The Vendor Management Office

Hotel Contract Negotiations Book Now Available for the Kindle

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2012-02-09T10:39:24Z

My book, Hotel Contract Negotiation Tips, Tricks, and Traps, is now available for the Kindle for only $9.99!

I wrote this book to equip meeting planners and representatives of groups (such as third parties and intermediaries) with the information and tools necessary to negotiate a fair and reasonable hotel contract. Too often, the focus of a hotel contract negotiation is on "dates, rates, and space" and there's less attention paid to the contract terms and conditions. The fine print and legalese of a hotel contract isn't nearly as interesting as booking the room block--until it comes around to bite someone (usually not the hotel).

In the book, I dissect an example hotel contract template (which has seen years of actual use for booking tens of thousands of room nights along with F&B, A/V, and other hotel services) and I explain each key provision in the contract. For each provision that I explain, I include the excerpt of the provision from the contract, I describe the provision in detail, I describe what issues, if any, that a hotel may have with the contract language, and, where appropriate, I include alternative contract language or I describe what's a reasonably acceptable compromise. The contract that I dissect and explain in the book can be downloaded in electronic format, free-of-charge, here on the Vendor Management Office blog.

The book is really meant to be a practical training and learning tool as well as a reference guide that you can use on a room block-by-room block basis. I wanted to avail people with a hotel contract that I have used with much success and I wanted to make sure that they really, really understood how to negotiate the terms and conditions. I do describe in the book about how to negotiate room rates and other concessions, but the focus of the book and the bulk of the pages are dedicated to examining a hotel contract provision-by-provision.

Over the years, I've been involved in horrible attrition situations, hotels walking numerous guests from my room block, unexpected construction during the middle of my group's meeting, deterioration in hotel quality, labor disputes--among many other things. All of those experiences have gone into this book and the hotel contract template that is explained in the book. Whether you're new to meeting planning or a seasoned meeting planner, I believe that you'll be able to pay for this book with your very next hotel contract negotiation by getting a better deal for your group based on what you've learned.

Spend Visibility? Get the How-To Guide from Sourcing Innovation!

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2012-02-04T19:35:03Z

Visibility into spend is a critical part of strategic sourcing. The discipline of spend visibility is a great example of the saying "you can manage what you don't measure." As a procurement professional, if you don't know what your organization is spending, you're missing out on a huge savings potential. With direct spend, it's a little easier to get your arms around because all of that contract spend typically flows through the procurement organization. With indirect spend, which is notorious for maverick spending, spend visibility is a different ball game altogether: What do you even look for? What's the best way to get the information? What do I do with the information?

Well, today is your luck day (as it relates to learning more about spend visibility)! The Doctor over at the Sourcing Innovation blog (one of my must-read blogs) posted a great blog article about spend visibility where you can download--for FREE--a comprehensive document entitled Spend Visibility: An Implementation Guide. This how-to guide describes what spend visibility really is, getting executive buy-in to do it, what traps to avoid, getting at the low-hanging fruit and then doing a deep dive, and best practices. The guide is well thought-out, practical, and well-written. Here's an excellent quote from the guide that sums up the reason for doing spend visibility right: "The reality is that if spend visibility is not approached in a strategic and methodical manner, then the resulting implementation will likely be only tactical in nature, with just a short term benefit."

So what are you waiting for? Head on over to Sourcing Innovation and get your spend visibility on!

Worker Misclassification and Co-Employment

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2012-02-04T16:03:17Z

SPOILER ALERT. For those of you who want a quick synopsis of this longish blog post, here it is... What worker misclassification and co-employment boils down to is that our Federal and state governments don't like it when employers treat contractors like employees, and, if you do, these government entities and the contractors want to "get paid." And that liability can be huge in terms of back taxes and employee benefits levied against your company. So, if you don't want to be that company, then don't treat your contractors like employees. It's that simple. END OF SPOILER ALERT.

Worker misclassification is a hot topic for procurement professionals (and human resources folks) and it has also stirred up the co-employment spectre of yore (remember the $97 million Vizcaino v. Microsoft case?). Oh yeah, before I get too far ahead of myself, if you want more information on the subtleties between worker misclassification and co-employment--as well as to get a better understanding of all of those crazy tests that different government agencies and regulations apply--download my article on Worker Misclassification and Co-Employment.

The aforementioned article is a little lengthy, so here's a quick description / differentiation of worker misclassification and co-employment... Co-employment is where a Contingent Worker is "treated" like an employee and it arises when two separate entities manage / control some aspect of one individual's employment relationship (so, two "employers" and one worker). (P.S. Wherever I use the term "Contingent Worker" in this blog post it means a worker who is NOT on your payroll.) Misclassification is where an individual is classified as an independent individual contractor (1099) but should be classified as an employee (W2) because of how the contractor is treated. In other words, co-employment can arise when you have a direct contractual relationship with an individual contractor or when you have a contractor through, for example, a "staff aug" agency. Misclassification can only occur in the former instance, i.e., a direct contractual relationship with an individual. One of the reasons for the distinction (and another reason why misclassification is so hot), is that 1099s make it easy for Federal and state governments to go after employers. It's an easy identifier for auditors, enforcement staff, and investigators: if your company issued a 1099, it's easy to spot and easy to ask questions about. Co-employment, on the other hand, usually only arises when the workers themselves complain to a government agency and / or files suit. Now, with misclassification, it's the government agencies on the prowl.

