Selecting the right consultancy supplier for your organisation is not easy. There are many variables to consider and not least of which is the need to ensure that the approach you take in reaching a decision is in full alignment with the outcomes you require and the complexity of the project. Who should be involved in the decision internally? What, if anything, should be competed? How do you ensure that your organisation will achieve best value for money from the engagement?
How to identify and select the right supplier
If potential suppliers have not already been discussed within the initial need definition stage then you will need to identify appropriate, experienced consultants that are capable of doing the planned work. This is typically achieved either through a pre-qualification or a Request for Information (RFI) exercise.
- What type of services are provided?
- How do they resource projects? (direct delivery, delivery via associate pool, combination)
- How long have they been a going concern?
- Who are their key people?
- Are they specialised in your particular business need?
- What is the average value of their typical projects?
- What geography do they cover? (National/International)
- Are they considered to be market leading? On what criteria?
Pre-qualification can be a reasonably lengthy process so organisations who regularly buy consulting services may look to create a preferred (or qualified) supplier list (PSL). However there are two key considerations that must be considered when creating a PSL:
- It is critical that the list of appointed firms remains dynamic as capabilities can change very quickly in the consultancy marketplace. Firms should be rotated on and off on a regular basis depending on project performance and any changes in their overall market capability/capacity.
- The PSL must provide the spectrum of choice that internal clients require and firms should be appointed against a balance of quality and commercial criteria – i.e. not just relative fee rates.
Once the supplier is identified you will need to have more detailed discussions as to how to engage for the particular project or indeed how to engage for a longer term relationship.
It is important at the outset of these discussions to understand the various commercial models available and the key contractual principles that each party will seek to address.
Clearly there are a number of different models available ranging from a traditional time and materials concept through to more innovative risk and reward pricing.
Here is our guide to the different consultancy Commercial Models. The document provides a clear definition of what each model means, the advantages and disadvantages of adopting them for both parties, the limitations and the most appropriate suitable scenarios.
It is important to remember as well that discussions on commercial models do not stand alone. You need to consider other variables such as structuring a rate card, the grade definition and expected levels of experience. How is time calculated? What is a standard working day? Is overtime chargeable? How is tax calculated and paid? What about payment terms and how should these be applied to the different models? When are expenses chargeable? Whose expense policy applies and what (if any) mechanisms are appropriate to manage and monitor the charging of expenses by suppliers balanced in the context of evolving project requirements and the need for agility and responsiveness on a supplier’s part. The guide provides greater clarity on all of these matters.
As with consultancy commercial models there are also a range of options available for entering into a contract:
Is a framework agreement the right answer? Are you contemplating multiple engagements and an ongoing relationship? What type of services are you usually going to buy from the supplier? Considerable time and effort are involved in setting up a framework agreement – is this really necessary for the envisaged relationship? Sometimes a rate card is enough to provide the certainty required. Alternatively both parties will have their own business terms – are one or other the better starting point? A supplier’s business terms will be appropriately tailored for professional services and any regulatory or market requirements that are relevant /typical. Would it save time and effort and be more efficient to use these? If so, are they reasonably balanced?
Determining the appropriate contracting structure is therefore key and depends much on the overall aim of the parties – a long term relationship or a bespoke/one off contract. Here is our guide to Consultancy Contracting.
Scope of Services
Once the contract structure is settled the parties will need to consider the terms within that contract i.e. the scope of services. There are essentially 6 key questions to cover in a scope of services.
Why: why are consultancy services being procured? – this is the background.
What: what are the consultancy services being procured? This is the meat of the scope of this project and will be described in a way that is consistent with the chosen commercial model.
Who: who needs to do what? This area reflects the symbiotic nature of consultancy projects and recognises the joint dependencies.
How: what are the necessary standards…this seeks to describe a mutual understanding of the standard and manner in which the services will be delivered.
When and where: these questions speak for themselves but are generally the areas relating to the timing of the services and the location of the services. These are all matters that need to be thought through and agreed to at the outset.
This is our guide to creating an effective scope of services.