Airspace Q4 2017: Cards on the table

1 December 2017

Acquisition Excellence is an essential guide that will prepare ATM for potentially seismic shifts in business and purchasing models.

Buyers and sellers both experience enormous challenges in doing business in the air traffic management sector.

Myriad reasons for this difficulty are cited, including government involvement, extended investment periods and long project times with the clear need to meet the high standards of safety assurance. In short, it is difficult to break established mindsets, secure funding and introduce a new solution.

CANSO's forthcoming publication, Acquisition Excellence – aimed at CANSO Full and Associate Members, ATM's buyers and sellers – will begin to break down the walls of this impasse by providing an insight into best practices in acquisition from both sides of the process.

"CANSO's Associate Members, typically the seller in this scenario, will be able to understand ANSP thinking and also their requirements in the purchasing process," says Simon Hocquard, CANSO's Chief Operating Officer. "And CANSO's Full Members, the ANSPs, will be able to improve their buying skills. Being predominantly State-owned monopolies, buying is not always top of the skillset of ANSPs, compounded by the fact that there are limited suppliers in ATM."

'How to' guides

Acquisition Excellence is not about determining an appropriate price for any good or service but rather about improving the buying process with the aim of ensuring best value for money.

Understanding will be provided through a series of case studies, which will form the basis of the publication. Alongside these case studies, the intention is to present 'how to' guides that pull out the specifics of a case study to make a general point and provide some simple steps to follow.

"The case studies will cover a number of topics and business models to ensure the scope of Acquisition Excellence is as comprehensive as possible," says Hocquard.

There is the classic purchase model, for example, where a State-owned ANSP wants to buy a new piece of equipment or software. Then there is the rental model, which is essentially a time-based fee, usually for software.

Public-private partnership will also be examined, as will outsourcing and other forms of collaborative models.

Perhaps of most interest, though, will be the service model. Hocquard describes this as a potential game changer for the future of ATM.

Aireon, for example, is pioneering space-based Automatic Dependent Surveillance – Broadcast. It is essentially selling data that was previously supplied by ANSPs' radars, although, of course, that data is much enhanced.

Previously, ANSPs typically built or paid for their radars so the business model they employed was clear: invest in radar and recoup the money by charging airlines to use the data provided by the radars. But with Aireon, and similar companies and services, comes a whole new business model.

"How should ANSPs pass on the cost to airlines?" asks Hocquard. "What does acquisition excellence mean in this context?"

Better outcome

As ATM advances, many expect the service model to proliferate with a few large infrastructure providers and most ANSPs following the service model.

"Excellence is equally applicable to the acquisition of goods and services," says Adrian Miller, Head of Supply Chain collaborations at NATS. "However, when considering a serviceoriented model, it is important to recognise the need for a different type of emphasis and how the relationship is managed with the supplier."

Miller believes working in conjunction with one or more solution providers, to help scope what will be required, can contribute to a better outcome, particularly for complex challenges. "Selecting the right service provision supplier is vital," he notes. "They must be capable of providing the right solution on a continuous basis, delivering the right level of service and agreeing to service levels that will guarantee acceptable quality and availability outcomes. And there must be appropriate rectification and remedy if any problems do arise."

As well as finding the right supplier and managing them successfully, in ATM some of the services are complex, and in some instances no single supplier will have complete contractual responsibility for every element of what is needed by the end user of the service.

In view of this, suppliers need to be made aware of how they contribute to the overall delivery, and work with the customer and other suppliers to ensure that their solution is used effectively in the delivery of a high-quality service.

"Ultimately, the technical complexity associated with major ATM systems and the challenge of integrating these with existing systems and infrastructure requires close working with suppliers," Miller advises. "Time and effort is needed to develop strong business relationships. The organisation needs to ensure it has the right people with relevant understanding and skills, as well appropriate processes and tools, to support these objectives."

Final contract

A critical element in any purchase is the final contract. Acquisition Excellence will examine this vital document and simplify it to a set of core components.

Each of these components is looked at in detail and will have comprehensive comments attached from both a buyer and seller perspective. Both parties thus get an insight into these components from the opposite point of view.

"The considerations will make the purchasing process far more visible and hence far more efficient and that will translate into notable financial gains for both parties," Hocquard notes. "This is not about how to squeeze the last penny out of your client or provider. It is about making the negotiation as transparent and painless as possible to benefit both parties."

If you want a successful long-term relationship, the needs of both parties must be recognised, as a win-lose approach simply undermines the association.

The end result of an improved buying process could mean the quicker implementation of critical new equipment and services that will enable ATM to handle projected growth and introduce even safer solutions more rapidly.

"ATM relies on infrastructure with very long investment cycles and asset lifetime," concludes Helios' James Hanson. "It is important to make the right choices as they will usually last for a long time. Even small gains will add up over such long periods.

"We must look to other industries, be creative, move away from traditional own-and-operate models to risk-sharing, win-win partnerships, or other models that spread risk or provide more flexibility, such as leasing and subscription."

Acquisition Excellence will be available early in 2018 from the CANSO publications library.

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