Like I mentioned in the Spoiler Alert, governments and individuals want to get paid when it comes to misclassification and co-employment. It's not illegal (yet), but, for example, the IRS wants the withholding taxes, the DOL wants to make sure overtime wages were paid, Unemployment and Workers’ Compensation entities want taxes and payments, and workers want back benefits. When it does become "illegal"--and that's likely--you'll have to pay civil penalties on top of everything else you have to pay.

There are two major thoughts around why misclassification and co-employment is "bad" for everyone. The first is public policy and here are some applicable quotes to give you a sense of the thinking that's out there:

“Independent contractors do not receive overtime and are ineligible to receive unemployment benefits. That's not fair.”
“Honest businesses—who are trying to comply with state and federal labor and employment laws—are forced to compete with ones that don’t pay their fair share”
“Employers will not have to make contributions to Social Security, unemployment insurance, workers’ compensation, and health insurance, will save the administrative expense of withholding, and will be relieved of responsibility to the worker under labor and employment laws."
"We don't want workers to become wards of the state because they didn't receive benefits that they were rightly entitled to but for an employer trying to skirt the law."

The other rationale is--and this is the real reason in my mind--tax revenue. In a bummer economy, that's what Federal and state governments are dying for. Here are some applicable quotes to help frame the rationale:

“It's cheating the government and affected employees.”
“Reduces receipts in Treasury and the Social Security, Medicare and Unemployment Insurance Trust Funds.”
“In 2009, GAO reported that misclassification has cost the U.S. government $2.72 billion.”

So why the big push for companies to get their act together? Because all signs point to serious:

2010: “The 2011 Budget for DOL includes an additional $25 million to target misclassification with 100 additional enforcement personnel and competitive grants to boost States’ incentives and capacity to address this problem.”
2011: “$8 billion over five-years in the Internal Revenue Service’s enforcement and modernization programs…will target critical areas of non-compliance.”
2011: Departments of Labor and Treasury pursuing joint proposal that eliminates incentives in law for employers to misclassify their employees.
4/2011: House introduces “Payroll Fraud Prevention Act.” System of record keeping and notice requirements, backed by fines and penalties, to compel compliance with classification requirements.
9/2011: IRS announces Voluntary Classification Settlement Program, allowing employers to voluntarily reclassify (as employees) workers that have been incorrectly treated as independent contractors for employment tax purposes, with partial relief from back federal employment taxes.
9/2011: DOL and IRS entered into MOU with eleven states (VA not included) where DOL will share information with IRS derived from investigations by its Wage and Hours Division into worker classification issues that may relate to payroll tax compliance. The IRS, in turn, will share that information with participating states.
10/2011: Senate introduces “Employee Misclassification Prevention Act.” Similar to bill introduced by House.
10/2011: California passes broad sweeping law requiring notice, reporting, and significant penalties (other states expected to follow).

In other words, when you see government agencies investing in enforcement staff, the Federal government sharing information with states, bills being introduced, and voluntary correction programs being implemented, it's time for you to take things seriously. I mean, if you can't spot what's coming from all of the foregoing, then hitting you in the head with it probably wouldn't work. So what do you do? Well, that's the real thrust of this article... Here's a list of some (not all) actions that you can take to help mitigate worker misclassification and co-employment at your company. Some of these actions may not seem intuitive (they do correlate / counteract elements of the "tests") and will make better sense if you read the article that I link to earlier in this blog post.

Use "Professional Employer Organizations" wherever possible and avoid contracting directly with individuals, sole proprietors, and one-member LLCs (just this action alone will go far in protecting you from worker misclassification). There are also other practical reasons to do this such as insurance issues and supplier rationalization.
Require maximum service durations (limiting workers to a max of 1,000 hours is helpful to avoid "substantially full-time" categorization) and require breaks in service (usually 30-days).
Enter into fixed-fee arrangements and avoid the use of time and materials contracts--you should be buying a product or service, not a person (this helps to avoid some of the financial control elements used in many co-employment tests).
Don’t permit Contingent Workers access to company amenities that are made available to employees.
Differentiate Contingent Workers from employees wherever possible. Some examples: use different security badges (a red color badge is common), different cube / office nameplates (like using red lettering), different email addresses (e.g., betty.sue-contractor@yourcompany.com instead of betty.sue@yourcompany.com), mandatory email signature blocks (e.g., including "Contractor to YourCompany"). Some of these actions also help to avoid "apparent" and "implied" agency issues.
Don’t include Contingent Workers in company events (such as social events and potlucks), staff meetings, company directories, company org charts, and rewards / awards / recognition.
Don't allow Contingent Workers access to any thing or program that is subsidized or sponsored for employees such as parking, cafeteria meals, membership in company-related organizations (e.g., Toastmasters), or a discount program (like movie tickets).
Minimize Contingent Worker use of company assets such as, for example, cellphones and tools. By the way, it's better if Contingent Workers don't use company email at all and have their own addresses.
Don't provide business cards to Contingent Workers.
Don't permit the use of company letterhead by Contingent Workers (unless an employee is going to sign the letter).
Don't require Contingent Workers to work on company premises.
Don't monopolize Contingent Workers by requiring set hours (e.g., 9 to 5), requiring full-time work, or mandating an exclusive relationship (in other words, allow Contingent Workers to have other customers). Never require a non-competition agreement.
Don't require that Contingent Workers seek approval for "time off" and vacations.
Don’t interview, counsel, or terminate Contingent Workers (do that through their agency).
Don't reimburse Contingent Workers directly for anything (e.g., travel)--only reimburse through their agency.
Don't allow Contingent Workers to manage employees.
Don't provide company training.
Avoid giving large deposits or pre-payments to Contingent Workers (they start looking like wage advances).
Don't require that Contingent Workers abide by company policy and don't require them to sign a company policy handbook. Do create Contingent Worker guidelines for Contingent Workers and employees responsible for Contingent Workers to document all of the above and to make it clear that there is no intent to create an employer / employee relationship.

