Examining Services Procurement SOW Adoption: Strategic Sourcing and Contract Management

This post references material from the Compass series report: Overcoming Challenges of Project- and SOW-based Solution Adoption. This paper is available in the Spend Matters Research Library and is free to qualified practitioners.

Spend Matters recommends considering the power of sourcing optimization tools to drive to specific outcomes rather than forcing suppliers to bid a rigid specification. By encouraging supplier-driven creativity and fluid responses that can then be compared against each other with internal constraints applied (e.g., 20% of business to sub-tier suppliers must be awarded to diversity vendors; no more than 50% of a contract can be staffed with offshore resources in a given set of countries) sourcing optimization can open up a world of better total cost outcomes – and better stakeholder engagement throughout the process – rather than simple unit cost-based decisions for many larger SOW services procurement decisions.

We've seen sourcing optimization applied to contingent spend as well. In one case study, we previously documented one project "involving nearly 200 stakeholders, 5,000 workers, 600+ job descriptions across 36 locations, 10 skill categories and 104 suppliers. Using the sourcing platform, the organization was able to gather information and conduct evaluations at multiple local, regional and global levels by individual sub-category based on specific job descriptions, locations and skill categories. Specifically, the software allowed the company to collect and examine data at a highly granular level, including individual pay rates, social costs and management fees across all geographies, sites and job descriptions."

Our research findings also suggest the importance of contract creation, implementation, management, and overall contract-based project management and audit as a core component of an overall SOW engagement model. Contract management software as an extension or adjunct to core VMS capabilities, which includes the ability to manage clause libraries, terms, T&Cs, etc. and ultimately ties back to project remuneration and supplier feedback to contract-based performance is an immensely powerful management tool. This approach tied to extended VMS capability to enable overall project oversight/budgeting and threshold/milestone-based management and payment against deliveries (e.g., as one provider suggests, "tracking how much of a premium/discount organizations are paying with the fixed fee pricing...in other words, tracking vendor margins)" is extremely valuable.

Curious to get learn more about sourcing and contract management tips for SOW spend? Download: Overcoming Challenges of Project- and SOW-based Solution Adoption in the Spend Matters research library today.

- Jason Busch

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