£5m savings on an IT contract for a leading UK not-for-profit organisation
One of the UK’s largest not-for-profit organisations engaged us to lead the commercial negotiations for the implementation and subsequent managed service of a major new IT system.
We supported our client in the commercial negotiation with a major global IT supplier for the final stages of systems development, implementation and managed service provision, for a system to replace their existing bespoke core operational systems.
In our role as “intelligent buyer” we ensured our client achieved savings of £5m against the supplier’s initial proposals.
Project background
This market leading not-for-profit organisation was in the process of implementing a complex, large-scale bespoke IT system to support its core operations. The programme was approaching the final stages of system development under a fixed-price contract with a leading global IT supplier when additional functional requirements were identified which would necessitate a significant and commercially complex contract extension. Our client also wished to retain the supplier to support the technical aspects of the system implementation, including data migration, and to support the new system as a managed service for an initial 5-year period following implementation.
Recognising the need for highly experienced, specialist support, Monro Consulting was engaged to lead the commercial negotiations across these complex and interrelated areas.
Key problems and challenges
The client’s key challenges were threefold:
Reaching mutually acceptable commercial treatments of ambiguous functional and technical requirements, many of which were undocumented and had been agreed verbally over many months and, in some cases, years
Overcoming a breakdown in commercial trust as a result of the tensions inherent in a long-term, fixed-price contract
Demonstrating value for money in a single-source contract.
Our solution
Working closely with both our client and their supplier, we began to unravel many months’ worth of misunderstood requirements, mismatched expectations and commercial conflicts. We deployed a range of consulting and commercial techniques including:
Switching from Fixed Price to Capped Time and Materials commercial mechanisms for greater transparency, granularity and flexibility
Splitting longer term project activities into logical project phases for greater clarity and certainty of effort, risk and cost
Adopting the use of PowerPoint-based “Rough Order of Magnitude (ROM)” initial supplier proposals as a basis for discussion and clarification as a first step in each new commercial stage
Establishing clear communication channels, approvals processes and decision ownership.
We succeeded in fostering a significantly improved commercial relationship based on mutual transparency and trust, giving both our client and their supplier much greater certainty in their costs, risks and dependencies. As a result, we were able to specify much more accurately the project scope and related effort, and to effectively eliminate the significant risk contingencies that had previously been required. The client’s costs were significantly reduced as the supplier’s delivery and commercial confidence increased.
Results
Our client achieved total documented savings of £5m against the supplier’s initial proposals for this tranche of activity of final development stage, system implementation and managed service provision. Our work also established a very strong foundation for a transformed commercial and delivery relationship, which will lead to further significant savings as the programme progresses.
Testimonial
“The Monro Consulting team have done an outstanding job in helping us to transform what had become a difficult, ineffective commercial relationship. Their experience in IT contract negotiation from both customer and supplier perspectives inspired confidence from the outset, and they managed to work effectively with both parties to rebuild trust and to establish new commercial mechanisms which have increased our supplier’s delivery confidence and substantially reduced our costs.
We now have a truly collaborative, partnering relationship with our supplier which continues to go from strength to strength with the valued support of the Monro Consulting team.”
Chief Information Office (CIO) and Senior Responsible Owner (SRO) for the new Operational IT System
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