OF Icon

Outsourcing Fundamentals

Independent guide to Outsourcing: BPO strategy, Service Provider selection, contracting and implementation projects. Assessing and improving your current service.

Contracting > Key Documents

The document progression during contracting

The outsourcing contract is built on documents used during the engagement and selection process and in turn leads to the operational documentation supporting the service. This page allows you to see how, staring with initial data collection, each builds on the earlier documents. A little planning can remove duplication of work in their development.

Initial data collection

The data required is:

DataCharacteristicRequired for
ActivitiesBreakdown of those activities in scopeDefinition of scope for RFP and contract. Design of service. Allocation of costs.
Current involved staffIdentificationRole revision as part of organisation design
Current involved staffLocation & Nature of employment (part time, contract,Assessment of impact of potential changes
Current involved staffCost of employmentBaseline cost
Current involved staffAllocation of person to activities 
CostsInternal cost of activities. Cost of external services used.Baseline cost
TechnologySystems used to support activities. Interfaces and data input to other business systems. Ensure company systems and related processes will continue to operate with outsourced services.
Activity volumesQuantification of transactions, inputs and outputs covering all in scope activitiesTo allow service provider to size their proposed service
Reports and other outputsExamples of reports or other outputs of the in scope activitiesAs part of the RFP to define the requirements.
Quality and service levelsAll currently measured levels of service and quality measures. Business requirements for response times, levels of accuracy and other measures of quality.As part of the RFP to define the requirements.
Current / Third party contractsContracts covering services that are potentially in scope or that interact with the in scope activities.Potentially for merging within outsourced service. Checking contracts for constraints to outsourced service
In-progress changesA list and description of changes to the company that will materially change the service requirements up to and during the term.Include in RFP as part of the requirement context

Invitation to tender

At some stage, the formal relationship with short-listed service providers needs to start. You will probably wish:

  • To get commitment to confidentiality of any information provided.
  • To get commitment to responding to an RFP.

This is best accomplished, after initial discussions with the service provider, by sending an overview of the RFP process together with an agreement on confidentiality and participation for the service provider to sign and return.

The invitation to tender sets the service provider expectations on the process.

Information pack

If you intend to explore capability and ideas with service providers, as described more fully in provider engagement, it is better done prior to the RFP. It can be helpful to provide an information pack with high-level objectives,

The information pack will be used in the RFP, perhaps with some refinement.

Request for Proposal

The RFP sets out what you wish your short list of providers to respond to and how you wish them to respond. The quality of the RFP is critical to getting good information for selection and in order that it and the response from the selected provider become a solid accurate foundation for contracting and negotiation.


The more specific you are regarding the content and format of the responses, the easier it is to make comparisons. I have written RFPs that ask providers to respond precisely to the requirements and then given the option for them to add any proposals that they would be even more attractive.

The more completely the response covers all the aspects that are required in the contract, the easier it will be to contract and negotiate.

The RFP will include:

  1. Context and objectives the company has for outsourcing
  2. The terms and conditions, process and timing of the RFP and selection
  3. Proposal Format: laying out the structure and content required in a response.
  4. The evaluation criteria: Inclusion helps to emphasize the capabilities you are interested in. For example, if you need all suppliers to have outstanding green credentials, then this should be included in the evaluation criteria.
  5. Current state description:
    • Current staffing numbers: particularly where the activities are not totally industry standard, showing staffing numbers will allow providers to size their resources more accurately.
    • Baseline costs: some RFPs include the current baseline costs, particularly when cost saving is the primary objective.
    • Relevant company organisation structures
    • Locations relevant to the service
    • Applications and other technical environment relevant to the service
  6. Requirements definition:
    • Summary of and vision for the services, including nature of the services, cultural aspects, future directions
    • Scope of services - list of activities included and excluded, specific capabilities and deliverables.
    • Relevant volumes
    • Service Levels
    • Resources and responsibilities for disaster recovery
    • Governance and reporting
  7. Implementation requirements:
    • Transition
    • Transformation
    • Project, risk and change management approach
  8. Contract key terms: RFPs either list specific contractual points for provider response (my preference) or provide a template contract for the provider legal team to mark up (sometimes the preference of the legal team). In each case, the objective is to have the providers respond to contract terms while in competition and to be able to take account of any issues in selection.

Contract Contents

Do take legal advice early to understand the complexities of different contract structures. Below is the table of contents of a fairly straight forward building block.

Schedule NameCoverage
MSATerms & ConditionsThe Master Services Agreement is the core of the contract. It contains the main contract terms and connects all the schedules into the agreement by reference.
1DefinitionsAny word with a specific meaning for this contract will need a definition.
2Statements of WorkDefinition of the activities to be executed by the services
3ReportingList and description of reports to be produced as part of the services
4Transition ServicesProvider actions to transition to the services
5Client Responsibilitiesclient deliverables required to enable the provider to deliver the services
6Pro forma Country AgreementIn the case of multi-country services, a pro forma agreement is provided as the template for each country
7ChargesAll charges are defined in this schedule
8Service Level FrameworkCovers the way in which service levels are measured, reported and the implications of under performance
9Service Levelsdefinition of the performance levels required
10BenchmarkingRights and obligations with regard to benchmarking of the services.
11Exit AssistanceSupport to be given by the provider when the client is exiting the services
12Disaster Recovery and Bus ContinuityThe level of service and recovery times in case of a disaster affecting the services
13GovernanceCovers the way in which governance is carried out including provider obligations.
14Change Control Procedurethe process for making changes to the services.
15Acceptance TestingDefinition of the tests to be carried out to ensure the service will perform satisfactorily on transition.
16Third Party SoftwareDefines software required and responsibilities for licensing
17SOX controlsDefines controls required to satisfy Sarbanes-Oxley
18client ControlsDefines controls required by client management systems
19Key PersonnelA list of individuals or roles regarded as critical to the operation of the services and obligations for retaining their involvement.
20Sub-contractorsA list of allowed sub-contractors
21Data Protection Model contractA contract to satisfy the requirements of the data protection act where appropriate for data processed as part of the services.
22Service LocationsA list of locations from which the services are delivered
23client PremisesA list of locations to which the provider needs access
24Employment Transfer ObligationsWhere staff are to be transferred as part of the deal, this schedule describes how the provider must deal with the staff transferred.
25Services DocumentationDefines documentation to be developed and maintained as part of the services.

Operating Manual

The master copy of the operating manual is a formal agreement between client and provider of how the services will operate and be managed. It is subservient to the contract, but may describe some contract content in a more readable form and will contain detail not included in the contract. Do discuss with your provider how the manual will be kept current and how you will have sign-off on changes.

Typical contents are:

  1. Index
  2. Calendar of events
  3. Client and Provider Premises Details
  4. Organisation and Contacts
  5. Service Delivery Model overview
  6. Governance Processes
    1. Controls
      1. HSE
      2. Data Security & Protection
      3. Sox & Financial
      4. Risk Management
      5. Audits
    2. Service Performance Management
      1. Details for how to measure the SLAs
      2. Root Cause Analysis
      3. Service Level Credits
    3. Change Request/Control Procedures
      1. Change Request Form
    4. Periodic Reviews
    5. Governance related reporting
    6. Governance meetings and Committees
    7. Technology Interlock Processes
    8. Escalation, Rework, and Incident Management Processes
    9. Financial Invoicing Overview
    10. Business Continuity and Disaster Recovery Plans and responsibilities
    11. Staffing
      1. Staffing for Volume Demand Management Assessments
      2. Training Plans for New Hires