Post on 02-Apr-2018
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Commercial Masterclasses
Day One
Written by ACEVO, AVANTA, Capita, Ingeus, NAVCA, NCVO,Serco and Social Enterprise UK
With additional support from Aylesbury Partnerships and
James Barrett Consulting
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Introductions
The trainers
Housekeeping
Introductory exercise
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Objectives
Confident knowledge on- The emerging context for public service delivery
- The role and mission of your organisation within this context
- The emerging options for partnership
- The role and quality of governance
Skill competencies to
- Identify and build appropriate relationships
- Assess opportunities in supply chains
- Manage efficient bidding processes
- Recognise and manage financial risks
- Negotiate effectively
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Style of training
What do we mean by a masterclass? Commercial sector case studies testing translation of process
Discussion-based learning making the most of delegates
Emphasis on delegate questions
What additional support is there?
Toolkit
Website materials
How do we put this into practice? Discussion and exercises
Competencies to measure progress
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Timetable
Day one
Introductions and objectives
Policy and procurement context
Understanding supply chains and the commercial sector
Exercises 1 and 2Lunch
Building relationships
Exercise 3
Bid or no bid
Exercise 4
Summary and reflections
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TimetableDay two
Recap
Governance and performance management
Exercise 5
Modelling financial riskExercise 5
Negotiation
Exercise 7
Managing bid effectively
Exercise 8Summary and reflections
Competencies and evaluation
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Agreements for working together
Confidentiality: Chatham House rulesThe masterclass format means everyone has something to contribute
Respectful challenge
Respect for diversity of needs
Allow the facilitator to move discussion on
Time given to reflect and test learning
Phones turned off
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Context:Policy and Procurement
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Government Expenditure on the VCSE
2009/210
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Policy Context (I)
Changing funding environment
Big society agenda
Open Public Services
Increasing opportunities for VCSE in public service delivery Plurality (e.g. mutuals, NHS restructure)
Continuation of commissioning
Localism new commissioners (e.g. PCCs, CCGs, HWBs)
New investors
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Policy Context (II)
New funding structures
Payment by Results
Personalisation and choice
Integration of budgets
Outcomes focus
Social value
Information and accountability
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Procurement context
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Now Evolving
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Examples of Different Contracting Structures
Prime
Work
Programme(e.g. Ingeus
DirectDelivery
Area 2
S1 S2 S3 S4 S5 S6
Specialist sub-contractors
End to end Sub-contractors
Prime
Justice
Sector(e.g. Serco, Doncaster)
DirectDelivery
Catch 22
Sub-contractors
Prime
S1 S2 S3AdvisoryBoard
Personal Independence
Payments(e.g. Capita)
Primes bring: Scale (able to carry risk) Governance
Service integration &
delivery skills
Area based sub-contractors bring:
Geographical
presence/knowledge
End to end capability
Specialist sub-contractorsbring:
Specialist capability
Proven track record
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Local commissioning context
Content to be added from host
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Understanding Supply Chains(& the commercial sector)
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Commissioning system model
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Commissioner
Commercial Prime VCSE Prime
VCSE
Specialist
VCSE
Specialist
VCSE
Specialist
VCSE
Specialist
VCSE
Specialist
VCSE
Specialist
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Exercise one: perceptions and motivations
As a group, in your role discuss and write down:
1. How do you see yourselves? (Your culture, values, concerns,
attitude towards getting involved?) What are your motivations?
2. How do you see the other groups? (Their culture, values, concerns,
attitude towards getting involved?) What are their motivations
Be prepared to feed back to the whole group
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Private Sector Expectations
Why they are involved
1. Shareholder value2. Deliver quality and value
3. Outcomes
4. End to end oversight
5. Risk placement
6. Commercial best practice i.e.communications, performancemanagement
7. Meet CSR objectives
8. Mission i.e. find employment forpeople
What they want from the VCSE
1.Able to bring insight and expertise2.Evidence competence andachievement
3.Open, realistic and motivated
4.Commercially attuned5.Able to help us to help you (and viceversa)
6.Aligned governance/decision making
7.People who are easy to work with
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Selling: the negative connotations
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Cold calling Hard selling
Loss leaderWin at all costs
Selling short
Selling is the process by
which you persuade people
to buy things they dont
want or need
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.a more positive view of selling
Relationship
Consultative Solution
Customer-centric
Insight
Selling is the way that
you help customers to
buy products or services
from your organisation
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LUNCH
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Exercise two: making it work
As a group, in your role discuss and write down:
1. What are the risk for you in this model?
2. What do you need most from the other groups to make this modelwork?
3. What might they need most from you?
Be prepared to feed back to the whole group
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Building Relationships
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Why do relationships matter?
