What makes buying goods different to buying services?
The importance of contracts in the world where non-lawyers are negotiating complex services contracts.
With Jeanette Nyden, Contract Attorney, Nyden on Negotiation
00;05;18;22 - The differences between buying services and buying goods
00;13;02;25 - Services procurement being left behind in digital transformation
00;18;45;28 - Measuring what was delivered against what was contractually agreed
00;33;21;18 - The role of the supplier in defining a scope of work
00;50;00;19 - Flexibility within services contracts
01;03;46;17 - Considerations for performance-based SOW arrangements
01;10;31;24 - Managing risk in services contracts
Episode Highlights
Transcript
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00;00;00;20 - 00;00;03;02
Jonny Dunning
So I think we're ready to go.
00;00;03;05 - 00;00;03;28
Jeanette Nyden
We are.
00;00;04;01 - 00;00;28;13
Jonny Dunning
Great. Well, thank you very much, Jeanette Nyden for joining me. It's a pleasure to have you here on the podcast. And, we're here to talk about it. Talk about navigating complexity in the services procurement environment in SOW based contracting. And I know, obviously, coming from your side, an area with very much expertise on the contracting side. We can go into that into a decent amount of detail.
00;00;28;15 - 00;00;50;06
Jonny Dunning
Before we get into the conversation, would you just be able to give a little bit of an introduction as to your background and what you do and stuff you've got going on at the moment? Because I actually first came across you via a, a friend of mine who's, services procurement professional. He recommended one of your brilliant, YouTube videos.
00;00;50;08 - 00;01;01;10
Jonny Dunning
Which I found really, really interesting. On kind of like, outcome and output based contracting. Could you just give a little bit of a kind of potted history and a bit of background?
00;01;01;12 - 00;01;33;23
Jeanette Nyden
Yeah. So I am an attorney in the United States, and I primarily train and mentor non-lawyers to negotiate complex contracts within very large corporations. And I chose that pathway because whether we all realize it or not, non-lawyers are increasingly doing the work that lawyers did a generation ago with respect to negotiating these complex contracts. As a result, the people that I work with are very bright.
00;01;33;23 - 00;02;00;21
Jeanette Nyden
They have business degrees, by and large. Some of them even have master's degrees. But they're not lawyers and they're not paralegals. And yet we're struggling to balance the part of the contract that's commercial and business, with also the part of the contract that touches, at least in the US, US case law, the United States, Uniform Commercial Code, primarily section two in the sale of goods, etc..
00;02;00;28 - 00;02;32;03
Jeanette Nyden
And so that level of complexity, most companies do not train for. And so when you hire really good people but don't necessarily have the skill set or performance in outcome based contracts, then companies typically bring me in to either train the team or mentor. And by mentor I mean I actually co-lead negotiations hand in glove with somebody else so that they develop the skill set in a complex deal in real time.
00;02;32;09 - 00;03;01;25
Jeanette Nyden
Then the next complex deal, they're able to to negotiate that as a lead on their own. And I am completely a nerd about this subject. So I've written four books about that. My pride and joy is getting to be, negotiating, agreements for highly collaborative relationships. That's, much more about the theory, the collaboration theory. Why, when we collaborate in business transactions, we're so much more successful.
00;03;01;28 - 00;03;34;10
Jeanette Nyden
And then how that translates into negotiating. I also coauthored the Vested Outsourcing Manual for a very particular type of outsourcing agreement, and very outcome in relational base. So that ties into the getting to we. And then I also wrote the contract professionals playbook for my clients. So this is the chapter by chapter step by step playbook with checklists and things like that to help you negotiate performance and outcome based agreements.
00;03;34;12 - 00;03;59;07
Jeanette Nyden
And that's how you found me, because I was doing a webinar series for managers for free on the five pillars of performance based contracting, and one of them is a really precise scope of work drafting it. And in what I've noticed since Covid is there's a lot more confusion about who owns drafting. The scope of work. Is it the company?
00;03;59;07 - 00;04;11;21
Jeanette Nyden
Is it the subject matter expert? Is it a third party subject matter expert hired on behalf of the buying company? Is it the supplier? Is it procurement? And so that's why I, recorded that webinar.
00;04;11;24 - 00;04;33;08
Jonny Dunning
Yeah. And it was, it was a really good guy, called Tom Everleigh Who recommended, who recommended passed on your the link to a YouTube video. And he's, right in the weeds of writing a book around, buying value in services at the moment. So it's great to see some people addressing these topics and bringing this content to life.
00;04;33;10 - 00;04;49;08
Jonny Dunning
I'd I'd still love to see more of it. I'm so, so grateful and appreciative of people like you out there putting out this, this sort of content. Because it is it is something that people are grappling with, and a lot of the time they feel that there aren't that many resources out there. There wasn't that much information out there for them to utilize.
00;04;49;08 - 00;05;07;07
Jonny Dunning
So, you know, hats off to you for doing that because it is a really useful resource. And no doubt some of the conversations that we get into in this, in this podcast will hopefully be really useful to people as well. But I wanted to start it off, by just kind of getting your the top level perspective.
00;05;07;08 - 00;05;44;19
Jonny Dunning
If we really kind of like zoom out in terms of looking at what we're talking about here, we're talking about the contractual vehicle that is used to procure a service. And, and, and one of the things that I think is interesting to look at is the difference in what makes, buying services different to buying goods. And when we first, when we first spoke, you, you started off by giving me a brilliant, like, background, view on this going quite, quite far back in time to look at the differences.
00;05;44;21 - 00;05;50;19
Jonny Dunning
What do you say is that as the key differences between the two, what's what makes them different?
00;05;50;22 - 00;06;17;06
Jeanette Nyden
One is tangible and one is intangible. And so it is so much easier to buy a good that is physically tangible, that can be factory accepted testing, that can have site inspection when it's delivered. It can be quality tested. It can be broken down by a QA department before receiving an entire shipment. We know exactly it's function.
00;06;17;06 - 00;06;42;10
Jeanette Nyden
A screw is meant to tighten. The nut is meant to keep a screw in place, a refrigerator is meant to keep food cool, etc.. Services are very intangible, and we don't really know what exactly they're supposed to do. If you hire a marketing expert to help you with your search engine optimization, then what is it exactly that they're doing?
00;06;42;10 - 00;07;12;14
Jeanette Nyden
They don't have any control over the search engines. They're just trying to make sure that the content on your website is marketed to a certain prospective buyer, based on what they know about that search engine. In a snapshot in time, six months from now, when that search engine optimization, for example, is released, the algorithms within those search engines could change, making much of what they did not as valuable.
00;07;12;14 - 00;07;41;03
Jeanette Nyden
And we like to point fingers and say you didn't do something, because if you buy a refrigerator that does not keep your food cool, that's pretty darn obvious. But if you purchase a six month contract or your contract for a fairly large company to improve your search engine optimization, to launch a new product or service and the search engines that you're aiming at change.
00;07;41;03 - 00;08;05;29
Jeanette Nyden
There are logarithms. The service may not be successful, but it's not as obvious to the buying company why it wasn't successful. What part made it unsuccessful? Was it a third party? Was it poor skill set of a supplier? Or was it that the buying company set the supplier up to fail?
00;08;06;02 - 00;08;38;26
Jeanette Nyden
So it's a very different, environment. And one of the things that really strikes me and I talk with people, who understand the history of business, it kind of clicks. Is that a lot of for the United States, the procurement, morals, ethics rules that we live by came out of the United States government out of World War two, when the United States government was purchasing to ramp up for our engagement in World War Two.
00;08;38;28 - 00;09;11;15
Jeanette Nyden
And so we were taking peacetime production, converting it into wartime production. And the Army was buying stuff. And at the time, the United States military and a lot of businesses, they did the services in-house, everything from marketing to process, word processing to janitorial services. Property management companies did all of that. Them selves in house, and they bought stuff.
00;09;11;15 - 00;09;40;06
Jeanette Nyden
We manufactured stuff. And when we came out of World War two into the 50s, that all those factories went back to consume consumer products, right? So we bought cars and refrigerators and built homes and schools, but companies through the end of the 60s still did a lot of their own services. So then you step forward into the late 80s and early 90s and companies started outsourcing with a vengeance.