Meat and Taters: How to Minimize the Work in Writing Statements of Work

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-08-18T15:58:36Z

The following article was contributed by Naoina Gartee, who works in NRECA's Vendor Management Office. She's found it to be a little, well, let's say, "challenging" to get her internal IT customers to develop good statements of work. Her article is a concise and informative guide to help customers in getting comfortable with better defining their requirements, not from a traditional IT perspective, but from a business perspective. Feel free to leave the article anonymously on the chair of any of your customers who could use a little help in this area. Enjoy.

Often I find clients struggling to write their statement of work, not knowing really where to start. While I am a firm believer that writing a good statement of work does not happen overnight, through practice our skills become stronger. Simply put, writing a statement of work does not have to be as challenging as some believe it to be.

NRECA uses a parent-child relationship (as some call it) when it comes to contracting. There is the master agreement that is more or less an administrative document and that sets forth the terms and conditions of the relationship: how are the parties going to act over the life of the agreement when it comes to items such as terminating the contract, breaches and indemnification obligations. Then there is the statement of work that sits below the master agreement — this is what I like to call the meat and potatoes of the deal: what services is the vendor going to do or perform for the organization in a particular instance. A statement of work is the place where the business gets to document their story of why they are hiring a particular vendor and what the vendor is going to do. In other words, it is the formal way of documenting what the obligations are of the parties around a particular delivery of a product or service.

When broken down, a statement of work can be viewed no differently from writing a story consisting of the five Ws (who, what, when, where and why, and sometimes how) we all learned in school. A statement of work usually consists of the following pieces to make up the business story, which can essentially become a working template for any organization:

Introduction/Project Description – What is this project about? Why is the organization doing this project now? While the drafters of the statement of work may be very familiar with the project, others may not; this first item in a statement of work does not have to be very long and should tell the reader what the project is about and why there is a need for the project to be outsourced to a vendor.
Description of Vendor's Services/Scope Statement – Who is the vendor with which the organization is engaging? What is the vendor going to do for the organization in this particular statement of work? This should be a clearly written concise statement that tells the reader that vendor "x" is going to do "y" for the organization and nothing else.
Vendor's Responsibilities – What are the ongoing responsibilities of the vendor over the term of the statement of work? This section of the statement of work may tell the reader if the vendor is to provide its own equipment, where the vendor will be completing its work, meetings the vendor is required to attend and status reports the vendor is expected to deliver.
Description of Milestones and Deliverables – Tying back to number two above, what is the vendor going to do for the organization? In addition, this section should include when the vendor is expected to deliver the services/products to the organization. A reader of the statement of work should clearly be able to determine if there is one big deliverable or many deliverables. Do milestone need to be included to track the performance of the vendor along the way to ensure they are/will meet their deliverable(s) deadline(s)? The timeline as to when deliverables are due often reflects the overall project plan. (A note with respect to project plans — unless incorporated, the project plan does not become part of the statement of work contractually obligating the parties to each other, so writing a good milestone and deliverable section will become critical to the success of the project.)
Payment Terms – How much is the organization going to pay the vendor? This section of the statement of work tells the reader how much the project cost and whether or not it is a fixed-price engagement or a time and materials engagement. Does the vendor get payment at the end of the statement of work, or does the vendor get paid over the term of the statement of work, as they deliver deliverable(s) or meet milestone(s)?
Acceptance Criteria for Deliverables – What does the deliverable need to look like or do in order for the organization to say to the vendor, "yes, this is what we asked you to do and now we will pay you?" I have even heard some people ask, "How do we know when the vendor is done with the statement of work." This section of the statement of work, will tell a reader what the deliverable must look like or do to tell the vendor they have delivered successfully. Delivery of a product or services does not mean the statement of work is done. The buyer should always be given a chance to inspect a deliverable for conformance to the standards they have engaged and contracted for with the vendor.
Buyer's Responsibilities – What are the buyer's responsibilities during the statement of work, if any? This section will tell the reader what the buyer is responsible for over the term of the statement of work (e.g. provide work space, laptops, access to systems, etc.).
Key Assumptions – What are the key assumptions? In this section, the statement of work is telling the reader about any unknowns when the statement of work was drafted. Additionally, this section could alert the reader to potential issues known when the statement of work was drafted, add support to the scope statement or may contain any assumptions around the vendor or buyer responsibilities.
Billing Contact and Address – Who and where should the invoice be sent to? This section of the statement of work will tell the reader who the invoice should be address to and where it should be sent. (The master agreement may contain a general clause as to payment address, but a statement of work can be more specific in the case where a particular business unit with the organization should be receiving the invoice.)
Term - When should this work be done? This section will tell the reader the start and end for the overall project. While not mandatory, some drafters of a statement of work choose to capture the start and end date of the project in the milestone and deliverable table.

