ability to meet the specified requirements and established criteria.
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.
Criteria should be established to address factors that are important to the project.
Examples of factors that may be important to the project include the following:
• Geographical location of the supplier
• Supplier’s performance records on similar work
• Engineering capabilities
• Staff and facilities available to perform the work
• Prior experience in similar situations
• Customer satisfaction with similar products delivered by the supplier
Typical Work Products
1. Market studies
2. List of candidate suppliers
3. Preferred supplier list
4. Trade study or other record of evaluation criteria, advantages and disadvantages of candidate suppliers, and rationale for selection of suppliers
5. Solicitation materials and requirements
Subpractices
1. Establish and document criteria for evaluating potential suppliers.
2. Identify potential suppliers and distribute solicitation material and requirements to them.
A proactive manner of performing this activity is to conduct market research to identify potential sources of candidate products to be acquired.
3. Evaluate proposals according to evaluation criteria.
4. Evaluate risks associated with each proposed supplier.
Refer to the Risk Management process area for more information about identifying and evaluating risks.
5. Evaluate proposed suppliers’ ability to perform the work.
Examples of methods used to evaluate the proposed supplier’s ability to perform the work include the following:
• Evaluation of prior experience in similar applications
• Evaluation of customer satisfaction with similar products provided
• Evaluation of prior performance on similar work
• Evaluation of management capabilities
• Capability evaluations
• Evaluation of staff available to perform the work
• Evaluation of available facilities and resources
• Evaluation of the project’s ability to work with the proposed supplier
• Evaluation of the impact of candidate COTS products on the project’s plan and commitments
When COTS products are being evaluated, consider the following:
• Cost of the COTS products
• Cost and effort to incorporate the COTS products into the project
• Security requirements
• Benefits and impacts that may result from future product releases
Future releases of the COTS product may provide additional features that support planned or anticipated enhancements for the project, but may result in the supplier discontinuing support of its current release.
6. Select the supplier.
SP 1.3 Establish Supplier Agreements
Establish and maintain supplier agreements.
A supplier agreement is any written agreement between the organization (representing the project) and the supplier. This agreement may be a contract, license, service level agreement, or memorandum of agreement.
The content of the supplier agreement should specify the reviews, monitoring, evaluations, and acceptance tests to be performed, if such activities are appropriate to the acquisition or product being acquired.
An acquired service may be delivered directly to the service provider’s customer or end user. The content of the supplier agreement for such an acquired service should also specify whether the acceptance process will be performed before, during, or after supplier delivery. If the supplier will continuously or repeatedly deliver the service to the customer, the content should also specify when or how often the acceptance process will be performed (e.g., every time the service is delivered, at specified or random times on a subset of the service deliveries).
Supplier agreements between independent legal entities are typically reviewed by legal or contract advisors prior to approval.
Supplier agreements should address the expected end of service, early end of service, and transition of service as appropriate.
Typical Work Products
1. Statements of work
2. Contracts
3. Memoranda of agreement
4. Licensing agreement
Subpractices
1. Revise the requirements (e.g., product requirements, service level requirements) to be fulfilled by the supplier to reflect negotiations with the supplier when necessary.
Refer to the Requirements Management process area for more information about managing requirements.
2. Document what the project will provide to the supplier.
Include the following:
• Project-furnished facilities
• Documentation
• Services
3. Document the supplier agreement.
The supplier agreement should include a statement of work, a specification, terms and conditions, a list of deliverables, a schedule, a budget, and a defined acceptance process.
This subpractice typically includes the following tasks:
• Establishing the statement of work, specification, terms and conditions, list of deliverables, schedule, budget, and acceptance process
• Identifying who from the project and supplier are responsible and authorized to make changes to the supplier agreement
• Identifying how requirements changes and changes to the supplier agreement are to be determined, communicated, and addressed
• Identifying standards and procedures that will be followed
• Identifying critical dependencies between the project and the supplier
• Identifying the type and depth of project oversight of the supplier, including selection of processes to be monitored and work products to be evaluated (and the corresponding procedures and evaluation criteria to be used)
• Identifying the types of reviews that will be conducted with the supplier
• Identifying the supplier’s responsibilities for ongoing maintenance and support of the acquired products
• Identifying warranty, ownership, and rights of use for the acquired products
• Identifying acceptance criteria
• Identifying specific requirements, scope, level of service, and communication processes to be provided by the suppliers
• Aligning subcontract service level agreements with contractor’s service level agreements
• Ensuring that risk handling responsibilities are flowed down to suppliers as appropriate
• Reviewing the legal aspects of the supplier agreement if necessary to ensure compliance and enforceability
In some cases, selection of COTS products may require a supplier agreement in addition to the agreements in the product’s license. Examples of what could be covered in an agreement with a COTS supplier include the following:
• Discounts for large quantity purchases
• Coverage of relevant stakeholders under the licensing agreement, including project suppliers, team members, and the project’s customer
• Plans for future enhancements
• On-site support, such as responses to queries and problem reports
• Additional capabilities that are not in the product
• Maintenance support, including support after the product is withdrawn from general availability
4. Periodically review the supplier agreement to ensure that it accurately reflects the project’s relationship with the supplier and current risks and market conditions.
