Agile for procurement

Turning lengthy supplier negotiation, contracting and engagement into a Lean, Agile, delivery and engagement tool.

The Situation

About half way through the financial year, funding was suddenly available for a corporate project. Unfortunately, the normal process time for procurement and legal to engage a vendor was 3-6 months. How could it reduce its lead time to support the outcome in a timely way?

Much of the time finance typically spent in procuring vendors was bound up in defining what would go into the contract – the detailed specifications of the deliverables – and then engaging with the legal department to finalise the contractual arrangements of the vendor before signing.

ZXM understood that:

  • The project only had 6 months to deliver the outcome.
  • The usual 2-3 month period just to develop a requirements specification to go into the contract would leave virtually no time to deliver a quality outcome.
  • Requirements were likely to change anyway throughout the contract, resulting in rework and waste.
  • Change management practices to manage scope changes during delivery through the contract would lead to additional delays.
  • Risk and timeframes needed to be tightly managed.

The Solution

ZXm recognise that a new procurement and contractual framework was needed, one that would:

  • Decrease the handovers between project management, finance and legal
  • Reduce the time to engage a vendor to maximise the time given to delivery.
  • Reduce upfront work needed to define the requirements.
  • Create clear instructions to the vendor regarding delivery expectations.
  • Be as rigorous, robust and low-risk as the current approach.

Scrum as a contractual framework

ZXM recognised that the organisation used agile to deliver and support many of its IT products and felt their familiarity with Scrum could be leveraged.

A new contractual framework was written around Scrum’s events, artefacts and roles. This detailed how the organisation and the vendor would collaborate to deliver the outcome without needing to be explicit as to the detail of the requirements.

A cross-functional, agile procurement team

ZXM brought project management, procurement and legal together with the business area and IT leadership in a Daily Scrum to assess progress toward defining the contract and impediments that were slowing things down.

We set goals each week, planned them and then reviewed the outcome at the end of the Sprint. This gave the team the following benefits:

  • Identified key areas of the contract that needed to be produced as we worked.
  • Worked through smaller batches of work and not only saw results faster but also gained feedback from others in the team faster.
  • People had greater transparency of what was missing in the contract to form a minimal viable product – high quality, robust and low risk, but minimal and sufficient to go to market.
  • Sign-off didn’t result in handovers and delays as those responsible for sign-off were part of the team.

Contracted Sprint Goals and the Product Backlog

The contract specified the wider scope and vision of the project, and used the Product Backlog as the backbone of the project with explicit statements that this would evolve over time. Sprint Planning and Sprint Goals formed the mechanism to produce a Statement of Work each Sprint. This was signed-off by the organisation’s Product Owner as representing value and the Development Team would then start delivering.

This turned each Sprint into a small contract with the focus on an outcome and Goal within a fixed timeframe (2-weeks). Throughout the Sprint, the vendor was expected to refine the items in the Product Backlog so that they were ready to be delivered in the following Sprint.

Contracted Quality

The Definition of Done provided a contracted level of quality from the vendor, outlining what documentation was needed each Sprint, what kinds of testing was required, architectural standards to adhere to, non-functional requirements including accessibility and usability, and what level of defects were acceptable. Annexes to the contract provided specific detail regarding defect definition

Costing Sprints and the Outcome

In terms of responding to the tender, a cost per Sprint was requested with an outline of the people, their skills and capability, brought to the Development Team. People responding to the tender were asked to use specification by example as the basis for their costing and time forecasts. That is, vendors were asked to compare the outcomes the organisation sought to previous projects the vendor had delivered in the past.

The Results

The initial forecast of 3 months to engage a vendor was reduced to 3 weeks. This left over 5 months for the vendor to deliver the outcome.

Scrum as a contract supported delivery as intended – providing a robust, lightweight, and repeatable framework that reinforced the need for continuous improvement, iterative planning and risk management, transparency and collaboration. 

Faster delivery

Delivered the intended outcome in 3 weeks, not 3 months.

Less red tape

Less time spent waiting for others to approve and sign-off and lowering the overhead of requirements specification for the contract.

Scalable and re-usable

The lower overhead of the contract, and its reduced specificity, enabled the contract to be used more widely.

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