Procurement of Professional Services – a view of value drivers (part 3)

Today we'll talk about the importance of choosing the right type of supplier in the professional services field. Again, our focus is largely consulting, but much is applicable elsewhere. And arguably, this issue could logically come before our part 2 on commercial matters, but the logic is that being able to implement today's thoughts requires some sophistication amongst procurement category managers, and the ability to work closely with the stakeholder community. So in terms of maturity of a procurement function, it probably follows the part 1 suggestions.

And these issues can have a larger effect on value than the procurement tools and mechanisms we talked about in part 2.  Let’s take an example – your organisation is looking for a project manager for three months to oversee the kick-off of an important IT programme, then hand over to a permanent member of staff who can’t be released just yet.

At one extreme, some would go straight to McKinsey on the grounds that “we use them for all our important work”. I don’t think McKinsey would particularly want this sort of work, but for a regular client, I’m sure they would find someone – at something like £2000+ a day.  A “big four” firm might charge between £1500 and £1800 a day for a pretty experienced consultant. A specialist advisory firm in the project management field might come in at £1200-1500; and a “body shop” type provider might be around the £1000. At the other extreme, you may find a perfectly competent, one man band interim for perhaps £500-750 a day.

So there’s a factor of 3 or 4 between the highest and lowest price, almost certainly more than the likely benefit you're going to get from all the mechanisms we talked about in part 2.

But it’s not just a case of saying “let’s go for the contractor”. Do you need a set of robust, documented and systemised processes to back up the individual? A firm may well have those – an individual may not. You might you want the same firm to provide other services on this project, so one with broader capability may be useful. It may be such an important project that the Board decide money is no object - just find THE absolute best project manager who is out there. Or it may be that a brand name reassures top management - not a great reason, to be honest, but one that procurement often has to cope with.

And this is where procurement’s ability to work with stakeholders, gain their confidence and trust really matters. If the CIO has always used Accenture or whoever, persuading her that Chris from Procurement Excellent (shameless plug there) can do it at least as well for half the price is a challenge. Quite rightly, while it is procurement who will claim the “saving” (60 days at £800 a day rate reduction – a nice contribution to your KPIs), it is the budget holder who will suffer if the contractor fails to deliver.

So the two key points for procurement people here are firstly, to build a real understanding of the market, of the capability held by different firms, and of the pros and cons of using the various resourcing options. Then secondly (and this is strongly linked to the first), developing credibility with the internal stakeholders - the budget holders and users of professional services.  If you can get this right, choosing the appropriate resource for each piece of work can lead to huge savings, and at the same time, better results from the providers.

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