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Conversion contractor selection, management & administration

Robert W. Brown
President & CEO
Baymont Technologies, Inc.
14100 58th Street North
ClearWater, FL 34620


Introduction
Once an organization has decided to implement an AMIFM system and has determined that they do not have the in-house resources to perform the conversion, they have started down the road to the selection of a conversion contractor.

At that point, they mayor may not have selected an AM/FM maintenance system (hardware and software). If a system has already been selected, it mayor may not have been installed. Each of these scenarios will affect the selection process in a different way. If there is going to be an inhouse system, the optimum time to take delivery of the first converted work package is at the same point the operators have become well trained enough to maintain the converted product. If the user organization has decided not to have a system in-house, it is important to select a conversion contractor who can provide efficient ongoing maintenance services. If the company has purchased a software package that requires customization, they may want a conversion contractor with the expertise to perform the customization.

Selection
Please refer to Figure 1 for a block diagram of the Conversion Contractor Selection Process.
  1. Education
    It is important that the user company have a good understanding of the conversion process before selecting a conversion contractor. Users can gain this knowledge through the use of one or a combination of the following methods:

    • Attend technical conferences
    • Hire a consultant
    • Visit conversion contractors
    • Attend conversion seminars

    Only with a clear understanding of the complexity of the conversion process can a company make an informed decision in the choice of a conversion contractor and minimize his reliance on chance.

    In addition to the knowledge to be gained at technical conferences and through the services of a consultant who has a thorough knowledge of the conversion process, much can be learned by visiting conversion contractors to observe the process first hand. There are also seminars available given by conversion contractors or system vendors which cover the conversion subject in detail.


  2. Specification
    The conversion specification is not an integral part of the conversion contractor selection process. It is mentioned here because it must be included in any request for proposal but cannot be properly prepared until after the education phase.


  3. Pre-qualification
    It is impractical to issue a request for proposal (RFP) to a large number of companies. Therefore, it is important to carefully prepare a short list of companies to which an RFP will be issued.

    This pre-qualification process may include one or more of the following:

    • Request for Information (RFI)
    • Presentations by conversion contractors
    • Visits to contractors' offices
    • Reference checks

    A decision must be made on the number of contractors who will receive the RFP. There maybe a minimum requirement by the company and the maximum number maybe left open and depend upon the qualifications of the respondents. Typical short lists contain from three to six company names.

    One method of obtaining a short list is to start from scratch and seek out qualified firms to put on the list. The most common method, however, is to start with a long list and eliminate the least qualified. A good source of information for a list of conversion companies is the AM/FM International Directory. Or even better, consult other organizations in your industry who have completed conversion projects or currently have them underway.

    The request for information (RFI) is a commonly used tool in the pre-qualification process. The main decisions to be made in the preparation of an RFI are related to the qualifications desired in a contractor. There are many questions that need to be answered at this time. Answers to specific questions should be sought in the response to the RFI.

    These questions should cover but not be limited to the following subjects:

    • key personnel
    • in-house equipment
    • project experience
    • available resources
    • company stability

    After an initial cut, either instead of or as a result of an RFI, the remaining companies on the list may be asked to make a presentation either in their own offices or on-site at the user's office. The advantages of a visit to a contractor's office are obvious. It gives the user exposure to more of the contractor's employees and business methods. It will also give the contractor a chance to demonstrate his equipment under actual production conditions. The disadvantage of visiting several contractors is the travel time and expense involved.

    A conversion contractor's references should be thoroughly checked. Each contractor should provide a contact name and telephone number as reference for each project they have submitted as similar experience. Conversations with reference contacts should address quality of work, adherence to schedule, and claims for extra work..


  4. Request for Proposal
    The major step in the contractor selection process is the preparation and issuance of the RFP and the subsequent evaluation of responses. The content of an RFP will vary depending on several factors (system selection, contractor pre-qualification, etc.) but it will typically contain the following sections:

    • instructions to bidders
    • terms and conditions
    • scope of work
    • selection criteria
    • response format


    Figure 1


    If there has been no pre-qualification process, then the RFP should also contain all of the questions normally included in an RFI.

