I was in a contract negotiations meeting for several hours yesterday. The most notable quote came after the customer was asking for the basis of estimates for the scope of work being proposed.

I think both the vendor and customer could have done a lot better if they had just valued customer collaboration over contract negotiation.

I felt like I was watching a first-time buyer at a used car dealership. When the sticker price is in the Millions of dollars, it becomes a very interesting game of poker. As usual, my job was not to negotiate. It was merely to observe and advise.

Vendor: You’re saying the LOE is too high.

Customer: No, I’m saying I want you to justify your LOE.

Like the image? Find it at Pictofigo

3 for the price of 1!

Prepare for the PMI Agile Certified Practitioner exam!
1. Download and print out PMI Agile exam flashcards
2. Download and print out 25-Question practice exam
3. Just click and get 100 free web-based flashcards

Popularity: 1%

About Derek Huether

Enterprise Agile Coach and Trainer at LitheSpeed. Co-Lead of the PMI ACP Support Team. Lover of Agile, Scrum, & Kanban. Lawfulgood PMP Level 15. Chaotic Good Agilist Level 5. Author of Zombie Project Management (available on Amazon)

http://www.geoCognita.com Dr. Edward Wallington

Hi Derek,

Couldn’t agree more, I have seen negotitaions focus on making sure the contract is water-tight… is this good use fo time or good for collaboration? I suspect not. My view is that there needs to be a collaboration/joint team approach to most projects, where both parties benefit, and are working as a team, together.

Anonymous

In the past, on another program, I saw a true collaboration in a negotiation. In this case, however, it’s very adversarial. It’s not a healthy relationship at all.

Anonymous

Paul, I’m certainly not going to argue with you! I don’t care if the deal is buying a car or multi-year project. There is a relationship. There is, of course, unless one of the negotiating parties doesn’t plan to be around at the end. Starting is easy. Finishing is hard. I can’t speak to the details of the negotiations but there has been quite a bit of leadership turnover with both the customer and the vendor in the last few months. It’s like a bad soap opera.
Anonymous

Can the customer collaboration “bound” the cost? If so do it. If not, you’ll need a better BOE.
LOE is NEVER allowed for deliverables. Only administrative functions. LOE means the passage of time and consumption of money means progress – which of course is nonsense in any project that produces products. All government procurements limit LOE to something like 10% to 12%. That covers PM, subcontracting, and finance.
Measures of physical percent complete, in units meaningful to the buyer are the only acceptable approaches when you’re spending some else’s money.

Anonymous

Glen, you hit the nail on the head on several issues that got people into trouble last year. They were busted last year on having too much LOE and not enough definitized and severable work packages. The vendor also kept trying to bill too much to a single CLIN that was not mapped to deliverables. (beyond cost of money, management, and subs). Their LOE work exceeded the thresholds. The list goes on and on.

Though I was quoting both the vendor and client as saying “LOE”, this is about the BOE.

We’re not debating with them about the level of effort, if they would just explain how they arrived at the numbers. The vendor is saying all estimates are based on SLOC. When pressed on what that estimate was based on, they came back with “on previous work”. If we counted the SLOC they delivered in the last period of performance, it wouldn’t come close to what they are proposing this time. This work is not based on previous work so they can’t claim efficiencies.

Perhaps I’m not long for government contracting. Only time will tell.

Anonymous

Oh Boy. How about basing the “earned value” on deliverable features, Function Points.
While SLOC are a good measure for sizing the code to fit inside something – FPGA, ASICS, even memory.

The estimating processes for SW are well defined in SEER and other tools. INCOSE has guidance as does DoD itself. No reason to allow a vendor to pawn off SLOC and LOE.

The “previous work” might be a starting point, but calibrating those estimates are part of IBR and the next couple of events.

What the size of this procurement? Does it trigger some level where you could apply more formal assessments?

Finally where is the M300 and Part 7 guidance for estimating and control?

Anonymous

I agree the vendor is supposed to base their EV on deliverable features. Unfortunately, the customer has been agreeing to deliverables like “draft” white papers. I don’t agree with this approach but I’ve been reminded that I’m just an advisor. Though I can’t be specific as to the amount of the procurement, I can say it falls under the radar. When a few of us pressed the vendor to explain how they could possibly arrive at a 1.0 or near 1.0 SPI and CPI monthly, the answer we got was the vendor was rebaselining monthly.

Program Control and the CO would deal with things like M300 or Part 7 guidance. I’m just asked to do cursory reviews of several artifacts on a monthly basis. Otherwise, I advise on a project overview level (I stay out of the weeds). Since the IMS hasn’t really been updated since September, I really have no window into what the planned work is.

I’m going to stop now, as this is beginning to sound more and more like a rant on my part. I do what I can where I can. I’m coming to a point, with this program, that I’m questioning if that is good enough.