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S Accounting Program (SAP) implementations are performed in five stages: Prep, Blueprinting, Realization, Final Prep, and Go-live/Support. I think this is a well established tradition in those circles (speaking as an outsider). Agile type sprints seem to be frowned upon in this circumstance, neither the Contractors nor out IT personnel thought it was appropriate.

My agency is implementing SAP and I was tasked with running two competitions to implement various modules.

When helping our IT people develop their statement of work, we were having trouble defining the work since the heavy lifting is done during the "Blueprinting" phase, which unhelpfully takes place after contract award.

The contracts are awarded now, and work is progressing without major heartburn.

One set of modules was accomplished on a fixed price basis, while the other fixed-priced the Blueprinting only, and the rest of the work was accomplished on a T&M basis.

Question: How do others contract for this work? Is there a third way which is superior? I'm generally supportive of Vern Edwards' thinking on complicated software implementations: pick the most qualified, negotiate on a sole source basis and award. I didn't consider that an option because software is not on the Brooks Act list (though perhaps it should- people are hacking dams so the safety justification seems to be thre now. One day they may be hacking our cars.)

Apologies if there is insufficient information, please roll your eyes and ask me for more info if that is the case.

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I'm not a government employee, but I'm confident that the implementation will be won or lost based on the requirements definition and business process mapping. Speaking as a employee at a company which did a fairly recent SAP implementation, I would have recommended going with one vendor for all modules (to keep finger-pointing at a minimum) and I would have recommended issuing an award fee contract, with a whopping big award fee pool that would be doled out based primarily on customer satisfaction. And I would reserve a significant piece of that pool for a customer feedback survey about six months after "go-live" because, in my experience, it takes that long for the problems to surface.

Edited to add: fixed price seems weird to me. You want the contractor to take as long as necessary to get the blueprinting and initial testing done right. You don't want corner-cutting and use of less senior personnel in order to keep margins where they were supposed to me. That might just be me, though.

Hope this helps.

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Guest Vern Edwards
Question: How do others contract for this work?

The question is ambiguous.

By "this work" do you mean S Accounting Program implementation, software development generally, phased development programs, or something else?

By "how do others contract" do you mean how do they structure their program, what terms do they include in their contract(s), how do they select the contractor(s) and award the contract(s), how do they manage the contracts after award, or something else?

I agree with here_2_help that awarding different phases to different contractors could give rise to problems. I wouldn't do it without a very good technical reason. I also agree that fixed-pricing the blueprinting phase is a mistake unless the job is very simple. I would prefer cost-reimbursement, but that's because I consider T&M a terrible pricing arrangement for projects.

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Hi, Vern,

By "this work" do you mean S Accounting Program implementation, software development generally, phased development programs, or something else?

I intended to write "S@t@n's Accounting Program (SAP) implementation", rather than "S Accounting Program (SAP)"- which is the translation from the original German we use around the office. Sorry if there was confusion there, and for ambiguity.

By this work I mean consulting services only. Consultants taking a very detailed look at current business processes, generate a lot of documentation (flow-charts, etc.) describing those processes, propose new processes, and configure SAP to execute those processes. All licenses were procured separately. I don't know why they were procured separately, that was before my time here. I doubt there was a good technical reason.

By "how do others contract" do you mean how do they structure their program, what terms do they include in their contract(s), how do they select the contractor(s) and award the contract(s), how do they manage the contracts after award, or something else?

I was thinking of: how the contractor is reimbursed, and how contractors are selected. However, if there is any insight as to program structure, contract terms and post-award management, I'd love to hear them.

. . . fixed price seems weird to me. You want the contractor to take as long as necessary to get the blueprinting and initial testing done right. You don't want corner-cutting and use of less senior personnel in order to keep margins where they were supposed to me. That might just be me, though.
I agree with here_2_help that awarding different phases to different contractors could give rise to problems. I wouldn't do it without a very good technical reason. I also agree that fixed-pricing the blueprinting phase is a mistake unless the job is very simple. I would prefer cost-reimbursement, but that's because I consider T&M a terrible pricing arrangement for projects.