00;09;40;06 - 00;10;06;03
Jeanette Nyden
Right? They really started saying, hey, this is not our core competency, but some other company over here. It's their core competency. Take facilities management, for example. And if you use your core competency, Jonny, to do facilities management all across the United States, then I'm going to outsource that function to your company, and I'm going to pay you to manage my facilities.
00;10;06;06 - 00;10;38;00
Jeanette Nyden
But, Jonny, you're managing facilities for banks, grocery stores, department stores, you, car dealerships, car repair shops, dentists office, doctor's office, lawyers office is, you name it. Right. And so you are an expert at facilities management. And then this company says, well, you're the expert, you manage the facilities to my expectations. So now you can start to see a little bit of the breakdown.
00;10;38;02 - 00;11;06;12
Jeanette Nyden
What are my expectations? My expectations? If I have a bank with a retail facility and retail, excuse me, in facilities management is going to be different than my headquarters for example, right, because our customers judge us on fraying carpet. No, this is a true story. No toilet paper in the ladies bathroom. That was a huge step.
00;11;06;14 - 00;11;08;16
Jonny Dunning
Yeah, that would definitely be a bad, but.
00;11;08;19 - 00;11;42;19
Jeanette Nyden
Yeah, but do you see what I'm saying? Like, all of these expectations are now transferred to you as the outsourced facilities management company, and I. I want you to perform a service which is intangible to my expectations, but I have different expectations depending on the facility as. So now all of that's going to be laid out. Now we have to train people, not how to maintain a facility, but how to oversee Jonny and Jonny's team to maintain that facility.
00;11;42;21 - 00;12;06;08
Jeanette Nyden
So you might know everything there is to know about facilities management and hire 20 people who don't know anything about it, and you're going to train them up. And then now I'm as the buying organization, I now need to oversee you and your team, and it gets more and more and more attenuated as we go. And so here we are now in modern times, in the 2020s.
00;12;06;11 - 00;12;31;27
Jeanette Nyden
And we want to have companies do all kinds of things that are not considered our core competency. So it's not just outsourcing anymore. It's all kinds of gig projects. Hire a consultant to write a study. Hire a marketing company to do your search engine optimization program for 12 months. There's all kinds of ways in which we engage services, what they're intangible.
00;12;31;29 - 00;13;02;22
Jeanette Nyden
And my expectations are completely subjective to me. Me as an organization and as a department, as a company, as a leader. And I could be in the same industry as three other people. But my expectations may still be different than my three competitors. And now you've got to meet my expectations on my terms. And if I'm not able to communicate that clearly, I've set you up to fail.
00;13;02;25 - 00;13;30;29
Jonny Dunning
Yeah, yeah. I love the the analogy of, of like looking at the, the US economy coming out of World War two and that kind of manufacturing. What led to this also this giant manufacturing boom. And, and I believe. Exactly. That's exactly why the technology that exists in the market, this kind of legacy technology is developed in the way that it has developed, in the sense it is.
00;13;31;02 - 00;13;59;28
Jonny Dunning
I feel like services have been kind of left behind. They've been left behind in the kind of digital transformation journey that procurement has gone through in other areas, because ultimately you had the ERP coming out of the manufacturing industry and then the kind of initial procurement platforms and and let's face it, procurement is a relatively young function, compared to some other functions in business and the source to pay and procure to pay platforms that came out of the ERP was still focused on buying stuff.
00;14;00;02 - 00;14;30;05
Jonny Dunning
And as exactly as you say, stuff is tangible, goods and materials are tangible. You can see them, you can weigh them, you can measure them. And, and when you talk about services and the tangibility of services, that could even be within an IT project where you're developing a piece of software, and not only might it change along the way as you work out the unknown unknowns, but you might not even be able to know where the end point is at the beginning of it.
00;14;30;08 - 00;14;33;17
Jonny Dunning
And yeah, it's just so much more flexible.
00;14;33;19 - 00;14;59;25
Jeanette Nyden
But it's not just the technology journey. It's also the law in the United States that is very focused on goods. And I, I, really struggle with my colleagues in law quite a bit because I get hired and the companies in the procurement, supply chain space or supplier, the VP of sales, if I'm on the supply side, I come in and I say I want to develop a flexible framework for the service.
00;14;59;28 - 00;15;30;27
Jeanette Nyden
I want to create flexibility in the contract for the most common forms of risk that need to happen and understand who's responsible for what. In the allocation of risk. A traditional lawyer from a law firm that comes in and overrides that conversation in some circumstances, not always, and says, no, you, Jonny, you're the outsource provider or you're the expert on facilities management, you're taking out all of this responsibility.
00;15;31;03 - 00;15;51;15
Jeanette Nyden
You're taking on the responsibility. If this window leaks, even if I don't tell you about it, even if I don't pay you to come in and inspect it often enough. But if that window leaks that you're the facilities management company. So now you're responsible for that leak. So you've got to figure out how to manage this unknown risk.
00;15;51;21 - 00;16;19;07
Jeanette Nyden
If I can foist and allocate that risk onto you and your company. And so now we get into this ferocious tug of war where your legal team says, hey, you don't have money in the budget for us to do an inspection. We bid out in full on, envelope service where we would look at everything roofs, wiring, plumbing, windows, etc. and give you a full report.
00;16;19;07 - 00;16;36;27
Jeanette Nyden
You did not accept that as part of our bid. So we're not taking on the responsibility. And if there's a leak in a window, that's that's your problem. And then the company pushes back and says, well, if you want to work for us, you're going to take on these risks and you're going to and some companies figure it out, right?
00;16;36;27 - 00;17;00;13
Jeanette Nyden
Some companies say we'll train our, cleaners that only come in twice a week to once a month, go through and look at all of the, you know, windows or plumbing or whatever the case may be, and they'll take on that responsibility and they'll put it into the overall risk profile of being in business with that particular customer.
00;17;00;18 - 00;17;34;10
Jeanette Nyden
But it's from the mindset of a refrigerator, refrigerator. It cools food. I know what it's supposed to do. And so as lawyers, we've taken on that same mindset with services, and we've tried to extend those concepts from universal, the Uniform Commercial Code in case law to try to make things very definite. You're a marketing company, you market, if you're a facilities management company, you manage my facilities, you know, making services.
00;17;34;12 - 00;17;59;00
Jeanette Nyden
They're trying to make them as concrete with a definitive outcome and an allocation to the supplier, as if I were buying a refrigerator where I could test it to see if it's actually 34°F, to keep my food cold, but not freeze it. And in a service is when the longer it takes to deliver that service, the more flexibility you need.
00;17;59;00 - 00;18;40;15
Jeanette Nyden
Because what I described about the SEO optimization, those things happen in, you know, some companies such as Google may or edge may, you know, roll out a whole change that disrupts all the work. I just did for six months and how in a very inflexible, rigid contract, you know, how how do I address that? Do I blame you for a third party that we have no control over, or do I find a way to maintain our relationship and rejigger and readjust and still get a product out the door?
00;18;40;18 - 00;18;45;04
Jeanette Nyden
Two very different kinds of legal mindsets as well?
00;18;45;06 - 00;19;16;12
Jonny Dunning
Yeah. And, you know, you talked about expectations being subjective. I completely agree with you. And you said that this, you know, this is a problem if that's not communicated effectively, which is absolutely right. And I think one of the key things around, the procurement of services is, is accurate definition and the ability to update the definition of what's promised so that the you always know what has been promised, and you can measure what has been delivered against what was contractually agreed.
00;19;16;17 - 00;19;40;06
Jonny Dunning
And that could be a variation or change order that comes in along the way. And, and the other side of it, the other side of it, the that you brought up, which is very relevant as well as unless you were auditing this, unless you're capturing effectively in the agreement and you unless you have ongoing management of that agreement, you're never going to know why changes have taken place, why is it taken longer?
00;19;40;06 - 00;19;56;03
Jonny Dunning
Why is it cost more? Why did it what? It didn't need to go in a different direction because it could be the suppliers letting you down. But equally, it could be that new information came into the into the, into the program. Or it could be that actually, from a client perspective, internal stakeholders and let the process down.
