This document outlines the steps for selecting and contracting with a business process outsourcing (BPO) vendor, including appointing a vendor selection team, establishing qualifications, distributing requests for information and proposals, evaluating proposals, and selecting a vendor. Key components of an outsourcing contract include scope of work, service level agreements, pricing models, intellectual property terms, and termination clauses. Careful consideration of governance, industry concerns, transition plans, and dispute resolution is also important for contract success.

1. Vendor Selection
and
Contracting

2. Objectives
• To identify and select the right vendor for a
BPO project.
• To develop a list of potential vendors.
• Recognize the criteria for selection.
• Focus on the key components of an
outsourcing contract.

3. Identifying and Selecting the Right Vendor
1. Appoint a vendor selection team
2. Establish qualifications
3. Develop a long list
4. Distribute the request for information [RFI]
5. Distribute the request for proposals [RFP]
6. Evaluate Proposals
7. Select a short list
8. Select a vendor

4. STEP 1
Appoint a Vendor Selection Team
BPO Steering Team
BATPMT /
BPO Champion
VST

5. Key Staff members for the VST should include:
• Senior Management
• Legal staff with contract expertise
• Technical staff and Information Systems
Analyst
• End Users
• Financial staff

6. STEP 2:
The qualifications most often sought in a vendor are:
- Quality
- Performance History
- Warranties and Claims Policies
- Facilities and Capacities
- Geographic Location
- Technical Capability

7. - Customer Service
- Process Expertise
- Data Sharing
- Vendor’s Business
- Industry Specialization
- Specificity

8. STEP 3:

9. STEP 4: Request for Information
Capabilities Interview
- What are the Vendor’s core capabilities?
- What metrics does the vendor use to evaluate
effectiveness?
- How many clients does the vendor currently serving?
- Where is the vendor investing its resources?
- Does the vendor fit with the buying company’s culture?

10. STEP 5: Request for Proposals
General RFP guidelines:
- Administrative
- General requirements
- Pricing requirements
- Contractual / Legal

11. STEP 6: Evaluate the Proposals
BPO Qualifications Weighting System
Parameter Weight
Quality:
• ISO Certification .20
• Six Sigma
Performance History:
• Experience with other, similar projects .25
• Performance with other clients
Warranties and Claims Policies .10
Facilities and capacity .15
Geographic Location .05
Technical Capability .25

12. Telephone Interview
- Approach
- Company Background
- Experience in the process area
- Strengths
- Availability
- Certifications
- Suggested Solutions

13. The Vendor should also be requested to furnish:
- Case Studies
- Copies of Resumes
- Copies of Certification
- References
- Proof of financial stability

14. STEP 7: Select a Short List
The VST chairperson should:
- Inform the vendor that it has made the short list.
- Explain that the vendor has four hours for its presentation
- Express interest regarding the vendor’s pricing model.
- Reiterate what the organization is looking for in a BPO vendor.
- Let the vendor know there will be a final telephone
conference to clarify the bid submitted.
- Ask the vendor to submit its best bid no later than the
deadline you have estalished.
- Let the vendor know when the decision will be made.

15. VST Members should look for the ff.
• Who has the vendor sent to the meeting?
• Is the presentation developed uniquely or canned?
• Does the vendor include contingency plans?
• What performance data does the vendor provide?
• Who are the vendor’s leading clients?
• How well does the vendor team listen to the buyer
team?
• Does the vendor’s presentation address issued in the
RFP?

16. STEP 8: Select the Vendor
Pre-contract Stage
- Members of the BPO Buyer staff should meet the
new Management Team before contracts are signed.
- Employees should be allowed to say their concerns
and questions.
- The firms should address issues of terms and
conditions of employment.

17. Negotiating BPO Contracts:
Standard Vendor Negotiations versus BPO
Negotiations

18. Terms of the Contract:
- Scope of work (SOW)
- Service-level agreements (SLAs)
- Pricing
- Term of the contract
- Governance
- Intellectual property
- Industry-specific concerns
- Termination of the contract
- Transition
- Force majeure
- Dispute resolution

19. Scope of Work:
Is the description of the nature of the work
being outsourced. It is also often called
statement of work.

20. Service Level Agreements:
Defining what to measure
- The foundation of the SLA is defining which
service levels and key performance indicators
to measure.
Precise Terms, Variables, and Responsibility
- Terms must be used with precision.

21. Pricing: (BPO Pricing Models)
• Cost Plus
• Unit Pricing
• Fixed Pricing
• Variable Pricing
• Performance-Based Pricing
• Co-Sharing Risk/Reward

22. Term of the Contract:
- The term of the contract is important,
especially since many companies terminate
outsourcing arrangements before the end of
the contract period.

23. Governance:
- Governance is the process of administering and
monitoring the performance phase of the BPO
life cycle to ensure that the interests of the
vendor and the buyer remain and that the
goals of the parties are met through the most
efficient processes available.

24. Intellectual Property:
- The transfer, use, disclosure, protection, and
development of intellectual property(IP) are
some of the most significant legal issues in the
outsourcing process.

25. Industry-Specific Concerns:
- Depending on the nature of the outsourced
process, addition regulatory hurdles may need
to be addressed.

26. Termination of the Contract:
- The contractual right to terminate a BPO
relationship can be granted for two reasons:
1. Convenience
2. Cost

27. The Contracts should specifically defined what
allows the buyer to terminate for cause:
• Financial insolvency or insecurity of the
service provider.
• Retention of key employees or overall
turnover rates of the vendor’s workforce.
• So-called cross-default provision with respect
to the vendor’s contracts with other service
providers.
• Changes in control with respect to the vendor.
• Changes of control with respect to the buyer.

28. Transition:
- If a BPO relationship falls apart and one or
both parties decide to terminate the
agreement, it may be necessary for the buyer
to reabsorb the outsourced process or find
another vendor.

29. Force majeure:
- Outsourcing contracts typically include force
majeure clauses, which excuse the vendor
from performance in the case of natural
disasters.

30. Dispute Resolution:
- The Outsourcing contract is a living document
that must have change management
processes integrated within it.

31. Summary:
- Identifying, selecting, and contracting with the
right BPO vendor is essential to the success of any
initiative.
The selection process should include:
- A VST
- Establishing qualifications
- Develop a list of potential vendors
- Distribute a request for information and RFP.
- Evaluating the proposals
- Making a final decision