4.6

Tendering and Sourcing Process

Service Portfolio Steering authorizes Sourcing to evaluate solution alternatives based on a Business Case which is about comparing the end-user benefits and savings provided by the service with the overall cost of sourcing and producing the service over a defined period. After that, Sourcing can be authorized to initiate the sourcing process that includes tendering and negotiation processes.

A successful tendering process requires clearly described busi­ness needs and requirements. Business, with the support of Business Engagement Managers, is responsible for defining the require­ments, whereas Service Managers typically take care of the formalized specifications and documentation. Sourcing is responsible for ten­dering and evaluating the alternative solutions. During tendering, Sourcing is responsible for documenting conversations and open topics for later use in negotiations and contract preparation.

SSM_Tendering_and_Negotiation_Process

Figure 4.6.1 Tendering and Negotiation Process.

 

Sourcing helps Business consider dependencies and compliance issues and to choose the best alternative. The purchasing decision is made by the Business Owner together with Service Portfolio Steering, but Sourcing typically manages IT-related contracts with the support of Service Integration.

A successful negotiation process requires a clear negotiation strategy and pre-defined roles for the assigned tasks. Sourcing sets negotiation targets and leads the discussion during the negotiations. The business representatives bring in their expertise related to business needs, whereas Legal Counsel evaluates jurisprudence, terms and conditions, and the protection of assets. If the purchase involves relocating or re-assigning of personnel, a Human Resources representative also takes part in the negotiations.

The result of a successful nego­tiation process is a contract that satisfies both parties. When the contract is made, it should cover all aspects of the agreement, as only what appears in the contract is included in the agreement. For example, the following should be clearly stated:

  • Risks, responsi­bilities and the governance model: One major risk in a customer-supplier relationship is that the service will not be developed according to the business needs. Therefore, it is important to have a governance model that emphasizes the strategic and tactical development rather than the operative follow-ups.
  • Penalties: The compensation by the supplier in case of failure to meet the agreed service levels, and the terms for contract termination need to be agreed.
  • Expiry: The details related to contract expiry are registered in the contract expiry plan, which is a document that is updated throughout the entire contract period.

 

After reaching an agreement, Sourcing ensures that the project and service organizations are made aware of the conditions of the contract. Sourcing is also responsible for evaluating the results of the negotiations.

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