CWS 3.0: May 18, 2011 - Vol. 3.12

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Ask The Procurement Guy: Moving SOW

We are scoping our internal contingent workforce program and looking for additional opportunities for efficiencies and savings. Specifically, we are considering incorporating SOW spend into our program. Our research has shown that many companies are considering such a move, but we are not sure if it is the right move for our organization. We have a VMS program in place and have been running it with internal resources for the past several years. 

You are right. Many companies are considering incorporating statement of work (SOW) spend into their programs. In 2009, everyone was concerned about cost savings. In 2010 it was about expanding globally. This year, everyone is interested in risk mitigation and SOW.

It is only logical to want to build upon the success of your current program. At the highest level, you need to be able to answer one basic question: “What is the problem you are trying to solve?” That’s a simple question to ask, but  finding the answer is anything but. You say you are managing your own program inhouse. There is no reason not to consider continuing to do so rather than outsourcing to an managed service provider — each option has merit and its own set of pros and cons. Before making that decision, though, you need to be able to answer a few obvious and not so obvious questions, which speak to whether SOW spend should be rolled into your program to begin with.

Scope

What the scope of the project? The simple definition of an SOW is relatively broad:  Statement of work projects are discrete projects that are usually billed based on a fixed-price deliverable or for hitting specific milestones as opposed to traditional time and materials billing. With this broad definition it is important to consider exactly what is the type of project that will be considered as a potential SOW opportunity for your company?

At first glance, this is a really obvious and easy question. But in reality, many companies struggle with identifying what to consider as SOW engagements. For example, is it information technology projects only? What about larger deliverables-based projects? Are you going to include construction, HVAC, or the guy who installed the carpet?

Many companies attack SOW starting with IT and limiting them to those within certain spend parameters, for example. Others mandate that any project above a certain cost threshold requires sourcing of vendors and final contract to be completed through the contingent workforce project office. Similarly, some companies require projects with a value below a certain threshold to be processed only through a VMS technology. But if your company has a large number of highly technical and complicated SOW projects, these rules may not apply. Pharmaceutical projects, for example, are incredibly complex and may not lend themselves to a VMS/MSP support process. More than the level of spend in the category, it is important to consider where you can bring the most value into the process. This leads us to the next question.

Governance

What is your current project governance process? Project governance is the management framework within which project decisions are made. These decisions at a high level are about how projects are scoped, green lighted or closed. For you, this means understanding how projects are managed at your company. Is there a central strategy that provides a framework for which SOWs are deployed? Is there a group of people or a single person who decides how projects start and are finished? Is there a governance software in place that currently tracks project performance? What is the financial criteria all projects need to satisfy to survive through execution? How do infrastructure-based projects and revenue-based projects relate to each other and how does one gain precedence in the competition for scarce dollars? What is the current SOW scoping process and how does it relate to best in class?

These are just a few of the questions you need to address prior to deciding on your SOW strategy, but really, these are all just mechanisms to help you understand how you can bring value to the process, which leads us to our final point.

Buy-In

What will make the folks up stairs buy it? I don’t care if you’re sourcing pencils, particleboard or people — one word defines the single most critical consideration for any sourcing initiative: Adoption. Program adoption — and how to maximize it — should drive your every decision and action. The reason is simple: It’s hard to have a successful program if no one’s going to use it.

Now, if adoption isn’t an issue in your organization and you are able to drive change simply by pushing a project out, you can skip this paragraph and grab a latté.

But for the 99.9 percent of you who don’t have that luxury, you need to consider carefully how you’re going to ensure maximum adoption. To  get senior support, you must show in concrete terms how you can bring value by managing SOW spend.  Show how you can solve problems, save money, create revenue or, even better, some combination of all three! Identify for the c-suite where current projects fail. How often are SOWs finished on time? How are they scoped and how can you bring expertise to bear that doesn’t already exist? Will your involvement bring incremental improvement or an exponential one? If you can’t provide proof that your company would benefit by incorporating SOW into your program, maybe that’s not the right option, anway.

Statement of work represents a huge opportunity for the contingent workforce manager, but it is an opportunity fraught with risks as well as awards. Those awards are best realized through a thoughtful and studied approach, and only through deliberate review of your scope, governance and support can you even begin to address how you are going to provide the most value to your organization.

Bryan T. Peña is vice president of contingent workforce strategies and research at Staffing Industry Analysts. He can be reached at bpena@staffingindustry.com.

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