5. Ensure that all parties to the supplier agreement understand and agree to all requirements before implementing the agreement or any changes.
6. Revise the supplier agreement as necessary to reflect changes to the supplier’s processes or work products.
7. Revise the project’s plans and commitments, including changes to the project’s processes or work products, as necessary to reflect the supplier agreement.
Refer to the Project Monitoring and Control process area for more information about monitoring commitments.
SG 2 Satisfy Supplier Agreements
Agreements with suppliers are satisfied by both the project and the supplier.
SP 2.1 Execute the Supplier Agreement
Perform activities with the supplier as specified in the supplier agreement.
Refer to the Project Monitoring and Control process area for more information about monitoring the project against the plan and managing corrective action to closure.
Typical Work Products
1. Supplier progress reports and performance measures
2. Supplier review materials and reports
3. Action items tracked to closure
4. Product and documentation deliveries
Subpractices
1. Monitor supplier progress and performance (e.g., schedule, effort, cost, technical performance) as defined in the supplier agreement.
2. Conduct reviews with the supplier as specified in the supplier agreement.
Refer to the Project Monitoring and Control process area for more information about conducting milestone reviews and progress reviews.
Reviews cover both formal and informal reviews and include the following steps:
• Preparing for the review
• Ensuring that relevant stakeholders participate
• Identifying, documenting, and tracking all action items to closure
• Preparing and distributing to the relevant stakeholders a summary report of the review
3. Conduct technical reviews with the supplier as defined in the supplier agreement.
Technical reviews typically include the following:
• Providing the supplier with visibility into the needs and desires of the project’s customers and end users as appropriate
• Reviewing the supplier’s technical activities and verifying that the supplier’s interpretation and implementation of the requirements are consistent with the project’s interpretation
• Ensuring that technical commitments are being met and that technical issues are communicated and resolved in a timely manner
• Obtaining technical information about the supplier’s products
• Providing appropriate technical information and support to the supplier
• Evaluating the supplier’s delivery of services against targets in service agreements (e.g., service level agreements, operating level agreements)
4. Conduct management reviews with the supplier as defined in the supplier agreement.
Management reviews typically include the following:
• Reviewing critical dependencies
• Reviewing project risks involving the supplier
• Reviewing schedule and budget
• Reviewing the supplier’s compliance with legal and regulatory requirements
Technical and management reviews may be coordinated and held jointly.
5. Use the results of reviews to improve the supplier’s performance and to establish and nurture long-term relationships with preferred suppliers.
Possible sources for improvements to the supplier’s performance or the organization-supplier relationship may come from analyzing the results of technical and management reviews as well as a comprehensive review that ensures alignment of business needs and contractual obligations. A comprehensive review of supplier agreements is held periodically to ensure alignment of business needs and contractual obligations. Improvements identified during these reviews may be recorded and included in an improvement plan.
6. Monitor risks involving the supplier, and take corrective action as necessary.
Refer to the Risk Management process area for more information about identifying and analyzing risks.
Examples of sources of risks to monitor include the following:
• Supplier’s ability to continue effective delivery
• Supplier’s viability
• Items covered by nondisclosure agreements
• Contract terms and conditions
• Availability of alternative suppliers
SP 2.2 Monitor Selected Supplier Processes
Select, monitor, and analyze processes used by the supplier.
Supplier processes that are critical to the success of the project (e.g., due to complexity, due to importance) should be monitored. The selection of processes to monitor must consider the impact of the supplier’s processes on the project.
On larger projects with significant subcontracts, monitoring key processes is expected. For smaller, less critical components, the selection process may determine that monitoring is not appropriate. Between these extremes, the overall risk should be considered in selecting processes to be monitored.
The processes selected for monitoring should include service system development, project management (including risk management and contracting), and support processes critical to successful project performance.
Monitoring, if not performed with adequate care, can at one extreme be invasive and burdensome or at the other extreme be uninformative and ineffective. Monitoring should be sufficient to detect issues as early as possible that may affect the supplier’s ability to satisfy the requirements of the supplier agreement.
Once data are obtained from monitoring selected supplier processes, they are analyzed to determine whether there are serious issues.
Documenting the roles and relationships between the project and its suppliers helps to ensure that effective monitoring and management of suppliers can be accomplished.
