An article popped up in my news readers this morning that scared me. An RFP was issued to privatize (outsource) a university health centre without sufficient investigation! The reason this scared me is the procurement/purchasing department had an amazing opportunity to provide value to the organization by facilitating research into the feasibility. In 2002-2003, my MBA consulting project was to investigate the feasibility of outsourcing the inventory management at a hospital. Part of my literature research indicated that outsourcing decisions needs a baseline and the best place to facilitate this is with the purchasing department... here's an excerpt of what I had found in my literature reviews:
Regardless of where the outsourcing idea originated, someone needs to conduct an in-house feasibility study, and solicit outside information before approaching an outsourcing decision. (McKillop, Barry, Outsourcing: Seminar Participant Notes, Purchasing Management Association of Canada, January 1996. pg 28). The feasibility study will include identifying what activities to outsource, assessing the current operations, identifying customer requirements, assessing human resources impacts, setting/evaluation of metrics, then taking that internal information and comparing to business process alternatives. (McKillop: pg32).
A comprehensive book on outsourcing recommended by the Institute for Supply Management, is “Strategic Outsourcing” by Maurice Greaver. Greaver provides a detailed process to approach outsourcing. Both McKillop and Greaver’s processes begin with identifying the area to be examined, proper planning, study and analysis. Within McKillop’s process, he identifies the key steps in the feasibility study as follows:
- Obtain sponsorship from the top
- Set objectives and deliverables to be met by the project
- Define which function/process/activity to examine
- Chart current situation using process mapping
- Conduct financial cost analysis of the above process map
- Interview users of the service
- Benchmark the process
- Define barriers/risks to outsourcing
- Obtain outside information from suppliers/others who have outsourced
The two authors’ approaches differ on the point where the multi-functional team involvement begins. With McKillop, the preliminary work is done within the purchasing department, and a team is developed when the process mapping stage begins. A multi-functional team of customer representatives, process experts, functional, financial, legal and human resources representatives are required for the analysis stage.
What do you think? How did this RFP get issued without sufficient stakeholder involvement/feasibility/research conducted? Did the University officials push for the RFP to be issued? Did Purchasing not offer expertise to suggest further research?
OR is it better to have the marketplace tell you what you need when others have already done it (ie we'll have what they're having)?