So the next time you are tasked with assisting in drafting a statement of work or take on the task by yourself, do not feel overwhelmed — take a deep breath and ask yourself, "what is this business story all about?"

NRECA's Tim Davis Finalizes $13.7M in Smart Grid Procurements

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-07-28T21:30:10Z

Tim Davis, who works in my Vendor Management Office at NRECA, is the procurement pro behind the following article. These are highly complex and competitively bid procurements that involve many stakeholders, including the Federal Government. Great job, Tim, on pulling these procurements off! Only $10 or so million to go...

NRECA’s Smart Grid Demo Project Finalizes $13.7 Million in Contracts

Contact:
Tracy Warren , NRECA
Phone: (703) 907-5746
Mobile: (703) 517-3411

WASHINGTON, DC; July 7, 2011 – By the end of July, 2011, the National Rural Electric Cooperative Association will close on contracts worth $13.7 million for smart grid components to be deployed at 23 cooperatives participating in the cooperatives’ regional Smart Grid Demonstration Project (SGDP).

Supported by a matching grant from the U.S. Department of Energy, over the course of the project, participating cooperatives will deploy more than 75 technologies and kinds of equipment in twelve states.

NRECA has made these purchases for research and evaluation of the following smart grid features:

Communications
AMI systems and digital communications software and infrastructure to enable smart grid features including demand response over AMI, load management, prepaid metering and in-home energy displays.

Efficiency and Demand Response
Software and equipment to improve efficiency both at the operational and end-user level, and enable automated demand response and load control. Components include load control switches, in-home displays, advanced Volt-Var control, demand response over AMI, meter disconnect collar sealing kits.

Reliability and power quality
Software and equipment to improve reliability by implementing SCADA, self-healing capability, power quality monitoring and regulation and improved conservation voltage regulation.

Distributed generation and renewable energy
Equipment to assist the integration of renewable energy and distributed generation resources.

NRECA has executed contracts with the following vendors: Cooper Power Systems, Inc., HD Supply Utilities, Ltd., Stuart C. Irby Company, Larson Communications, Inc., RFIP, Inc., Ruggedcom, Inc., and VFP, Inc.

Check Your Indemnification Provisions: Innovatio Asserts Patent Rights for WiFi and WLAN

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-06-23T14:08:00Z

Innovatio IP Ventures, LLC (a company formed in early 2011 for the purposes of acquiring, licensing, and litigating patents for royalties) purchased a number of patents that, according to Innovatio, encompass certain WiFi and WLAN technologies. Innovatio has been busy filing complaints against the likes of Cosi, Caribou Coffee, Panera, hotels, grocery stores and other entities that, for example, provide WiFi for their retail customers. Innovatio has also undertaken a broad letter-writing campaign, advising recipients that they may be infringing and inviting them to enter into a fee-based license (or potentially face a lawsuit). Cisco and Motorola have entered the fray, filing a lawsuit against Innovatio. Certain defendants have filed a stay while the Cisco / Motorola lawsuit is resolved. You can read more about that lawsuit in the motion to stay, which also gives a great overview of what Innovatio is asserting.

It might be a good time to check the indemnification provisions in your purchase agreements relating to WiFi and WLAN technologies. Here's an article that describes about how to contractually protect against patent trolls.

You Might Just Be a Fixed-Price Contract If...

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-06-15T19:58:47Z

My internal customers sometimes get confused with the major differences between a fixed-price contract type and a cost-reimbursement contract. For example, a customer may come to me with a contract that specifies a named resources, named skills, no truly tangible deliverables, and a monthly "fixed" fee (which is, in reality, the named resource's hourly rate multiplied by 160 hours)--and the customer argues that the contract is a fixed-price contract. Here's a chart I drafted to help eliminate confusion between what constitutes a fixed-price contract and what constitutes a cost-reimbursement contract.

Contract Type	Fixed-Price (Using Firm-Fixed-Price Example)	Cost-Reimbursement (Using Time and Material Example)
Basic Description	A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the seller’s cost experience (other than buyer-initiated modifications such as change orders) in performing the contract. This contract type places upon the seller maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the seller to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties.	A cost-reimbursement contract type provide for payment of allowable incurred costs, to the extent prescribed in the contract.
Application	Use when requirements and acceptance criteria are known with sufficient accuracy.	Use when uncertainties involved in contract performance do not permit requirements, acceptance criteria, costs, etc. to be estimated with sufficient accuracy.
Performance	Deliverable	Effort
Level of Requirements Detail	Well-Defined	Unknown or Broad
Level of Acceptance Detail	Well-Defined	Unstated or Vague
Payments	On Delivery	As Incurred
Buyer-Specified Type of Resources (e.g., Skills)	No	Yes
Buyer-Specified Quantity of Resources (e.g., Headcount, Hours)	No	Yes
Contract Administration Effort	Low	High
Change Controls	As Needed	Primarily for Extensions
Risk to Buyer	Low	High
Risk to Seller	High	Low

And even if you say you're a "fixed-price" contract, you might just be a cost-reimbursement contract if...

