Does Your Selected Supplier Have the Capability to Deliver?

by: Grant Rule

Now outsourcing is regarded as a preferred method of acquiring a business system or even an organisation's entire portfolio, the CMM^® is increasingly applied for its original purpose, as a means of supplier capability evaluation and monitoring.

Professional software supply companies are likely to run projects more predictably and cost effectively than an organisation's in-house staff. Especially when a project necessitates integration of COTS or the adoption of new technology. Or so the argument goes. If it were true, newspapers would not be full of major software disasters.

In practice, it was the very unpredictability of software acquisition projects that caused the US Department Of Defense to commission the Capability Maturity Model ^® and the associated assessment method. Such a high proportion of projects were late, over-budget or delivered a product that failed to fulfil expectations, that the DoD realised that 'lowest cost' does not equate to 'lowest risk'. If you want a product that works, that is available in short order, when planned and that will stay operational, you have to be prepared to pay a sensible price for it. Selecting the supplier that submits the lowest bid, often intentionally as a 'loss leader' to undercut competition, with the intention of recouping a profit during the subsequent maintenance and support contract, has been shown by experience to be a high-risk strategy. The supplier must exhibit the capability to deliver.

This lesson surely applies just as much to the typical business as it does to government and military contracts.

While the CMM ^®-Based Appraisal for Internal Process Improvement (CBA-IPI) can be expensive in terms of the time and effort required from both in-house staff and external Appraisal Team Leaders, it must be understood in context. Around 50% of the effort is spent on generating commitment to process improvement, leaving the rest for assessing the practices performed.

Conversely, when the CMM ^® is used as the basis for evaluating and selecting a supplier, little time need be spent on generating commitment. The customer sponsors the evaluation as a means to minimise the risk of selecting the 'wrong' supplier(s). The supplier's incentive for improvement is built into the desire to win the contract and to sustain a long-term partnership. The overall result is that Supplier Capability Evaluation is significantly cheaper and quicker to perform, yet it delivers a robust, internationally respectable result. It enables the customer to award a contract with confidence. What is more, the assessment results can be used as a baseline from which improvements can be measured, enabling performance targets to be set, agreed and included in the contract. Additional SCEs can be performed to monitor improvement.\

Of course, partnership involves at least two, er, partners. So most beneficial results are achieved when there is some match between the maturity of both the customer and the selected supplier… and when both commit to continuous improvement.