I appreciate your response very much. I do feel that maybe I wasn't as clear as I should have been on the way we currently process the paperwork for these resources or rather the time periods that we are working with. We currently have terms for these resources that range from one week to 12 months. That said, most of them are over 3 months and the majority run 3-6 months. So thankfully we are also only using PO's for anyone working more than 1 month and usually only the 3-6 month range resources are renewing on a regular basis. I hope that helps to paint a more clear picture of the situation.
I would raise a call off PO so invoices can be processed and hours agreed, I wouldn't raise a PO for each person each week
Yes, there are multiple templates and business cases available for potential outsourcing frameworks. IACCM offers its members access to a wide range of standard templates which can be used as-is, and/or adapted to include elements specific to companies on a case-by-case basis, so we should learn more about the specific requirements, needs and size of your organization prior to analyzing templates for those purposes.
As Pablo has indicated there are multiple options, as a business case will be highly variable and largely depend on the structure a given enterprise expects of their business cases across the enterprise. Plus, the business case will largely depend on the nature of what is being outsourced. With these variables in play, someone else's business case might not be an ideal for your purposes - it will have limitations and should not be treated as the solution. Rather, it is best utilized as a general starting point. Has your enterprise created business cases for other endeavors? Those internal templates should be consulted.
With these caveats aside, you are encouraged to join the IACCM Community of Interest (COI) focused on Outsourcing, as there are probably a few members in the Outsourcing COI who can share some specific examples.
• BHP Billiton
Thank you very much, i will join the IACCM Community of Interest :)
BlueCross BlueShield of South Carolina
It is a good topic to talk about. I struggle with what metrics to report on. It only takes one bad contract to cost the organization lots of money but it is hard for people to grasp it. How do you report on that? Currently, I report on the number of contracts the organization has and the amount of money expected to spend under a contract. Cost savings and cost avoidance is reported by my department through our category managers. I believe the category managers take the first offer from a vendor and then subtract the final number after negotiations to calculate cost avoidance. Cost savings is calculated if the organization will contractually pay less under this contract than it historically has for that same commodity. These definitions were agreed to by both our CFO and our Director.
• Century 21 Vanguard
Patrick, are you familiar with IACCM's "10 Pitfalls" research? This study looks at the top value erosion areas. Flip the erosion perspective and you'll quickly find key areas where by improving your capabilities you will improve ROI. Please reach out to me if you wish to discuss this in detail.
• BlueCross BlueShield of South Carolina
Thank you for the excellent recommendation. I've reviewed the research in the "10 Pitfalls" and it has provided me with concepts that I will research further internally.
Patrick, in addition to this first part of the "ROI of Contract Management", I'd also recommend to continue reading Tim's part two of that blog: blog.iaccm.com/commitment-matters-tim-cummins-blog/the-roi-of-contract-management-part-2 You may have already read how the article describes how the Contract Management role has evolved. Now, in this new section, you will have the chance to identify the benefits that can be achieved when creating and demonstrating value from such a role.
Michelle, you might want to first search the IACCM Library for data that can help you make your case. We have studied many large global companies and believe the average loss for poor contract management is about 9.15% of revenue. Of course this varies depending on industry and your organization's contracting maturity. Please reach out to me if you'd be interested in an assessment of your organization.
You might also wish to look for last year's Innovation Awards, where the Winner Layne Jeffery built a CM department where there was none:
An interview with him and the other award winners is in the library as well.
• Rogers Communications
Thanks to both of you. I'm new here, so my apologies if I'm asking obvious questions.
Michelle, if you are still struggling with this, let me know and I will be happy to arrange a time to talk and help with your questions.
I hesitate to give you a generic answer because it depends a lot on some of the business objectives and management issues that prevail in your company. Your success will depend on making a proposal that aligns with management thinking and priorities.
You can reach me at firstname.lastname@example.org
• EB5 Brics
While you build the business case, if you need technical assistance or perhaps some metrics, I'd be happy to help.
In terms of the 8 different payment schemes I was specifically referring to what we call 'payment curves' (see attached graphic) as opposed to payment regimes such as cost+ (time and material), fixed price, cost + fixed fee, etc. In this light these are grouped into 5 main families with a couple of variations inside each. These are as follows:
- 'all or none' payment curves
- Linear payment curves
- Non-linear payment curves
- Alternative payment such as demerit point and visual payment curves
- Matrix payment curves
The intent of this discussion is to simply highlight that the choice of payment curve, similar to the choice of performance measure and level, can have a significant impact on the success (or otherwise) of the overall performance management framework. My blog (www.performancebasedcontracting.com) has 3 posts specifically on this topic including the graphics.
I hope this helps and answers your questions. However, please let me know if you have any further questions.
Whilst it's the way that a lot more suppliers seem to be going, if you think about this in with your procurement hat on - and that is what's going to happen at the end of 3-5 years - it's tough to see you doing anything but just rolling this over (and over and over again) as someone else has all of your data on their server.
At the risk of being awfully contentious, my own experience is that in a lot of circumstances, there's little consideration of whole of life costs - especially with that thinking about what's to happen in 3-5 years. Right now, many of these purchases done right now are flying under the radar of procurement teams because they're below procurement limits or just being called operational expenditure within business delegated authorities.
That said, one of the benefits that I've also seen is that upgrades happen automatically on the server of the host without the business having to create teams to do this, especially where there was a major upgrade - which were previously a big financial impact on many businesses.