I think we have managed to avoid those problems despite ourselves by picking very good contractors who did not under-price their proposals, but I take those recommendations to heart. We may have just been lucky so far, and luck can run out. The fixed-price implementation phase for the winner was toward the upward limit of our budget, and that winner was very highly technically rated.

I'll ask to see if there was a good technical reason for spacing out these modules over time, and running separate competitions for each. I know that some of this is budget driven, I know that the implementers tend to specialize in different areas, and I know that everything being in SAP eliminates elaborate interfaces between each module. I'll check to see if there is something I do not know.

Our ability to administrate a cost-type contract is hampered by lack of experience and access to audit resources. When I am King I'll fix that, but for now I'll continue harassing the management. T&M has its warts for sure.

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Hello, H2H,

Thanks for this recommendation:

I would have recommended issuing an award fee contract, with a whopping big award fee pool that would be doled out based primarily on customer satisfaction.

Who is the "customer" in this case? Is it the end-user, the management, someone else? Sometimes these groups are at cross purposes, though maybe not in your case. The caricature of both groups is that the end users want to interact with the system as little as possible, while the management will break your back to get some pointless report. I personally like both our user group and our management group, but we all have these incentives.

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apsofacto,

Again, I'm not a government employee -- just a person who's been around for a few decades on the other side of the table. That said, obviously there are a number of "customers" -- including the customer who approves the invoices -- but the real customers are the system users. If the users aren't satisfied then it's a failed implemention, regardless of what the testing reports showed.

I get it that some users are never going to be satisfied, because *change is BAD* but I assume you are spending the money for a valid reason. I assume the current system is less than satisfactory. Thus, I assume the new system creates value to the users, the agency, and the taxpayers. Forgive me if I'm just being naive.

But if I'm right, then a wide customer satisfaction survey 6 months after "successful implementation" would be a good thing. It's not like people don't use SLAs and other satisfaction metrics in IT acquisitions. So it's very customary. And it would show whether value was created for the users, or not.

If you like you can issue multiple surveys to multiple "customer" communities, and you can weight them the way you want. Just document the communities and the associated weightings in the award fee plan, and then follow the plan.

Those are my thoughts, for what they're worth.

Hope they help.

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Guest Vern Edwards
By this work I mean consulting services only.

apsofacto:

My comments about contract type were based on the belief that the work was for some kind of software development. I did not realize that you were talking about consulting services. I misunderstood. I think consulting services can be fixed-priced if there is a clear description of deliverables and a common understanding about the required level of effort.

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Vern,

I'm not sure there's a tremendous distinction between consultants and software developers in an SAP implementation. SAP is a fully coded system, of course. It comes ready to use right out of the box. But almost nobody uses the vanilla, ready-to-use, version and it typically requires significant customization to meet the users' specific circumstances and business process needs. That customization journey is often guided by "consultants" who are large teams of diverse SMEs (or what they will tell you are SMEs). Consulting teams include IT folks, change management folks, business process mapping folks, project management folks, etc. In my experience, the consultants run the project and the users are there to provide input and testing.

SAP consulting is a bustling industry and good SAP consultants are worth their weight in platinum.

H2H

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Vern,

Speculation but based on my contractor experience, the deliverable is the system that is tested and found to meet functional specs. Nothing else.

H2H

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Guest Vern Edwards

Yes, but a key pricing issue is whether they have to do any coding to deliver the system. Coding is a significant source of cost uncertainty. If they have to do a lot of coding in order to make the SAP work for the customer, that raises a question about whether fixed-price is a good way to go.

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H2H is correct in our particular case- there is a rule in the project that there will be no coding (although things called BADIs are OK). However, the consultant is writing their own functional specification subject to our approval. I think this is normal- I could be wrong.

Our consultants have spent a lot of time generating documentation about our AS IS business process, and the proposed TO BE business process. These are piles of paper they use to build the functional specification.

They have likely also begun configuring SAP to do the things we plan on. While there will be no new code generated, but they will do a fair amount of configuring. I confess I can't explain, nor do I quite understand, the difference. I'm told that configuring is much less risky than coding, and makes upgrading the system later a much easier job.

I think our largest source of cost uncertainty is our ability to stick to the new business processes we agree to.

