Value Analysis: Output-Based Contract Management

Contract management based on measures of output has proven successful around the world in facilitating an outsourcing partnership focused on the delivery of customer value. Output-based contracts use measures which reflect the output functionality that the users and managers of the applications require.

Output based procurement is calculated on the basis of current productivity. How do we measure productivity? Productivity has traditionally been based on the number of lines of code ( LOC) produced per hour/day/month. LOC is NOT a measure of the output requirements of the users. Functional Size Measurement Models SMS recommends use of ISO standard Function Point counting models to provide comparative measures productivity, and advocates the adoption of COSMIC functional size measurement. COSMIC was developed in the late 1990s specifically for sizing modern software systems. COSMIC can be used to provide comparative performance measures for Agile development.

Benchmarking

As important as the selection of the supplier is the contract that is drawn up between the organisation and supplier and its management thereafter. It must clearly set out all the agreed terms and conditions of the project, with unmistakeable guidelines for contractual deviations. The content of the contract and the performance of the supplier can be benchmarked by confidential and anonymous comparisons between one organisation, its projects and another. The art of successful benchmarking is in the choice of study for comparison. Using QPeP (QuantiMetrics Performance Enhancement Programme). SMS offers independent and objective advice on the most relevant study for comparison based on our extensive experience of working with many benchmarking services and suppliers.

Performance Measurement

To ensure the project is progressing as planned the supplier's actual performance can be continuously compared against expected progress.

Software Size Measures

Measurement of the size of the product to be delivered and problems to be solved drive the predictive models and must be comparable with benchmark data. Historically Source Lines of Code (SLoC) were measured, this has become impracticable as modern applications are vast and employ varied technologies. As a result Functional Size Measures (FSM), often referred to as Function Point Analysis (FPA) evolved to measure size. The three most commonly used methods, which we use, are COSMIC, MkII FPA and IFPUG FPA.

Data Collection

Meaningful benchmarking depends on the quality of the project data collected for the software measurement programme. It must be accurate, relevant and timely, drawn from internal and external sources, considering both entities and attributes with allocation of an appropriate mathematical representation. This identifies the existing position and capability against which comparisons can be made.

Project Audit

For audits of external supplier performance we provide an independent, objective and professional view of the situation. We ensure that the chosen criteria and indicators are relevant and measurable.

Supplier Capabilty Evaluation

The SEI^sm Supplier Capability Evaluation (SCE^sm) is a proven method for gaining insight into the capability of software suppliers. It is a valuable, almost essential, decision-making tool for the management of outsourcing, because it provides an objective view of the relative merits and abilities of competing suppliers.

An SCE^sm provides a means of predicting the most likely outcome of a supplier's next project. In other words, it gives a client a quantitative assessment of the risk involved with the placement of a software contract. Once the contract is awarded, the SCE^sm findings form a sound basis for ongoing risk management by both parties.

Non SEI Appraisals

SMS' proprietary Software Process Evaluations (SMS/SPE) can be used internally or externally to investigate the maturity of certain important process areas.

This method draws on our experience in using both the SEI^sm SCE^sm and various ARC-compliant assessment models. It is based on the continuous model of the CMMI^® which allows the flexibility to concentrate on specific process areas that are considered to be 'high risk' or offer potential high returns on investment. SMS' own evaluation service gives the familiar qualitative evaluation of the CMM^® and CMMI^® Assessments, but also places special importance on the quantitative evaluation of software development and maintenance processes. Appraisals are carefully tailored to fit the circumstances during an initial Scope Study, and are geared towards initiating, expanding or redirecting process improvement activities.

Starting a Measurement Programme

Buy in and involvement from senior management is the starting point for any measurement programme. Then through good planning and accurate selection using GQM clear precise goals and objectives with input of company-specific data can be initially established. SCOPE STUDY follows to fully quantify the project criteria. Once this has been completed then the measures such as defect rates, staff, and effort must be quantified numerically. Once the key metrics and processes for measurement have been established and a plan devised the actual measurement and analysis can get under way.

Customer/Supplier Arbitration

It is critical with any package of work that all parties agree and understand the terms as laid down in the contract. This must be monitored throughout to ensure that deviations are minimised. If changes need to be made, a properly regulated change management process must be in place to record the changes and likely impact. SMS can provide either one off or continuous monitoring and communications services, indicating necessary actions for all parties.

Should there be a major issue we have considerable experience of assisting with outsourcing partnerships and the negotiation skills to get the work back on track in the shortest time.