Go-live
Horizon Scanning
Shaping
Pre-bid Engagement
Bidding
Go live-Y1-Y2-Y3
Ongoing Qualification
Recognising
needs
Formulating
strategy
Procurement
strategyProcuring
Commissioner/Client
Private Sector
Indicative Timeline
Evaluating
options
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TACT: customer concepts in practice
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Goodrelations
Understand your customer
needs
Assessopportunities
againstmission
Build your reputation
Manage yourrelationships
Drawn from a case
study of the VCSE
fostering agency,
TACT
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Principles to building relationships Plan ahead before making contacts
Saves time Leads to better outcomes
Enables you to measure success
Be realistic about what you can achieve
Be clear about the reputation you want to project
Involve staff, trustees and engaged stakeholders
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Relationship Managing
Relationship Manager: challenges of the role
The shop front, the brand, the access point
Expectations are high, and not achievable
Prioritising the long-term over the short-term
Reactive, hard to size portfolioNew or existing customers?
Demanding or deserving customer?
you will never get all this right: be realistic
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How to map Stakeholders
?
Supporter
Undecided
Negative
Dont know
Mary James
Commercial
Lead
Tom Jones
Supply Chain
Mgr
Jean SmithFinancial
Modeller
Tommy Steel
Risk Analyst
John Smith
Sales Lead
?
NG
NGTH
THSR
NG Our relationship owner
Mandhese Patel
Solutions
Lead
TH
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Exercise three: valuing relationshipsPositive perception
Influenceon appointment
Supply Chain Manager
Negative perception
Financial
Modeller
Solutions Lead
Commercial Lead
Sales Lead
Risk Analyst
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To bid or not to bid?
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Mission-Money Matrix
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majority activity
stay out! proceed with caution
prime target
(love it here)
on mission
off mission
more moneyless money
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What opportunities are available?Grants
Block Contracts
Preferred Provider Frameworks
Spot purchasing (e.g. Individual service Funds)Payment by Results (inc. Bonds)
Prime / sub models (often private VCS)
Consortia (SPV, hub and spoke)
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To bid or not to bid?
1. Suitability of contract terms, specification and payment
Supply chain conditions
2. Market positioning (relationship building)
Future opportunities
Practice in the new market Competition and partnership options?
Viability next time round?
Provider and/or influencer
On-going suitability for mission and business
3. Portfolio (cross-subsidy; core funding)
Sustainable funding (non-statutory options)
Investment
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Suitability of contract terms, specification
and payment
Consider:Contract terms (*we cover this more, later)
Mission fit
Likelihood of a win (SWOT)
Competitor analysis
What value you bring
Business viability (financial risk) (*we cover this more, later)
Risks that you own and variables you dont
i.e. contract volumes
Supply chain make up
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Control over Success Factors
ImpactonOutcomesInfluence
/Control In-House Intervention B
Partner Intervention Referral numbers
Referral quality
Project Management
Information Management
In-House Intervention A
Programme Management
Key:
External
Internal
Great
delivery
Risk
assessment
Many risks within PbR contracts are inevitably outside your control
Understanding their likelihood and impact is crucial
Understanding incentives helps predict your partners focus areas
Governance
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Exercise four: assessing opportunities
In pairs, discuss
- What are the variable factors in a supply chain?
- Given limited resources, which factors do you prioritise learning
about before you commit to a contract?
Be prepared to feed back to the group
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Working with a prim: things to considerRelationship: values fit?
What role do you want to (& can you) play?
Can you meet the requirements of the Commissioner?
Can you meet the specific requirements of the Prime Contractor?
Review all the terms
Minimum delivery & performance expectations
Financial modelling
Key contractual requirements
Information Security
TUPE
Implementation timescale Dont be afraid to ask questions!
