Agile Procurement - Fundamental Changes Required

If you see the supplier as the enemy - then agile is not for you, stop reading now. If you see the contract as a tool with which to beat the supplier - then agile is not for you, stop reading now. If you are focussed on savings and achieving the lowest possible price - then agile is not for you, stop reading now.
However, if you see the buyer/supplier relationship as a collaboration (within bounds) – then agile could work for you. If the contract is a means to measure business benefit then agile could well work for you; and, if delivering true value to the business is a key agenda then maybe the rest of this article could work for you.
From a Procurement perspective there are three factors that must be addressed before progressing with an agile agenda: Stakeholders, Capability and Suppliers. All three of these factors are integral to moving to an agile methodology; exclusion of any of these will make the move to agile very difficult, if not impossible.
Stakeholders – A new way of thinking required
Procurement and Finance have always looked towards fixed cost models for contracts in the belief that this will deliver to scope against an agreed cost with risk reduced as much as possible. Fixed cost contracts will not deliver cost certainty if the contracting organisation is unable to manage its obligations or risks outside of contract develop. Risk and uncertainty are always included in a pricing premium for fixed cost contracts. Developing a tight and accurate scope should move any organisation away from a fixed model to a time and material contract structure.
Waterfall delivery based on a fixed cost basis and milestones helps delivery a final output that matches a fixed scope, i.e. output based. The use of standalone milestones in a technology development environment will often fail to be cognisant of recognising previous milestones. However, an iterative test and accept process broken down into discreet packages ensures that all stages are not only fit for purpose but work together, i.e. outcome based. 
Getting stakeholders comfortable with moving to a discreet stage (sprint) on a time and material basis will only work if the work is undertaken upfront to identify what capability will be delivered and how this capability can be measured against business outcomes. Delivering to stated and recognised business outcomes will give stakeholders the opportunity to become satisfied that the development is progressing as anticipated. Should the incremental delivery fail to stand on its feet and meet the business outcomes then the organisation has the ability to unilaterally cease further development, something that would not be possible under a fixed cost contract.
Capability – A new toolset
Embarking on agile will require a different approach than traditional waterfall projects. The use of mixed (contracting authority and supplier) multi-disciplinary teams is essential if agile is going to be successful; this will include representatives from Procurement, Finance, User (aka) the business and Project Delivery. A key tenet of agile is timely decision making; the need for suitably empowered teams are key to ensuring that delivery is completed in line with the delivery schedule. Each development sprint is bounded by time, cost and quality (for quality this can be interpreted as product capability); there should be no need to seek wider business approvals outside of the delivery team construct. Acting in a team construct, with full team member participation, will greatly aid timely decision making.

Suppliers – Or partners?
How an organisation views its relationship with their suppliers is fundamental as to whether agile procurement will ever work for the organisation. Having identified this trait for the organisation it’s equally applicable to the supplier and whether they view their customers as partners or cash cows.
An organisation that focuses on the bottom line as the key driver in all negotiations and that negotiations are win-lose activities will struggle to grasp agile and the necessary behaviours. Recognising the importance of the services being contracted for should help an organisation take a suitable approach to the supplier and realisation that this significant business endeavour, often delivering competitive advantage is too important to be run on an adversarial approach. Adding value not seeking cheapness is key.
The table above lists the attributes of organisations who could adopt an agile approach and expect to be successful in the endeavour and those whose inherent nature would be incompatible for the successful adoption of agile.
For those organisations that focus on the spectrum of pre and post contract award the adoption of an agile approach is that supplier relationship management is an inherent element of agile deployment.
Understanding the need for a collaborative approach, both with internal stakeholders and with suppliers, and the need to have the right skills across a combined team are essential. There is a need for both collaboration and capability; a strong attribute in one cannot offset a notable or total lack in the other. A greater mix of both attributes provides the potential for agile to work.

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