Happy New Year!

Maybe businesses should consider adopting New Year’s Resolutions: “We will be smarter as we get leaner.” “We will consider profit levels of our customers as well as our own.”  “We will work toward Win-Win strategies with our partners.”

Genuine objectives, made to improve relationships and build capacity. A little too much mushy thinking, you say?

Not at all. There’s evidence that this kind of approach is far more than some touchy-feely, kumbaya kind of exercise.  It’s a vital nexus to a future of greater stamina, greater potential…greater profits.

Stephen Covey coined the term “Abundance Mentality” in his 1989 book, The 7 Habits of Highly Effective People. Covey explains it is “the paradigm that there is plenty out there and enough to spare for everybody. It results in sharing of prestige, of recognition, of profits, of decision making. It opens possibilities, options, alternatives and creativity.” In his new book, The 8^th Habit: From Effectiveness to Greatness, Covey further expands, saying that “abundance mentality means that rather than seeing life as a competition with only one winner, you see it as a cornucopia of ever enlarging opportunity, resources, wealth.”

To the skeptic, this sounds like lofty thinking. To Kaiser-Hill Company LLC (K-H), a joint venture of CH2M Hill and Kaiser Engineers, it sounds like the strategy they used to successfully accomplish the closure of the contaminated nuclear Rocky Flats plant. Working with the U S Department of Energy and other partners, the site was not only totally cleaned up, but also, transformed into a wildlife refuge now visited by thousands of school children each year. And it was accomplished in about 10 years, six decades earlier and nearly thirty billion dollars less than originally projected.

In the book, Making The Impossible Possible: Leading Extraordinary Performance, The Rocky Flats Story, the authors Kim Cameron and Marc Lavine concluded the “overarching leadership lesson” learned is, “The impossible was made possible by adopting an abundance approach to change rather than a deficit approach.” This is definitely Vested Outsourcing kind of thinking where all the parties involved work together to solve a problem where everyone goes home winners!

In 1995, The U.S. Department of Energy (DOE) projected the Rocky Flats cleanup would take 70 years at a cost of $36 billion, unacceptable on both counts. Thus, DOE dramatically changed the way it did business. Instead of the typical government cost-plus Management and Operating Manager model, a dynamic Performance-Based Management contract was written to include both incentives and penalties. K-H accepted responsibility for vital processes and change controls up to $20 million in order to gain flexibility in work sequencing. To find solutions, they were free to experiment and adjust. If mutually agreed objectives were reached, there was much to gain for both DOE and K-H.

A hostile public (after all, there were documented accounts of plutonium leaks into the Colorado countryside) was invited into the process. Ultimately it was their idea to  turn the site into a wildlife refuge. In recognition of the new final objective, the project name was changed to “Rocky Flats Environmental Technology Site.”  K-H motivated hopeless and angry workers by pledging to share 20 percent of their profits at project end. Eventually, pride was cultivated by the knowledge that everyone was involved in accomplishing something really important–and  something never done before–the first successful nuclear plant closure and cleanup in the entire world! It was a vision that inspired pride and gained buy-in from stakeholders.

To me, this sounds like another great example of how the Five Rules work. In Vested Outsourcing, the golden rule is that a company should not win at the expense of its service provider, and vice versa. The economics of the collaborative business model should be so powerful that it drives efforts to solve for an optimized, complete solution. It requires going beyond overcoming challenges; it reaches for the best outcome possible. In the case of Rocky Flats, it was extraordinary.

In this New Year, if you see the need to move beyond expectations, to do more than simply meet challenges that come your way, consider this. Use the book, Vested Outsourcing: Five Rules that will Transform Outsourcing to check your readiness to adapt to a new strategy.  After all, even if your business New Year’s Resolution is a straightforward, “We will make more money,” you still need a blueprint for transformational change.

Most of us grew up hearing about the controversies surrounding the Rocky Flats Plant near Denver, a U.S. nuclear weapons production facility that operated from 1952 to 1992. The 6,200-acre facility was under the control of the Atomic Energy Commission until 1977 and after that the Department of Energy. To make a long, complicated and often amazing story short, numerous violations of federal anti-pollution laws were found there in the late 1980s, including massive water, soil  and building contamination.

That triggered an arduous process of environmental cleanup remediation and restoration, along with the decision to close the facility. It became the Rocky Flats Environmental Technology Site in 1994, and the cleanup effort was contracted to the Kaiser-Hill Company.