So I would add to H2H's statement that the consultants:

  1. Generate a picture of our current process (AS-IS) (paper)
  2. Generate a new busienss process (TO-BE) (more paper)
  3. Generate a functional spec based on the preceding (yet more paper)
  4. Configure SAP to conform to those specs (Configuration)
  5. Stick around to support the aftermath and provide grief counseling

Fix-pricing they whole job seems trickier since they develop the functional spec partway through the process.

H2H- Are BADIs considered coding? We are doing some of those.

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Hey! Nobody made me an SAP SME. In fact, if I were to call myself that, it would generate disbelieving laughs and derisive guffaws around the work place. I'm FAR from any kind of SAP SME, except I have been through a couple of "interesting" implementation experiences, and I've gotten some lessons learned through the usual painful methods -- which is why Item 5 in the list made me laugh. It's so true!

That said, I walked down the hall and found my business process analyst, and he told me that BADIs, BAPIs, and SQVIs are all methods of accessing data in a database in order to generate a report. Kind of like a "macro" in Lotus 1-2-3. (Which is really more my speed.) So: NOT coding.

H2H

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It is really difficult to lump all commercial software development projects together and create a single template that will be great for all. One size does not fit all. With that said, one strategy that I have used is a combination of T&M labor categories and FFP line items, and have a single contractor perform the work. I strongly recommend a single contractor, as only the contractor has a reasonable method to estimate coding time of its personnel. Estimating coding by a separate contractor constitutes what some would call a "WAG." Typically, all software projects involve three basic steps:

1) Needs Assessment (it has been called Blueprinting here);

2) Software Development

3) Maintenance and Support

Under Phase 1, I use a T&M. Unless the project is very simple with a small amount of stakeholders, or minor modifications to an existing software, I think you run into too much risk not to use a T&M. During this phase, the Contractor will need to meet with your stakeholders, gather project objectives and functional requirements, and design integral documents (at a minimum: wireframes, data flow diagrams, needs assessment report documenting stakeholder requested functionality [becomes your functional specifications], testing plan, deployment schedule, workflows, and an price estimate to implement).

The last document, the price estimate, will identify FFP line items. Those FFP line items are based upon the complexity of a specific feature. For example, a moderately complex feature, which the government anticipated would take 30 hours each, is $3,000. This way, the government should receive a list of features that make up the software project, all tied to the FFP line items in the contract. The Government can then negotiate with the Contractor to specify which features to pursue and then authorize work for phase 2. The CO modifies the contract with the necessary funds and provides authorization to proceed with development of specific features using the FFP line items.

Under Phase 2, the Contractor implements the features authorized by the CO in Phase 1. One issue you are going to face is your customer changing their mind about a feature. The needs assessment said that the module should do a, b, and c, but really wanted x, y, and z. You are going to need a T&M line item for these scenarios and a process to allow agility in project development. Use your project schedule as a guide for which sprints offer opportunities for changes, and how you will prioritize which changes get implemented.

Under Phase 3, I use a single line FFP line item that represents a percentage per year of the total development cost. This is a standard commercial practice by hundreds of software developers.

Through the line item structure, you can estimate the number of features and complexity of those features. You can estimate the number of hours required for the needs assessment. You can estimate the hours needed for changes. You can estimate maintenance cost. With a reasonable basis for comparison, you can conduct a best value trade off between software vendors.

A cost reimbursement contract would probably be easier and get you similar results, but many vendors are ill-equipped with cost accounting systems or financial expertise to submit a proper proposal. Not to mention, cost reimbursement is not a standard commercial practice for commercial software. That is why they are unallowable under FAR Part 12.

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Guest Vern Edwards

Cost-reimbursement contracts are widely used in some parts of the commercial sector, where they are commonly referred to as "cost plus contracts'. (Don't confuse discussions of "cost plus contracts" and "cost plus pricing". Different topics.)

See e.g.:

http://www.engineeringtoolbox.com/contract-types-d_925.html

http://www.lifeofanarchitect.com/residential-construction-contracts-cost-plus-fee/

http://goodcode.io/articles/pricing-fixed-vs-agile/

What are different are the government's terms for CR contracts: cost principles, CAS, limitation of cost/funds, etc.

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