The Five Steps to Outsourcing – Part Two

The Five Steps to Outsourcing – Part Two

3.0 Organise for success

First of all vendors to this for a living – often the vendor sales team have been doing this for years and when this is done will move onto the next. The customer side on the other hand may have not done this before or the team carrying out the supplier proposal evaluation may be completely new compared to the last time the outsource process was run through. It may be very wise to engage a contract consultancy to handle (or mentor) your side of the whole process.

A point that is often missed is to plan the capacities of the customer team that will be creating then managing the outsource process. In a large bid the job is fulltime and often key members of the customer bid team will also have a day job to contend with – don’t forget this (or holidays etc.) plan capacity well. Plan well, resource well and set realistic time scales – time pressure can act in the vendor’s favour and allow skipping of important details. Do not be put under pressure by poor capacity planning or too optimistic time schedules.

Just a few words on the differences between the types of bid document commonly encountered during the bid process. A RFI is a high-level document inviting general response and can be used as a test for possible solutions and to pre-select candidates for the bid. Usually there is no bid price given by the suppliers – nor should we expect too much detail here. An RFP invites a formal response and takes longer for the vendor and the customer to evaluate. In a significant bid the costs associated can run very quickly into hundreds and even millions of pounds there fore before starting the whole circus make sure that you intend to place business. Ensure we are being realistic and take care that the quality and clarity in the RFP promotes conformance in the proposals received to ensure comparability. I always favour a clear template approach that forces answers in a clear structured way and allow suppliers to put all the waffle in the attached appendices.

4.0 Set up a competitive bidding process

You need to decide on sole source versus competitive sourcing towards the market. Sole sourcing is usually suggested (by the vendor) if there is a history between the companies and there is a time constraint – but there are significant downsides. Loss of leverage, not being able to compare alternatives, less aggressive pricing, and a sole source could have high impacts such as the legitimacy of the deal. Last but not least, the process may actually take longer as there is no time pressure that comes from a true competition.

It is our view that a competitive bid process has a better chance of realising cost savings, suppliers can come with more innovative proposals that the in-house supplier – although a well managed internal bid can address this problem. The process can actually be quicker as the client can drive the competitive process – by a strict time based approach to the process for example. But on the other side competitive bidding is more resource intensive, for the supplier as well as the client and this has to be planned for. Be careful about inviting a supplier to the party just to act as a market testing benchmark when the intention is really to squeeze the in-house supplier. You may do this once but will be pre-qualified out of any future by business by suppliers. In principle this is business be open and prepared to do business with other suppliers it keeps the market healthy.

Be precise, not prescriptive, comprehensive but concise in the way you pose your requirements – focus on key objectives. We need the ‘what’ not the how – avoid laying down all sorts of preconditions about how the service is to be delivered – that’s the suppliers job in the proposal. I have seen in several RFP’ s detailed specifications of what packages to use and how precisely the service is to be delivered – effectively closing off all innovative solutions that may have been available from the vendor.