Achieving Best Practice

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Achieving Best Practice

• Robert Sumroy
• 17 June 2004

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The Life of an Outsourcing Deal
DECISION TO OUTSOURCE
SUPPLIERSELECTION
CONTRACT NEGOTIATION
SCHEDULEPREPARATION
SERVICEDELIVERY
RE-EVALUATIONAND EXIT
RFP
MOU
CONTRACTSIGNING
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Outsourcing Lifecycle
DECISION TO OUTSOURCE
RE-EVALUATIONAND EXIT
SUPPLIERSELECTION
SERVICEDELIVERY
CONTRACT NEGOTIATION
SCHEDULEPREPARATION
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Decision to Outsource
DECISION TO OUTSOURCE
RE-EVALUATIONAND EXIT
SUPPLIERSELECTION
SERVICEDELIVERY
SCHEDULEPREPARATION
CONTRACT NEGOTIATION
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Client Stakeholders
Driver
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Unified Client Team
Driver
Executive Management
HR
Operational Management
Tax
Finance
Procurement
IT
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Supplier Selection
DECISION TO OUTSOURCE
RE-EVALUATIONAND EXIT
SUPPLIERSELECTION
SERVICEDELIVERY
CONTRACT NEGOTIATION
SCHEDULEPREPARATION
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Supplier Selection

• Solution
• Price
• Reputation
• Technical Compatibility
• Cultural Fit
• Robustness
• Terms of Engagement

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Contract Negotiation
DECISION TO OUTSOURCE
RE-EVALUATIONAND EXIT
SUPPLIERSELECTION
SERVICEDELIVERY
SCHEDULEPREPARATION
CONTRACT NEGOTIATION
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Benefits of a Comprehensive Contract

• Charging and benchmarking
• Risk and liability
• IPR
• Controlled flexibility
• Voluntary and partial termination
• Exit and migration
• NB Beware of agreements to agree

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Schedule Preparation
DECISION TO OUTSOURCE
RE-EVALUATIONAND EXIT
SUPPLIERSELECTION
SERVICEDELIVERY
CONTRACT NEGOTIATION
SCHEDULEPREPARATION
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Schedules Schedule 1 DEFINITIONS Schedule 2
SERVICES AND SERVICE LEVELS Schedule 3 SERVICE
CREDIT REGIME Schedule 4 SERVICE
MANAGEMENT Schedule 5 TRANSITION AND
TRANSFORMATION PLANS Schedule 6 CHARGES AND
PAYMENT Schedule 7 PRICE VARIATION AND
BENCHMARKING Schedule 8 CONTRACT MANAGEMENT AND
CHANGE CONTROL Schedule 9 OPERATIONAL PROCEDURES
MANUAL Schedule 10 ASSET INVENTORY/PREMISES Schedu
le 11 THIRD PARTY CONTRACTS/AGENCY
SERVICES Schedule 12 EXIT MANAGEMENT Schedule
13 SERVICE CONTINUITY Schedule 14 SECURITY Schedul
e 15 HUMAN RESOURCES Schedule 16 PENSIONS
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Schedules

• Accurately describe the deal
• Legally binding
• Consistent with Ts and Cs
• Consistent with other schedules
• Agreements to agree
• boilerplate protection

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Schedules - A Project Within a Project

• Engage early
• Build the right team
• internal experts
• consultants
• legal advisers
• Manage the process to completion
• Coach, counsel and coax
• Impact on contract timelines

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Service Delivery
DECISION TO OUTSOURCE
RE-EVALUATIONAND EXIT
SUPPLIERSELECTION
SERVICEDELIVERY
CONTRACT NEGOTIATION
SCHEDULEPREPARATION
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Relationship Management

• Monitoring performance and reports
• Relationship management
• Change control
• Technology refresh
• Price review and benchmarking
• Business transformation
• Acquisition and divestment
• Partial and early termination

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But Easier Said Than Done

• Identifying initial SLAs and verification
• Measuring the right thing and the appropriate use
  of service credits (debits?)
• Multiple levels of governance and clearly
  understood levels of authority
• Keeping track of changes in the manner
  contemplated by the agreement

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Relationship Management
RELATIONSHIP
Original Contract
TIME
ContractSigning Date
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Re-evaluation and Exit
RE-EVALUATIONAND EXIT
DECISION TO OUTSOURCE
SUPPLIERSELECTION
SERVICEDELIVERY
CONTRACT NEGOTIATION
SCHEDULEPREPARATION
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Exit or Escape

• Step in rights
• Consensual termination/renegotiation
• Hostile termination/insourcing
• Partial termination

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Fundamentals of a Smooth Transfer

• Exit plan
• Asset identification and transfer
• Third party contracts and consents
• Employees and consultants (and TUPE)
• IPR and know-how issues
• Migration and post-transfer assistance

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Collaborative Contracting - the new Holy Grail?

• Objective Subjective
• Quantitative Qualitative
• Linear Collaborative
• Bi-partite Partnership
• Specific Holistic
• Supplier incentives Win/win

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Collaborative Contracting - a new risk profile?

• Minimum term (5, 7, 10 years) Annual review/break
  points
• Revenue commitments Performance payments
• Charge profiles Market benchmarking
• Defined benefits Consultancy approach

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Best Practice Pre-Contract
Deal quality
Minimum expectation
Proposed ContractSigning Date
Time
Commencement of Process
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Best Practice Pre-Contract
Deal quality
Minimum expectation
Time
ContractSigning Date
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Best Practice Pre-Contract
Deal quality
Minimum expectation
Time
ContractSigning Date
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Best Practice Pre-Contract
Deal quality
Minimum expectation
ContractSigning Date
Time
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Best Practice Post-Signing
Deal quality
Relationship
Managingchange
Original contract
Time
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Achieving Best Practice

• Unified client team is vital
• Early legal input saves costs in the long term
• Negotiations are a project to be managed
• Contract must be relevant to the operations team
• Controlled flexibility is key to long term
  success
• Moving towards collaborative contracting
• Do not underestimate the time to complete

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Achieving Best Practice

• Robert Sumroy
• 17 June 2004

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(No Transcript)