Yesterday, we kicked off our blog series “Cost Savings in the Windy City” with a quick recap of the contract that the City of Chicago has just signed with Accenture to provide strategic sourcing services. Before Joe and I get into the contract term analysis, I wanted to talk about our high level impressions of the contract.

As with many large-dollar contracts that we evaluate, we expected to see a lot of legal jargon and clauses meant for lawyers to potentially argue over down the road. In reality, there was not a lot of that in this agreement. However, in my opinion, the contract has an abundance of overly-complicated terms, buzzwords and redefined definitions that serve little purpose other than to confuse the reader. Or perhaps they are meant to be consistent with some internal (non-industry recognized) terms used either at Accenture or the City of Chicago. Either way, they get challenging when used in conjunction with run-on sentences.

Here is a quick example of some of the gems you will find in the contract: Unique Value Events (UVEs), Value Defined Milestones, Value Committed Milestones, DPS, Value Based Fees, OBM and of course the ones that you already know, such as TCO (total cost of ownership) and PSA (professional services agreement). Huh?

  • “Unique Value Event” (UVE) - is an individual project within a spend category (we call them “projects”)
  • “Value Defined Milestone” - is Accenture’s version of a Baseline report (how much stuff costs today)
  • “Value Committed Milestone” - is their version of a Savings report (which becomes their basis of future billings)
  • “Value Based Fees” - we call these “fees” in our company
  • “DPS” - my guess is “Department of Procurement Services” or “Department Professional Services”, really not sure, it is not defined in the document
  • “OBM” - I think refers to the Office of the Business Manager, again, not defined

I was hoping to see Chicago and Accenture adopt some of the “plain language law”  signed into law recently by Chicago native, none other than, President Obama. For the unfamiliar; the law requires Federal agencies to use “Clear Government communication that the public can understand and use”. On January 18, 2011, the President issued a new Executive Order, "E.O. 13563 - Improving Regulation and Regulatory Review.” It states that "[our regulatory system] must ensure that regulations are accessible, consistent, written in plain language, and easy to understand." Well, unfortunately, this is not a Federal sourcing initiative, so none of this applies.

Without plain language regulations, we arrive at paragraphs such as this (taken directly from the contract verbatim):
“Value Committed Milestone. The next milestone for each UVE will be the “Value Committed Milestone” checkpoint which will occur when applicable commitments are obtained (eg., supplier makes a commitment on price reduction, plan is finalized by the City of Chicago to strategically manage demand or reduce inventory, etc.) at which point the leadership team or relevant stakeholders meet to review preliminary benefits calculations based on the foregoing and more accurate estimates on proposed benefits realization and timeline will be reviewed and established (also, “Value Committed”).”
Okay Accenture, I was with you for a while there, but then my eyes crossed after line 5 of this run on sentence. Don’t worry; we will untangle this mess for our readers in a subsequent post about the fee structure established in the contract. For those of us that use standard industry language, they are attempting to define a baseline report here (their basis on how theoretical savings are then calculated).

The use of their redefined industry terms is not even consistent throughout the document. For instance, early in the document we get the definition of a UVE:
“the City of Chicago and Accenture will perform specific Strategic Sourcing projects referred to as Unique Value Events (UVEs)”.
However, later in the document, when talking about Chicago’s right to audit Accenture, they slip back into industry standard language:
“If the City of Chicago does not elect within 13 months of the completion of the project to initiate the review, Accenture shall have no obligations to participate in any review.”
What happened to our UVE? Why can’t we just stick with the word project?

I am not sure the real reason behind adding all the lingo and jargon and redefining terms that have been industry accepted for 20 years. All I know is, at times, it can be a confusing read.

Our next post in the series will discuss the fee structure defined in the contract, and determine if it is truly contingency in nature.
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William Dorn

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