The focus when buyers come through a long tender and negotiation process, sign on the dotted line and enter into a new contract, is understandably seldom on "what happens when it runs out?" Here's our take on why this shouldn't be overlooked and what progressive procurement professionals can do about it.
Category Strategy should provide the medium term strategic and tactical direction for the end of life for contracts within the supply area it governs. But how is this best implemented? How do we deal with operational transition and change?
The most painless way to ensure that moving to a new strategy, supplier or delivery model is achievable and smooth is to have your incumbent supplier tell you the best way of managing the change.
Suppliers know best
When it comes to what you'll need, be left without, and what you've never had, rarely is anyone better informed than your current supplier themselves.
Be sure to stipulate in your RFP and subsequent contract that the supplier must provide and exit management plan for the cessation of their service and/or transfer to a new provider.
If buyers are unsure how to approach this - keep it high level. The following wording is a good basis from which to start:
"No later than 90 days following the Commencement Date, the Supplier shall deliver to the Buyer and maintain a detailed exit plan for the transfer of each of the Services from Supplier to the Buyer or third party as directed by the Buyer at the relevant time. Upon request from the Buyer, the Supplier shall provide a copy of such plan to the Buyer for their review."
Buyers can use this as a basis to develop a wider plan for exit or transfer.
Key Considerations
Depending on the specifics of the goods or services provided, buyers should ensure that the following are covered to a satisfactory level in the exit management plan:
-a process for the successful migration of data to any new system or service -a requirement that the existing supplier ensures that data is accurate, retained and available during and after the transition process -a requirement that the existing supplier provides all necessary assistance and information to enable an efficient and effective transfer of services -timely development and agreement of plans to describe exit activity and compliance with the plans -a requirement that the existing supplier shall continue to perform the service during the exit process without disruption or deterioration of the services
The final point is perhaps the most pertinent - it is paramount to protect services during the uncertain times of transition. Procurement practitioners should ensure it is explicitly stated that service does not deteriorate when an exit is impending, and that suitable remedies can be applied.
Collaborative administration adds value
TUPE may be a key consideration in any service transfer, where staff are in scope to transfer, set out the information requirements relating to each member. Secure an early statement of staff working more than 40% of their time, or those material to the services, giving all relevant details including costs, skill sets, role and secure their continuity of service from the moment notice of termination is served.
Secure an asset list of all property owned by the customer and operated by the supplier. Seek to secure an asset list of key assets owned by the supplier and used to operate the service, even if they are shared with other parties. This is not to say the ‘how‘ will be replicated post transition but indicates the scale and nature of any infrastructure in use.
Gather together all material subcontracts used in the service delivery. These may need to be novated to the new service provider. Check these contracts have clauses to permit novation and communicate with these suppliers so their service levels and relationships do not decay in any way. Ensure that the supplier again provides a list with contact details in their exit plan.
Intellectual Property and confidential information is invariably critical to an outsourced service. Over a long term relationship, new IPR and confidential information may have been developed. Ensure the contract states all IPR belongs to the buying organisation even where jointly developed and is deposited in a known location.
Ensure the plan includes the requirement to co-operate in the re-sourcing and transition process. It might be desirable to appoint a single point of contact for the whole process with mini-service levels to ensure cooperation with the buyer responsible for exit and/or transition.
Ensure your incumbent supplier will co-operate with prospective and successful suppliers. Agree a clause for co-operation and access for due diligence purposes. Suppliers generally do not like to open up their service to a competitor’s inspection so ensure minimum levels of access and co-operation are defined including a process for requesting access is detailed and agreed.
Transitioning an outsourced contract is never easy and does require careful planning. Early planning and securing commitments will reduce risk and cost and increase levels of co-operation so it is a good practice to anticipate exit right from the start.