3 tips to minimize COVID-19 disruption to services procurement with the support of an MSP

Editor’s note: COVID-19 has forced organizations to come to grips with a typically under-managed sprawl of services contracts, even as more and more organizations have been looking at SOW (statement of work) engagements with fixed-fee, outcome-based contracts. While much attention has been focused on the pre-signature sourcing and contracting phase of the process, it is the post-signature service delivery and contract/supplier management phase of the engagement that figures heavily in taking the SOW outcome to the bank. Our guest contributor article today looks at how outsourced managed programs can add value in the post-signature phase of SOW management, a phase that many organizations come up short on. Spend Matters welcomes this guest post from Scott Brewer of Randstad Sourceright.  

Since the COVID-19 outbreak began, its impact on organizations has been profound and far-reaching. From broad adoption of work-from-home practices to the acceleration of digital transformation, businesses have had to adapt to new circumstances across the board with varying degrees of success. Furthermore, the pandemic’s economic impact on supply chains, procured services disruptions and contract defaults has had a significant effect on procurement management. This has resulted in many companies struggling to effectively assess and respond to changes affecting their services procurement and statement of work (SOW) engagements.

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So how can procurement leaders address the consequences of the COVID-19 crisis on services procurement and protect their company’s best interests? A number of organizations are turning to their managed services program (MSP) providers to address key areas of concern:

1. Identifying service engagements and supplier workers impacted by site access restrictions.

Early on in the outbreak, companies scrambled to assess the impact of quarantines and lockdowns on their procured service engagements. Buyers needed to quickly determine what projects and services relied on supplier workers residing at company-owned worksites, subject to shutdowns, and adjust accordingly. Companies with SOW components within their MSP programs were able to leverage their MSP team to identify the impacted sites and supplier workers. Analytics provided by the MSPs enabled buyers to proactively identify and prioritize the engagements and suppliers needing immediate remediation plans.

Adapting to shifting market demands in the midst of a pandemic has challenged traditional paradigms on the viability of onsite versus virtual service delivery. Drastic and immediate changes have forced the development of better virtual workplace platforms and collaboration tools. Service suppliers have adapted, and buyers with MSPs supporting services procurement can leverage their program analytics to assess those best positioned to deliver virtually or overall.

For services tied to essential businesses and their applicable facilities, there are emerging screening requirements linked to COVID health and safety precautions. For instance, some companies now require supplier workers to complete safety training centered on protective equipment, cleaning practices and distancing prior to engaging services onsite. Having an MSP provider that can add this training validation to their existing onboarding processes will accelerate service delivery, improve efficiency and reduce exposure to workplace health risks.

2. Assessing the effects of “force majeure” or catastrophic default clauses within service engagement contracts.

Similar to the urgency on restricted site measures, buying companies are faced with the risk of supplier delivery default. Prior to COVID-19, “force majeure” clauses were given little attention in the drafting process but have since become more relevant and impactful. Struggling suppliers are seeking to limit their losses, and buyers need to know what and how much is at stake.

MSPs supporting services procurement maintain electronic service engagement records containing the contract terms, supplier workers records, deliverables/SLA’s and payment transactions. Buying companies have been leveraging their MSPs to retrieve the stored, active contract copies to quickly assess the default risk exposure per engagement.

The MSP program technology being used can provide electronic contract drafting, collaboration and authorization functionality. This promotes a compliant and consistent contracting process under the guidance of the accompanying program team. Force majeure terms can be drafted per policy, inserted into a common engagement template, and locked to prevent any unfavorable edits during the negotiation process.

3. Reconciling delivered services with payments owed on discontinued contracts.

As budgets were cut and projects terminated early on in the pandemic, companies were forced to reconcile services received with supplier payments made on inflight engagements that were cancelled. To help with this process, companies with an MSP partner were able to compare the payment stream against deliverables completed and those pending at termination. Those companies that leveraged “retainer holdback” provisions for T&M engagements were in a more favorable position for outstanding items owed.

This termination experience exposed sizable risks from poorly structured service agreements and the limitations of managing pay-for-performance with traditional P2P (procure-to-pay) systems. To combat this, best-in-class companies are planning more outcome-based engagements that enforce specific deliverables accountability and provide better cost-control management overall. MSP programs enable buyers to successfully frame their outcome-based agreements and ensure pay-for-performance controls.

The pandemic has shown that even in the most carefully drafted service contracts, unforeseen circumstances can expose companies to delivery risk and unplanned costs. The current crisis is unprecedented, and how procurement leaders react and adapt will have significant impacts on the services they buy and, ultimately, their company’s success. By leveraging the expertise of their MSP, buying organizations can engage a trusted partner that brings the needed expertise, marketplace insight, and policy and contractual advisement to guide their overall service procurement lifecycle.

Scott Brewer is the Global Services Procurement (SOW) Practice Lead & Vice President, Contingent Workforce Solutions at Randstad Sourceright.