We advised how to use outcome-based contracts to align vendor and operator interests in a BSS transformation

The problem

• Analysys Mason was asked to provide programme assurance for a large business support system (BSS) consolidation programme
• The main vendor and system integrator required a substantial share of the budget, but trust levels were low in their ability to deliver; as a result, the board wanted know how to manage the vendor to ensure successful completion of the programme on time and in budget

The solution

• We suggested using an outcome-based contract so that the risks of the programme were shared between the operator and the main vendor
• During the negotiations, we provided support to ensure that the design, development, testing, implementation and system integration work was outcome-based, incentivising the vendor to use the same objectives as the operator
• We ensured that the defined outcomes of the contract matched the business outcomes of the programme, i.e. decommissioning of legacy platforms, better net promoter score (NPS), time-to-market and average handling time
• We designed a multi-million euro vendor bonus which could be awarded in addition to the agreed fixed price if the programme objectives were met by the deadline
  • any slippage would have cost the operator many million euros so using a bonus as incentive was deemed more cost-effective than the slippage

Figure: An overview of deliverables and services provided

The result

• Our client was very happy with the performance of the main vendor, who surpassed internal teams and smaller vendors in quality and on timelines
• The main vendor was proactive, identifying risks early and adopting tasks outside their original scope. The set-up drove collaboration and removed the usual talks around change requests, delays. It was seen as a joint effort to make the programme a success and deliver the common objectives