00;19;56;03 - 00;20;00;06
Jonny Dunning
They weren't there for meetings. They were held. You know, there were a way, whatever it might be.
00;20;00;09 - 00;20;24;21
Jeanette Nyden
That is that struggle is real. And it is gotten so much more intense in the last 20 years where the buying organization is letting the supplier down and letting themselves down. So I see a lot fewer stakeholders willing to make time to meet with suppliers and have grown up conversations. Instead, they just want the lollipops and roses on the slide.
00;20;24;21 - 00;20;48;22
Jeanette Nyden
Everything's fine. Number two, we don't have QBRs anymore. We might be able to meet once or twice a year. And so we're not getting enough information quickly enough. When there are challenges in the industry that's going to disrupt the project. And number three, there's with the, and I've been talking about this since 2018. You know, we're here now.
00;20;48;24 - 00;21;12;25
Jeanette Nyden
We are at the place where the boomers in the United States and in Europe have left the workforce, by and large, and new generations of employees are coming in. And it's very disruptive from the perspective that the younger generations have not been properly trained. So boomers learned trial by fire. I'm not a boomer, pretty close, but I'm not.
00;21;13;03 - 00;21;37;28
Jeanette Nyden
And I learned trial by Fire. I, you know, some respects were self-taught. My generation, the generation ahead of me. Right. The boomers, the millennials though and the Zs they have not had the time to self teach, you know, what are they 1015 years into the work force and they don't have the time to learn the 30 years that a boomer may have.
00;21;38;01 - 00;22;05;25
Jeanette Nyden
And we certainly don't train the way we used to. People just don't have time for training anymore. So we've got a huge issue too, where we've got a lot of people coming in who have literally they're telling me, I have never done anything like this before, never. I've whether it's a subject matter expert or the person that I'm mentoring and it's like, wow, this is a lot of money for never have done this before.
00;22;05;27 - 00;22;31;09
Jonny Dunning
Yeah. I mean, it's it's the, the to a certain extent, the issues you just highlighted are, mitigated and counterbalanced by things like, you know, the fact I've got every bit of information humans have ever known, in the, in my pocket. And I can go onto YouTube and I can watch one of your videos about, you know, outcome based contracts, for example.
00;22;31;11 - 00;23;08;27
Jonny Dunning
And I think that's where the level of information and the technology needs to bridge the gap that may exist if people aren't given the same level of training. And as you say, there's this kind of generational changeover. Yeah. But it's, but at the, at the pace that things need to be done is quicker, the pace of change is quicker, and the skew towards buying services versus buying goods is happening quite rapidly in the sense that of course, lots of organizations still buy goods and materials, but lots of organizations buy more services than ever before.
00;23;09;00 - 00;23;42;04
Jonny Dunning
I think the figures that Tom was quoting, in a white paper that he put out was that the growth in services spending is five times faster than the growth in spending on goods, which is pretty crazy. And so therefore, you've got this potential knowledge gap. You've got I would, I would argue, a technology gap where the technology is not specifically designed to deal with the nuances of services, and then you've got, this kind of conceptual gap where in procurement, I feel like we're talking about goods versus services.
00;23;42;04 - 00;24;09;05
Jonny Dunning
I think a lot of procurement teams and senior procurement people don't view the world like that. It's it's something that's kind of literally, going through my head is as I'm talking because we're talking about it from a contractual point of view. And it's quite clear the differences in terms of how a contract is structured and the difficulties in structuring a contract for buying a tangible thing that might have a complex supply chain.
00;24;09;05 - 00;24;34;17
Jonny Dunning
But that's, that's by the by that's a managed a solved problem versus the complete opposite, where you're buying a service that probably has a simplistic supply chain in most cases, but is very difficult to define and very difficult to measure. So it's I feel like that is a problem that from a contractual point of view, a technology point of view and to a certain extent a supplier relationship or, you know, supply chain hasn't been at the forefront.
00;24;34;20 - 00;24;58;23
Jeanette Nyden
Let me add another layer to so, I work in the nuclear industry, I, I support, nuclear in the United States. So we've got a lot of really mission critical parts in nuclear, like super mission critical parts. But a pump is a pump. There's a specification for a pump. We know what the pump needs. The you know, the volume.
00;24;58;23 - 00;25;22;02
Jeanette Nyden
The pump needs to, push out. We know that we need an alternative source to maintain that pump in a crisis. So that pump has to not only feed into the grid, but if the grid isn't generating because of the earthquake and it comes down, we need to have a diesel generator. So it needs to also be able to run with an alternative source like a diesel generator.
00;25;22;02 - 00;25;49;11
Jeanette Nyden
We know all those things and as time has gotten quicker, we now, you know, I lived through the spreadsheets where we bought by spreadsheets. Now all of that's online and portals, right? But I can buy all the things that I need for my nuclear power plant through this portal. We know through management, through these portals, how many screws and bolts and everything all the way up to everything we need for the nuclear reactor.
00;25;49;12 - 00;26;16;15
Jeanette Nyden
Right. And all of that is governed, and it's regulated in the United States. It has to meet certain specifications. Everybody knows how to do their job now. Now let's add the service. Who is going to take apart the old pump and who's going to disassemble it and remove it from the location and scrap it, or refurbish it and put it in as a spare?
00;26;16;17 - 00;26;37;10
Jeanette Nyden
And who's going to come in and who's going to reinstall the new pump, and how is that going to be installed? And is there welding? Is there electrical wiring that has to be done? There's all kinds of things with the service of the installation. And in nuclear it is not just a simple you're just going to go and install that pump.
00;26;37;12 - 00;27;12;13
Jeanette Nyden
That pump might be in the containment, it might be radiological in a sensitive area. So you might require the services of people who know how to work in a really logically controlled area to physically remove and reinstall that pump. And everything becomes very, very precise with that service, except that we don't have all of the the management through the tools to your point of how do we identify the right service, how do we appropriately outline it?
00;27;12;13 - 00;27;43;16
Jeanette Nyden
How do we know that we've got it right, other than when we turn the pump on, it works, right? So we then take people who are in category management who manage a category that's arbitrary. So might include parts and services, because that category might be the reactor or that category might be the protected area, which is larger than the reactor, or that category might be spent nuclear fuel, which is both goods and services.
00;27;43;18 - 00;28;22;09
Jeanette Nyden
And then you get a Yahoo who comes in and who bought consulting services. Very large, very, very large consulting for very large consulting companies in the United States who comes in to that situation and thinks he can take his knowledge of, you know, multimillion dollar consulting contracts that might last five years, that might be tens of millions of dollars at an enterprise level, and just transfer all that knowledge over into the buying of services in a nuclear supply chain.
00;28;22;11 - 00;28;59;27
Jeanette Nyden
And it is not transferable. But I can come out of aerospace where I did come out of, supporting aerospace, and I can then go into nuclear because the parts and the requirements are so similar that my learning gap is not that significant, but the significance between buying consulting services at an enterprise national level in the United States and buying services to support a nuclear power plan is two completely different kinds of purchases.
00;28;59;29 - 00;29;28;13
Jeanette Nyden
But we often think, well, if I'm interchangeable, I can buy parts for aerospace and I can buy parts for a nuclear power plant. Then if you managed multi-million dollar deals in consulting, you can manage this multi-million dollar deal in nuclear supply chain service. And they're not the same. You can't transfer. I can't take what I know how to do in and in, consult an agreement and then transfer it over to the service.
00;29;28;16 - 00;29;30;03
Jeanette Nyden
You see the point?
00;29;30;05 - 00;29;58;06
Jonny Dunning
Yeah, I do, and I think it also, it speaks to the lack of kind of standardization across the industry with regards to categories, because as you, you know, how do how do most companies break down their procurement strategy either there'll be a direct versus indirect approach or there'll be a category strategy. But category strategies are often different based on the industry and how that companies organize and the size of the company and the location.
