Covendis has participated in a number of surveys and proposals over the years for both VMS and MSP projects, and one of the issues that clients seem divided over is whether to have the VMS/MSP fees quoted separately from the rest of the proposal, particularly for MSP programs, where a single provider is to provide and manage hourly staffing services via a web-based vendor management solution (VMS).
The proposals range from requesting only a final bill rate to be charged for a particular position (e.g. a rate card), to itemizing all major underlying costs including such items as:
- Wages paid to the contractor
- Statutory Costs
- Benefits
- Overhead/Profit
- Fees (e.g. Administrative fees and/or VMS and MSP fees)
- Candidate Costs/Wages (Candidate)
- Recruiting Costs (Staffing Supplier/Subcontractor)
- Management Costs (VMS/MSP)
For example, let’s say you were evaluating 2 fresh food delivery services. You want to purchase 2 steaks to grill, set aside a budget of $40, and both services quote $40, including delivery. Either service should work, as the final cost to you is the same, right? Not so fast! One service charges $15 for delivery, leaving $25 for the steaks, and the other charges $3 for delivery, leaving $37 for the steaks. If both services ordered their steaks from comparable butchers, which service would be able to provide the higher quality steaks? Everything else being equal, which delivery service would you purchase from? Seems obvious, right?
However, the above scenario plays out every day in MSP/VMS solicitations that don’t require that proposals detail the MSP/VMS fees. In fact, in a recent RFP, the winning proposer’s MSP fees were almost ten (10) times the average of the rest of the proposals. So while the billing rates proposed were about the same, in the winning proposal, the portion of the bill rate left for the individuals actually performing the work was among the lowest, if not the lowest.
In summary, when evaluating MSP services, one best practice is to clearly identify the MSP fees being charged for the requested services. It may be helpful to keep in mind that one of the main reasons to engage an MSP provider is to provide high quality candidates; once placed, it is the candidate that will do the work and provide the services. Therefore, the first step to maximizing your ability to attract and retain top contract candidates is to clearly identify where the fees you are being charged are being allocated across the three following categories:
- Candidate Costs/Wages (Candidate)
- Recruiting Costs (Staffing Supplier/Subcontractor)
- Management Costs (VMS/MSP)
About Covendis
Since 1999, Covendis has helped companies and government organizations buy and manage services better through the development of innovative VMS and MSP programs. Covendis has over 10 years of experience managing Vendor Management Solutions (VMS) and Managed Service Programs (MSP) in North America, Europe, and Asia, and owns and operates a commercially available VMS.
To learn how a Covendis VMS or MSP might benefit you, please contact us at info@covendis.com