During this process, the Contract Management article reports that DOE wanted to “do things differently” in how they contracted for the Rocky Flats closure and cleanup project by providing incentives for the contractor to perform consistently within DOE goals. The department outlined the WHAT and turned to a supplier team of Kaiser Engineers and CH2M Hill, an engineering, consulting, construction and operations firm, to fulfill the HOW.

A short paper on the Rocky Flats closure states the CH2M Hill – Kaiser team “operated under two innovative DOE contracting models” at the site. The first, awarded in 1995, “was the first performance-based contract in DOE,” paying the contractor only for “specific units of verifiable work.”

The second contracting model was the 2000 closure contract, which authorized the entire scope of work to clean and close the site by October 2005 at a target cost of $3.9 billion. DOE originally estimated in 1995 that it would take 65 years and $30 billion to clean up and close Rocky Flats.

No wonder DOE’s drive to do it differently.

Fast forward to 2007, when the cleanup was certified by the EPA as complete; in July that year DOE transferred about 4,000 acres of land on the Rocky Flats site to the U.S. Fish and Wildlife Service to establish the Rocky Flats National Wildlife Refuge. It’s an environmental triumph and a major success for innovative contracting. The Kaiser-Hill contractor team brought innovative approaches to clean up the mess, and the result was that contract incentives for schedule and cost savings resulted in the closure more than a year ahead of schedule and $530 million under the contract budget!

It was a groundbreaking example of performance-based collaboration. DOE’s 346-page Rocky Flats Closure Legacy report says: “Beyond any specific innovation, it was through unparalleled cooperation among the interested parties that a conservative and compliant cleanup and closure of Rocky Flats was enabled; ahead of schedule, under cost, and without a fatality or serious injury.”

The report outlines some major takeaways from Rocky Flats, including:

-      Contract reform works: “The first K-H ‘Integrating Management’ contract demonstrated that incentivizing clearly defined performance measures vastly improved actual results.”

-      What, Not How: Simply put, DOE said it “must manage to a contract, not manage the work for the contractor.”

-      Collaborative working relationships: The closure was a success because everyone was “engaged in the process and supportive of the ultimate goal. We communicated openly and often to seek the best solutions, and came to value the input from formerly dogmatic opponents.”

Those points encompass all of Vested Outsourcing’s Five Rules, especially Rule 2, Focus on the What, Not the How; Rule 3, Agree on Clearly Defined and Measurable Outcomes; and Rule 5, Governance Structure Should Provide Insight, not Merely Oversight.

My take? If the government can turn a political, legal and environmental disaster into something innovative and worthwhile by using collaborative, performance-based relationships, industry should pay really, really close attention.

Randy Tinseth, vice president marketing, Boeing Commercial Airplanes, in a blog post late last month stated, “A few of our partners are working through some spot shortages and are still incorporating engineering changes.” Aviation week magazine was a bit more harsh, saying Boeing’s supply chain is out of control.

It sounds like Boeing might be suffering from  Ailment 8, Driving Blind Disease, or the lack of a formal governance process to monitor the performance of the contracting relationship.

The 787 saga proves that even the big guys can profit from the lessons and rules of Vested Outsourcing in dealing and contracting with suppliers. It’s a good thing that giants like UPS and the Department of Energy are getting on board with Vested Outsourcing’s performance-based principles.

Boeing perhaps should pay attention to UPS’ Brad Mitchell, who recently advised Vested Outsourcing as a Top 5 Trend to watch: “The key is collaboration. It’s crucial that companies and their vendors, suppliers, and service providers work closely to establish appropriate goals based on business objectives and then create realistic and measurable supply chain outcomes that will advance mutual goals.”

Even mega-giants like the Department of Energy are singing the praises of performance-based thinking. I was pleased to get my new issue of Contract Management magazine and find the cover story sharing some of the recent successes the government has had in adopting performance-based approaches to recent contracts.

I especially like the one about how DOE wanted to “do things differently” in the way they contracted for the Rocky Flats Cleanup Project by providing incentives for the contractor to perform consistently within DOE’s goals. The department outlined the WHAT and turned to a supplier team of Kaiser Engineers and CH2M Hill that brought innovative approaches to clean up the DOE’s mess - which came in ahead of schedule and $530m under budget!

A good vested relationship with a collaborative governance structure works to anticipate the kinds of problems that Tinseth referred to, and provide better incentives and strategies to drive performance to achieve desired outcomes.