Thank you very much. It's a pleasure to be here again.
What I'd like to talk about today is agile procurement. Obviously it's in the context of complex business arrangements, because it wouldn't need to be agile if it's not that complex.
It's not a secret that the majority of complex business arrangements fall short of meeting stakeholders' expectations in the long haul. There is no shortage of evidence out there that shows that there are two fundamental that this failure occurs.
The first one is what we believe to be the transactional orientation of these business arrangements. We seem to structure them as transactions and deals, rigid deals that don't respond well to change and evolution. Parties to the contract try to pursue certainty in the long haul based on an initial set of parameters.
The second thing is really the oversight models we use to manage those complex business arrangements. We use top-down, command and control, compliance-based models that have been counterproductive to people working together to achieve improved outcomes.
Needless to say, the combination of these two has created a culture of mistrust, if you like, and some adversarial walls that impede progress.
What's happening in the industry is that there is a push towards relationships management. I think you've touched on that. Really, there is recognition that no number of procurement specialists and lawyers and accountants can create certainty in the long haul.
Then what can we do? There are three things. One is that the contract must become a platform to manage the inevitable change, not to pursue certainty based on the initial deal. The second thing we can do is think about how we think about risk, because the public sector, really, cannot transfer risk. This whole idea of transferring risk to the private sector hasn't worked very well, because ultimately it's your risk. At best what you can do is lend risk.
The third thing you need to have is more insight into your governance, not just oversight. Oversight is good, and you need oversight, but without insight, your oversight is superficial and will lead to wrong conclusions over time.
The third thing that's happening in the industry is that there is wide recognition that there is a dependent relationship between complexity of these complex arrangements and collaboration. The more complex it is, the more collaborative you need to be. It's not hands-off kind of stuff. The more complex it is, the more collaboration is needed, and that collaboration is needed to resolve ambiguity in the business arrangements to arrive at certainty together over time.
What's also happening is the emergence of standards. We have ISO 44002 right now that really speaks to this issue—sorry, that's ISO 44001, and now 44002 is actually being launched. It talks to exactly the same problem, and it provides common language and standards for arriving at really good solutions in this space.
Overall what's happening in the industry is that there is wide recognition that managing the relationships among stakeholders is the most critical aspect of a successful initiative.
It's against this backdrop that I want to talk a little bit about agile procurement. I'm here to talk about that. Agile is a software development methodology in which integrated product teams representing all stakeholders work very closely together to develop a product or deliver a project. From a procurement perspective, these teams would work together, utilizing a very similar approach, an iterative process, to define a certain set of requirements and work together on a solution and arrive at the outcome that way.
It's not the same as the waterfall approach of the past. It's really a series of small waterfalls, if you like, that allow people to build on what they have already done by going back and reworking or adjusting, as required, on a go-forward basis.
My question really is, which part of this agile procurement have we not tried before? I recall, for those of us who are old enough, the BDP process, the benefit-driven procurement process. Does anybody remember that? Sure, this was back in 1994. It was an outcome-based process, exactly the same stuff we're talking about here. You needed to have a solid business case and a robust risk assessment, and that was all you needed to do.
Next we came up with something called CPP, which is a common-purpose procurement, which is exactly the same stuff. In the style of Dragons' Den or Shark Tank, people came in and 90% of the evaluation was about how well they presented or how slick the marketing team was.
Of course, we have the JSP, which is joint solution procurement, which really comes down to a very competitive process between the final two vendors. Again, it's a very collaborative process, through engaging the vendors. They have access to the management team and all this other stuff. I've studied it in great detail.
We have performance-based contracting, which came into the federal government from Australia and which we actually do right now. Most of the contracts that are coming out of DND are all performance-based contracts.
We have smart procurement, as of a few years ago. Smart procurement was designed to really increase this collaboration throughout the whole competitive process, from planning to procurement to contracting. You have heavy-duty engagement with industry groups. We've done all that.
Now we have commissioning, which is really another form of performance-based contracting, the old ASD model in a combination with the JSP. Now we call it commissioning.
If all we want to talk about is having agile procurement, which is really a combination of all these different things that we've done in the past, my view is that they haven't really worked very well. The outcome we've been looking for has been very elusive, because I think we're not addressing the real problem.
The real problem lies in the relationship management, not in the procurement. It's not a procurement problem. It's a relationship management problem. The key to success really lies in focusing on the relationship as the pivotal point at which procurement and contract management actually occurs. In recognizing this pivotal role, we need to, if you like, source relationships instead of deals or transactions. Relationships is the first approach. In this relationships-first approach, the priorities actually shift to the need for establishing a management framework to manage the stakeholder relationships very early in the process, during the procurement process, and after the procurement process.
Sourcing relationships really means three things.
It means that you need to select vendors. We can't just write one page and say, “Okay, that's the requirement.” We need to know how to evaluate these things. We need to really understand if we are getting a chicken or a turkey here.
How do we know that? That's what's been missing. What's been missing is our ability to assess the vendor's corporate abilities and capabilities to do the job. There are a lot of analytical tools out there to do this. We call this strategic fit assessment, which is the ability to objectively assess whether there is a match between what we're trying to achieve in terms of outcomes and benefit realization factors and the capabilities, strategies, and management structures of this vendor.
The second thing we need to do is measure the internal processes and systems that organizations have and their ability to collaborate. ISO 44001 is a good start for an evaluation to see whether those organizations actually meet the standard. Do they have the internal systems and processes to collaborate and work with each other or work with others?
The difference is very stark. In the traditional contract model, the contract governs the relationship of the parties. In the relationship-based model, using the relationship management framework, the relationship actually governs the contract. That's really the difference. One is that you do a contract and you're handcuffed by that contract. The other is at the relationship management framework governs that contract and its evolution over time.
The good thing is that PSPC and DND have recognized the importance of relationships. In 2014, they launched a new procurement regime. It's called a relational contracting model or relational contracting management. It recognizes that the contract is incomplete when you sign it and it needs to be influenced by the relationship of the parties. It is a complete framework that DND has adopted for all of their in-service support business arrangements. I think they've launched one of them already. They're launching a bunch of these.
That's really what I wanted to say.