00;29;58;08 - 00;30;20;15
Jonny Dunning
And some people will do it kind of both ways. So, I feel like there's a real there's a lack of uniformity within procurement that is far more noticeable than, for example, if you looked at like how legal functions set up across different organizations or how the finance function set up, there's way more variation in procurement because because it's not such a mature function.
00;30;20;17 - 00;30;21;17
Jeanette Nyden
Correct.
00;30;21;20 - 00;30;54;01
Jonny Dunning
But yeah, I mean, it's like you say, when when a category within an organization might be split across buying goods and services, well, services as well, that can complicate things further. But I feel like there's just the the broad brush approach to buying buying stuff or buying buying anything seems to be still very led from that goods perspective, which kind of, you know, it ties in what you were saying about from a legal perspective, how that's approach contractually as well.
00;30;54;03 - 00;31;20;14
Jonny Dunning
But but I think more and more I'm starting to see more specialism around the people who are buying services. And clearly in certain industry verticals like nuclear or safety critical industry like aerospace, the expertise required to buy services in aerospace, not just the kind of standards and security, but the levels of rigor and all the different things that that relevant to that particular industry sector.
00;31;20;17 - 00;31;27;27
Jonny Dunning
We seeing we see more and more people who are specialists in buying services because it brings a unique problem set with it.
00;31;28;00 - 00;31;54;17
Jeanette Nyden
And we see this first in it. So when enterprise wide, technology purchases were made, that was really held by the chief technology officer. And in some circumstances those are still held by the chief technology officer. And that's a place where we absolutely see what you just said, which is the specialization really is required for that service. And it is not transferable.
00;31;54;23 - 00;32;23;10
Jeanette Nyden
You can't bring somebody in who knows how to negotiate a consulting agreement to suddenly buy enterprise wide software for a mission critical function within an organization that person needs to understand hardware and software and bring that knowledge with him or her into that services procurement. So that's the one area I would say you're absolutely correct where that specialist, we see that specialization, we honor that specialization.
00;32;23;12 - 00;32;32;17
Jeanette Nyden
And that specialization continues to be honored as its own specialty within an organization.
00;32;32;19 - 00;32;58;15
Jonny Dunning
I mean, if I look across the clients that we work with her in all sorts of different sectors, finance, defense and aerospace, you know, pharmaceutical engineering, public sector, lots of different areas, I.T services. So we're dealing specifically with buying services. I.T services is the biggest by by a significant margin. So like you say, probably the most mature.
00;32;58;18 - 00;33;21;16
Jonny Dunning
And it's like we mentioned earlier about look, it might be that your deliverable or your output is a sprint in an agile process. That's, that's almost like the perfect definition of services to, to a certain degree in the sense that it is it is an agile thing. It's not it's not just, a commodity. It's something that can change and may well need to change for good reason.
00;33;21;18 - 00;33;49;26
Jonny Dunning
So, yeah, like I said, kind of led led the market with it. Really. One of the things that you mentioned, earlier, just in terms of talking about the nuclear industry, was talking about the issues with the level of expertise. So, so basically, you you'll have expertise within the, the let's call them the buying manager or the or the buying stakeholder within, within the organization, within the organization, the nuclear, organization.
00;33;49;28 - 00;34;17;03
Jonny Dunning
They will they will have a certain level of subject matter expertise. But the reason they're outsourcing or buying an outsourced service is because they need some additional expertise that either they don't have or they need extended capacity on that level of expertise. So so this is where if you've got somebody in procurement who's suddenly coming in and working on in nuclear and buying pumps that are critical to the, you know, a backup recovery of a, of a power station or the, you know, making sure it doesn't meltdown.
00;34;17;06 - 00;34;33;07
Jonny Dunning
Correct. Maybe that's a potential problem. What what role do you see? How do you how far do you see the role going of the supplier in that side of things in terms of let's let's get into how these scopes get created. There's a balance.
00;34;33;09 - 00;35;20;17
Jeanette Nyden
Okay. Yeah. Okay. So I would say, so 20 years ago is when I really started teaching, in earnest as in not just a webinar here and there, but I mean, it was it's a was my profession. In addition to practicing law, 20 years ago, there were more than enough subject matter experts within buying companies that unless it was something completely new with respect to technology, there was a subject matter expert who could write the scope of work, who understood what he or she wanted, and even if it wasn't completely outlined in paper through the relationship management with the supplier, that person could get what he or she wanted.
00;35;20;19 - 00;35;50;28
Jeanette Nyden
And then as we started, I started seeing more and more technology that we didn't quite understand. And I started to see a shift where the supply company was involved in developing the scopes of work because it was their particular technology. It was it was their whiz bang thing. And so they were influencing the writing of the scope of work based on what there was being thing delivered.
00;35;51;00 - 00;36;15;06
Jeanette Nyden
So if it delivered, you know, a blinking blue dashboard and nobody else offered a dashboard, let alone a blinking blue dashboard, guess what the statement of work now started to say, you're going to you shall deliver a dashboard, and that dashboard shall blink blue. Well guess what? There's only one company that can do that. And the other part of the scopes of work is that they're written so that you could go out to compete.
00;36;15;07 - 00;36;53;17
Jeanette Nyden
You write a scope of work so that you could go to the market and if there are three companies now that can develop a dashboard that links blue, you can purchase the correct dashboard that blinks blue at the lowest possible cost that the market has to offer. But in order to do that, you have to have the same scope of work so each company can bid and tell you how much that is going to cost you to hire them to deliver that dashboard that blinks blue when we lose that subject matter expertise.
00;36;53;17 - 00;37;18;11
Jeanette Nyden
I need a dashboard that links blue within the buying company. The buying company that either has to go hire a third party company to write that scope of work for them. And there are retired, experts out there all the time that can be hired to write a scope of work, for your organization, because they used to be the subject matter expert in that organization.
00;37;18;13 - 00;37;51;17
Jeanette Nyden
Or if those experts are not around, then some companies turn to the supply base and say, you know, whoever is the incumbent, can you help us write the scope of work for what we need for the next generation? Sometimes those scopes of work written by a particular supplier actually go to the market to be bid. And the competitors know the scope of work is written in such a way that my competitor wrote it, because there's a feature in here that we don't have that must be produced.
00;37;51;20 - 00;38;13;26
Jeanette Nyden
So therefore we know it's tilted to towards our competitor, and sometimes it's just good business to have a supplier write a scope of work. If you don't have any idea what it takes, what you know, what the outcome is, you know that the outcome is a dashboard that blinks blue, but you have no idea how to get from.
00;38;13;28 - 00;38;54;00
Jeanette Nyden
I hire the supplier to I get a dashboard that blinks blue. Then it makes sense to have that supplier draft that scope of work. You might choose to select your supplier first based on other qualifications and a request for solution, and then collaboratively develop that scope of work and then allow that supplier to, implement that scope of work, because you've you've selected them for their solution and you're going to trust them that they actually know how to draft and deliver a dashboard that blinks blue.
00;38;54;02 - 00;39;24;23
Jonny Dunning
Yeah, yeah. It's really interesting. I think there's now there's another element which is starting to come into it, which is which is AI where effectively, you know, AI pointing a large language model at a problem can give you wildly different quality of results depending on what the problem is. If the problem is something that's quite subjective and say, for example, you say, here's a podcast transcript, write me an article based on this podcast transcript.
00;39;24;25 - 00;39;59;01
Jonny Dunning
Quite often with some of the platforms, you can find that it's kind of coming out with something that you like. Well, it's that's stretching stretching the truth a little bit. Let's just put it that way or not quite getting a you know, aligning with, with what that podcast was actually talking about. But if you ask it to, if you ask I the decent kind of corporate APIs, if you ask, if you ask it to look at something that's much drier, a and more fact based like, for example, if you say I need to write a scope of work for buying a service that is something along these lines, like doing a, on a
00;39;59;01 - 00;40;23;26
Jonny Dunning
decarbonization assessment of university real estate or something really specific that AI has the ability to look at anything that's ever been on the internet that relates to a scope of work for a project to do a decarbonization, you know, consultancy project for a university real estate. So, so actually, that can draw on some subject matter expertise that sits within the literature that's in, within the internet.