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Summary and reflections
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Todays modules
Policy and procurement context
Understanding supply chains and the commercial sector
Building relationships
Bid or no bid
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Tomorrows modules
Governance and performance management
Modelling financial risk
Managing bid effectivelyNegotiation
Competencies and evaluation
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Day one reflectionsDiscuss in pairs
- What went well for you?
- What was less helpful (and how could we change it)?
- What do you need to get the most out of the next days programme?
- What has this inspired you to explore further after the Masterclass
programme?
If you wish, you can feed back key points to the whole group.
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Thank you from:
And to the Office for Civil Society, Cabinet Office for funding thisProgramme.
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Commercial Masterclasses
Day Two
Written by ACEVO, AVANTA, Capita, Ingeus, NAVCA, NCVO, Sercoand Social Enterprise UK
With additional support from Aylesbury Partnerships and JamesBarrett Consulting
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ObjectivesConfident and knowledgeable on
- The emerging context for public service delivery
- The role and mission of your organisation within this context
- The emerging options for partnership
- The role and quality of governanceSkilled and competent to
- Identify and build appropriate relationships
- Assess opportunities in supply chains
- Manage efficient bidding processes
- Recognise and manage financial risks
- Negotiate effectively
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Introductions
Welcome back!
Recap on yesterdayPolicy and procurement context
Understanding supply chains and the commercial sector
Building relationships
Bid or no bid
Introductory exercise
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TimetableDay two
Recap
Governance and performance management
Exercise 5
Modelling financial risk
Exercise 5
Negotiation
Exercise 7
Managing bid effectively
Exercise 8
Summary and reflections
Competencies and evaluation
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Governance and PerformanceManagement
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What is performance management?
In competitive markets performance is crucial
In publicly-funded markets performance is crucial
In outcomes markets performance is crucial
What drives the need for performance management?
Performance management is:
Monitoring against contract terms
The systems / information required to prove your work
The corrective steps taken The rewards offered
The comparison with other providers / the wider market
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Good GovernanceWhat systems and information do you need?
Principles from code of good governance
1. Understanding the boards role
2. Doing what the organisation was set up to do
3. Working effectively4. Effective control
5. Behaving with integrity
6. Openness and accountability
http://www.governancecode.org
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Exercise five: governanceGet into groups of similar organisation size
Imagine you are considering entry to the example supply chain.
Consider the implications for your governance. Discuss:
- What governance procedures would you want in place to
manage performance risk in this regime?- How would you need to reconfigure your resources (skills,
capacity, information) to implement this governance approach?
Be ready to feedback
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Complexities for Performance
If it isnt proven, it doesnt count
Move to results oriented monitoring
Tools to capture and analyse outcomes / rather than outputs
Performance managing staff
Aligning systems e.g.
data capture with prime/contractor
IT systems
Governance decision timetable
Performance management
Build in flexibility (e.g. staff) to deal with fluctuating demand
Maximise performance by utilising the full portfolio of contracts you deliver
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Mobilization from winning to delivery Often an afterthought
Consequences of not getting ready
What needs to happen and when
Exercise in groups to identify the different aspects of delivery readiness you
would consider important
What good mobilisation looks like
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Example Gantt ChartTo come from AVANTA
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Adjusting Delivery Capabilities
Have you got whats needed?
Step up from grants to contracts?
Exercise in groups to brainstorm what capabilities organisations might need
to develop in order to meet their obligations to deliver and manage
contracts.
Would it depend on their particular role subcontractor or prime contractor?
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e.g. Move to results oriented monitoring
Capturing of outcomes/ rather than outputs
Performance managing staff
Aligning systems e.g. data capture with prime/contractor
Build in flexibility (e.g. staff) to deal with fluctuating demand.
Maximise performance by utilising the full portfolio of contracts you deliver
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Modelling Financial Risk
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Financial Risk: the impact of payment-by-results Scenario Analysis and cash-flow modelling helps identify pinch-points
At what point do you breach your reserve policy? Is that a problem?
