For the past few years, the “hot topic” in the contingent workforce industry has been the management of Statement of Work (SOW) project services. We have all read the statistics. “For every dollar spent on agency contractors, a large enterprise spends $3-5 on project services.” “The percentage of projects that fall short of time, budget or quality goals ranges from 40-60 percent.” Of course, whenever a problem is identified, a seemingly unlimited number of companies come forward with a solution. However, when it comes to managing project services spend, we need to heed the advice of Abraham Maslow: “It is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.”
When it comes to managing SOW spend, many vendor management systems (VMS) are ‘hammers,’ treating SOW projects as though they are nothing more than the engagement of multiple independent contractors working under time-and-materials payment terms. In reality, most projects are highly complex, requiring careful balancing of scope, people time and money. An effective VMS system can provide that balance only if it has been designed to address these four elements of project services spend.
PREMIUM CONTENT: VMS and MSP Differentiators report
Defining project scope. Project overruns are often tied to a poor statement of work that fails to clearly state project goals, deliverables, responsibilities, schedules, acceptance criteria, SLAs and related KPIs, and other critical project details. The VMS must provide extensive support when defining project details, forecasting required resources, estimating resource costs, structuring agreements, and managing against the SOW once the project is underway.
Critical VMS features include:
Online creation and distribution of an RFx, with the ability to define the response format through user-specified pricing and non-pricing questions.
VMS allows standard Ts& Cs and standard documents to be uploaded so that they can be automatically incorporated into the SOW.
Once the supplier(s) is selected, the RFx automatically converts into a SOW and the system can then issue and process a binding agreement.
The SOW can include multiple rate configurations including time-and materials (hourly, daily, monthly), fixed price/deliverable based pricing, cost plus pricing (cost with invoices, expenses etc. plus a fixed fee as percentage or a flat rate fee) and rate cards for different skills or different deliverables.
Pricing structures can differ by suppliers, business units, work locations, project work packages, etc.
For every work package or sub-project, the buyer can define all deliverables, the charge number, cost center, hours allocated (if any), estimated cost and the individuals who will have sign-off authority on the deliverables.
Support for business process outsourcing (BPO) projects.
Forging and managing the project team. Project teams are comprised of multiple team members, each with a specialized skill, who need to work collaboratively. Often, project teams incorporate multiple organizations, bringing together employees, clients, vendors, sub-contractors, and other third parties. Typically, work must be synchronized across multiple time zones. In establishing a project team, the VMS must aid in sourcing, screening and onboarding the needed talent. On an ongoing basis, the VMS must allow each team member to access project information from any browser in the world, in real-time, assuring that all project members and executive management can view the most recent information about the project.
Required VMS features include:
Decision support for determining the right type of temporary worker for any outsourced work.
Decision flow for defining which suppliers receive the RFx (distribution lists or by skills).
Ability to score and rank each response. Users define weighting of each question.
Distribution of responses to reviewers and ability to generate shortlists based on reviewer responses.
Talent pool of consultants/suppliers who have completed pre-hire onboarding processes and all mandatory compliance steps.
Ability to use social media techniques such as crowdsourcing to source the best resources for each project task.
Validating the credentials of selected suppliers, and managing onboarding in compliance with government regulations and corporate policies.
Delivering on schedule. Aspects such as milestone-tracking, delivery date performance, payment triggers and qualitative capabilities are critical to keeping a project on track. The VMS should go beyond monitoring project status and providing “rear view mirror” status updates to providing accurate forecasts of project performance problems, enabling early course corrections that avoid “scope creep” and “after the fact” purchase orders.
VMS features should include:
Deliverables can be tracked directly or integrated with industry-leading project management software.
User-specific dashboards and reports provide real-time status at the enterprise level or for each location, cost center, supplier and supervisor.
Automated enforcement of project terms and conditions.
Tracking of each supplier’s progress through supplier scorecards and performance reports.
A formal approval process to address requests for scope changes or project adjustments by buyers and suppliers.
A common repository for project-related documents including project scope documents, risk lists, issues lists, files, emails and deliverables.
A full audit trail of all transactions.
An embedded collaboration suite.
Staying within budget. To adhere to the established budget, the project leader must be able to identify the moment a project misses a milestone or is in risk of going over budget.
Critical VMS features include:
The overall project budget is allocated to each cost center or charge number assigned to each work package.
Consolidated budget entry for multi-supplier projects.
Full enforcement of order-level fixed pricing, variable price, UOM, milestone and rate cards.
At every approval step in the workflow, the initial budget, actual expenditure and remaining budget are shown.
The VMS forecasts the date or hours left on a budget based on past burn rates.
Client-defined business rules specify timeframes in which expenditures can be charged to a specific cost center or budget. The VMS rejects charges against closed charge numbers and alerts the approval chain.
Real-time updates and alerts are issued when budgets reach an established threshold.
If requests exceed available budgets, actions can be tied to the budget (e.g. reject timecard/expense approval, terminate worker).
Workflow supports multi-buyer visibility and approval.
Flexible hierarchical structures in which approvals can be based on spend limits or organizational structure.
Automated invoicing/payment is triggered by client sign-off on completed deliverables or client approval of time/expense submission.
Certain portions of the payment can be tied to approval of a percentage of completion or to completion of certain sub-tasks.
The VMS supports non-PO-based services with invoices tied to the master services agreement.
Is your VMS system able to provide the support you need to address the complexities of project services spend?
MORE: Managing SOW through VMS delivers the best results