Wednesday, January 12, 2011

Specifications - The Importance of Good Specifications

I learned about the importance of good specifications the hard way. My first Procurement job was in the Air Force. I was responsible for operating and maintenance Procurement and would contract for services like painting, custodial services, landscaping etc. Clearly not the most glamorous work of my career, but it was a good place to learn.  As the government was very concerned about equality in treatment of Suppliers  virtually everything had to be competitively bid and work would be awarded to the lowest bidder, unless you could prove that they weren’t qualified. In that approach to Procurement, you wound up with a real “mixed bag” of potential Suppliers all competing for business. The joke we always had was that “the low bidder was the one who made the biggest mistake”. We also knew the other reality of government contracting was that the low bidder might fall into two other classes:
1)    Those that bid low expecting substantial changes, where they would make their profit up on the change,
2)    Those that would find a loophole in the specifications and use that to take enough short cuts to make the money back.

The best example of this second type of Supplier which relates to the importance of good specifications is what I call the “two coats story”. We awarded a contract to do painting of the exterior of a number of housing units. The contractor was proceeding with the job much faster than anyone had expected, so we went out to investigate. We arrived as they were painting what was obviously the first coat of paint, but they picked up their drop cloths and were getting ready to move to the next unit. The engineer asked the foreman when their second coat would be applied, and he said that it had already been. The engineer argued that the surface had not been previously painted and what we had seen was only one coat. The foreman then stopped, picked up the roller and ran it up the wall and said: “there’s one coat”, and then ran it down and said: “there’s your second coat”. The first thing that we did was to check the specifications to see if there had been a drying time specified between the coats and there wasn’. They had found a loophole and intended to use it. We exercised an option we had build into the contract to cancel substantial portions of the work. When we later re-bid the work, this time the specification had a four hour curing period between coats. This time the prior contractor wasn’t close to winning the bid. This taught me the need to have good specifications or scopes of work.

Specifications - Using Supplier Specifications

Frequently there may be Supplier specifications that may be used. Prior to using them, it is important to do a thorough review of them to ensure that:
1.     They clearly define what you want or need.
2.     Any parameters, such as use parameters, are acceptable.
3.     They don’t include any restrictions or exclusions you don’t want.
4.     The terms don’t conflict with your contract’s terms (like warranty coverage or term)
5.     They aren’t written in a manner that allows multiple interpretations of the requirements.
6.     They are under formal revision control and can be fixed in time so the requirements don’t change.

If there are any problems with the Supplier’s specifications, prior to incorporating those into your contract or purchase document, you should clarify and document any changes, additions, or deletions to the Specification and include that as part of your contract or purchase document giving priority of that clarifying document over the specifications.

In many law suits or disputes between Buyer’s and Seller’s the critical factor may be what is in the Specification, Statement or Work or Scope of Work as that establishes what was required. If you can’t prove what was required, you won’t be able to recover if you get something different, something less that you expected, or something that doesn’t work in the manner you wanted.      


In making sure that you have a good specification you need to ask a number of questions with the user about what is needed.  Here's an example of the kinds of information you ask in formulating specifications or terms required  for your contract.

What is required for the work to be considered to be fully performed ?  (e.g. meets all of the commitments for speed, speed at volume loads, quality, functionality, reliability, etc.)

What tests are required to prove the work does in fact meet the acceptance criteria

How do you want the items to look? Materials, treatment, finish, color, etc.?

Available information
What information do you have which you can provide to the Supplier to assist them in their work ?

Buyer deliverables and responsibilities.
What are the items you must provide as part of the work, (including review, approvals, loaned materials, equipment, space, etc.)

Change process.
What should be the basis for the cost of changes? When would you want changes effective?  What mark-ups should the Supplier and subcontractors be allowed? What are the requirements on disposition of excess or scrap material? What costs or approvals are required on re-work of existing materials? Are their any special requirements on disposal of excess or scrap (e.g. proprietary which must be destroyed).

What are the requirements on the Supplier to coordinate their work or operations with you or other Suppliers?

When is all work required to be completed? Are there other critical dates that must be met for sub-stages to be completed?

Data to be provided by the Supplier.
What of the data the Supplier may generate in performing the work do you want ? E.g. copies of studies performed, data calculations, etc.

