Pre-contract due diligence for sourcing programme

This third blog in the series of nine blogs on the sourcing lifecycle highlights the importance of pre-contract due diligence for a sourcing programme.

Pre-contract due diligence for sourcing is the single most important preparatory activity that the organisation needs to undertake for any sourcing programme. The more information that can be collected by the organisation, the more comprehensive will be the requirements definition and internal business case. If suppliers are being asked to manage and transform an IT environment, they need to know the detail of that environment.

The following types of due diligence data should be collected:

• Site list with some form of site categorisation
• Services delivered at each site, including volumes (e.g. bandwidth, port counts etc.)
• Asset database, including make/ model, age and net book value
• Service management processes and operating manuals
• Service level reports – performance against existing service levels
• Current incident volumes
• Traffic profiles
• All existing third party contracts that cover the in-scope services
• Total cost of ownership (TCO) model including all internal and external costs
• Details of all current and planned projects
• Project, change and IMAC volumes
• Employee transfer numbers and details

When presented with uncertainty of scope or detail regarding any proposed deal, suppliers will naturally build in a level of risk premium. Presenting the supplier(s) with a complete and accurate view of the customer’s environment will minimise the risk premium applied by the supplier(s) and result in a more stable commercial proposal, less likely to be subject to ‘true-up’ variation.