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Closed Bid Renewal Process for Outsourcing Services

If you’re engaging in a closed bid renewal process for your outsourcing services there are a number of keys to remember and to operate by:

In any renewal process, in the current economic environment where all business are trying to cut costs and increase their revenue opportunities, nothing should be off the table. Labor reductions, equipment right sizing, changes to service levels that result in cost savings as well as changes to print management workflows that change end user habits to redirect print output to the lowest cost device should all be on the table. At the same time, the renewal process is NOT all about beating up the (incumbent) vendor to get them to reduce their costs to such a point where their margins are untenable and the operation becomes a burden on them financially.

While your outsourcing provider is your partner, remember that in outsourcing, outsourcing providers make margin on head count, the number and size/productivity levels of equipment, more challenging SLAs as well as expanding their services, e.g., lit support services, electronic discovery and other support services areas such as reception, word processing, catering/conferencing, etc. Therefore, don’t expect your outsourcing provider to come to you with the maximum head count and equipment reductions that you can accomplish, it is in the provider’s best interests that the opposite occur. They have a dis-incentive to reduce headcount, downsize equipment and reduce service levels as it reduces the overall revenue base of the operation and consequently, their margin. You may want to consider a clause in your contract that shares any cost savings through headcount, services or equipment reduction initiated by the vendor. This way, they do have an incentive to come to you with cost savings.

But a successful renewal process can’t be all slanted to the customer and against the vendor/partner. Outsourcing vendors today acknowledge that their traditional revenue basis in labor and equipment are drying up. That’s why they are pursuing other services such as lit support, print distribution/management cost recovery and output maximization schemes and other services areas to broaden their reach and revenue base. As a Firm, you should look towards these opportunities to reduce your own head count, reduce costs and achieve additional client chargeback where prudent. It is definitely not a one-way street.

Remember that office support services are NOT all commodity-based and if you have an incumbent provider, you no doubt have tenured outsourced staff and other operational cost blocks that have evolved over the course of time. If you have had the same vendor more than 8 or 10 years, contract creep has no doubt occurred in your contract.

Remember that you pay a high price if you require the vendor to keep staff turnover down, keep ramped up office equipment and insist on unnecessary service levels. Don’t let your outsourcing provider strong arm you into perpetuating high staffing costs buy appealing to your desires for low turnover and keeping the same familiar faces. Outsourcing providers are supposed to be cycling in/out non critical staffing positions (aside from site management) to reduce costs and keep staff fresh. Turnover is good to bring in fresh blood and lower costs. Complacency and familiarity breeds high costs and lesser productivity.

Finally, don’t fall into the trap that you must have the same copier models all over the Firm. Right size the fleet that is based on the output volumes for print, scan and traditional copy volumes. Remember that convenience copier volume is decreasing by as much at 10% per year with the push towards digital documents and decentralized scanning. Chargeback for decentralized scanning, especially by Corporate and litigation practice areas open up new areas for revenue enhancements too.

The last word when you renew is Service Level Agreement, KPIs and Performance Standards. In your renewal process, if you’re like most Firms today, you’re looking to cut costs, perhaps reduce service levels and really put your in house vendor to the test to deliver more for less. You want to be able to substantiate and regulate this. First off, you need meaningful management reporting and Key Performance Indicators that are tracked and reported, but are not just hallow numbers like many fall into–reports should show trending analysis.

Where are the KPIs headed: up or down; what is this telling me? Secondly, you want very detailed and descriptive Service Level Agreements. You MUST articulate and document all of the services, the service levels, the expectations, the unexpected–everything that you can think of to measure and that you want your provider to perform on paper so there are no disagreements or misunderstanding later on, no scope creep or “not my job”.

Finally, to substantiate, regulate and police these Service Level Agreements, you want Performance Standards in place that articulate the desired success rates in as many of the key and measurable services areas as possible. You want a risk reward system that puts the onus on the vendor to deliver, with penalties if they don’t, and yes, some reward if the provider EXCEEDS the standards. Note you are NOT rewarding the vendor for simply doing their job; subways and buses run on time because they are supposed to–you can reward the vendor when they go above and beyond the call of duty and perform to exceed service standards (assuming they are not overstaffed of course!) Again, you want strict, specific and strong control mechanisms to inspire and challenge your provider. Your provider will respect this and use this hopefully to make your operation the highest standard they can achieve.

You don’t need an RFP process to total revamp and revolutionize your outsourcing services. You do need to approach it with an open mind, make sure the provider knows everything is on the table and that you’ll listen to new services, it if makes sense to the Firm. As always, RAS Consulting is here to provide consulting and mentoring to help you achieve your Outsourcing Services Renewal Bid objectives.

 

Please also visit our website at www.ras-consulting.com   To sign up for our blog, please click here.

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