When you start considering outsourcing you may not know exactly what you need (it is not unusual), what is available and where to find it. For this you will often benefit from sending out a Request for information (RFI) outlining in brief the areas the customer is considering for outsourcing and asking a number of questions relating to the supplier's capabilities and competencies.  The information obtained will help you to qualify candidates in accordance with your minimum requirements and to select a shortlist of qualified candidates to invite to tender (ITT) or to negotiate the proposed outsourcing contract. 

Invitation to tender

 If a tender process is followed, the ITT should include all the information which the customer considers that the supplier needs to enable it to make a meaningful bid for the services. The more that is included in the ITT, the more likely it is that the customer will receive a comprehensive response from suppliers and one that will enable the customer to compare like with like when reviewing the various suppliers' responses. The complexity of the ITT will depend on the complexity and status of the services which are to be outsourced.

 ITTs take many different forms. They will invite bids setting out the supplier's solution to the proposals. 

 It is also good practice for the ITT to contain a draft of the proposed contract, with an invitation to suppliers to comment on it in their response. If this is not possible or practicable at this stage, the customer should set out in the ITT a detailed list of its key contractual requirements. The supplier should then be asked to comment on the draft outsourcing agreement or contractual issues (as appropriate), as this will enable the customer to review the supplier's commercial and legal response to the proposed risk transfer as part of its evaluation of the technical solution and price which is proposed by each supplier. It is unlikely that the responses will comprehensively address each of the issues in question or necessarily hasten any resolution of areas of difficulty. Nevertheless, it is a useful for identifying the key issues and certainly helps in awarding the contract to the right supplier.   

Evaluation and evaluation criteria

Once the responses are received from the suppliers, the customer will need to evaluate them against its evaluation criteria. These criteria should be considered by the customer at the beginning of the process at the same time as producing the business case, as it will be necessary to establish right from the outset what the key drivers are in selecting the most appropriate supplier to deliver the services. The evaluation criteria may be split into different areas such as legal, commercial, technical and financial (regarding, for example, the terms and level of the bid itself and flexibility of the charging structure). 

Timetable

The time available to conclude each outsourcing process will vary enormously from transaction to transaction, depending on many factors such as the wishes of the board of directors to implement matters quickly to avoid uncertainty or the need to finalise matters before the incumbent supplier’s contract comes to an end. It is not unusual, however, for preparation by the customer before the ITT is sent out to take at least six months, with the procurement process after that taking at least another six to eight months to complete. It is helpful from the supplier’s perspective to include in the ITT the outline timetable that the customer has in mind, with clear instructions as to how the supplier can comply with the customer’s proposed approach. In public-sector procurements, certain rules as to timings will apply and these should be considered in detail when advising in relation to public-sector outsourcing 

Negotiation

The negotiation process itself will vary considerably from one transaction to another. Sometimes negotiations will continue with one favoured supplier first, whereas in other cases negotiations will continue with suppliers in tandem. Simultaneous negotiations with more than one supplier enable the customer to take advantage of the competitive tension in the procurement between the different suppliers. This should enable a customer to negotiate a stronger contract (in terms of legal/commercial, technical and financial considerations).

While the simultaneous negotiations process requires time to be invested with each supplier, the process often avoids the need for protracted negotiations with a single preferred supplier. That said, it is not usually productive or indeed cost-effective to conduct detailed simultaneous negotiation processes with more than three suppliers, although the timing of short-listing from more suppliers down to three may vary.  

The negotiation should occur with each of the shortlisted suppliers during the same period. Here the contract will be negotiated with each of them in a separate series of meetings. In some cases (as it happens in e-auctions) best and final offers will be invited and received. Once negotiations have been concluded, and matters are reflected to both the customer’s and supplier’s satisfaction in the draft contracts with each supplier, a preferred supplier will be selected and the contract with that supplier signed.