The substance of work is research or investigatory
You don't contain tangible, detailed requirements
You don't contain tangible, detailed deliverables
You state quantity of resources
You state resource names
You describe resource skill sets (such as skills required or years of experience required)
You don't contain a deliverables schedule
You contain a milestone schedule (that is not deliverables-based)
You contain a payment schedule (such as a monthly “fixed-fee”)
You describe a “fixed-fee” that is in reality a resource hourly rate aggregated over the contract term and then is divided by some time period (such as a monthly “fixed-fee”)

Two Senior Buyers Needed in Arlington, VA

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-06-15T16:52:07Z

$100K base + pension plan + full relo. Send e-mail with resume to stephen@guthventures.com.

One position will focus on IT and the other will focus on hospitality (primarily hotels). 5-years experience w/ indirect spend in excess of $10M and bachelor degree required. Candidate must have a procurement certification (e.g., CPSM, CCCM) or be able to obtain one within the first year of employment (as a condition of continued employment).

Vendor Gifts: Another One Bites the Dust (Hey, Hey)

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-03-28T16:01:00Z

As most procurement professionals know, vendor gifts have been on a steep decline since the heady days of our once over-heated economy. That's a good thing from the perspective of ethics--now I don't have to worry about refusing vendor gifts because they're just not offered that often anymore. Unfortunately, there have been some unexpected negative consequences from the downward vendor gift-giving trend--there are companies that depend on vendor gift-giving for a large part of their revenue. This week, another one bites the dust. Harry & David, I hope that you make it through Chapter 11 because I love your pears!

Speed Dating for Supply Management Pros?

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-03-18T12:33:00Z

I typically get a lot out of going to my Institute for Supply Management local chapter's monthly meeting. The presenters usually have very practical information that I can put to use in my day-to-day job. Mostly, I can say the same for other meetings and conferences that I attend. But I'm missing out on something when I go to those events--and I'm missing out big-time.

So what am I missing out on? Expanding my professional network...

At my local ISM chapter meeting, I tend to congregate with the people I already know. When I'm at a conference, I'm busy running from session to session and I'm just not willing to make the effort to try and meet new people. Sure, there are the stuffy "networking" receptions at these events, but those require me to come up with something professionally witty and pithy to break the ice with so I don't come across like I'm trying to hit on someone. Sometimes, it's just too hard, so I tend to forgo receptions (plus I don't drink).

So, my professional network suffers...

I always thought that it would be great if there was some sort of "facilitated" networking session at these events, where my fellow attendees and I had some common objective to focus on and were sort-of forced (in a good way) out of our shells to network with other people who we don't know. About six-months ago, I heard about "speed networking ," which sounded interesting but was more oriented toward sales folks trying to meet new prospects. Speed networking is a lot like speed dating (in terms of the "speed" part).

After thinking more about it, it seemed to make sense to have a speed networking event for supply management pros. The concept is that attendees are paired together, introduce each other, and have only 5 minutes to discuss two interesting (and easy) supply management topics. When the 5 minutes are up, the attendees move on to meet someone new and to discuss other topics. I thought it would be a great and easy way to meet new people and learn something relevant to the supply management profession at the same time.

I put together a set of materials: a "Speed Networking for Supply Management Professionals" presentation containing instructions for speed networking (including the room set) as well as a list of speed networking topics specific to supply management. Here are two example topics:

Topic #7. What’s worse and why—stock outs or too much safety stock?
Topic #16. You have an old friend, Billie Jo, who works for vendor ABC, but you’ve lost touch with her. You recently issued an RFP and vendor ABC is a bidder. Out of the blue, you receive a call from Billie Jo, who says that her boss is giving her a trip for herself and one other person to Hawaii. She asks if you would like to join her. What do you say and why?

I first tried the concept out on the members of the ISM chapter in the DC area. It was a huge hit! A month or so later and after some tweaking, I tried it out on a group of supply management professionals at the TechAdvantage Conference. Another huge hit! Here's what attendees from those events had to say (taken from evaluation forms):

The speed networking class was really good – enjoyed getting to know a lot more people, for sure.
This was valuable. To meet people before I felt like I was being too forward. This made it easy to network.
Loved the event.
Excellent session!
This was great--especially for new members!
Very good session!
Great concept.
Good idea!
Enjoyed the interaction and format.
Met lots of people I didn't know before. Fun to discuss the topics / questions.
Definitely do this again!
The topics...provoked learning and thought.

Here's a picture of 28 supply management professionals meeting each other and talking about supply management topics during my speed networking event at the 2011 TechAdvantage in Orlando, Florida.

If you're interested in doing the same thing for your next chapter meeting or other supply management event, my step-by-step materials are available to you for free. I'd love to hear feedback from anyone else who tries the speed networking concept for his / her event.