    During the preparation of the RFP, certain decisions must be made which will be reflected in the content. Two very important questions to be answered before the RFP is issued are:

    • What type of contract is desired (lump sum, unit price, time and materials)?
    • How will the contractor be selected (low price, qualifications, a formula)?

    If a price is requested in the RFP, it should be made clear to those bidding whether it is to be a firm bid or an estimated price as a basis for negotiation. If it is to be a lump sum bid, then the scope of work and conversion specifications must be clear, detailed and complete. The bidders must have access to review all source records and time to determine the quantity of work. In many cases the user will provide the total quantities (drawing, items of plant, are, etc.) on which the contractors should base their lump sum bids.

    If unit prices are requested, then a review of the source records is important; however, the total quantities may be estimated with greater tolerance. Time and materials contracts are rare in the conversion industry and would normally be associated with a not-to-exceed ceiling price. It is very important that each bidder on the IU?P knows what the user's selection criteria are. If all bidders have been pre-qualified through an RFI or some other process, then price maybe the only criterion. Some users may make their selection purely on the technical content of a proposal and the contractor's qualifications to perform the work. Others may use a formula to select the successful bidder, assigning weights to each of the selection criteria. It is to everyone's benefit to spell out the method of contractor selection in the RFP.

    In formulating the selection criteria, the company must decide what price should be paid for quality. If the successful contractor delivers a substandard product or does not meet project due dates, it could be costly for the user. There maybe people and equipment waiting idle to use the converted data. Besides the expense, a delay in the project resulting from the poor selection of a conversion contractor will neither help the career of the project manager nor bolster the continued support of company management for the AM/FM./GIS project. To encourage the lowest possible price from each bidder, the user should include the following items in the RFP: the total amount of future work to be contracted; the schedule for complete system conversion; and the planned number of contractors to be used on this and any future contracts.

    A response format is an important part of the RFP; it is a standard format which all bidders must use for their response. It may help to clarify some points in the scope of work to a contractor, and it will make the task of the evaluators much easier. The response format may include the following topics:

    • proposed prices
    • proposed methodology
    • conversion team organization chart
    • resumes of team members
    • project schedule
    • assumptions and exceptions
    • company qualifications (if no pre-qualification)

  5. Contract Award
    The signing of a contract is the last step in the contractor selection process. It maybe painless or difficult depending upon how carefully the previous steps in the process have been carried out.
Management
What happens after the selection of a conversion contractor and the execution of a contract? That depends greatly on the user organization's management of the project's conversion phase. A typical but simplified project organization chart is shown in Figure 2.
  1. Proiect Team
    The user organization will have a project manager and a project team established before the conversion contract is awarded. The contractor has agreed to establish a conversion project team and has included an organizational chart in its proposal. It is essential to the project that the conversion project team become an integral part of the overall AMlFM7GIS project team. To achieve this, user and contractor team members must work toward a common goal and establish communication lines at various levels in the organizational structure.

    The main duty of the overall project manager with respect to the contractor is to ensure that a product of acceptable quality is delivered on schedule. The project manager will have little control over this if the selection process failed to provide a competent contractor.


    Figure 2


    The conversion schedule is of utmost importance to the overall AM/FM/GIS project. The project manager has to schedule his people to do acceptance testing and subsequent maintenance functions on converted work packages. Assuming that the user has selected a competent contractor, it is important for the user project team members to remove any roadblocks or bottlenecks that my prevent the conversion contractor from delivering on time. The basis of these problems is usually a lack of some type of information on the part of the contractor. To keep the conversion process on track, the conversion team must receive information in a timely manner.


  2. Quality Control
    By virtue of contracting the conversion to an outside firm, the user's project manager has relinquished the quality control fiction during the conversion of any one work package (ie. one telephone exchange). He may return a package for rework if it does not pass the acceptance tests, but checking the quality of the work on a half completed package cannot be considered. This is because the cost-efficient processes used by most conversion contractors do not produce a product to review until the end of the process. If the user's acceptance criteria have been detailed and the conversion specification is well understood, then the contractor should have no problem in delivering a product which will pass the acceptance testing.