Define what you want throughout the activity and at the end. What are their commitments for:
·       Overall functionality of the product or service delivered
·       Output or the product or service
·       Speed of the product, service or individual portions thereof,
·       Quality levels of the product, processes, etc.
·       Services, product life, availability or delivery channels.
·       Appropriateness of staffing, staffing levels, etc..
·       Mandatory requirements, desired requirements ?
·       Periodic deliverables? (weekly status reports)
·       Phase related deliverables? (status reports and presentations)
·       Are reviews, reports and updates required?
·       How will reports be delivered? Form, format, number of copies etc.
·       Who is responsible to provide what information? (we may also have deliverables).

Each deliverable should have a schedule for its delivery.

When do you want the items delivered to you e.g. samples, prototypes, first production units, etc.

Delivery schedules.
For items with multiple units of production, how many do you want, when, where?

Documentation to be provided.
On completion of the work, what information or documents do you want provided. Operating manuals, test scripts, as-built/as constructed drawings, training manuals, final specifications, third party and governmental approvals received, etc.

Enhancements, updates, additional scope.
What are your expectations on being able to purchase enhancements, updates, future scope changes and what commitments do you want for the current Supplier to provide them ?

Equipment required.
What, if any, equipment do you want to require the Supplier to have to perform the work. E.g. on time an materials you may be concerned with the equipment uses as equipment = productivity and that impacts cost.

Exclusivity Requirements.
What restrictions do you want to place on the Supplier or the specific team regarding doing similar work for your competitors?

Form / Fit.
If it is a product, what is the specific form it should be? Are there any requirements concerning fit regarding where or how it connects with other items that it must integrate with.

If not already addressed in the answer to the questions on deliverables, what are the functions that the item must provide?

Legal or other requirements.
What, if any legal requirements do you want the Supplier to provide? e.g. legal approvals, permits, etc.. What other requirements do you want them to meet? e.g. approvals of professional or standards organizations such as Underwriters Laboratories (U.L.) Canadian Standards Institute (C.S.I.)

Level of effort to be provided.
If you only want to have a specific item addressed by a designer or consultant, do you have a specific level of effort on the work that you don't want them to exceed? e.g. Not to exceed amount for consulting work.                                                                                         

Long term protection requirements
What items do you feel you need for long term protection ? E.g. source code, licenses, escrow ? Guaranteed periods of availability for product, parts, repairs ? Notification of end of life decisions and ability to do end of life purchases ?

One time costs .

What one time costs are there in performing the work ? e.g. Non-recurring expenses (NRE), capital equipment, test equipment, fixtures). How do you want these managed?
Who pays for it.
            When is it paid for.
            Who owns it.
What the responsibilities are with respect to Supplier  bailment (if retained at their site)

Tool Replacement
What happens at the expiration or termination of the contract?

Operating environment requirements.
Are there specific physical environments the work needs to be designed or made for? Are there specific technical environments or configurations the work needs to be designed or made to be compatible with?

“Or equal” products, materials or requirements.
Are their any items to which you can say that as part of the work you want the Supplier to use a defined Supplier's part or materials, or something which would be determined to be equal to them?

Other Suppliers, contracts, assignments.
Are there other Suppliers or relationships which they need to take into account with their work. E.g. Suppliers who you or someone else in authority dictates must be used, or Supplier with whom you already have a relationship or contract who you wan them to use or manage.

Who should own the proprietary rights to the work produced? Can the Supplier sell the work or portions thereof to third parties? Will you be locked into using the seller for all follow on work because they own the work product or design?

Performance and Measurement.
What items of performance do you want to track and how will they be measured ?

What do you need or want from the Supplier in terms of warranties, maintenance, support, enhancements, upgrades?

What items and what quantity of those items are included in the basic pricing?
e.g. training, If so, how much? Delivery? Installation? Warranty? etc.

Availability of follow on equipment, parts,  or services ?
Do you need to have protection against changes in cost for follow on purchases of equipment, materials, parts, services or maintenance?

Can, or should the work be broken down into phases or stages for better management, or clean completion of portions of work before proceeding with additional work?

Are there any preparation requirements for the Supplier to perform the work?
E.g. for construction or installation, is there any demolition or site preparation required before the work can commence?

Problem resolution, escalation.
What do you feel you will need in terms of a management commitment from the Supplier regarding resolution and escalation of problems? Who should be involved and what is the schedule for escalating from one level to the next?