00;40;23;28 - 00;40;41;02
Jonny Dunning
It's not for, not for all projects and not for all industries, but it's something that's being starting to come into the market more. We've been doing some really interesting, research and work on that side. And I definitely think it's going to be, a factor in the future as, as things develop, because it's just it's just a way of utilizing that information.
00;40;41;02 - 00;40;54;25
Jonny Dunning
But I think when you talk about utilizing the suppliers, that's still really important and it's going to remain really important if it's done in the right way, because the the way that's not so great, which you described it, I would call like marking their own homework.
00;40;54;28 - 00;40;55;22
Jeanette Nyden
Or yes.
00;40;55;28 - 00;41;18;28
Jonny Dunning
Or writing, writing the, the, the RFP that only they could ever possibly win with the blank blinking blue dashboard that no one else has got. But would you how do you feel about the kind of the level of input whereby if the organization can come up with enough of an outline requirement and they might know, not know
00;41;19;01 - 00;41;46;22
Jonny Dunning
What the end point is. But but they've defining the problem. That's that's an area where certainly we've seen suppliers get involved at the bid stage. So a competitive process where the information is going out to the market, how that scope of work is shaped might be shaped differently by three different bidders. They're all trying to get to the end point, but they could bring their particular subject matter expertise or their modalities, their ways of doing things to bring a different slant to it.
00;41;46;22 - 00;41;57;18
Jonny Dunning
So sometimes we're seeing that happen where the actual scope of work really ends up being properly defined at the bid stage.
00;41;57;21 - 00;42;27;24
Jeanette Nyden
Yes. And so the way that I do it is through a request for solution. So in a request for solution environment, I'm not asking for a price. I'm asking for the best possible solution. And I clearly define the outcome. Now this again you know this is could be a dog chasing its own tail right. Like do I know what the outcome is if I know with definitive ness what the outcome is?
00;42;27;24 - 00;42;51;23
Jeanette Nyden
And this is an outcome that other buying organizations in my industry have also gotten. So I can benchmark, I can go to those locations, talk to those people on the phone and say, what outcome were you seeking? What best practices, what lessons learned, and then I can create that outcome for my organization. Then I can request solutions to the market.
00;42;51;25 - 00;43;24;26
Jeanette Nyden
And you're absolutely right. Through proprietary and confidential transfer information, I could get three very different solutions. I could get lots of insights and best practices from those three organizations. Now there's a split the road do I take. So the best practice, I believe for other procurement perspective would be to take those three and to then devise a scope of work based on those three for the buying organization.
00;43;25;03 - 00;43;55;09
Jeanette Nyden
So I take a little bit from a little bit from B and a little bit from C, but I don't make it slanted that only organization C can win. But I do give organization C an opportunity to win as I do A and B, because all three of them and I've done this. So I know for a fact that this happens, that all organizations have something to contribute in our request for solution, something that's an an moment for us.
00;43;55;12 - 00;44;16;01
Jeanette Nyden
Okay. That's a best practice because then we take all this information, we run it through our own subject matter experts or a third party we've hired to draft the scope of work. And now we have a realistic scope of work that all three companies can support. All three of them can do the work. Now we can get a good market price.
00;44;16;08 - 00;44;39;26
Jeanette Nyden
So now A, B and C can tell us with some certainty it's going to cost you $100 million, $105 million, $98 million. Okay, great. So now I've got my range and we can do another layer of culture, making sure that the company we choose, because now they're all within the range, that that culture is going to fit our culture, be able to work together to implement that.
00;44;40;02 - 00;45;05;24
Jeanette Nyden
That's best practice what I've seen, because things have to go so fast. Things are going too fast in some circumstances. Is that we do a request for solution. And then I've seen a company, select the supplier at that stage, disqualify all the other suppliers, turn to that supplier and say, here's a, a purchase order to draft a scope of work.
00;45;05;24 - 00;45;27;05
Jeanette Nyden
So we're going to pay you to write the scope of work. So you've said this is the solution. Now you've got six weeks. You go write the scope of work, and then we'll take that scope of work and then we'll digest it. We'll tweak it for ourselves. Then we'll kick that scope of work out back to you and we'll say, okay, now how much does this cost?
00;45;27;08 - 00;45;53;29
Jeanette Nyden
And you see, there's a lot of trust in that second scenario, because we have no other market variables to judge other than through any Gartner type benchmarking that we may have done. But I'm I'm doing that with my clients where we don't have the time to take 6 or 8 weeks to write the scope of work, and then two months to go out to bid to get a price.
00;45;54;02 - 00;46;12;29
Jeanette Nyden
We we have three weeks. And so we give the supplier six. We borrow three weeks from some other part of the implementation schedule. And we say, go write your own scope of work and then tell us how much it's going to cost us to get it done. But there's a sense of work is being done. You know, that we've selected the supplier.
00;46;12;29 - 00;46;23;19
Jeanette Nyden
They're writing their own scope of work. We're starting to make headway towards reaching this elusive outcome that we need to reach by a date certain.
00;46;23;21 - 00;46;29;20
Jonny Dunning
Yeah, yeah, it can create a false sense of confidence in some situations.
00;46;29;23 - 00;46;55;13
Jeanette Nyden
It's a double edged sword. What I'm personally seeing is that, in some respects, some aspects of traditional negotiation and dealmaking that I personally love are stalled. And it's in some cases, it's because the supplier is already on site doing work. And so the people whose attention I would normally have, who would be chasing my tail, Jeanette.
00;46;55;13 - 00;47;16;09
Jeanette Nyden
Have we heard back from them yet? What's the price going to be on this? Did they accept our counteroffer on this? What about the schedule? Like all these things that I would normally negotiate as part of developing an entire package for a complex service? All of that, sense of urgency is gone because the supplier wrote the statement of work, and they're working.
00;47;16;11 - 00;47;40;03
Jeanette Nyden
Yeah. And so I was sort of like, guys, I really need, a milestone schedule so I can negotiate my liquidated damages and my withholding of the final, you know, a 5% to the final acceptance above. Well, like, I need to know what all these dates are so I can peg them. And yet my liquidated damages for delayed delivery and all those sorts of things and, you know, there's sort of like a whole,
00;47;40;06 - 00;47;59;10
Jeanette Nyden
Yeah, I can get that to you. Friday. Friday comes and goes. Oh, yeah, I'll get it to you next week. Oh, I'm in training or I'm on vacation or I'm covering for my manager for two weeks, so I will be able to get that back to you because of that illusion. They're here. They're they're doing stuff. They're getting work done.
00;47;59;12 - 00;48;23;26
Jeanette Nyden
Why do I now need to get my negotiator anything like that? So that's already been figured out. It's like no kind of has it. We have a scope of work, but there's a lot more that goes into getting that deal structure and then that's the end. So that's why I understand my colleagues in law that think I'm insane, because they just kind of want to come in.
00;48;24;02 - 00;48;40;25
Jeanette Nyden
You know, they have three tools in law. They have a what's it called, a level, you know, is it how far tilted is it? They've got a screwdriver to tighten things down, and they have a hammer to whack it into place. Right. So they come in with their. Is it. It's two level. It's got to tilt more my way.
00;48;40;25 - 00;49;16;11
Jeanette Nyden
You know we got to tighten this down and we got to whack you into place supplier I understand why they feel that way when they see what I'm going through. Because it is complete and utter chaos. If we don't have the right tools, it contractually to hold each other accountable in the statement of work, things like schedules and and then how schedule gets worked through in accountability in the form of milestone payments, deadlines, liquidated damages and things like that.
00;49;16;13 - 00;49;33;00
Jeanette Nyden
That starts in the scope of work, though, guys, you know what I mean? Like, I can't make this stuff up. I know what to do once I have it, but I need a scope of work and a schedule, and then I can go develop my metrics and my leads and things like that. That's why the scope of work is so critical.
00;49;33;06 - 00;49;53;27
Jeanette Nyden
But often if we lose momentum, we'll get a scope of work, but we may not get all the other inputs that we need for the contracts full, accountability. And that's and that's why I understand where my colleagues are coming from. They want to go back to buying a good let's nail it down. Let's screw it down. We know what this is.
