Ruby van den Hoff (Randstad Sourceright):
‘SOW gaining traction in contingent workforce strategy’
Randstad Sourceright runs the contingent workforce programme of a large global pharmaceutical company. This programme relies heavily on Statement of Work (SOW) contracts. ‘SOW is increasingly regarded as a key element of a managed services provider’s portfolio,’ says Ruby van den Hoff, Managing Director Global Accounts EMEA at Randstad Sourceright, which serves as the managed services provider (MSP).
The pharmaceutical company whose contingent workforce programme was taken on by Randstad Sourceright in 2020 is one of Randstad’s largest clients. Ruby van den Hoff was involved in this project from the very start. She knows that the client’s expectations are high. ‘It’s quite different from implementing a first-generation contingent workforce programme. That’s when managers are easy to please and it’s usually good enough for them to see in the blink of an eye how many hours their direct reports have spent. Once a client has used a contingent workforce programme for some time, their ambitions for a second- or third-generation programme are much higher. They will expect their MSP to provide a higher level of added value, for instance by improving its service performance management through SOW contracts.’
Services Procurement 360
Randstad provides a range of services to its pharmaceutical client. These include temporary on-site staffing (light industrial), direct sourcing, i.e. recruiting professionals for the client, and SOW services. SOW used to make up a rather small share of the service offering, being mostly of an admin-based transactional nature in minor projects/tenders, but this has changed since Randstad Sourceright started managing this client’s contingent hiring as its MSP, Ruby van den Hoff says. ‘Managing the SOW process is now a key aspect of our role as an MSP. To facilitate this, we’ve invested in procurement professionals who are experienced bid managers. They proactively engage with managers ahead of time to make sure that the programme is the right fit for them.’
Randstad Sourceright uses the Services Procurement 360 model, a holistic procurement workflow. This model is based on a four-stage SOW engagement lifecycle.
The stages in the lifecycle are:
- Define the work: identifying (in dialogue with the managers) what the client requirements are, which types of activities are involved, and what contract type (SOW, Time & Materials) would be appropriate. What is the time line, which measurable milestones are in place?
- Source the work: finding talent, selecting parties who are most suited to managing the requirements, and actively soliciting bids from multiple parties.
- Do the work: providing transactional services (contracting).
- Evaluate the work: reviewing whether milestones have been delivered within the set deadlines. Is the quality up to par?
‘The transactional stage (contracting) isn’t the most laborious. The stages before that and the evaluation stage are where the focus of our efforts lies,’ says Van den Hoff. Third-party outsourcing not only calls for definition of the milestones you want to achieve ahead of time. It also requires evaluating in retrospect whether – and to what extent – the supplier managed to deliver on those milestones. ‘As part of this, we sit down with the managers and suppliers to make sure that everything runs smoothly, so that the partnership becomes a success. It’s important that the MSP facilitates this process properly. The crux is that everyone – not just the client, but the supplier too – feels heard and appreciated. What’s in it for everyone? To us, that’s the central question.’
Advantages of SOW
One of the advantages of SOW-based outsourcing is that it provides the MSP (and hence the client) with an extra staffing channel, which is more than welcome in today’s tight job market. It is a fact that there is a market for specialist subcontracting. Organisations offer these services to each other without providing staff. Van den Hoff sees this as well. ‘SOW offers a broader scope and gives us greater access to talent in the job market.’
Another clear advantage of SOW is that the responsibility for the quality of the service and the success of the project rest with the supplier. This promotes efficiency; as an organisation, you don’t need as many internal resources to manage your external workforce.’
Risks
Van den Hoff knows that transferring the responsibility for the success of a project can also be a drawback to SOW. ‘It depends how business-critical a project is. Writing a brochure for a communications department is a lot less high-risk than implementing an IT project that has a direct bearing on a company’s business processes. If a project is critical to the success of your organisation, you need to be mindful of every little detail and make sure that the outsourcing contract you sign is watertight.’
Role of MSP in compliance
‘SOW does away with the Time & Materials (T&M) approach. It’s a different take on billing altogether,’ Van den Hoff explains. ‘It requires performing a cost versus efficiency analysis within a compliance framework.’
In this context, Van den Hoff refers to the important role an MSP plays in monitoring compliance, for instance by assessing whether or not a project lends itself to SOW outsourcing. ‘That’s a grey area that, as an MSP, you need to address thoroughly. Classifying the work correctly, determining whether the nature of the project is suited to services (SOW) or to a standard T&M contract. The compliance perspective also comes into it. How do you protect people who provide project-based services as self-employed persons, but should really have been hired on by the client?’
Compliance tends to be one of the reasons why organisations opt for Randstad Sourceright and why they want to improve their SOW-based contingent hiring, Van den Hoff says. ‘Sometimes, flex workers who can no longer be engaged due to legal restrictions on the length of flexible work arrangements are given an SOW contract, while, in reality, they continue working on a T&M basis.’ This kind of improper use of SOW contracts results in compliance risks. With Randstad Sourceright as the MSP, it is easier for organisations to make the right decisions, Van den Hoff says, which the pharmaceutical client can attest to. ‘In the first year, we looked at what came under the umbrella of the contingent hiring programme. We reviewed what contracts genuinely qualified as SOW and what were unadulterated T&M contracts.’
MSPs offering SOW
Van den Hoff: ‘A growing number of organisations are reconsidering and evaluating how best to carry out projects. Would they be better off hiring people on or engaging third parties under SOW contracts?’ What Randstad Sourceright is seeing is that SOW is clearly gaining traction. ‘More and more, clients are asking for tenders to include a proposal for SOW services. SOW is increasingly regarded as a key element of a managed services provider’s portfolio,’ Van den Hoff says. ‘And that’s only set to continue growing over the coming years.’