This case study focusses on an organisation which had undergone an acquisition process of its largest competitor. An immediate need for professional advisers and the confidential nature of the acquisition meant robust procurement processes were not applied. Spend had become out of control and delivery expectations were not being met.
The organisation had recently undergone an acquisition of its largest competitor in the UK marketplace, and subsequently began an organisational-wise business restructure. This process saw the consolidation of supply chains; departments; and the standardisation of working practice, which unfortunately led to the loss of a large amount of experience across the organisation.
As a consequence, in the short term, there was a sudden and large scale need for additional third party professional services providers and consultancies.
However, the largely distressed nature of these engagements meant a hugely fragmented approach to procuring these services, with no regard for sourcing strategy, robust contracts or cost control.
The organisation had a number of relationships in place with providers and as a result these incumbent providers were deeply entrenched, to the extent that there was no desire to displace or replace these providers, significantly reducing leverage.
The challenge was to introduce a strategy to manage cost, ensure consistency and clarity of deliverables and leverage spend, but with an established set of suppliers and in lieu of a traditional tender process.
- Outsourced Internal-Audit
- External Audit
- Legal Services
The fact that suppliers could not be displaced, nor were we able to competitively tender each category of professional advice, represented a major hurdle in deriving value from this area. With this in mind, our broad approach was to focus on implementing improved buying practices customer-side along with taking opportunities where tactical negotiations could be made with the providers, at the point of demand. Our strategy was therefore threefold;
- To improve the quality of buying practices and upskill the localised buyers.
- To tactically negotiated both demand and outright cost, at the point of demand.
- To tactically address and right-size consultant cost, ensuring that unit costs were representative and appropriate for the complexity of the engagement in question.
- The introduction of robust and clear contracts with all providers.
Considerable improvements were made across the portfolio of engagements;
- Firstly, standard forms of contract were introduced across all engagements. The contracts established clear approaches to cost; deliverables; and what is, or is not, within scope of the suppliers fee arrangements.
- Secondly, the largely de-facto set of suppliers was formalised as more akin to a ‘preferred supplier list’. Suppliers were mapped against specialisms/competencies so to ensure future volume was consolidated and leveraged through lesser providers. In doing so, facilitating up-front tactical negations whilst enabling future fee arrangements to be established and contracted.
- Third, the introduction of a methodology in how professional services engagements are to be specified. This saw various disciplines introduced, in terms of fixed fee arrangements; project planning disciplines; and capping the seniority of consultants for certain BAU engagements; and clearly established relationship/supplier owners.
As touched on within the Solution section of this case study, the solutions delivered gave rise to a number of benefits.
- Supplier contracts were standardised so to ensure the commercial and legal interests of the organisation were protected, whilst ensuring that deliverables, statements of work and similar were of appropriate quality, without giving rise to scope creep.
- The quality of buying practices were improved; the silo mentality approach to procuring these services was removed which saw a conscious effort by budget holders to consolidate and leverage their collective requirements.
- Circa 10% saving across unit cost reduction and demand reductions for existing engagement, supported by fixed deliverables