00;49;54;00 - 00;50;00;17
Jeanette Nyden
And if you don't produce this on this date at this time, you owe us $100,000 a day.
00;50;00;19 - 00;50;32;11
Jonny Dunning
Yeah. And it just comes back to the whole point that services require flexibility. It's, you know, whether it's trying to tie down these, these, these measurable metrics, or whether it's actually defining what it is that needs to be done to get to the desired outcome. It's ultimately a problem solving exercise. So, I mean, basically, if you're buying a service in some ways you could define that as you're buying a buying a problem solving, you're paying for somebody to do a problem solving exercise, whatever it might be.
00;50;32;11 - 00;50;57;06
Jonny Dunning
You're buying a solution. Ultimately it's solving a problem. So it requires flexibility throughout the process. And that's just where it jars with the way that the world that how you buy goods and and as I say, for me, I find that quite fascinating. I mean, my background is basically how companies use technology to get work done. So that could ranges across how companies use their permanent workforce.
00;50;57;06 - 00;51;28;21
Jonny Dunning
Temps, contractors, freelancers, you know, gig gig marketplaces, all that sort of stuff. And, and predominantly services became there are ultimately all just ways in which organizations get things done. This their extended capacity and capability. So I view the world where I look at it and I go buy services different to buying goods, but I think more people are kind of it's not the mainstream approach, because the whole procurement industry feels like it's built around buying goods.
00;51;28;23 - 00;51;30;14
Jeanette Nyden
Yes.
00;51;30;16 - 00;51;35;29
Jonny Dunning
And, and the world isn't like that anymore. So, so so it's become hard.
00;51;36;01 - 00;52;05;25
Jeanette Nyden
And the other thing is, is that, that agile or waterfall way of purchasing it can be incredibly successful, but I haven't seen it jump the fence outside of the IT world in, in the sense that I am not hearing my colleagues who know nothing about agile and waterfalls because they've never done those really big kinds of IT enterprise wide contracts.
00;52;05;27 - 00;52;30;14
Jeanette Nyden
Be able to then take that and then apply it to services. And by that, what I mean is we need this end service. We need all of our North American facilities managed to go back to that. And our outcome is that we have we still have customer forward facing locations. They need to have a certain look and feel.
00;52;30;14 - 00;52;51;25
Jeanette Nyden
We are going to steal traffic away from our competitors by having a certain look and feel, etc., etc.. Right. And then we have these. You know, warehouse you've got to manage and data, you've got to manage and then headquarters and they each have their own different thing. But as like as I cascaded out and a waterfall or agile, I just sort of determine what that next gate is.
00;52;51;25 - 00;53;16;16
Jeanette Nyden
And we go up to the gate at the work is accepted, and then it's released for the next gate. And now I find I'm really comfortable in that environment, but I also feel really confident of my abilities to be able to, with a good contract, be able to hold both both parties accountable for making sure that they do what they're supposed to to do.
00;53;16;22 - 00;53;43;00
Jeanette Nyden
So the buying company has obligations to the supplier, and the supplier has obligations back to the buying company to get to that gate. The challenges, though, is that that takes a lot of collaboration, and it takes a lot of grown up conversations. And I don't see either one of those right now really expanding in the purchase of services.
00;53;43;00 - 00;54;17;17
Jeanette Nyden
I don't see suppliers and customers having great grown up conversations that say your milestones schedule for a customer for the services that you're requesting is unobtainable. It is just simply unobtainable. We don't have the resources in the market. The customer is still sort of have a I hold the goal. So therefore I make all the rules attitude. Well, Jonny, if you can't do this, I'll find someone who can, you know, and you don't want to lose the work unless you've got more than enough work.
00;54;17;17 - 00;54;47;03
Jeanette Nyden
And I've certainly had suppliers walk away from bad bids because they had more than enough good work. Right? But then you're left with bad suppliers who are willing to sign up for this stuff. Those kinds of conversations and the level of collaboration, rather than playing hide and go seek with information, is really necessary for those kinds of agile waterfall kinds of, deployments and some of that hide and go seek.
00;54;47;03 - 00;55;13;00
Jeanette Nyden
And it, you know, that was hard fought. There were a lot of years at the very big companies who shall remain nameless, played hide and go seek about technology and pricing. And their P&Ls showed 50% profit year after year. Until competitors could get their foot in the door and start, offering competitive service at a more competitive price.
00;55;13;03 - 00;55;36;21
Jeanette Nyden
So now we can have these conversations because we've got enough information. And but if we play hide and go seek, if we're not collaborative, we don't exchange information and we're not willing to hear and have a grown up conversation about those customer expectations then it gets really hard to have these flexible frameworks based on the statement of work.
00;55;36;21 - 00;56;01;07
Jeanette Nyden
So we go back to what we know for the purchase of goods. We have to have a very precise scope of work that is completely nailed down. We have very onerous, change contract, change scope, change modifications. I have a sweep clause in my contract. This is Jonny. You're the expert. If you didn't identify at the time of execution that these additional services needed to be done.
00;56;01;09 - 00;56;21;09
Jeanette Nyden
So sad. Too bad it's still your responsibility under the sweep clause, because you're the expert. You can't modify to change the schedule unless I agree to it. You can't modify the change of a price in a fixed price agreement because you told me this is how much it was going to cost. So you've got to eat this change.
00;56;21;12 - 00;56;46;02
Jeanette Nyden
And that's the way you purchase goods. That's not how you purchase services in a dynamic environment, because you purchase a good. That good is, once and done, you might be purchasing bolts every month, every year, but you've got a delivery date when those bolts are are going to be delivered. A service could be ongoing for a decade.
00;56;46;05 - 00;57;17;15
Jonny Dunning
Yeah. And, you know, talking about companies walking away from bad bids, I was literally talking to a massive, massive client of ours, big global organization I recently who talked about literally walking away from a bid for a very large contract because it just wasn't tenable. And you end up with a supplier who's just going to basically say, well, over X period of time, I'm willing to forego any profit on this opportunity until this point, but then I'm going to be rinsing the customer.
00;57;17;22 - 00;57;22;26
Jonny Dunning
And so the customer's not getting the value out of it anyway. It's just a like a total false economy.
00;57;22;29 - 00;57;42;29
Jeanette Nyden
It's that is exactly what happens. That is I, I went out to dinner with an account executive who did who you know, put in sort of a halfhearted ho hum kind of bid. And when he was in town here in Seattle, we went out to dinner and I asked him about it, and he said, you really don't have any idea how much work we have.
00;57;42;29 - 00;58;04;08
Jeanette Nyden
Do you? And I kind of thought, I kind of don't, actually. I just have this one little peek slice at your business, he said. We have more than enough work. We were doing it out of, you know, answering out of respect, but no harm, no foul. You don't hire us. We got we got more than we can handle on our plate right now in other areas of our business.
00;58;04;11 - 00;58;31;24
Jeanette Nyden
And I thought about that because then by default, what ends up happening, they'll be on future bid lists, but they're not really all that interested because that's not very good work for them. It's not very profitable. So now whoever does have that work can do exactly what you just said. Because when we have a de facto sole supplier in the market, they will lose business to a certain point.
00;58;31;24 - 00;58;59;11
Jeanette Nyden
And then you said rinse and I, I have seen those price lists come out companies have hired me to come in and try and go out and beat back that situation. But the stakeholder can't change the supplier. They're the sole supplier. They have too much data. You name the reason why they can't change away from that supplier. And I say, well, how am I supposed to beat back this doubling of the price?
00;58;59;13 - 00;59;08;04
Jeanette Nyden
You know, we're not they weren't collaborative with us and we weren't collaborative with them. Why are we surprised now that the price doubled? That's the price now.
00;59;08;06 - 00;59;38;25
Jonny Dunning
Yeah. And and the on the collaboration side of it, ultimately that collaboration is essential to also ensure that you can get the best suppliers, that you can secure the best suppliers, because in an area that might be highly competitive. So the the best suppliers like, I don't know, cybersecurity where there's maybe a shortage of suppliers and some very specific areas and it's constantly changing, you know, skill shortages in areas like cybersecurity, artificial intelligence, massive, massive issue globally.
