In a recent Staffing Industry Analysts buyer survey of organizations with more than 1,000 employees, 19% noted that a majority of their contingent workforce spend was project/SOW-based. Seventy-nine percent of respondents reported that at least some of their CW spend is made up of such arrangements. Via our conversations with CW managers, we can say they agree there is a “huge” non-employee, management opportunity for the savings and risk mitigation governance value in SOW spend activity.
But how much of this contingent worker, services-related activity can be properly managed by CW program governance?
Complexity. Most SOW projects are services procurement engagements that require expertise not otherwise available from today’s CW programs. That includes sourcing the service provider to manage the the service milestones, such as an SOW project that annually manages the development of a public company’s quarterly and annual public report filings. Such a project would be fairly specific and heavy on the public accounting, content expertise with regard to overseeing this mission-critical project’s progress, milestones and deliverable results. Most CFOs would not feel the need to have the CW program office involved with this “SOW” engagement/spend management. The key point is that some SOW engagements may be too complex for today’s CW programs to provide valued project management expertise. Again, the majority of SOW spend is managing a procured service engagement, not just the placement and management of the contingent workers involved.
Spend limits. Second, some large procurement functions cover a portion of SOW spend in good working order with outstanding services procurement best practice management. The delineation falls under a spend threshold — typically $250,000 to $500,000 spend per project. Anything below this spend threshold is typically and loosely governed by a standard company purchase order. Anything above the spend threshold designated by an organization’s purchasing function is controlled and managed by services procurement professional practices. While there may not be a big role for the CW program to play above the designated threshold, there is a lot of opportunity to add value in the spend below the project size threshold.
Outsourcing service engagements. These “SOW” engagements are comprehensively sourced, packaged, managed and totally focused on the services being provided. The key performance indicators and service-level agreements in these engagements are focused mostly on the service being provided versus the performance of the contingent workers delivering the service. Is there a valued, management role for the CW program office in the management of these service engagements? Maybe, but some services content management expertise will have to be central to the management value that is offered.
At the end of the day, one has to carefully define the value role that the CW program will play in an organization’s SOW spend management. A CW program will have to discover where it can bring some of its contingent workforce management expertise to add value to the SOW engagement and will need to further enhance its service procurement/management skills to add the required value to these types of “service-related” engagements.
Certainly, misclassification might transition many sizes and types of SOW engagements from a services procured arrangement to a more appropriately managed contingent worker spend.
But real SOW spend equals service procured management, and management skill sets beyond contingent worker risk mitigation and savings expertise will be required to add value that current SOW engagement managers will be attracted to and adopt.