Are there any requirements for samples or prototypes to be provided as part of the process? If required, how many are required, when are they required, at what stage of completion do they need to be at?

Qualifications to perform the work, approvals over team, changes to team.
Do you have any requirements about the qualification of the individuals or team which you want to perform the work ? Technical skills, background, experience? What controls do you want to have about the Supplier being able to change members of the team?

What requirements, quality standards, workmanship standards, quality and test processes, audits, etc are required? Is there an existing product that can set the quality benchmark? For example if you wanted a consultant to produce a manual, and they provided you with an acceptable sample from another project they performed, you could reference that manual and have their requirement be that they produce a manual for you of similar quality, scope, and detail as the referenced manual.

For things which the Supplier is to provide, what are the quantities which are required ? e.g. how many copies of reports, documentation, etc.

What requirements do you have for record keeping and what rights do you want to audit the records.

What requirements are there? Are there any unique or specific regulatory requirements which they have to perform the work to which may be unique to you or to the project which they should be aware of?

What items of cost will be treated as reimbursable expenses? What are allowable? Are there restrictions on their cost?

Required third parties to be used.
Are there any consultants, Suppliers, etc. that the Supplier must use either because of your requirements or requirements of a third party (e.g. landlord, leasing company, etc.).

Required third parties to provide products to.
As part of any outsourcing, is there an expectation that the Supplier will sell the product to an authorized third party that is performing work on your behalf?

Required materials to be used.
Are there any materials or equipment that the Supplier must use either because of your requirements or requirements of a third party (e.g. customer, landlord, leasing company, etc.).

Are their project reviews that you want to require either on a regularly scheduled basis or at different milestones or provision of certain deliverable? If so, where should they be held, who should be there, what should be the agenda?

Are there an specific safety requirements you want to impose on the Supplier?
Will the Supplier be working on your site and need to be subject to your safety and security rules?

Do you require the Supplier to provide and samples of work, products or design for your review at different stages?

Do you have an overall project milestone schedule you want them to perform to which has phases, deliverables, reviews, approvals to proceed with subsequent phases?

Site requirements.
If the work will be performed at your or a third party’s site, are there any restrictions that the Supplier needs to be aware of regarding their work or their operations. E.g. what will be provided to them at the site, what restrictions exist regarding access, storage, available utilities and services.

Specific or unique requirements.
Is there anything that is unique about this work which the Supplier need to be appraised of in advance?

Standards, Specifications, or requirements to be incorporated in the Product or Service.
Are there any standards or specifications or requirements that the service must be performed according to, or which must be incorporated in the work.. E.g. Standards of professional organizations, Specifications provided by professional organizations or industry trade groups, etc.  

Start-up responsibilities.
When the work or installation is complete, are their any special requirements that you want when it comes time for you to start up or use the equipment, tool, process, software or facility?

Service capabilities:
What service capabilities are required: Hours of operation? Location? Capacity? Skills?, Off-hour support? Do you want them to provide hotlines and problem databases? If there is a problem, what response times do you want from them and what, if any, escalation process must they follow if the problem isn't corrected within a defined response window.

Structural management tools.
What do you need from a structure perspective to best manage the work? E.g. Contract requirements for reviews, progress meetings, reports of various performance indicators, status against schedules, activities performed, staffing and equipment assigned, problems identified, action item status.

Tasks, time between tasks.
What are the individual tasks you want them to perform and are there any requirements that exist prior to performing the initial task, or requirements for time between that and subsequent tasks? e.g. If you wanted to paint a house exterior with 2 coats of paint, are there requirements before the first coat may be applied (e.g. surface preparation, weather, temperature, dew point) and are there requirements before the second coat may be applied (e.g. cure period for the first coat, secondary preparation, weather, temperature and dew point?

What testing will we require the Supplier to perform: Design Testing? Reliability Testing? Performance testing under simulated loads? What testing will you perform?

What are the requirements for initial training and on-going training? Where should it be conducted? How often should it be given? What's included in the basic price? What are the costs of additional training?

What type of warranties do you require? Are there any special requirements? E.g. do you need a loaner during any repair time? Do you want warranty repairs to be performed on site? Do you want them to have parts in stock for immediate repairs?

If you develop standard contracts for Procurement the specific type of product or service, some of these requirements may be addressed in your boilerplate contracts, but you may still want to review each item to determine whether the contract requirement meets the specific need.