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Property and Vendor Management Services:

Overview of the RFP/SLA Process:

The following process is listed to help inform the organization of the process and practices they must include in their decision or selection process to obtain the services of a consultant/consulting firm.

The primary principle behind the RFP/Contract process is cost savings for the organization. The ability to offload the IT/IS equipment and personnel to the outsourcing partner improves the organizations bottom line, and reduces the costs to deploy state-of-the-art technologies, upgrades, and maintenance. If there are budgetary constraints, outsourcing frees up existing IT/IS personnel for more strategic duties or efficient use of their time. IT/IS maintenance and upgrade costs, high salaries of IT/IS employees, and cost of training and upgrading skill sets are cost deterrents when comparing internal and external IT/IS services.

The secondary principle behind the RFP/Contract process is based on an evaluation of the internal strengths and weaknesses of the IT/IS capabilities to determine if they can satisfy strategic goals and adapt to business drivers; if the internal organizational IT/IS abilities are not capable of providing the services and technology to meet the four strategic goals, then outsourcing can provide the necessary abilities to compensate for this internal weakness. The existing IT/IS organization is often designed to allow for decentralized IT/IS services based on individual organizational departments or subsidiary needs. This leads to specialized IT/IS architectures that cannot be integrated at an enterprise level without the development of a new internal IT/IS infrastructure leading to added operational costs.

Lastly the selection of the service provider’s ability to supply the services through existing capabilities, partnerships, and alliances is critical to the success of outsourcing or utilizing internal resources. Vendor-selection criteria such as governance and skill requirements, cost structures, and acceptable locations is paramount to determining if the vendor has the skills necessary to implement the IT/IS architecture the organization requires. The service provides must be able to provide services to complement existing IT/IS services and overcome any weaknesses. Some organizational constraints that can affect the choice of service providers are: Personnel restrictions, such as union contracts; regulatory restrictions, such as data-privacy laws; company culture, such as user expectations for IT/IS response time; and business restrictions, including trade-secret protections and disaster-recovery requirements.

Responsibilities: Organization and Vendor:

Organization Negotiating Perspective/Tactics:

 It is the responsibility of the organization contemplating Outsourcing, insourcing, or off-shoring to learn how to create a contract and effectively negotiate this contract so they do not get taken advantage of by the service provider. The organization can have an advocate (lawyer, friend, ect) who has experience with IT/IS outsourcing/insourcing/off-shoring contract negotiations to help them through the process. Here is a common way to do effective negotiation:

 1. Begin by identifying an initial set of negotiation topics based on prior negotiations, existing organizational guidelines, policies and procedures, organizational objectives, marketing information about services being offered and information about the vendor.

 Typical negotiation topics are flexibility, price, schedule, payment milestones and payment terms, scope of service, factors for designing and deploying the service, management and control issues, features, deliverables, Service Level, resources, transition issues (such as personnel), termination provisions, security, confidentiality, warranties and indemnities, limitation of liability, use of subcontractors and licensing.

 2. Determine which topics to cover in the first negotiation meeting (the strategy for negotiation).

 3. Prior to negotiation, the client communicates the initial set of topics to the vendor, and vice versa.

 4. Updating topics are done during the negotiation as new topics may be uncovered. They will also decide what topics to cover in the next meeting.

 5. During negotiation, monitor the status of the topics. Track them to closure, and finally into the contract.

Key Points:

Ask for Price Benchmarking:

In addition to competitive and itemized pricing, standard contractual clauses should provide for periodic benchmarking of prices against the market, especially for services like telecommunications and disk storage, where prices can decline 10%-12% annually.

Benchmarking could be provided by an independent third party and paid equally by the vendor and client to remove any real or perceived bias. They may also agree to base benchmarking on widely accepted industrial market surveys.

 Aim High, but do not be Unrealistic:

It is good to aim high on what you can get out of a negotiation, but you have to be realistic. As far as possible, you should work on win-win situations with your vendor.

 Avoid Vague Talks of Partnership:

Further, where negotiating is possible, vague talks of "partnership" should be avoided, and as mentioned earlier, all details must be spelt out in writing.

 Don’t just Focus on the Price Alone:

While negotiating the final price is important, teams also need to pay considerable attention to contract terms and conditions, which could have a huge impact over the course of a contract. In particular, you need to focus on gaining maximum flexibility to make changes as a result of the quick changing business environment that you may be operating in. You may also want to focus on the prices for change. Vendors often price their base contracts very low, but charge as much as possible for changes.

 Focus on Interests, Not Positions:

This would allow the parties to go beyond what is on the table for negotiation and come out with innovative win-win situations.

Objective Standards based on Industry Practice:

Where possible it is desirable for clients not to accept standard form contracts as these may be heavily weighted in favor of the vendor. Choose instead for objective standards and standards based on industry. Whether contracts can be negotiated or standard form contracts have to be accepted will depend on the bargaining powers of the parties concerned.

Allow for Price Adjustments:

It may come as a surprise to clients that very often the pricing reached during contract negotiations also fails to be best and final. Indeed, while negotiated prices may represent the best intentions of both vendor and client, standard outsourcing contracts specify a transition period (normally 90-120 days) during which operational “surprises can further adjust pricing. Unlike earlier best-and-final prices, contract terms often specify adjustment boundaries (e.g. 10%) without renegotiation.

Consultant or 3rd party IT/IS Vendor:

 It is the responsibility of a Consultant or 3rd party IT/IS vendor to help the organization create a working relationship, whereby, neither party feels they have been taken advantage of, feels obligated to continue or make an open ended contract because deliverables are not met, that the system is too complicated and not documented properly; It is the responsibility of the consultant to ensure that the negotiation process is positive and illustrates to the organization their capabilities and willingness to utilize their knowledge and experience as temporary partners who supplies the resources and staff to enable the organization to:

This is a representation of the documents we can provide our clients to help them develop an RFP/SLA to outsource/insource/offshore their business needs. From Software development to desktop support, HGC can provide the processes, methodologies, and leadership your organization requires to succeed. If you would like to buy copies of our RFP/SLA development processes, write us at: Hiredgunconsulting@sbcglobal.net 

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Last modified: October 28, 2007