I. The Problem

1. Customers and Vendors Have Opposed Objectives
   1. Vendors are trying to
      1. Maximize their profits
      2. Minimize their risk
   2. Customers are trying to
      1. Minimize their cost
      2. Maximize their protection
2. The Sales/Purchase Disconnect
   1. Salespeople sell “solutions”
   2. Customers think they are contracting for results
   3. Surprise, the contract is for resources, not results

II. Overview, Results-based Contracting

1. Contracting Options
   1. Two types
      1. Results
      2. Resources
   2. Examples
2. Level Setting
   1. What is results-based contracting?
   2. When do results deals work best?
   3. Contracting for results requires a comprehensive approach
      1. The agreement
      2. The Statement of Results
      3. The Statement of Obligations

III. Results-based Contracting

1. Key Contract Provisions
   1. Inducements
   2. Services/products to be defined as results
   3. Payment based on results
   4. Key warranties
   5. Accountability of both parties
   6. Change-order control process
   7. Remedies
   8. Dispute resolution
   9. Termination
   10. 1Force majeure
2. The Transactional Documents
   1. The Statement of Results (SOR)
      1. A list or description of the results the Vendor must achieve
      2. Timeline for deliverables, milestones, etc.
      3. Money – payment for results
         • Fixed Price
         • T&M not to exceed
      4. Quality and acceptance testing
   2. The Statement of Obligations (SOO)
      1. A complete list of the Customer’s obligations
      2. Everything else in scope to achieve the results is Vendor’s responsibility
      3. Rolling estoppe

3. Results-based Deals with Service Level Agreements (i.e., Ongoing Results)
   1. SLA Process
      1. Identify stakeholders for SLA
         • Creation
         • Negotiations
         • Implementation
         • Monitoring
         • Enforcement
      2. Determine critical results
      3. Develop possible measurements for each critical result
      4. Evaluate possible measurements for each critical result
         • Screen for possible issues (legal, “political,” unintended consequences, other)
         • Analyze, compare and determine which is most appropriate
         • Calculate cost of each measurement method
         • Select service levels for each critical result
      5. Determine who will collect data and create reports
         • Customer collects and reports
         • Vendor collects and reports
         • Vendor collects and reports; Customer has audit rights
         • 3rd Party collects and reports
      6. Create appropriate remedies for each SLA
         • Types
           • Financial
           • Non-financial
         • Levels
           • Fix it
           • Attention getting
           • Termination
      7. Determine whether incentives will be allowed
         • Exceptional performance
         • Earn-backs
      8. Identify flexibility needed after agreement is signed
         • Change service levels
         • Change metrics
         • Change remedies
         • Change measurement period
      9. Draft the SLA
      10. Secure final buy-in from stakeholders
      11. Present to Vendor(s)
          • In RFP
          • At negotiation table
      12. Negotiate with Vendor(s)
      13. Execute the SLA
      14. Manage the SLA
          • Monitor performance
          • Implement remedies
          • Identify areas for improvement
          • Adjust SLA
      15. Identify lessons learned
   2. Pitfalls – fifteen, including:
      1. Too many SLAs
      2. Too few SLAs
      3. SLAs that are too complicated
      4. Unintended consequences
   3. Success factors – twelve, including:
      1. Gain executive support
      2. Ensure enough commitment of time and resources
      3. Use reliable metrics
   4. Review of examples
4. Preserving Your Results-based Deal
   1. How Customers unintentionally undo results deals
   2. How Vendors intentionally undo results deals

IV. Implementing Change

1. Selling These Concepts within Your Organization
2. Selling These Concepts to Vendors (Negotiating)

V. Q&A