You have heard it said dozens of times.  We want a win-win situation with our subcontractors.  I have an example of a win-win subcontractor experience that worked well and one example of one that did not turn out very good.  Hopefully these examples will give you some insight into what is meant by win-win and now to make it happen.

WIN – WIN EXAMPLE
My company had down-selected to a subcontractor for the design, fabrication, integration/test and installation of a large servo control antenna mount based on their proposal which was considered by management to be too high in cost.  I was sent to the subcontractors’ facility by the Deployment Manager to work with the subcontractor in getting cost out of their proposal.  The subcontract was also a cost plus award fee which required Earn Value (EV), a tool they did not have any experience with.  Part of my job was to help them set up an EV system for the project.

I worked with the subcontractor approximately over a month to: set up their EV system including identification of a EV software package to help in the analysis and reports for EV; coach them on how to resubmit their proposal in accordance with the new WBS (work breakdown structure); and review their proposal in detail to identify what I considered unnecessary scope as well as new scope they missed.

The proposal review process started with carefully reading and assessing each paragraph of our SOW (statement of work) and Specification to ensure a mutual understanding and intent of the text.  We marked up the SOW and Specification as we went through them to clarify text areas as required.  I convinced them to add a SOW for their major vendors in lieu of stating requirements in the purchase order to ensure they made it clear exactly what they expected and to avoid meetings of surprise.  They planned on placing a major subcontractor for a large roller bearing to a well-known foreign supplier.  They had included one visit to the supplier which I felt was insufficient.  I convinced them to add two additional trips for and internal inspection before it was closed (after which time the pre-load for example could not be inspected), and for final acceptance.

These are just a couple of examples of added scope I suggested they add to their proposal to ensure they and my company did not have surprises later on.  I also identified some scope I felt was unnecessary which they removed from their proposal.  They re-submitted their proposal and it was accepted.

The subcontractor executed the contract extremely well delivering on time, at a lower cost than planned, and with a specification compliant antenna mount.  It was truly a win-win situation for both companies.  Many times large companies have many assets but subcontractors do not.  Once you find a viable, qualified subcontractor you may need to help them get up to speed including educating, training and helping them to incorporate new tools.

In the example above, it behooved us to work with this subcontractor to bring them up the learning curve to perform as we expected rather than just micro-manage them which more than likely would have resulted in a less than stellar performance and not meeting our expectations.  My company continues to use this subcontractor for their large antenna mounts.

LOSE-LOSE EXAMPLE
My company had subcontracted with one of the very few tactical shelter companies in the United States.  We had done business with them over the years with success.  An onsite representative from my company approached his counterpart and asked him to accelerate the delivery date of the first shelter by a month.  The subcontractor manager told our representative that he could not have all of the paper work (change orders, material certifications, inspection reports, etc.) ready.  Our representative told the manager to forget about the paper work for now. It will catch up later.  We need the shelter.  The subcontractor manager mobilized his team, put them on over time, worked them 7 days per week and completed the shelter in a month as requested.

Our company’s QA team arrived shortly thereafter to accept the shelter.  They requested to review the paper work but since it was not ready they did not accept the shelter.  An investigation by my company was conducted.  It took a couple of months for the investigation report to be completed.  Our representative was reprimanded for telling the subcontractor manager to forget about the paper work in the short term but the vast majority of the fault was assigned to the subcontractor because they should have known the paper work was required. The subcontractor had to rectify the mistakes and prepare the proper paperwork before the shelter was accepted, 3 months later.  The subcontractor was placed on our “bad subcontractor” list which meant they had to submit a corrective action plan for approval and then implement it before we could contract with then.

About 2 years later, we approached the subcontractor to submit a proposal for a large number of tactical shelters for a large contract we had with the Navy.  The subcontractor refused but notified us they would be willing to be a subcontractor to a system house that they recommended to insulate them from us.  In other words, they did not want to contract with us directly.  We took their recommendation and gave a subcontract to the system house that in turn placed a purchase order with the shelter subcontractor.

It turned out to be a disaster because we paid the system house a lot of money to manage the shelter subcontract and they did not do a good job in managing them.  In fact, the system house became a gigantic filter we had to go through in order to communicate with the shelter vendor who was doing all of the design, fabrication and test tasks.  We lost a lot of money and schedule time on the subcontract.  It turned out to be a lose-lose situation for my company and the shelter subcontractor.

SUMMARY
A win-win situation with a subcontractor is in the best interest of both companies.   It takes awareness of the subcontractor limitations and a willingness to work with the subcontractor even though it may cost you an investment in people, tools, and other assists to make them succeed.  Accepting a subcontractor’s proposal even though you believe it is missing scope or misunderstanding scope to keep your proposal cost down and be more competitive is a short sighted policy which will come back and haunt you in the vast majority of the cases.  Fixing the subcontractors proposal short comings is the best approach to a win-win situation and success.

HARD LESSONS LEARNED
Some suggestions for ensuring a win-win situation with a subcontractor are as follows:

1. Have a win-win attitude when evaluating and negotiating with a subcontractor.
2. Know your scope and requirements and be aware of the subcontractor’s limitations.
3. Do not ignore subcontractor proposal missing scope and costs just to get the lowest subcontractor price to make you more competitive.
4. If a subcontractor is lacking the tools and experience to implement a requirement, provide the necessary training, education, and supporting tools to ensure they will succeed.
5. Review the SOW paragraph by paragraph to ensure text is clear and if not mark it up to make it clear.  Do same thing with the Specification.
6. Remember that it is a win-win situation as the contract is executed and changes and problems arise.
7. If your subcontractor succeeds, then you succeed.
8. Do not ask your subcontractor to cut corners just to meet delivery.
9. Insist your subcontractor complies with all requirements and does not cut corners.
10. Do not get into a subcontractor arrangement where there is a contractual filter between you and the company doing all the real work.

Bio:

John earned a BS in Mechanical Engineering and MS in Engineering Management from Northeastern University. He has a total of 44 years’ experience, 30 years with DOD Companies. He is a member of PMI (project Management Institute). John has managed numerous firm fixed price and cost plus large high technical development programs worth in excessive of $100M.  He has extensive subcontract management experience domestically and foreign.  John has held a number of positions over his career including: Director of Programs; Director of Operations;  Program Manager; Project Engineer; Engineering Manager; and Design Engineer. His technical design areas of experience include: radar; mobile tactical communication systems; cryogenics; electronic packaging; material handling; antennas; x-ray technology; underwater vehicles; welding; structural analysis; and thermal analysis.  He has experience in the following areas: design; manufacturing; test; integration; selloff; subcontract management; contracts; risk and opportunity management; and quality control.  John is a certified six sigma specialist, certified level 2 EVM (earned value management) specialist; certified CAM (cost control manager).