Maximising the Value and Minimising the Cost of Consultancy

Paul Hutchison | Client Partner

Introduction

The majority of large enterprises are under increasing cost pressure to deliver more for less – budgets for Consultancy are being reduced, and spend is being put under much tighter governance controls by senior executives.

This article examines the steps that Procurement can take to maximise the value, and minimise the cost, of Consultancy spend:

1.Selection

This is the first step in the process and selection is key, so choose your consultancy firms carefully, and don’t just invite (and select) firms out of habit!

When running competitive bids consider involving a mix of suppliers to provide you with options, whilst ensuring that the selection criteria are considered on a case-by-case basis.

The supplier selection criteria could include considerations such as:

  • Company Experience and Capability
  • Location and Reach
  • Approach and Methodology
  • Time to Deliver
  • Team make-up and skill sets, and of course
  • Price

The brand strength of the supplier should typically not be a consideration, although this can sometimes be relevant when key external messages need to be conveyed.

 In summary, it’s best to select the consultancy provider that is right for your company, and for your requirements, each and every time.

2. Contracting

There are a wide range of contracting models available to improve your ability to drive value for money from your consultancy supplier.

To start, it’s important to always ensure that your project requirements are clear, unambiguous, and stretching.

  • Straightforward time and materials (T&M) agreements are easy and sometimes appropriate, but often are not
  • Instead, look to milestone payments being present in the contract, and ensure that they are set at proportionate levels with clear client acceptance criteria
  • Consider alternate payment structures that could include retaining sufficient payment percentage for the final step of the project. It’s also worth considering gain-share and other reward pricing structures that guide and encourage consultancies to focus on the key objectives, timeliness and effectiveness of delivery.

3. Management

Even assuming the optimal selection of your consultancy firm and effective contracting, significant value can still be lost at the delivery stage.

The management of the consultancy engagement from your client perspective is a key consideration – showing interest, taking personal accountability, and holding the consultancy firm to high standards.

It’s also important to recognise that successful consultancy engagements are rarely dependent solely upon the performance of the consultancy firm.

The client also has a key role to play in ensuring that:

  • Insights to the client’s culture, standard operating procedures and any legacy issues are shared
  • All resources are available at the time required (this could include staff availability or access to systems and data)
  • Key client decisions are made in a timely manner so as not to delay the project mobilisation and progress

So it’s a good idea to be aware of the contract, but it’s generally not a good idea to quote it excessively or use it too quickly as a stick (or too often)!

But it is important to hold your consultancy firms accountable, and to strive for collective success.

Conclusion

Driving value from every penny spent on consulting services is essential in the current climate, as large organisations are under increasing pressure to deliver more value from smaller Consultancy budgets.

This article was written in conjunction with our B2E Procurement Principal Stephen Green, who would be pleased to provide expert insight into these issues.

Paul Hutchison headshot

About the author, Paul Hutchison

Paul has over 30 years commercial and senior management experience in Technology and Services organisations. As UK Director of Commercial Operations, Paul led the merger planning, restructuring and systems migration of Konica Corporation and Minolta Inc.

He has worked for UK, US and Japanese companies, as a Director of quoted and private businesses, and as an interim consultant.