Suppliers are Primary Stakeholders Too
The SOW services procurement value equation is straightforward: clear need + sufficient budget + right service provider + right price + excellent delivery = best outcome
If you look more closely at that equation you will realize the best outcome can only be achieved if the individual elements are in balance with each other. Consider the following:
- If the business need is vague or ambiguous, then service providers won’t be clear on what they are being asked to deliver or what their success measures will be.
- If the engagement manager has insufficient budget, then it is almost inevitable that the outcome will not be delivered to the level of quality they require.
- If the need is vague and the budget is insufficient, then it is highly likely that the best service provider for the work will not find the opportunity or the terms of business attractive.
- If the budget is insufficient, then the service provider will not be able to charge a price that represents a reasonable return on their resources.
- If the need is vague and the supplier cannot charge an equitable price, then they will not deploy the right level of resources, and the quality of the delivery will be compromised. Also adding challenges, the engagement manager may then decide to move the goalposts of success once the work has started!
None of the above should sound like rocket science because it isn’t. But you may be surprised to learn that many of the challenges that arise during services procurement could be prevented by ensuring that the equation is balanced at the start.
You can avoid imbalance by recognizing the importance of the service provider in achieving best outcomes. Here are some examples of how you can avoid underestimating the role of your service provider in the sourcing and contracting process:
- After you take time and care to prepare RFP documentation, be sure to give service providers ample time to prepare a well-considered and well-written proposal.
- Be willing to pay “A team” players what they’re worth. This is true especially in today’s competitive markets. Set clear expectations for pricing structure at the beginning. If you request that your service provider commit to a fixed price structure, in some cases for multiple years (irrespective of what may happen in the world economy), you should expect to make the same level of commitment in return.
- Be willing to share your experiences with others. If you know how important detailed case studies and references from previous clients are in your own decision-making process, be willing to step up and help your peers understand your success as well.
- Be honest about the scope of your projects at the start. At times, companies will exaggerate the scope of work to elicit commercial concessions, only for it to narrow once the engagement starts. But changing these details requires the service provider to re-engineer their resource assumptions or their price structure, which can cause delays and challenges for your program.
The simple truth is organizations that achieve best value when buying external services will be the ones who are clear on what they need, pay the right price from the right service provider and create the right environment for engagement success.
This approach will help your organization become a customer of choice, helping you get the best outcomes.