00;59;38;28 - 00;59;59;17
Jonny Dunning
If you're not collaborating and you're not working in a sensible way, you're not going to be able to get those best suppliers and therefore you're going to have a competitive disadvantage. I think the other thing that that really, kind of stood out to me from what you were saying, was that, when you're procuring services again, another difference versus procuring goods, you're not just buying something.
00;59;59;20 - 01;00;10;15
Jonny Dunning
You're working together towards an objective. It's correct. And by its very nature, that has to be collaborative. It's less of a transaction.
01;00;10;18 - 01;00;37;03
Jeanette Nyden
Yeah. And here's the problem, Jonny. If we go back to, you know, buying goods, it's not collaborative. There's nothing collaborative about buying goods. Even if I my organization writes the specification for how this pump needs to function and what metals and composites and to what depth, you know, something needs to be the dimensions, etc. there's nothing collaborative. I'm not collaborative.
01;00;37;08 - 01;01;07;10
Jeanette Nyden
Sitting shoulder by shoulder in the production facility. I might witness factory acceptance testing, but it's a witness. It's not a normally buyers don't perform factory acceptance. They they witnessed it. Now they may perform other tests once it's once it's arrived. But that's not collaborative either. Right? Then the supplier has the right to witness site acceptance testing. So it's a very different environment in services.
01;01;07;15 - 01;01;36;28
Jeanette Nyden
The handoffs are so intertwined that it's really hard to find where I end. And you begin. It's and so again, so so so so typical. So customers will hold suppliers and so in services responsible for meeting deadlines. And customers will not meet the deadline. And so within, I don't know, six weeks of signing a contract. And it wasn't huge.
01;01;36;28 - 01;02;04;11
Jeanette Nyden
It was 5 or $6 million. But it's the beginning of a series. We get a, delayed notice from the supplier. Hey, you're ten days late in getting X to us, and the customer's all bent out of shape. They're all mad, and they ask me to come in and resolve the claim. Of course, they don't want to pay any kind of claim or anything like that to the supplier, or they don't want to move the schedule over ten days.
01;02;04;13 - 01;02;22;13
Jeanette Nyden
And I'm just sort of flabbergasted. I'm like, well, you were late, you know, you think we're going to have it done by X date and you didn't get it to them till ten days later, and you've now just robbed them of ten days and you still want them to hold to their date to deliver something back to you.
01;02;22;17 - 01;02;44;16
Jeanette Nyden
And I literally have people look at me blankly and they're like, yeah. And I'm like, wait, wait, how does that work? But, you know, in a, in a situation when you buy goods off of a production line, you can say that, you know, you can say, I want this delivered on Tuesday and I'm going to, you know, charge you $1,000 a day for every day it's late.
01;02;44;16 - 01;03;10;05
Jeanette Nyden
Get it here on Tuesday, because there's very little interaction between me buying a good that needs to be delivered on Tuesday. There is a lot of interaction for me as the buying organization for you to deliver a service by Tuesday, and when I don't uphold my end of the bargain, it has a serious consequence, but we don't have the flexible frameworks to be able to adjust to that.
01;03;10;08 - 01;03;34;02
Jeanette Nyden
So we go back to what is the contract say. The contract says, now I have to issue a delay claim, and now I am in the dispute resolution section 52 of the contract trying to resolve this delay claim, because really, the supplier has no choice but to issue a delay claim because the the buying organization missed its deadline by ten days.
01;03;34;04 - 01;03;46;14
Jeanette Nyden
Where is the collaboration? Where's the respect? Where's the understanding of the handoffs? Where where's the the shared, goal? Where is the shared achievement to the outcome?
01;03;46;17 - 01;04;06;08
Jonny Dunning
That that leads me on to another point that I wanted to discuss with you, which is which is something I've seen you talk about, which is just the the key issues to consider with these performance based statement of work type arrangements. And, and one of the things that I've seen you talk about is checklists.
01;04;06;10 - 01;04;07;12
Jeanette Nyden
Yeah.
01;04;07;14 - 01;04;12;14
Jonny Dunning
So so so so talk to me about how that feeds into this this whole process.
01;04;12;16 - 01;04;38;15
Jeanette Nyden
Yeah. So in my book, The Contract Professionals, playbook. So this manual here, I have checklists, lots and lots of different checklists and spreadsheets and the way that I, develop these checklists for and that one that, that I use the most is the requirements for a hybrid purchase is the purchase of goods and services. Right?
01;04;38;16 - 01;05;08;03
Jeanette Nyden
Really starts off with what are the business objectives. So we go back to what I said just a minute ago. Where is the collaboration towards the business objectives. And so and then to have a little bit of, of a moment, whether the Uniform Commercial Code applies or not to the purchase of the good has to do with what is the purpose of the purchase, is that the purpose of the purchase the good with a little bit of services, or is it a service with a little bit of a good.
01;05;08;03 - 01;05;27;25
Jeanette Nyden
Right. So we have to start with what is the business objective? Am I buying a motor. And you guys are just providing a little bit, you know, one day of service to install the motor. Or is your installation services what I'm buying. And by the way, you're also going to procure the motor for me. So we have to get that sorted.
01;05;28;02 - 01;05;58;18
Jeanette Nyden
And then from there I have other forms of subgroups of topics. So developing the specification, what is the work through some precision and that specification applies to services as well. What specifically do we want them to do. And I don't mean how you know, I don't need to tell you Jonny, the facilities management expert, how to clean a facility.
01;05;58;20 - 01;06;20;20
Jeanette Nyden
But I do need to tell you that, you know, a data center has to be completely and utterly, you know, dust free, and it has to be at a certain temperature and, you know, x, Y, and Z. So I can expect those sorts of things from you at my data center. And then I have to have a different set of specifications for headquarters.
01;06;20;22 - 01;06;43;01
Jeanette Nyden
Right. So for headquarters, I might just be hiring you to vacuum because no one wants you to touch their desk anymore, that sort of thing. And I need to be very specific about that. Then as you start to think about the specificity, this level of specificity, then I start to identify risks. And in my checklist I actually say this is a potential risk to monitor.
01;06;43;06 - 01;07;17;04
Jeanette Nyden
So for example, I should the customer's policies regulatory or statutory requirements be documented in this specification for this particular service. And in other words, does that service need to meet a regulatory or a policy obligation. And if so that is a potential risk. So what I then have people do is I say okay, that's a risk. We put that on a risk register now.
01;07;17;11 - 01;07;41;23
Jeanette Nyden
So the risk and I so for example I worked with the state government. And we have a lot of those situations where the service of delivering for example, transportation of children in the foster care system to visit their parents and vice versa, that has to be done to certain regulations and policies, have to be background checks, etc., etc..
01;07;41;23 - 01;08;22;03
Jeanette Nyden
Right. So that now goes on to a risk register. So now what I do is I say to myself, so what is that policy? I can't just say it has to be done per policy. I have to say what the policy is and I have to link it somewhere. And if the policy is, is that everybody has to be drug tested once a month and everybody has to go through, federal background check every couple of years and a state background check annually that I have to make sure that that is somewhere documented for the contract, so that that service of transporting foster youth to and from parental visits, that those drivers, those social workers
01;08;22;10 - 01;08;51;20
Jeanette Nyden
meet that state policy. Right. So that all has to be connected. And that's connected actually at the scope of work level, because when I work with my colleagues in law and I just read a contract, that law revised to connect it to the scope of work for my client, you know, that the lawyer was very good at noting all the applicable laws and making sure all the sections were noted, but that's all the contract says.
01;08;51;22 - 01;09;32;15
Jeanette Nyden
You know the supplier shall meet all applicable laws. Colon. And then there's this long list of what those applicable laws are and hyperlinks, where to go find them and things like that. And that's typically where U.S. lawyer ends. Now in the scope of work. I had to connect the dots. I have to say that, Jonny, if you're now out of facilities management and you're now providing social work services in rural Washington, you now have to have a background check, drug test, federal background checks, etc., etc. before you can transport these fordable children to go visit their parents.
