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Services Procurement - SOWs Best Practices
The document outlines best practices for services procurement, particularly focusing on Statements of Work (SOWs) and their management within the Vendor Management System (VMS) industry. It discusses the significance of managing SOW-based spending to achieve cost savings, risk mitigation, and operational efficiency, along with strategies for enhancing visibility and compliance across various business units. Key recommendations include establishing a supportive committee, understanding organizational needs, creating standardized processes, and regularly measuring performance against set indicators.
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Services Procurement - SOWs Best Practices
- 1. © PeopleFluent 2014 ServicesProcurement – SOWs Best Practices February 2015 For best results, please stream the audio for this presentation directly from your computer.
- 2. 2© 2014 PeopleFluent| Confidential Services Procurement • Session Overview • Introductions • Presentation: • SOW Landscape • Best Practices • Getting Ready • Process • Q & A Agenda
- 3. 3© 2014 PeopleFluent| Confidential Services Procurement • Within VMS industry, SOW spend under management has grown 74% since 2012* • Savings potential for SOW- based spend is 10 to 20 times higher than staff augmentation The Growth of VMS/SOW *Staffing Industry Analysts, 2014 VMS and MSP Landscape
- 4. 4© 2014 PeopleFluent| Confidential Services Procurement Why Manage Services? Visibility Cost Savings Risk Mitigation Fiscal Controls Operational Controls Supplier Management Supply Chain Optimization
- 5. 5© 2014 PeopleFluent| Confidential Services Procurement Visibility Only 30% of enterprises currently have the ability to track performance of SOW based labor and services against predetermined and agreed-upon delivery dates and milestones. Ardent Partners- State of CWM, 2014 SOW
- 6. 6© 2014 PeopleFluent| Confidential Services Procurement • Cost savings • Risk mitigation • Fiscal and operational controls • Policy compliance • Supplier management • Supply chain optimization With Visibility…
- 7. 7© 2014 PeopleFluent| Confidential Services Procurement SOW-based Skill-based Medium to high risk Spend management Services Consultants Specific expertise High risk Compliance management Independent Contractors Staff Augmentation Transactional Low risk Supplier management Temporary Broad View of Contingent Workforce
- 8. 8© 2014 PeopleFluent| Confidential Services Procurement • Complex Contingent Spend • Process outsourcing: application services, infrastructure management and BPO • Consulting: IT and management • Professional services: tax, audit and legal, as well as various specialized services projects. • BPO and Consulting are the most common SOW- based services spend under management and have the highest levels of supplier and buyer adoption. Services
- 9. 9© 2014 PeopleFluent| Confidential Services Procurement SOW Landscape SUPPLIERS $ 10 to 15% of spend Largest number of transactions 75% of spend and up Smallest number of transactions 15 to 20% of spend Strategic/Consulting Services IBM, Big 4, ERP Tactical Services Support & Operational Contracts Discretionary Projects IT, Niche Suppliers, ICs
- 10. 10© 2014 PeopleFluent| Confidential Services Procurement Goals Drive Projects Recurring/Non- recurring activity Utilize expertise Capabilities Single MSA Tracking Analytics Compliance Metrics Milestones met SOWs that are service-based Projects budgeted Index Solutions VMS SMS Integrations Create a Foundation
- 11. 11© 2014 PeopleFluent| Confidential Services Procurement • Build a committee and educate/enlighten • Procurement – SOWs • Finance and AP– accruals, reconciliation, invoicing, budgets and payment process • Legal – SOW standards mean less disputes • HR – tracking, compliance, quality • IT – both client and service provider • Business units – identify power users • Executive sponsorship 1. Enlist Support
- 12. 12© 2014 PeopleFluent| Confidential Services Procurement 2. Know Your Business Understand what your organization is using SOWs for today and then design the tactical processes that will increase visibility, efficiency, and cost savings while reducing risk. • Identify Projects, ICs and Services • Determine if there are (or should be) deliverables • Determine if there are (or should be) SLAs • Identify recurring payment services
- 13. 13© 2014 PeopleFluent| Confidential Services Procurement 1. Create SOW • Role/Permission Based • Configurable Approvals • Create SOW • Attach RFP & Support Docs 8. Off-Board Contractors • Finish Notifications • Reporting & Analytics • Security Badge Deactivation • System Logon Deactivation 2. Source Bids • Provider Distribution Controls • Budget / P.O. Controls • Time & Date Stamp 7. Billing and Invoicing • Pay Provider • ERP Feeds & Extracts • Audit & Adjustment Support 4. Engagement Management • Milestone/Deliverable Management • Cost Center, G/L, Project Code Support • Manage Change Requests • Manage Budgets / Burn Rate 3. Award Project • Review/Rank/Score Bids • Select Provider • Finalize Milestones • Create Payment Schedule • Define Payment Schedule Analytics 6. Time & Expenses • Time & Expense Capture • Milestone Capture • Invoice Approval 5. On-Board Consultants • On-Board Consultants • Compliance Manager • Security Badges • System Provisioning 3. Work the Flow
