Top Tips to Consider when Procuring Consultancy Services
Recent global events have accelerated business transformation projects within many organisations. Such projects often necessitate the engagement of external consultants with non-core expertise that is unavailable in-house. Procurement can deliver real value by managing the strategies, contracts and relationships between stakeholders and consultancy service providers. At a recent RoundTable discussion, procurement professionals from within the CASME community identified best practice and top tips, plus some of the latest trends and technologies impacting this sector.
Consultancy assistance is typically sought and engaged when internal expertise is lacking due to hiring restrictions or resource allocation practices. Engagements are usually associated with non-core competencies of the organisation, although recent global events have resulted in an acceleration of overall business transformation projects. Consultancy projects should be carefully aligned across the organisation to ensure consistency with objectives and to avoid duplication or fragmented spend. Due diligence and evaluation are essential in selecting a consulting partner with the knowledge, reputation, capabilities, compatibility, and bench strength suited to the needs of the organisation.
A centralised, focused information repository is an ideal way to maintain current insights into consultants’ performance regardless of their size. Preferred supplier lists (PSLs) should not be used exclusively, in order to avoid unnecessary expense and reliance on large established consultancies (Big 3/Big 4) and to enable a broader tender that includes niche and diverse suppliers. Working with qualified subject matter experts (SMEs) has been elevated significantly by using freelancers and former experienced consultants.
Key contract clauses focused on consultancy, to address risk and compliance, include:
- IP ownership
- Defined roles/experience/rates of assigned team
- Definition of blended rates
- Key personnel replacement approval
- Knowledge transfer
- Contract variation procedure
- Force majeure specifics.
Time and materials, and fixed cost, remain the cost models most frequently employed, with outcome or performance-based pricing gaining increased attention. Master service agreements (MSAs), service level agreements (SLAs) and key performance indicators (KPIs) targeted at compliance and adherence must be clearly defined and understood, with frequent milestone reviews. Due to the impact of the pandemic, overall quality of deliverables against targets may exceed cost as a value measurement in many instances.
Procurement has used its elevated status as a valued strategic partner to obtain increased visibility and accessibility to stakeholder objectives and projects. The use of stakeholder mapping to understand the influence of strategic stakeholders, and the emphasis on collaborative approaches among consultancy stakeholders/suppliers and Procurement, have added credibility to the enterprise regarding approval of future engagements. The value of a robust supplier relationship programme (SRM) managed by Procurement, has proved to be of significant value over the past two years, leading to a level of consistency in managing primary suppliers as well as those sub-contractors throughout the supply base.
Trends and Technology:
Recent experiences utilising offshore or nearshore consultancies to manage continuity of supply have demonstrated the added value that these suppliers can offer alongside reasonable costs. This trend is set to continue. In-house consultants have begun to receive more attention, particularly when very specific, long-term expertise may be required. The level of consistency with in-house and the associated increase in internal value has influenced organisations to assess the ROI of external assistance versus internal competence in certain cases. Digital transformation strategies involving AI, ML, RPA, Blockchain, IoT and more will place an additional burden on consultancy providers to continuously upgrade their competency and experience in these tools. M&A activities are anticipated to expand exponentially as consultancies seek to maintain current technology expertise and offer a platform of digital services.
The acquisition of small, technology businesses will provide a fertile source for an instant digital offering. This practice, combined with other consolidation activities, will result in the unfortunate consequence of limited supply options and loss of client leverage. Additionally, diverse suppliers may also be absorbed - thereby increasing the complexity of enabling inclusion activity to be as expansive as it should be. It remains incumbent on the client base to evaluate diversity and inclusion (D&I) opportunities and to pursue the sub-contractor base for qualified, diverse expertise.
The full report from the Consultancy Services RoundTable will be released to CASME subscribers shortly. Discover more about our upcoming programme of procurement events.