Upcoming: Gartner Supply Chain Executive Conference 2011

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-03-17T20:25:00Z

Gartner Supply Chain Executive Conference 2011 is "The World's Most Important Gathering of Supply Chain Leaders."

The Gartner Supply Chain Executive Conference provides a unique opportunity to collaborate and connect with the world's leading supply chain executives, all in one place at one time. We'll also acknowledge the accomplishments of those organizations that have established a path toward a successful supply chain future. The conference combines strategic and tactical Gartner advice from industry analysts and thought leaders who collectively have over 150 years of supply chain and end-user experience. Plus, gain insight from peer exchanges and interactions with leading solution providers at the forefront of the supply chain market. Also, you'll be able to network with your peers to share insights on real-world strategies, implementations and best practices. Gain access to peers from leading global organizations at a variety of formal and informal networking opportunities, including end-user case studies, workshops and hospitality suites.

Upcoming: Gartner Outsourcing & Vendor Management Summit

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-03-17T20:14:00Z

Gartner Outsourcing & Vendor Management Summit 2011 (9/12 - 14, Orlando) provides an in-depth exploration of the significant developments and trends shaping vendor and strategic sourcing management practices, as well as the sourcing marketplace.

The Summit provides CIOs, IT Directors, Sourcing Executives, Procurement Managers & Vendor Managers with a useful set of best practices, frameworks and tools to create long-term impact back at the office.

Economic, business and technology changes demand innovative actions from both buyers and providers of IT services in how they form long-term sourcing relationships. In an environment in which consolidation, mergers and acquisitions, and new entrants are the norm, sourcing strategies must become more agile and responsive to change.

At the summit, you'll learn how to:

Navigate market forces and apply new approaches and objectives for successful outsourcing.
Establish the governance and strategic management disciplines that bring needed order to the many moving parts of your sourcing ecosystem
Uncover the disruptive trends that are reshaping the future of IT services
Move beyond cost take out to business results oriented outcomes
Learn how to improve control, reduce risk and drive more value from your vendors
Uncover efficiencies at a time when every budget dollar counts

Vetting Your Vendors: EPLS Isn't Just for Government Procurements

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-03-16T13:33:00Z

In my procurement organization, we're required by the Code of Federal Regulations (e.g., 10 CFR 600) to use the Excluded Parties List System ("EPLS") whenever we do a procurement that is funded by the Federal Government. EPLS includes information on vendors and individuals debarred, suspended, proposed for debarment, excluded or disqualified, or otherwise declared ineligible from receiving Federal contracts, certain subcontracts, and certain Federal assistance and benefits. In other words, if a vendor has done something "bad" (like fraud), the Federal Government disqualifies the vendor for purposes of doing business with the Federal Government and for procurements conducted by others (like my organization) that involve Federal funds.

The cool thing about EPLS is that it's open for everyone--meaning that you can use it as a tool for your commercial procurements. If you're considering doing business with a new vendor, EPLS serves as an important resource for doing your due diligence and research. If a vendor shows up on the list, ask why.

Full Day Negotiation Workshop - Only $249! - March 26th - D.C. Area

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-02-10T20:06:00Z

For those of you within reasonable driving distance of D.C., there’s an upcoming procurement / negotiation workshop in Arlington, Virginia you may be interested in…

On Saturday, March 26^th, I’ll be conducting a full day “Negotiating and Managing Contracts” workshop. The workshop is being sponsored by the National Association of Purchasing Management – National Capital Area chapter of the Institute for Supply Management. I’ve given this workshop a number of times to rave reviews (mostly). The cost is a crazy cheap $249 and you’ll receive a free copy of my Contract Negotiations Handbook. If you’re interested in attending the workshop (you don't have to be an ISM member), you can contact Theresa Polzin at education@napm-nca.org or at 703-907-5873. There are a limited number of seats, so register as soon as possible. Eight CEUs will be awarded for the workshop and can be used toward your ISM certification.

The workshop is intended for participants at all levels of procurement experience from those new to the profession as well as the most experienced negotiator. The course follows a structured procurement process from beginning to end, explaining each step of the process and focusing on negotiations. The course also covers contract management, which is a process separate and independent from procurement. The workshop is hands-on, with participants “learning by doing” as well as learning from each other.

Attendees follow the process of contract negotiation and management from the onset of writing a request for proposal (RFP) to managing a contractor’s performance through a combination of lecture and hands‐on group exercises. Participants will also learn how to write an effective RFP, negotiate favorable contract terms, and resolve supplier disputes. After completing the workshop, participants will be able to:

- Use a Structured Procurement Process that to Purchase a Variety of Different

- Products and Services

- Identify Procurement Objectives and Recognize that “Lowest Cost” may not be the Primary Objective

- Conduct a Competitive Bid that Strengthens the Buyer’s Bargaining Leverage

- Negotiate Price and Terms that Meet the Needs of the Buyer

- Transition from Procurement to Contract Management

- Avoid Basic Contract Management Issues Such as Co‐employment

- Manage Vendor Disputes to Mitigate Risk

Whoops! IRS Hires Contractors Who Didn't Pay Taxes

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-02-08T18:16:00Z

According to the linked-to report , the IRS has done business with dozens and dozens of contractors that haven't paid their taxes--to the tune of over $5 million. Apparently, the IRS doesn't verify whether contractors they hire are up to date with their taxes.