Typical Work Products
1. List of processes selected for monitoring or rationale for nonselection
2. Activity reports
3. Performance reports
4. Performance curves
5. Discrepancy reports
Subpractices
1. Identify the supplier processes that are critical to the success of the project.
2. Monitor the selected supplier’s processes for compliance with requirements of the supplier agreement.
3. Analyze the results of monitoring the selected processes to detect issues as early as possible that may affect the supplier’s ability to satisfy the requirements of the supplier agreement.
Trend analysis can rely on internal and external data.
4. Determine and document actions needed to resolve detected issues.
Refer to the Project Monitoring and Control process area for more information about managing corrective action to closure.
SP 2.3 Evaluate Selected Supplier Work Products
Select and evaluate work products from the supplier.
The scope of this specific practice is limited to suppliers providing the project with some risk due to complexity or criticality. The intent of this specific practice is to evaluate selected work products produced by the supplier to help detect issues as early as possible that may affect the supplier’s ability to satisfy the requirements of the supplier agreement.
The work products selected for evaluation should include critical products, product components, and work products that provide insight into quality issues as early as possible. In situations of low risk, it may not be necessary to select any work products for evaluation.
Typical Work Products
1. List of work products selected for evaluation or rationale for nonselection
2. Activity reports
3. Discrepancy reports
Subpractices
1. Identify the work products that are critical to the success of the project and that should be evaluated to help detect issues early.
Examples of supplier work products that may be critical to the success of the project include the following:
• Requirements
• Analyses
• Architecture
• Documentation
• Service staffing plans
• Service procedures
2. Evaluate the selected work products.
Work products are evaluated to ensure the following as appropriate:
• Derived requirements are traceable to higher level requirements
• The architecture is feasible and will satisfy future product growth and reuse needs.
• Documentation that will be used to operate and support the product or service is adequate.
• Work products are consistent with one another.
• Products and product components (e.g., custom-made products, off-the-shelf products) can be integrated.
• Service staffing plans are feasible.
• Service procedures are complete.
3. Determine and document actions needed to address deficiencies identified in the evaluations.
Refer to the Project Monitoring and Control process area for more information about managing corrective action to closure.
SP 2.4 Accept the Acquired Product
Ensure that the supplier agreement is satisfied before accepting the acquired product.
An acceptance process involving appropriate activities, such as acceptance reviews, tests, and configuration audits, should be completed before accepting the product as defined in the supplier agreement.
When acquiring a service that will be delivered directly to the service provider’s customer or end user, this practice may be implemented before, during, or after delivery of the service to the customer or end user. Potentially, you may implement this specific practice more than once.
Typical Work Products
1. Acceptance procedures
2. Acceptance review or test results
3. Discrepancy reports or corrective action plans
Subpractices
1. Define the acceptance procedures.
2. Review and obtain agreement from relevant stakeholders on the acceptance procedures before the acceptance review or test.
3. Verify that the acquired products satisfy their requirements.
Examples of verifying that an acquired service satisfies its requirements include the following:
• Piloting the service and comparing the results against its service level agreement or operating level agreement
• Inspecting the supplier’s service system to verify that it meets its requirements
• Monitoring the supplier’s delivery (or deliveries) of the service to the customer against the requirements in the supplier agreement
4. Confirm that the nontechnical commitments associated with the acquired products are satisfied.
This confirmation may include confirming that the appropriate license, warranty, ownership, use, and support or maintenance agreements are in place and that all supporting materials are received.
5. Document the results of the acceptance review or test.
Examples of documenting the results of an acceptance review of a service include the following:
• A report assessing the results of piloting the service
• A report evaluating the results of inspecting the supplier’s service system
• A completed checklist recording the results of monitoring the supplier’s delivery (or deliveries) of the service to the customer
6. Establish an action plan, and obtain supplier agreement to take action to correct acquired products that do not pass their acceptance review or test.
7. Track action items to closure.
Refer to the Project Monitoring and Control process area for more information about tracking corrective action to closure.
SP 2.5 Ensure Transition of Products
Ensure the transition of acquired products from the supplier to the project as appropriate.
Before the acquired product is transferred to the project, customer, or end user, appropriate planning and evaluation should occur to ensure a smooth transition. The use of “as appropriate” in this specific practice refers to the fact that the transition of products is not applicable to those acquired products that are services, because they cannot be stored. Therefore, in a service context, this practice applies only to products that are not services.
Typical Work Products
1. Transition plans
2. Training reports
3. Support and maintenance reports
4. Descriptions of how ongoing support obligations, such as warranties and licenses, will be satisfied
Subpractices
1. Ensure that there are facilities to receive, store, integrate, and maintain the acquired products, as appropriate.
2. Ensure that appropriate training is provided for those involved in receiving, storing, integrating, and maintaining acquired products.
3. Ensure that acquired products are stored, distributed, and integrated according to the terms and conditions specified in the supplier agreement or license.