What’s the best way to check up on outsourcing partners?

Outsourcing can be a positive thing when done right. That means building a partnership between your company and the contractor’s company. Even with a good relationship, however, it’s still necessary to ensure the contractor performs up to par — and tweaks its processes for the better regularly instead of sticking with the status quo.

How do companies evaluate their contractors and ensure they take steps to improve where needed? Should we issue a report card with a formal letter or have a meeting to discuss strengths and weaknesses?

— Linda, Director

Grading outsourced partners
by Meryl K. Evans, Editor, PSJ

Outsourcing done right saves money. It lets experts handle the outsourced process that isn’t part of the company’s core business. But what happens when the process doesn’t run smoothly? A partner could be a great match at the start of the contract, but as contractors come and go, this relationship could fall apart. How can we hold our outsourced partners accountable? How can we ensure they don’t get lazy? And, on our end, how do we prevent taking them for granted?

One reader says: Grade them! Channel a teacher and hold quarterly evaluations. This reader’s company provides quarterly feedback regarding its outsourced partners’ performance. The feedback includes the following:

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• Metrics regarding warrant claims

• Failure reports

• Feedback from customers on turn-around time and reliability

The reader’s company also gives the contractor the opportunity to provide feedback. The evaluation process is backed by process models like Carnegie Mellon Software Engineering Institute’s Capability Maturity Model (CMM). One of CMMI for Development’s [pdf file] components, supplier agreement management (SAM), includes monitoring and evaluating the supplier’s processes. Typical work products for monitoring supplies are lists of processes to monitor, activity reports, performance reports, performance curves and discrepancy reports.

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Here’s an example form for evaluating a contractor’s performance from the U.S. Department of Transportation. Government agencies frequently evaluate contractor performance. A simple Internet search yields examples and policies on many government Web sites.

Keep your contractors on their toes, and regularly issue a report card. Adding a penalty clause is one way to ensure they’re accountable for their actions when they’re not performing up to standards or the requirements outlined in the service level agreement (SLA).