(Dear IRS people, please don't audit me for posting this.)

Is Anti-Indemnity the New Anti-Matter?

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-02-08T16:02:00Z

Not really, but it caught your attention...

In contracts that I draft, I try (really, I do) to be as fair and balanced as possible. However, when it comes to drafting or negotiating an indemnification provision, I tend to be a little more biased to my employer. Even so, I always wrap-up an indemnification provision with some wording that appears counter-intuitive in that it is absolutely more beneficial to the other contracting party than it is to my employer: “…the foregoing indemnity shall not apply to the extent that the applicable claim resulted from the acts or omissions of a party, its officers, directors, agents, or employees.”

What that wording means is that my employer isn’t going to be indemnified by the other contracting party if my employer did or didn’t do something that ultimately resulted in a claim against my employer. Sounds risky, because I'm intentionally carving out something that my employer might be indemnified for. Occasionally, someone will ask why I include the wording because it’s not beneficial to my employer and that someone will also likely ask whether it’s better to leave the wording out and see if the other contracting party asks for like language to be included (if they think of asking for it).

Here’s why… Over 40 states have enacted legislation that voids certain types of indemnification provisions on the basis that these provisions are against public policy. Mostly, such statutes are oriented toward construction and prohibit (for public policy reasons) the shifting of the burden of liability from contractor to sub-contractor where the contractor is the cause of the claim (through act or omission). Despite the orientation to construction, I don’t want to run afoul of my state's anti-indemnity provision, hence I include the above described wording in the indemnification provision of almost every contract type I draft or negotiate.

(A quick Internet search will lead you to scholarly articles that do a much better job of explaining anti-indemnity statues than I do here. I recommend you read up rather than relying solely on this blog post.)

How One Simple Procurement Action Can Totally Transform Your Entire IT Organization (and Business)

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-02-04T14:50:00Z

There is one simple procurement action—a statement, actually—that I guarantee will totally transform your entire IT organization. In fact, it may even dramatically transform the customers of IT: the business units. This procurement action will drive discipline into your IT processes, the business units’ development of business requirements, your SDLC, your project management, your coding, and your testing. Not only that, it will ultimately save your organization money and time.

The mere utterance of this simple, one-sentence procurement action by a CEO, CIO, CFO, or COO will have far-reaching ripple effects that rapidly drive efficiency and effectiveness into all areas of IT software development and delivery.

Imagine a typical IT organization hamstrung by the business… Ever-growing IT budget and staff. Bloated numbers of contractors. Contractors managing contractors. Business units slow to develop business requirements, and when they do, the requirements change because they weren’t well thought-out to begin with. Project managers who spend all of their time manipulating project plans and “re-estimating” rather than getting the job done. Slipping dates. Daily changes in priorities.

It’s out of control.

To deal with that rather than to deal with that, things with colorful names like “waterfall,” “cascade,” and “agile” were invented. Yawn.

How much would you pay to hire consultants to transform all of that? Hundreds of thousands? And wouldn’t that just be another worthless exercise which would go nowhere?

Wouldn’t it be great if there was some simple silver bullet? Something that ratcheted back those double-digit year-over-year IT budget increases? Something that flattened the proliferation of contractors? Something that got the business units really engaged and partnering to develop solid, stable business requirements? Something that got project managers managing deliverables actually being delivered? Something that didn’t require daily changes in dates and priorities? Something that drove control and discipline?

Well, here’s your silver bullet in the form of a simple procurement action. If you’re a CEO, CIO, CFO, or CCO, this is all you have to say...

“From now on, I want at least 50% of all IT professional services engagements to be firm-fixed-price.”

Think about it.

The basic elements of a firm-fixed-price (FFP) contract are specific and detailed requirements, results-based (not resource-based), “all-in” payments based on deliverables, and the contract not subject to any adjustment on the basis of the vendor's cost experience in performance.

Think of going to FFP contracts as an intervention and rehab for your IT organization and business units. At first, it’s a shock. “No, I’m sorry, we’re not going to enable you any longer. We’re not going to give you any more money to feed your addiction to things like agile.” It’s tough. You have to be real. You have to be honest with yourself and your counterparts in the business units. You have to make tough choices. And, you have to stay the course to get well.

The transformation will begin immediately. Of course, at first, staff will try to argue that FFP contracts will cost more or take more time. (Actually, statistics show otherwise.) They’ll try to creatively force T&M, level of effort, or cost-reimbursable contracts to appear as FFP types. They’ll try to redefine what FFP really means. Don't put up with that, hold fast, and the transformation will grow and will spread.

IT will be forced to re-evaluate its capabilities and the mix of its capabilities... “Hmmm, to get better requirements, maybe we should re-allocate some of our staff to help the business units develop requirements. Maybe we should have more project managers and SMEs on staff, have less coders, and contract out more development. Maybe we should dump all of the staff augmentation firms and independent contractors that we (mis)manage and hire a true software development vendor.”

The business units will be held accountable. They will slowly wean themselves from the addiction of being able to change requirements and priorities on a moment’s notice. They will slowly learn to develop solid and stable requirements. They will slowly take responsibility for testing. But, they will do those things.

