8 July 2010 | Peter Smith and Fiona Czerniawska

Procurement’s approach to buying consultancy can have a big impact on the success of the project, say Peter Smith and Fiona Czerniawska

How can purchasing people make the buying of professional services a success for their organisation? The links between all involved parties need to be balanced to work together effectively.

In most organisations there are three main participants in the purchasing process: the supplier of the goods and services; the purchaser, who puts in place the contractual arrangement; and the user of the goods and services in the purchasing organisation.

When users control the budget they might see the procurement function as an obstacle. When the procurement department controls expenditure, it might want to deter users from spending what it regards as its money. 

Where the cost/quality debate between users and purchasers has not been resolved, suppliers will be in the invidious position of trying – and failing – to keep both sides happy. This three-way tension is particularly acute when buying professional services.

Gatekeeper or faithful servant?

“Gatekeepers” are procurement people who concentrate on the purchasing process, compliance and policy. They see their job as protecting the organisation against users who, given half a chance, would spend their organisation’s money foolishly or beyond their authority. Gatekeepers make every effort to put in place policies that give them the upper hand over users. They establish lists of suppliers, seek to lead on negotiations, choose the supplier and dictate terms and conditions.

A decade or two ago, many purchasing departments aspired to the gatekeeper model. Control over spending on procurement was sought, often unsuccessfully. This lack of success was most marked in the purchase of professional services because gatekeepers found it hard to infiltrate the close relationships between users and professional advisers, often at senior levels. The result was impressively thick process manuals, preferred supplier lists and policies. By contrast, practical compliance was poor on the part of users, who tended to take a dim view of purchasing staff.

The flaws in the gatekeeper approach led to a shift towards better user engagement in the shape of a “faithful servant” model. The purchasing team may assist, but only where users want them to.  They may be involved in selecting suppliers and setting out basic terms and conditions, but always at the request of users. If the users decide to manage the procurement process themselves, faithful servants will politely withdraw.

This approach can lead to chaotic spending patterns, and to purchasing people who are helpful but do not challenge users or get much value from professional services spend. Lack of governance and objectivity can lead to supplier choice based purely on friendships and personal prejudices. Suppliers can economically exploit the buying organisation. Selling becomes a matter of developing strong relationships with decision-makers, rather than providing the best business solution.

Constructive relationships

The success of a professional services assignment depends on the relationship between users, purchasers and suppliers being balanced. The needs of the user must be recognised by the purchaser and the supplier; and whether the purchaser or user take the lead role in selecting the supplier, both must be involved.

Relationships change during the purchasing process. Once the contract is up and running, the links between user and supplier will be stronger, but this should be allied to effective contract and supplier management, with the purchasing team continuing to play a part.

The role that combines the best of the gatekeeper and faithful servant roles is that of “business partner” (see table below). The purchasing department achieves control, enabling it to look for value through aggregation, careful selection of suppliers and effective management of the contract. But users also have a major input into supplier selection and management, and suppliers recognise that they have to deliver the desired outcome.

The skills a business partner needs

There are four main skills required when buying professional services:

l Market knowledge. Procurement people need to know about potential suppliers and their pricing structures. Understanding this allows them to portray themselves as experts rather than administrators. Process is important, but a business partner will place it in the context of buying the service needed.

l Internal intelligence. Business partners need to have a handle on patterns of demand within their own organisation. For example, has another business unit recently hired a consulting team to look at the same issue? Professional services firms thrive on the inability of departments to exchange information effectively.

l Communication skills. With more facts at their fingertips, business partners are better able to explain the reasons for procedures. Many preferred supplier lists fail not because the wrong firms have been selected, but because no one in the procurement team has explained why they have been chosen.

l The ability to see projects in their entirety. A reason procurement people are often asked to sort out the paperwork on done deals is a focus on the buying process. The role of the business partner, however, starts earlier, by helping users analyse what value they think an external firm will add. It also finishes later, to include monitoring progress and evaluating supplier performance.

l Self-confidence. Having the confidence to communicate a deep knowledge of the professional services market is essential if procurement people are to get others to take them seriously. 

☛ Buying Professional Services: how to get value for money from consultants and other professional services providers, by Peter Smith and Fiona Czerniawska, is published by Economist Books, RRP £20