Your Outsourcing Team –Consultants

I have been asked by a few clients what I perceive to be the value of having non-lawyer independent outsourcing consultants in the RFP and contracting process. So here are my two cents worth by way of an analogy.

In the early 2000’s I bought a very rundown house – basically a slum - with two other co-purchasers to renovate and move into. We were renovation newbies: three lawyers with no knowledge whatsoever relevant to renovations, and arguably anything else practical.

We hired an architect who drew up beautiful plans with appropriately detailed scope and materials documentation. We interviewed a few general contractors, and ended up hiring a general contractor recommended by the architect.

In consultation with the architect, we gave the general contractor a high level budget and a copy of the plans and the scope and materials documents, asking him to give us firm quote for each phase of work. After discussions and paring down some of the plans/scope, we entered into an agreement with the contractor with a budget and a delivery time frame. We mentally built in a 10% to 15% cost and time overrun.

Then the fun began.

While the plans were lovely, what we did not understand is that they required a lot of customized work - as opposed to “off the shelf” materials - to implement. We were unaware of the level of hostility of the neighborhood association to anything that smacked in anyway of post-1900 architecture, and the fact that they will lie to the by-law and planning authorities at regular intervals about perceived “violations” in order to deter renovations. And don’t get me started about the City’s planning process.

The general contractor was appallingly incompetent and unremittingly dishonest. He deserves a Mike Holmes @$$whooping.

For the second round of renovation/re-renovation we worked with a highly competent and scrupulously honest general contractor.

However, and this is key, we also hired a skilled project manager to manage the whole process. He is an architect and designer who also specializes in supervising commercial and residential space renovations and coordinating commercial space moves. He understands the City’s planning process and building standards; he can talk “architecture” and rein in an architect’s flights of fancy to make the plans more practical; he can give realistic time and cost estimates. He was a godsend and worth every penny.

You outsource something because it is not a “core competency”, and you are looking to someone to bring their expertise to make the outsourced function work more effectively while you concentrate on your core business. If you can do it more effectively in-house for less you don’t outsource it. This is not only true for the outsourcing of a service or business function, but also for getting the outsourcing contract into place.

More often than not, in the first outsourcing of a business or technology system or service, you will not have a comprehensive grasp of the scope of the system or services that are being provided by your in-house capabilities, nor will you have consistently measured performance metrics. Often you will not know what you should be entitled to expect from an outsourcing service provider.

For an initial outsourcing, an advisor who has “been there done that” will be able to help you to assess your internal systems and approximate initial metrics, and translate this into a RFP process through which you can more effectively evaluate service providers' proposals. In concert with legal counsel, they can assist with the contract negotiations.

There are cons to using third party consultants, particularly if you do not understand and control their mandate. There will further posts about outsourcing that will address this.

If I ever again go temporarily insane and buy a “fixer upper” – increasingly unlikely in this current real estate bubble – I will know what to do. I will use my second general contractor again, I will use my project manager again (and I will try to persuade him to do the renovation plans as well), but I will also be able to give clearer instructions about what I expect. As with most of life’s experiences, you often learn the most from a trial by fire.