- 14. 14© 2014 PeopleFluent| Confidential Services Procurement 4. Design for Everyone • End User • Business • Procurement • Audit • Executive • Policies and Processes • Risk Management
- 15. 15© 2014 PeopleFluent| Confidential Services Procurement • What are your costs? • % spend of SOW to staff augmentation • Average cost per SOW (normalized, per hour) • Cost Index (actual / awarded = index) • Spend per SOW vendor • Soft costs • What is the process today? • How much management time does it take? 5. Set the Baseline
- 16. 16© 2014 PeopleFluent| Confidential Services Procurement • Revise internal purchasing policies, approval limits, processes • Source labor categories to establish supplier base • Create standards 6. Develop Standards • Deliverables • Milestones • Pricing • Payment terms • Requirements • Timelines • Change control • Governance
- 17. 17© 2014 PeopleFluent| Confidential Services Procurement 7. Measure Everything • Everything • From RFx to award • Measure cost (Total / time = hourly, overage) • Measure quality (change orders, rework) • Measure commitment (response to RFx, awards, terms) • Achievement Index • Awards/RFx Responses = Index • Total $ Spent / Total $ Awarded = Index
- 18. 18© 2014 PeopleFluent| Confidential Services Procurement • Supplier Scorecards • Share all of your data • Select key performance indicators • Hold quarterly review meeting with supplier • Invite only those who are accountable • Account manager, recruiters • Review against previous quarter’s scorecard • Set action items over next quarter • Hold an annual meeting with all suppliers • Share comparison data What Should You Measure?
- 19. 19© 2014 PeopleFluent| Confidential Services Procurement Comparing Services Workers to Contractor bill rates on Case study top 5 roles 0 25 50 75 100 125 Business Analyst Sr Project Manager Software Engineer DBA Production Support Specialist • Services Workers, those workers associated to statements of work on average had 44% high bill rates than their staff augmentation average • Specific examples of the same worker transitioning from contractor to SOW were able to be cited and tracked for leadership and reclassification • Eventual reclassification of staff augmentation on 15% of the statement of work, yielded $1.7M in savings Spend Misclassification Example
- 20. 20© 2014 PeopleFluent| Confidential Services Procurement Financial Management Risk Mitigation Vendor Optimization Process Efficiency Adoption Management Rate Intelligence Program Scalability Managing the Process
- 21. 21© 2014 PeopleFluent| Confidential Services Procurement Compliance Process Optimization Visibility Payment Management Benchmarking Bidding Discounts Performance Management Review Process Competition Negotiation Supplier Management 0 0.5 1 1.5 2 2.5 3 Savings Opportunities SOW Process Savings
- 22. 22© 2014 PeopleFluent| Confidential Services Procurement According to recent research*, the vast majority (77%) of enterprises believe that total talent management will be a widely-adopted approach for managing all enterprise talent, both traditional and non-traditional under a centralized program. One More Poll… *Ardent Partners, State of Contingent Workforce Management 2014 Total Talent Vision for Tomorrow
- 23. 23© 2014 PeopleFluent| Confidential Services Procurement Questions…
- 24. TM © 2014 PeopleFluent| Confidential Talent Insights. Business Outcomes.TM Thank You Find PeopleFluent on… Twitter: twitter.com/peoplefluent LinkedIn: linkedin.com/company/peoplefluent Facebook: facebook.com/peoplefluent Blog: peoplefluent.com/resources/peoplefluent-blog John.Moore@PeopleFluent.com
Editor's Notes
- #12 Use your understanding of the priorities of these groups to enlighten them as to why SoW standards are important to them.
- #16 It’s hard to justify program savings when you don’t know where you started. If your program has already started, set your baseline from this point. Your goal is to continue to maximize your savings and therefore justify your program.
- #18 Maintain all of the operational metrics the system will give you, even if only a few are used in the SLA or KPIs. These measurements are good to analyze trends in more depth and to provide explanations to suppliers who question data (and they will). KPI Index is a quick way to evaluate supplier base. Divide the number of metrics met or exceeded by the total metrics the supplier is responsible for.
- #19 Maintain all of the operational metrics the system will give you, even if only a few are used in the SLA or KPIs. These measurements are good to analyze trends in more depth and to provide explanations to suppliers who question data (and they will). KPI Index is a quick way to evaluate supplier base. Divide the number of metrics met or exceeded by the total metrics the supplier is responsible for.