Vendors are using the SOW agreement as an effective tactic to avoid MSP programs and associated fees; beef up their margins and build much stronger relationships with the business leaders they service. Business leaders are happy to engage in these agreements because they get a one to one vendor relationship and are able to justify it if the costs come under budget. They fail to realize that in many cases the rates they are paying are well over market.
So how do we quickly identify if an SOW agreement is being used as a mask for Contingent Staffing? A quick scan of the agreement will tell you. If in the agreement you see that the vendor is signing up to specific deliverables and/or milestones with specific acceptance criteria which triggers invoicing and payment (in essence they are responsible for delivery) then this is an SOW and the supplier is justified in pricing increased margin to account for the added responsibility and risk of delivery. If the agreement is based on labour and expenses and billing happens as a matter of course without any acceptance criteria attached to delivery this is pure contingent staffing.
Once you have identified that the agreement is staffing based you can understand more about the skills required, the experience and the location of work to compare the bill rates to the market bearing rates for other resources with similar skills.
You will be amazed how much savings you will find……..