01;09;32;17 - 01;09;52;22
Jeanette Nyden
And I have to put that in the scope of work, not just that you're going to adhere, but I have to be able to say, these are the things you need to comply with, that you need to prove to me. So you need to prove by giving me your federal background check, your state background check. You have to prove by submitting drug and alcohol analysis.
01;09;52;22 - 01;10;17;07
Jeanette Nyden
If that's one of the requirements of you and your, social workers. And then I have to receive those documentations, and then I have to have a way of filing them somewhere, and I have to have a way of being able to trigger when they're due again, to make sure that they come back and that they're updated when they're supposed to be updated.
01;10;17;09 - 01;10;31;22
Jeanette Nyden
All of that risk is held in the scope of work. The contract just says, Jonny, you're going to abide by all applicable laws for this type of service. Transporting, vulnerable children.
01;10;31;24 - 01;10;57;22
Jonny Dunning
Yeah. The, it keys into the the kind of last question I wanted to specifically cover with you, which was which is again around risk. So expanding on that. So you got these these this approach with the checklists to manage the risk. But let's let's just briefly talk about the different types of risk. So clearly risk can operate at different scales.
01;10;57;24 - 01;11;05;28
Jonny Dunning
How do you how do you view that. What do you see happening. And what are the things that you think people should to mostly kind of be aware of.
01;11;06;01 - 01;11;23;29
Jeanette Nyden
So the day to day, most likely operational risks must be tracked and monitored by both parties in a service all the time. The contract is going to is going to deal with death and destruction. I like to call it. Right.
01;11;24;01 - 01;11;30;02
Jonny Dunning
So that description that that clearly separates it added as a different level of risk all together.
01;11;30;04 - 01;11;54;05
Jeanette Nyden
And, and we we know based on the United States case law what would happen if someone dies. We know what would happen if there was destruction in some sort of service. Those things are clearly outlined by state. They're, you know, could be gross negligence, malpractice. There's insurance policies for all of that. There's almost, people can kind of kick in.
01;11;54;05 - 01;12;35;14
Jeanette Nyden
We know what's going to happen. You know, there's going to be a claim in court and there's probably going to be a regulatory involvement, and the insurance claims will be filed and insurance will likely pay the damages, etc., but nobody knows what to do when the day to day sort of thing happens where, let's say these drivers of these, vulnerable children, you know, annually you have to have a state background check and your organization loses track of that because whatever sub supplier you use to be able to do that went out of business in your rural area, and you just let it slip through the cracks.
01;12;35;20 - 01;12;58;11
Jeanette Nyden
That's, that's the kind of operational risk that's likely going to happen, is that whoever you hire to make sure that all your employees have the annual state background checks goes out of business, you don't then get a new supplier in time. Now you have all these drivers that are supposed to be submitting their annual update. They don't.
01;12;58;13 - 01;13;25;20
Jeanette Nyden
And one of them has some sort of like crime that would disqualify them from being able to transport vulnerable children, but they're continuing to transport more vulnerable children because it was never caught. And then something unfortunate happens. You know, the person is caught driving drunk while transporting vulnerable children while there was a DUI six months ago, but it was never caught on the background check.
01;13;25;27 - 01;13;53;02
Jeanette Nyden
So you weren't able to catch it and you weren't able to pull that person out. Now that's a very serious operational risk. And so that's the sort of thing that I like to focus on in the statement of work. What's likely going to happen? That scenario is likely freakishly likely in rural areas in the United States to happen that you would have a driver that has something that would disqualify him or her from driving vulnerable children, and it is missed.
01;13;53;02 - 01;14;06;24
Jeanette Nyden
It is it falls through the cracks until there is a holy heck moment. And that holy heck is the person's pulled over for driving under the influence. And by the way, there's two vulnerable children in the backseat of the car that's that's the more likely thing.
01;14;06;26 - 01;14;48;21
Jonny Dunning
Yeah. So, so so what you're saying is that the can be a bit of a blind spot, in, in terms of people will focus on the death and destruction, but actually that's pretty well catered for that. That's, that's a, that's a known quantity. It's all of the day to day stuff that can still have significant risk, that if it's not captured within the statement of work, can lead to significant problems, which is I think, again, it comes down to the diligence, the quality, and, and the focus on the specific requirements for doing this, because that wouldn't be the same in the way that you procure a thing, some goods or
01;14;48;21 - 01;15;00;18
Jonny Dunning
materials. So again, it's it's quite specific. But, I think that's a really important point for people to take on board. And, and no doubt people know that. But it's one of those things that, like you say, can just slip through the cracks.
01;15;00;20 - 01;15;29;29
Jeanette Nyden
Yeah. And going back to the example that I'm living where the customer is ten days late getting some information to the supplier, but still wants to hold the supplier accountable. That's the kind of operational risk I live in all the time that that's a very real operational risk, is that one party will not be able to adhere to the deadlines that it owes to the other party, and it has a cascading negative impact on the project as a whole.
01;15;30;02 - 01;15;49;23
Jeanette Nyden
And until it gets to the oh holy heck moment at the end, where three months late in deploying the software. Why? Because it started weeks after the contract was signed and the customer was ten days late, and it just kind of cascaded through to now we're three months off schedule then. Then we're paying attention because we're three months off schedule.
01;15;49;26 - 01;16;17;11
Jeanette Nyden
I want people to start paying attention when things are ten days off schedule. I want people to pay attention in how they write their scopes of work, that that's a real risk. Like that should set your hair on fire when you have a buying organization that that's laissez faire, that they want to hold the supplier accountable, but they themselves cannot meet deadlines ten working days, two, full weeks, that's a big deal.
01;16;17;11 - 01;16;44;27
Jeanette Nyden
That's a big risk. And when you write your scopes of work, when when the supplier then reviews the scope of work before it's, actually awarded that work, I advocate that the suppliers need to very thoroughly go through that scope of work and identify those kinds of gaps that were left out by the customer, like the customer shall, you know, deliver things on time, you know, shall I accept?
01;16;44;27 - 01;17;05;11
Jeanette Nyden
And if it's not accepted within 14 days, it's deemed accepted so that customers can't just, you know, take their, their time and not honor their partner in getting the work done to achieve that service related objective.
01;17;05;14 - 01;17;23;02
Jonny Dunning
I love the fact that you take a balanced view, because a lot of the time, you know, you're going to be brought in when there's a problem. But what you're talking about is doing it right in the first place so that these that can be the beautiful execution of this service is great for the buying organization and great for the supplier.
01;17;23;02 - 01;17;43;05
Jonny Dunning
So I think, you know, I know obviously we've finished talking about risk there. But there's there's great opportunities here for people to do to do really good business and get maximum value from their service providers. I think that's a really exciting opportunity that the people are kind of missing out on. At the moment. I really appreciate you taking the time to chat.
01;17;43;05 - 01;18;02;19
Jonny Dunning
There's so many things we, you know, there's there's definitely further things we could we could discuss. But I'm really pleased you managed to cover those topics there. Before we wrap up, how can people kind of find you and engage with your content? I'll. I'll just. What would you recommend people to do?
01;18;02;21 - 01;18;25;04
Jeanette Nyden
So two things. Number one, obviously LinkedIn. My name is Jeanette Nyden So there's only one Jeanette Nyden. So if you put me in, you'll find me on LinkedIn. Please, follow me and send a request because I post every day on something having to do with contracts, lots of videos and ways to get other, content through my website.
01;18;25;06 - 01;18;55;13
Jeanette Nyden
And then my website is jnyden com jnyden.com. And that's where a lot of my longer form, blog articles, longer form webinar series, articles, and where you can also read about my books if you choose to, purchase them, you can purchase them through, you know, an online retail source. But if you want to know what they are before you do that, you can also find those on my website as well.
01;18;55;15 - 01;19;13;21
Jonny Dunning
That's awesome. Thank you so much. You. Now I really appreciate your time, your insight, and I really appreciate what you're doing in the market. Thanks for being out there and being a voice, talking about this sort of thing and, and bringing it to light for people. And also using great examples to kind of like, thank you, you know, put it and put it in people's heads.
01;19;13;21 - 01;19;16;09
Jonny Dunning
So yeah, really appreciate your time. Thanks so much for joining me.