What if your organisations other contracts perform worse than expected
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Shows example working capital requirements & break even point by month
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The Work Programme payment structure
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Xweeks Yweeks
Payment()
TimeonProgramme(Weeks)
StartonProgramme
AttachmentFee
Payment()
TimeonProgramme(Weeks)
StartonProgramme
SustainmentpaymentsJobOutcomePaym
ent
AttachmentFee
JobStartPaymenttriggerpoint
Payment Groups on the Work Programme
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Payment GroupYear 1
At tachment Fee*
Maximum Job Outcome
Fee**
Sustainment
Payment (per 4
week)***
Maximum Total
Outcome Payment
JSA 18-24 400 1,200 170 x 13 3,410
JSA 25+ 400 1,200 215 x 13 3,995
JSA Early Access 400 1,200 250 x 20 6,200
JSA Ex-IB 400 1,200 250 x 20 6,200
ESA Volunteers (allgroups)
400 1,000 115 x 20 3,300
ESA Flow 600 1,200 235 x 20 5,900
ESA Ex IB 600 3,500 370 x 26 13,120
IB/IS Volunteers 400 1,000 145 x 13 2,885
Prison Leavers 400 1,200 200 x 20 5,200
* Reducesyearbyyear;0inyears4&5** Pricecompetitionelement discountexpectedbytheCommissioner***Numberrepresentsmaximumamountofsustainmentpaymentswhichcanbeclaimed
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Qualification: Selecting the right opportunities
Deal or
NoDeal?
StrategicAlignment
Measurableresults
Procurementprocess
GovernanceSponsorship
Rate ofReturn
Riskprofile
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Risk Categories
Volume/Demand
Specification (complete? Accuracy?)
Service transfer or implementation
Cost overrun
Timescale overrun
Obsolescence
Termination and Exit
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Quantifying the financial opportunityParameter Bid Target range Red zone (re-qualify now)
Total value of all contracts of
this type
x% of fcast turnover x% of fcast turnover
Bid costs x% of target gross profit x% of target gross profit
Target profit margins Gross Profit > y (%)
Net profit > y(%)
Gross Profit > y (%)
Net profit > y(%)
Working Capital Worst position no more than
x% of revenue
Cap at x
Max exposure under worst
case scenario modelling
Gross Profit > y (%)
Net profit > y(%)
Gross Profit > y (%)
Net profit > y(%)
Revenue at risk from penalty
regime
x y
Max exposure if we have to exit
the contract early
x y
Win probability 10%
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Managing individual risks
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Risk
Initial
RAG Mi ti gati on
Post
Mitigation
RAG CommercialTreatment
Dipinserviceperformanceduring
transferandtransitionperiod Red
Duediligence.Detailedplanningof
transition.Consultationand
communicationwithstakeholders Green
Setoutin
transition/implementation
schedule
Numberoftransactionsmaybe
higherthanforecast Red
Agreepricebandingsforadditional
volumesandtriggerforchange
control Green BandingsinPricingSchedule
Costofsolutionhigherthan
anticipated Red
Duediligenceandreviewofdesign.
Seektoagreeacceptable
assumptions Amber
LimitedprotectiononDue
Diligencethrougha'TrueUp'
Subcontractorfailstomeet
milestones/serviceperformance
targets Red
Flowdownkeycontractualterms.
Ensureliabilitiesarebroadenough
toincludelossessuffereddueto
failure.Establishperformancemgt
process Green
Subcontractandmanagement
arrangements
Contractmaybeterminated
beforenaturalexpiry Red
Agreeterminationtriggers.Ensure
clarityoncoststhatcanbe
recoveredindiferentscenarios. Green
Specifyterminationprovisionsin
maincontract
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Exercise six: financial risk modelling
In pairs consider the three opportunities listed in the
exercise pack.
Discuss the options and decide which opportunity you
would choose.
Be prepared to feedback and discuss your reasoning for
and against each option.
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Financial risk modelling best practice (I)Risk framework
Content
management
Information:
Check quality and gaps
Check veracity
Remember predictions are no guarantee
Variables:
What factors can vary
What do you control
What is the range of variation, and what can you bear
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LUNCH
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Negotiation
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NegotiationYou can negotiate on:
1. Contract terms i.e. IP rights, performance
2. Aspects of the specification i.e. quality, demographic3. Payment terms and mechanisms i.e. payment schedule
Negotiation should aim to achieve:
- Consensus of purpose and approach to the contract- Proportionate, relevant and sustainable terms of delivery and
management
- Flexible and transparency review, management and resolution
processes- Synchronicity between contract, specification and payment
schedule
- A good foundation for future communications and partnership
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Principles of negotiationBe prepared
Know what you want to achieve
Know your absolutes: when will you walk away
Know points you can vary onKnow how this fits with / subsidises the rest of your portfolio of work
Know what the other party wishes to achieve
The same questions as for yourself
Understand the power balance
Is any imbalance real or perceived?
