Vendor Policies and Procedures

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The size of business operations and the uneven demand for services influence the type and amount of outsource services required. Within the business, available funds are balanced with needs, and often they are not in agreement. Service vendors outside the organization come in a variety of flavors including consultants, technical service and hardware vendors, and contract human resources. Good business sense, based on ethics and morals, is the best policy in dealing with outside vendors.

Several units within the organization come into play when selecting outside services. The organization's purchasing unit should provide information about vendors, their reliability, financial status, reputation in the business community, and whether they will be in business a year from now. This is information that should be at hand before negotiating a contract.

The legal unit must review any vendor contracts before they are signed and large amounts of capital committed. One of the more-important tasks the legal unit performs is the review of the contract's performance language where there are penalties assessed in the event the vendor fails to complete its responsibilities.

The legal units must ensure there is contract language detailing that promised services or products meet the organization's expectations. This language needs to dovetail with SDLC provisions if services or products must be certified and accredited before the contract is fulfilled. If the project involves classified materials, the legal unit is responsible for requiring and verifying that contractors have security clearances.

The organization's audit unit should be included in the contract review to see that important provisions are detailed that will require its involvement. Such details involve auditing of ongoing contract compliance by the vendor. Auditors should be involved if the vendor provides services within the provisions of the SDLC. The contract should allow the review of development procedures and the quality of the services or product.

Outsource Potentials

Following are possible areas for outsourcing efforts:

• Operations that are difficult to staff and manage

• Providing special skills not available within the organization

• Reducing internal operation costs by not having to develop skills that will be used infrequently

• Delivering system improvements or benefits more quickly than can be performed internally

Consultant Procedures

Outsourcing consultant services can be a valuable asset if the proper relationship is developed. Consultants can just as easily be acquired or employed for all the wrong reasons. Following are several wrong reasons for contracting a consultant:

• Not having clear goals and performance expectations. Having very clearly defined goals and performance expectations will permit maximum benefit to be derived from consultants.

• If there is bad news for projects in trouble, let the consultant deliver it. Wrong idea. If a project is in trouble, the future of the organization's credibility may be at stake. Handle any internal project problems within the organization. Do not outsource them.

• Contracting a "hired gun" from out of town to impress the locals. For some unknown reason, the distance the expert traveled, the cost of the expert, and the perception of the expert's skill set frequently impresses employees. Senior managers have an ability to be impressed with experts who have many titles behind their names. It is not unusual that a consultant came up with a solution that was the same as one developed by your own employees.

• Weak senior management. Project managers lacking decisive skills will often attempt to employ consultants to make decisions for them. Consultants are contracted at the staff level of an organization. They should not be substituted for poor managers.

Outsource Vendor Selection Procedures

Choosing vendors for services, software and support, and hardware requires evaluation procedures. When a business decides it requires a vendor to submit proposals, a request for proposal letter is sent to all possible vendor candidates.

In the case of hardware, this request approach details the proposed time period, professional and financial references, hardware and hardware configuration, architecture, and requests a price quote. With software and support, a request defines the target system and asks the vendor to provide a support performance objective for a specific configuration. System operation performance requirements include systems design, configuration and architecture, types and number of users, production volume, maintenance and operation objectives, and price. Outsource service proposals should include at least the following items:

• Professional and financial references

• Objective of delivered services

• Security requirements

• Services delivery schedule

• Documentation

• Pricing

In all request for proposals, there should be a deadline by which proposals must be received by the organization to be considered viable.

Evaluating Proposals

All received vendor proposals should be analyzed in detail. There should be common elements addressing the specific proposal requirements. Organize an ad hoc committee to evaluate the submitted proposals and discuss them. Be mindful that there may be laws and regulations governing the request for proposals and their submission. Most notable are organizations requiring legal adherence of those doing business with federal, state, and local governments. Some governments have requirements where selection preference is granted to vendors doing business within municipal boundaries. In some cases, these restrictions are codified as regulations or laws, and in other cases they merely follow custom or tradition. Failing to observe such restrictions can result in protracted grievance proceedings and litigation.

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