  3. Communication
    There are three main lines of communication necessary between the user's members and the contractor's members of the project team: project manager to project manager; computer operator to computer operator; and records technician to records technician. A situation where either project manager says "all communication must go through me" will be detrimental to the successful execution of the conversion.

    The disadvantage of more than one line of communication between two companies is the potential for lack of control by one of the two project managers. A written report of all telephone conversations copied to the project manager will avert such problems.


  4. Penalties
    What penalty can be imposed on a contractor who does not meet his contractual obligations? Financial penalty clauses for failure to meet schedule or quality should be avoided. Penalty clauses will tend to introduce unwanted tension between the contracting parties. They will also increase bid prices due to the additional financial risk involved and the certainty of higher administration costs to complete documentation required for each minor schedule delay. A suggested method for including a penalty clause is to offset it by adding a bonus clause to reward the contractor for any early deliveries. The future well-being of any contractor depends on his reputation. This reputation is certainly not enhanced by producing inferior quality work behind schedule. If a conversion project is behind schedule or if it must be returned for rework, it is highly possible that the contractor has already accrued financial penalties without others being added.

    If a contractor consistently fails to meet his contractual obligations, then the contract should be canceled and no further work awarded to him.
Administration
The management of any project requires a certain number of administrative duties. The secret of a successful project is to find the right balance of administration time. There is a minimum requirement without which the project will not proceed, and at the other end of the scale there is a theoretical limit which will completely bog down the project manager with paper work. The optimum amount of administration will allow for the sound management of a project without spending excessive time on paper work.
  1. Communication Methods
    Good communication has been discussed as a management tool. The methods used and the recording of this communication are project administrative functions.

    The telephone should be used as the primary communication link between the user and the contractor. Frequent telephone conversations are the best way to maintain a good working relationship between the parties. All project related information discussed in a telephone conversation should be recorded in writing and distributed in a standard project distribution.

    The frequency of project meetings will depend on the distance between the offices of the contractor and user and on contractual conditions. Certainly a kick-off meeting at the beginning of a conversion contract is recommended to introduce team members to their counterparts and to discuss project specifications and procedures. Too many intercompany project meetings can be nonproductive.

    Written communication between the two parties is essential, especially for dealing with contractual matters and for transmitting paper documents or computer tapes. The facsimile has become a common mode of communication between contractor and user. It is especially convenient for solving problems discovered on the source records.


  2. Progress Reports
    Progress reports are an administrative tool that will help the user project manager keep abreast of the project schedule. The project report frequency should be determined before signing a contract while a mutually acceptable format may be decided upon before the start of actual work on the project. A typical progress report would report the percent complete of each task on each work package that the contractor has received. The report should be concise and received by the user within a few days of the end of the reporting period.


  3. Invoices
    The method of invoicing should be spelled out clearly in the contract. Typically on conversion projects there is monthly invoicing with an amount held back until final acceptance of a converted package. The amount invoiced may or may not be supported by progress reports depending on the requirements of a contract. Invoices should be processed and paid within the time specified to help the contractor offset his high labor costs at the beginning of the conversion period.


  4. Extra Work
    The amount of work performed beyond the scope defined in the contract will depend on the completeness of the conversion specification and the number of unlmowns at the time of the contract signing. Excessive extra work will cause hard feelings between the parties and should be avoided. The user project manager should try to anticipate the quality of extra work on a project by making himself aware of the gray areas of the specification - those which cannot be adequately defined prior to starting work.

    A good rule of thumb is - the lower the contract price in comparison to other bids, the more claims for extras there will be. Often the idea of extra work is not mentioned in a contract using an "out of sight - out of mind" philosophy. The rules for claiming, documenting and paying for extra work should be detailed in the contract in order to avoid problems at a later date.
Conclusion
There are many things to consider before entering into a contract for the conversion of records to an AM/FM/GIS system. With a capable project team, a thorough knowledge of the conversion phase of a project, and a well-thought-out selection process, a user organization should have few problems in contract management and administration. The selection of a qualified contractor is the most important step in the conversion phase and it should not be left to chance.
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