“From now on, I want at least 50% of all IT professional services engagements to be firm-fixed-price.”

That's all you have to say.

Procurement and Contract Expert Witness Stephen R. Guth Now Represented by The TASA Group

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-02-02T20:25:00Z

Washington, D.C. (PRWEB) February 4, 2011 – Procurement and contract expert Stephen R. Guth is now represented by The TASA Group, a leading provider of expert witnesses to the legal profession. Founded in 1956, The TASA Group provides superior, independent testifying experts within the fields of technology and business, and was recently voted as the “Best Expert Witness Provider” by readers of the New York Law Journal.

Guth has over fifteen-years of procurement and contracting experience representing large, multinational companies. He is an expert in procurement, contract law, and contract interpretation in a variety of spend categories with an emphasis in information technology and hotel contracting. He is a licensed attorney in the District of Columbia and Virginia. Guth is a graduate of the University of Miami School of Law (J.D.), University of Maryland University College (M.S., Procurement and Contract Management), and Saint Leo University (B.A., summa cum laude). He holds numerous professional certifications, including Certified Professional in Supply Management, Certified Commercial Contract Manager, Certified Purchasing Manager, and Certified Technology Procurement Executive. Guth has taught graduate-level procurement courses at the University of Maryland University College.

Guth is also a frequent speaker at procurement and contracting industry events and has published numerous books on the subjects, including: “The Contract Negotiation Handbook: An Indispensable Guide for Contract Professionals,” “The Vendor Management Office: Unleashing the Power of Strategic Sourcing,” “Hotel Contract Negotiation Tips, Tricks, and Traps,” and “Project Procurement Management: A Guide to Structured Procurements.” Guth’s books are available on Amazon.com or can be found at Guth’s blog, www.vmo-blog.com, which covers a wide variety of sourcing, procurement, negotiation, and contracting topics.

Guth can be booked as an expert witness through The TASA Group online at www.tasanet.com, through a referral specialist by phone at 800-523-2319, or by email at experts@tasanet.com.

Press Release! Stephen Guth Releases New Book on Hotel Contract Negotiations

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-01-26T16:04:00Z

Washington, D.C. (PRWEB) January 11, 2011 -- In his most recent book, author Stephen R. Guth provides a unique insider’s perspective on the high-stakes complexities of hotel contract negotiations.

In “Hotel Contract Negotiation Tips, Tricks, and Traps,” Guth exposes real-life hotel contract negotiation tactics and ploys in the form of a practical, easy-to-understand handbook that can be used by novices and seasoned industry professionals alike. Covering topics from attrition to force majeure to walked guests, Guth dissects hotel contract provisions and provides alternate contract language to counter hotel negotiation ploys. Says Guth, “When negotiating hotel deals, the focus is on dates, rates, and space—and not on the fine print of the contract. Until something goes wrong. Then, the hotel contract and the legalese quickly become all-important.”

Based on years of practical experience, the contract negotiation tactics described in Guth’s latest book could save a group tens of thousands of dollars on its next meeting and could protect a group from being hit with even more in liquidated damages. Guth explains the risks, “Hoteliers are worried about yield management first and groups second. If heads in beds or other revenue from your group doesn’t materialize, some hotels won’t think twice about hitting you with liquidated damages. The best defense is a strong contract.”

Guth describes his approach in explaining the included Master Hotel Services Agreement contract template that can also be downloaded from his blog at no charge, “I deconstruct the Master Hotel Services Agreement section-by-section and provision-by-provision, describing and explaining any tips, tricks, or traps. This book isn’t an academic treatise on hotel contract negotiations—it’s a practical, how-to guide.”

Whether you are a meeting planner, ten-percenter, or just someone who is looking to get a great deal for your next group meeting, this book has something for you.

This latest book by Guth is currently available at Lulu.com and will be available at Amazon.com. Guth is also the author of “The Contract Negotiation Handbook: An Indispensable Guide for Contract Professionals ,” “The Vendor Management Office: Unleashing the Power of Strategic Sourcing ,” and “Project Procurement Management: A Guide to Structured Procurements .”

Stephen R. Guth, Esq. is the Vice President of Vendor and Legal Services at the National Rural Electric Cooperative Association headquartered in Arlington, Virginia. He has provided negotiation services, as both a buyer and seller, to numerous multinational companies. Guth is a graduate of the University of Miami School of Law, the University of Maryland University College, and Saint Leo University. He is a Certified Commercial Contract Manager, Certified Purchasing Manager, Certified Professional in Supply Management, and Certified Technology Procurement Executive.

Click here for an excerpt from the book.

My Shiny New Tool (CORI K-Base)

stephenguth@vendormanagementoffice.com (Stephen Guth) — 2011-01-26T15:55:00Z

While I'd like to think I'm a consummate contract drafter and can whip out any old whereas, heretofore, or notwithstanding I might need at a moment's notice, I actually rely (a lot) on what people have drafted in the past. Unfortunately, some folks don't like to share and getting my hands on contracts to use as examples hasn't always been easy. Well, the folks at the University of Missouri - Columbia like to share. One of my staff recently turned me on to the CORI K-Base which makes searching for old contracts (mostly from EDGAR) super easy. Check it out, it's free!