The control activities to protect against the SOW engagement risks noted in Part 4 are fairly simple and straight forward:
- Document the commercial terms in the SOW / contract;
- Compare invoices, payments and quality of deliverables to those commercial terms in the contract;
- Make corrections to inaccuracies BEFORE payments are made
- Adjust invoices / payments
- Hold supplier accountable for noncompliant deliverables.
The pre-award control activities are similarly simple and straight forward:
- Document all terms, rate cards and other preferences negotiated with vendors or operational preferences instituted;
- Compare vendor selections and resulting contract drafts to the documented preferences to ensure they are fully engaged;
- Make corrections to inaccuracies BEFORE executing contract
- Adjust terms
- Revisit non-compliant vendor selections.
Why, then, is it complicated?
The complication of creating the control environment does not lie in the complexity or difficulty of the control activities themselves; rather it lies in the scale to which that level of control is to be achieved.
When I first started managing professional services and other SOW-based categories I was able to control things pretty well with a spreadsheet … for the slow trickle of SOWs I was actually able to get in front of. The scale issue came into play as we developed our practices and implemented procurement, sourcing, AP and vendor management policies that dramatically increased both the volume and especially the rate of SOWs that came to me and my team. It wasn’t long before we were underwater. Not because of the inadequacies of the spend management and control activities themselves, but because we had no system or automation supporting our growing volume. A nice problem to have, but a problem none the less.
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What does the full control solution look like?
The full control solution – protecting transactions both pre and post-award — is a system (perhaps a vendor management system!) that supports the following:
- Automation of relevant pre and post-award control activities;
- Integration of those activities throughout the source-to-pay process;
- Controls on both the company and the supplier sides;
- Rule-based control exception routing and or notifications; and
- Provides centralized and flexible configuration management of all control activities, features and associated business rules or procurement preferences.
Transaction-based Control Attributes
The following attributes are taken directly from the Control Landscape Map. 
They are described here to help portray the mechanics involved in bringing the simple, 3-step control process and the pre-award sourcing control activities to life. Ultimately, each of these control attributes will take on the shape and form of the host company’s culture and policy environment. The examples provided are suggestive of a typical application of the attribute in a representative large company.
Accountability. The creation of highly visible points of accountability, beyond expected system audit trails. For instance, a field on the invoice creation screen requiring suppliers to acknowledge adherence to stated acceptance criteria or SLAs as a prerequisite to being able to submit the invoice.
Rate Tables. There are two types of rate tables that can help control sourcing and invoicing transactions: one for resource-based rates (i.e. hourly, daily) and one for defined services (i.e. price for installation of X amount of linear feet of 2 inch diameter piping, snow removal services per 1000 square feet). The system housed rate tables can be drawn upon to populate proposed pricingduring the sourcing process or control contract compliance during the invoicing process.
Budget Management. Budget management takes two forms as well. Demand side budgets are defined amounts that limit the pending sourcing event or SOW amount, or at least require additional approvals. SOW budget tracking is a crucial attribute that controls not only the budget itself but supplier performance, ROI and project or service outcomes.
SOW/RFx Templates and Configurable Workflows. Templates and workflows are different control attributes but typically go hand-in-hand. Templates can infinitely follow segmentation differentiators. One of the primary objectives of defined workflows is to deliver the user to the preferred RFx or SOW template. That precision routing can also be applied to engaging the right rate card at the right time or the preferred set of vendors for the SOW type selected or based on geography.
Preference Management. Preference management refers to the ability to centrally manage procurement preferences and workflows (i.e. revise, update, change). The ability to update preferences centrally and easily minimizes the gaps in controls during times of transition or change.
On/Offboarding and Worker Tracking. Worker tracking is system-generated visibility that lets companies track the location, status and access history of each non-employee worker engaged. On boarding is the process of assessing the needs of each non-employee and the process of granting access to appropriate sites, systems and other assets. Off boarding is the process of ensuring non-employee workers have their access terminated and their assets returned upon conclusion of their engagement with the company.
Hey!? You got your chocolate in my peanut butter!
Yep, that’s what just happened. We showed you how peanut butter and chocolate go together perfectly. If you haven’t seen the old 1980s commercial that started it all for Reeses, be my guest to follow this link and have a good laugh. We will wrap up our series on controlling SOW-based services spend with a look at how the control solution positively impacts organizational controls and feeds the idea of continuous improvement.
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