Trade, dont give
Wait til you have two points to discuss and balance them out
Stay solution focused
It is sales, not fundingRemember your long-term relationship building objectives
If you do walk away, do so carefully
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Weighing up your negotiation approach
MOSCOW is a tool that enables you to determine inadvance priorities for negotiation and your red lines
Must Should Could
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MoSCow example
Negotiating point 1 Dream 2 Outcome where 3 Outcome
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Negotiating point 1. Dream
scenario
2. Outcome where
you might
proceed
3. Outcome
where you might
walk away
MUST Payments terms, need money
up front for cash flow
9 9 8
Quantity 9 98
SHOUL
D
Price(you have some flexibility)
9 8 8
Monitoring9 9 9
Approach 9 8 8
COULD Brand 9 8 8
Flow(you would prefer a steady flow of demand
but could live with more in year 2 than year
1 of this contract)
9 8 9
Communications 9 8 9
IP 9 8 9
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Exercise seven negotiation
In pairs use the scenario in the exercise packs to complete
the MOSCOW chart:
1. Your priorities absolutes that you must not negotiate on
2. Those terms you should be able to negotiate on
3. Those terms you could negotiate on
Be prepared to feedback and discuss your reasoning.
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How to negotiatePrepare
Know your case
Your strengths, weaknesses, needs and flexibility
Your starting & exit points
Your authority and position of board
Know your enemy partner
What does the other party want?
Find the right person to negotiate with?
What are their priorities & pressures they face?
What are their exit points?
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Managing Bids Effectively
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Bidding as a part of bigger strategy
Go-live
Horizon Scanning
Shaping
Pre-bid Engagement
Bidding
Go live-Y1-Y2-Y3
Ongoing Qualification
Recognising
needs
Formulating
strategy
Procurement
strategyProcuring
Commissioner/Client
Private Sector
Indicative Timeline
Evaluating
options
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Compelling
commercialproposition
Strong
servicesolution
Effective
sales campaign
Well managedand executed bid
The four elements of a good bid
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Good bid management
Designated roles co-ordinating and producing: Data and evidence
Internal and external input and relationships (people)
Finances, budgets and projections
Competing offers
Risk assessment, value, and strategic suitability
Drafts and deadlines; review and sign off Drawing on cross organisational strengths
Clear authority to make decisions
Proportionate system, suitable to your organisation Critical appraisal black hat
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The Importance of good InformationCentrally managed information Held by the lead
Everyone feeds in and takes ownership (TACT)
Suitable formats
Different channels
Use third parties
Know it well Mission driven
Key messages
Successes, not just activity
Quantitative evidence
SROI and other peer-assessed impact evidence
Do something different, that stands out
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Bid gates: the importance of critical review
Decision points gates
Gate 0 Internal qualificationGate 1 Go GetGate 2 Bid/No Bid (PQQ Stage)Gate 3 Internal re-qualification (ITT Received)
Gate 4* Approval to submit bidGate 5 Contract SignatureGate 6 Contract Start-upGate 7 Transition CloseGate 8 Service Delivery/TransformationGate 9 Rebid/Contract Close Down
* Gate 4 approval is required every time a detailed solution design orpriced proposal is submitted to the client.
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Exercise eight: bid gates
Individually in your exercise packs create action-plans thatrecord:
What the gates are in your organisation
Who is responsible at each gate What action / decision needs to be made
Be prepared to feedback to the group
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Summary and reflectionsCompetencies and evaluation
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Todays modules
Governance and performance management
Financial risk management
Bid management
Negotiation
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Competencies Complete the competencies
Reminder that we will contact delegates in 3-4 months to ask for
progress
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R i bj ti
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Review: our objectivesRewrite!!!
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Day two reflectionsDiscuss in pairs
- What has made the biggest impact on you?
- What was less helpful (and how could we change it)?
- What are you inspired to explore further?
- What will you do differently as a result of the Masterclass?
If you wish, you can feed back key points to the whole group
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Thank you from:
And to the Office for Civil Society, Cabinet Office for funding this
Programme.
89 Commercial Masterclass, Day Two