Managing Federal contracts is a core part of the business of Federal Government Contractors. Yet, more than half of GovCon organizations are not using a formal contract management system. Many are looking to change.
We provide the R3 Contract Management solution which is specifically built for GovCon organizations. Yet, even if you love our solution, most probably you will have to convince others of the value. This means that you will have to build a business case.
So, in this article we will help you in doing just that. We provide you with a simple and effective way to frame, build and present your business case. Our approach includes a specialized R3 Productivity ROI Calculator that you can use to put some hard numbers and dollars behind your value proposition.
The General Business Case Framework
There are 3 parts to our business case framework. In the case of Contract Management for GovCon organizations, the primary drivers for a decision to move forward are the benefits that organizations get from Reduced Risk and Increase Effectiveness. These are the first 2 parts – the benefits. Your Government Contracts are core to your business. They represent living and changing relationships with your Government customers. There is constant work by many people across the organization to satisfy the needs. It is very valuable to reduce your risk and increase your organizational effectiveness. These are the benefits.
The third part is the quantifiable productivity impact. We call this the Productivity ROI. You want to quantify it. Ideally, by making an investment, you will have cost savings in time saved that will be more than your investment – a positive ROI.
In effect, using this framework you are driving towards a business case that says that you can get benefits of Reduced Risk and Increase Effectiveness for free or maybe even for less than you are spending right now. That is a compelling business case.
Our framework can be depicted as shown below. It works like this:
- Present how it Reduces Risk
- Present how it Increases Effectiveness
- Show how you get more in productivity cost savings than your investement
Building the Business Case
Now, we’ll turn to building your business case. We will walk you through each of the three elements:
- Reduced Risk (Benefit)
- Increased Effectiveness (Benefit)
- Productivity ROI (net cost after productivity gains)
By adopting the R3 Contract Management system you are proactively taking a decision to reduce risks of various types. A fundamental way that you reduce risk is by moving to a single, centralized source of information and having the ability to control access to the information. Below I will list some of the risks you are reducing and how we reduce the risk. This should spur some thoughts specific to your way of working.
- Lack of control over information – in a manual environment, organizations usually face a choice of on or off. This means that people can access everything or nothing. If you open up the system you run the risk that mistakes can happen. Our system gives you role-based, controlled access. You can control what users can see and what they can do. This means that you can provide access to drive Increased Effectiveness, but, it is controlled.
- A key contract person gets sick or leaves – instead of things being in their heads, the information, work and activity is now in a system. The work can carry on.
- People work with the wrong information – you now have one source of contract information. People are working off the same page. In fact, in a second people can get an instant Contract Brief with real time information.
- Reduce the chance of things falling through the cracks – along with one source of information you have one source of the work that needs to be done. The system even has a feature called My Work that brings everything that someone needs to work on to them. Visibility closes cracks.
- Missing contract deliverable requirements – the system has a robust system to track contract deliverables and streamline getting the work done
- Getting out of compliance – you can track FAR/DFAR clauses, provisions, deliverables (CDRLs). And, you can easily find the relevant contracts when things change and drive change system-wide in one step.
- Not ready for audits – having a formal system helps you perform better to put you in a better position for an audit. And, when an audit comes the system provides everything you need.
- Missing deadlines – you don’t want miss important time sensitive events. The system becomes your extra hands. It sends off email alerts and presents upcoming dates dashboards/calendars/reports to provide visibility.
Again, with our system you now have all of your information in one place. People can begin to collaborate, and, they can get used to working together in a single system. In addition, our system is a full work management system. It automates and streamlines work. These capabilities increase productivity. But, the greatest driver of effectiveness is the elimination of silos, roadblocks and administrative “noise” – this enables people to focus on the work that matters.
- Controlled Access to Information – this also drives effectiveness. To reduce risk, many organizations with a manual approach restrict access. They therefore require requests to be funneled through contracts. This negatively impacts peoples effectiveness. R3 provides you with appropriate controlled access. People have the appropriate, real time information at their fingertips and are more effective.
- Instant, Accurate, Single Source Information – it is not effective for people to have to ask for information, have someone research and prepare it and then use it. With our system any people get that information in real time. It is the same information for all people at the same time. A good example is our instant Contract Briefs. One click to get the full, current story about a contract.
- Accessing Customer and Subcontractor master data – the master databases for customer, subcontractor and contact information are often spread across an organization. Our system allows you to centralize this information as Master Data and make it accessible and reusable through the system and your organization.
- Following consistent work processes – you can increase effectiveness by having your organization follow consistent processes. Our system allows you to set up processes. It streamlines and automates the work. An example is the New Customer Contract process. You set up your process and the system takes care of moving it along and making sure that all of the information is available to each participant to do their part.
- One system – many organizations manage contracts using many tools. They might use Excel for tracking, CRMs for people data, 10 custom databases, file shares for documents or Google Drive or SharePoint, lots of email and multiple workflow tools. All of these are part of our system. You can consolidate these tools. This makes it easier for your people.
- Analytic Reports like Contract Waterfalls – people need good information to be effective. However, with the manual work required to pull together information and do analysis this means that the right information is typically not timely which means that it may not be accurate. With our system, you can get instant reports like a Contract Waterfall that shows you your portfolio of contracts with contract revenue spread out over the period of performance. The system will do the analytics in the background so people don’t have to.
- Driving the Work – fundamentally, R3 is a work management system. This means that you use it to assign work and track that things that need to get done, are getting done. In GovCon, for instance, Contract Deliverables are a major compliance issue. Our system can drive the work as follows:
- you document the Contract Deliverable Requirements
- you create Actions Items into the future for the Deliverables (such as “spawning” 60 Monthly Reports using our Recurring Action Item feature)
- and then, when the time comes, you manage the work for each Contract Deliverable Action Item. R3 Action Items are like little virtual folders that can hold multiple documents, track activity and be routed, reviewed and processed.
- Effectiveness across Departments of Work – silos are constraints to organizational effectiveness. Contracts in GovCon is a “team sport” that crosses departments. With our system BD/Sales/Capture/Proposal people can access Subcontractor information, make requests for NDAs or Teaming Agreements, track the progress and participate. Or, Program Managers can use the system to instantly get a Contract Brief or to manage the Contract Deliverables that need doing. It is not just a system for Contract Department effectiveness – it drives organizational effectiveness.
- Just the right reporting – R3 is an open system. It starts with reporting tools that are configurable by business users. It also has advanced reporting and an API enabling organizations to create very custom, advanced way of looking at information and/or combining it with information from other systems such as your financial system. It can also be accessed and used with third party reporting tools such as SQL Reporting Services.
The two sections above make up the main benefits of your business case. Now, in this section of the Productivity ROI we work to understand the impact on productivity and determine if you will have any net cost. Ideally, what you will determine is that you have a positive ROI. This means that you get more cost savings through increased productivity than your investment.
We support this analysis by providing an ROI Calculator for Contract Management. It is an Excel spreadsheet that gives you a model of your contract work. You use the model to do three things:
- First, you are laying out the core tasks that you do on Customer Contracts and Subcontracts and the time you work on these Tasks.
- Second, you are estimating what % of time our solution will save for you.
- Third, you see how it all comes together to impact total hours of work and ultimately drive an ROI.
In our ROI Calculator we provide a model that is already filled out based upon our customer experience and best practices. You can start with that and go from there. For instance, below is a screenshot of some default tasks and their estimated hours for a customer contract.
There is another article, ROI Calculator for R3 Contract Management System for GovCon, that has the link to download the ROI Calculator and walks you through how to use it. It will help you to work through the tasks, the hours, the potential savings. It will end up showing you how many total hours go into contract work.
To get a Return on Investment, you will need to enter your costs. There are two parts:
- Pricing – you can contact R3, to get the pricing.
- Your time – In addition, we include a field for the number of hours that your organization will invest in the information migration into the system and in training.
Your objective is to get a positive ROI in your first year. Remember if your ROI is greater than $1 it means that the benefits above are effectively free. However, your management will probably look for an ROI greater than 30%-50% in the first year. Also, to fully realize cost savings you have to not hire more people. So, you might be more productive but you actually have a net investment in the first year.
ROI calculators such as this are not intended to provide you with accuracy. They provide you with a practical estimate. The way that we have done our calculator allows you to estimate your productivity savings based upon explicit tasks and hours. This is something that you can benchmark and track. The process of working with this model also helps your organization align around the following:
- what Tasks they do when working on contracts
- who does it, in which department
- how much time do they spend
- what the time savings could be and how the system makes that happen
- and then, better understand what behaviors need to change in the organization to realize the savings
Bringing It all Together
Doing the work of preparing your key benefits for Reduced Risk and Increased Effectiveness and fleshing out your Productivity ROI model is the real work. For your business case, you will probably be putting together a presentation deck. These elements are key parts of the deck. You may also want to include the following:
- Your contract situation today – the tools you use
- The number,type and complexity of contracts – which will be backed up by your Productivity ROI model
- The cost of R3 and Your Time
- Key Things that You will Stop Doing – 5 to 10 – they go away
- Key Things that You will Start Doing – 5 to 10 – new best practices
- The Implementation – work with R3 to flesh this out
When you are ready to get going, we suggest that you contact us to work with you on your business case.