Bundled Solutions: The Return of Conflict of Interest in Contingent Workforce Procurement | DCR Workforce Blog

Bundled Solutions: The Return of Conflict of Interest in Contingent Workforce Procurement

conflict of interestAs the concepts of Contingent Workforce Managed Services Programs (MSP) and Vendor Management Systems (VMS) emerged, companies raised concerns regarding the potential conflicts of interest that could occur when a staffing agency also served as the MSP.   They worried that the MSP vendor would direct business toward their own staffing agency recruiters, creating an unfair competitive advantage and possibly reducing the quality of service while increasing the price. These clients were told that this was a non-issue – companies merely needed to ensure that all qualified suppliers could simultaneously receive new requirements. In addition, the candidates could be submitted in manners that masked the name of the supplying agency until a decision to pursue the candidate was made. Of course, this limited definition of “vendor neutral” completely ignores the responsibility of the MSP to coach, encourage and nurture all suppliers so that they can provide the highest possible service to the company.

Does the consolidation that is currently underway within the staffing industry increase the possibility of conflicts in a new way?

Selection of an MSP or VMS provider has significant ramifications for any business. The selected vendors exert major controls over your entire non-employee workforce and the suppliers who provide these resources. Multi-year contractual agreements make it difficult to correct selection mistakes. To ensure that the right choice is made, most companies direct their Procurement organizations to conduct rigorous bid processes in which numerous vendors are evaluated, resulting in a fact-based, objective decision.

What happens when the company conducting the bid process or owning the procurement tool owns a subsidiary bidding on the same commodity? As ERP companies expand their portfolios by acquiring staffing agencies, MSP firms and VMS providers, the likelihood of this happening will continue to increase. While it is to be assumed that these ERP firms are highly reputable, it is worthwhile to ask what specific controls are in place to ensure that the confidential business information being gathered from all vendors is not in any way available to the competing vendor that is now part of the ERP’s family.

Companies can support the objectivity of the process by requiring companies that provide procurement services or tools to indicate any affiliations with MSP, VMS or staffing companies. When they exist, we encourage companies to include contractual language that specifically prohibits the sharing of any data provided by submitting vendors during or after the completion of the bid process. Companies should also ask the procurement services providers to explain their processes for protecting confidential information to you and to all bidding MSP/VMS suppliers. By doing this, you will encourage suppliers to provide the complete and candid responses you need to ensure that you have made the best choice.

One final thought – Dr. W. Edwards Deming advised us to “Expect what you inspect”. Sound advice. The most effective way to ensure that your MSP and/or VMS selection process will yield the best result is to be heavily involved. Carefully review all responses. Check for unnatural similarities between responses of all submitters, not just the affiliate of the procurement services/product company. If these occur, ask each firm for further collaboration or explanation. All participants will appreciate your efforts to create a level playing field, and will show their appreciation through stronger business proposals.

As the concepts of Contingent Workforce Managed Services Programs (MSP) and Vendor Management Systems (VMS) emerged, companies raised concerns regarding the potential conflicts of interest that could occur when a staffing agency also served as the MSP.   They worried that the MSP vendor would direct business toward their own staffing agency recruiters, creating an unfair competitive advantage and possibly reducing the quality of service while increasing the price. These clients were told that this was a non-issue – companies merely needed to ensure that all qualified suppliers could simultaneously receive new requirements. In addition, the candidates could be submitted in manners that masked the name of the supplying agency until a decision to pursue the candidate was made. Of course, this limited definition of “vendor neutral” completely ignores the responsibility of the MSP to coach, encourage and nurture all suppliers so that they can provide the highest possible service to the company.

Does the consolidation that is currently underway within the staffing industry increase the possibility of conflicts in a new way?

Selection of an MSP or VMS provider has significant ramifications for any business. The selected vendors exert major controls over your entire non-employee workforce and the suppliers who provide these resources. Multi-year contractual agreements make it difficult to correct selection mistakes. To ensure that the right choice is made, most companies direct their Procurement organizations to conduct rigorous bid processes in which numerous vendors are evaluated, resulting in a fact-based, objective decision.

What happens when the company conducting the bid process or owning the procurement tool owns a subsidiary bidding on the same commodity? As ERP companies expand their portfolios by acquiring staffing agencies, MSP firms and VMS providers, the likelihood of this happening will continue to increase. While it is to be assumed that these ERP firms are highly reputable, it is worthwhile to ask what specific controls are in place to ensure that the confidential business information being gathered from all vendors is not in any way available to the competing vendor that is now part of the ERP’s family.

Companies can support the objectivity of the process by requiring companies that provide procurement services or tools to indicate any affiliations with MSP, VMS or staffing companies. When they exist, we encourage companies to include contractual language that specifically prohibits the sharing of any data provided by submitting vendors during or after the completion of the bid process. Companies should also ask the procurement services providers to explain their processes for protecting confidential information to you and to all bidding MSP/VMS suppliers. By doing this, you will encourage suppliers to provide the complete and candid responses you need to ensure that you have made the best choice.

One final thought – Dr. W. Edwards Deming advised us to “Expect what you inspect”. Sound advice. The most effective way to ensure that your MSP and/or VMS selection process will yield the best result is to be heavily involved. Carefully review all responses. Check for unnatural similarities between responses of all submitters, not just the affiliate of the procurement services/product company. If these occur, ask each firm for further collaboration or explanation. All participants will appreciate your efforts to create a level playing field, and will show their appreciation through stronger business proposals.


Disclaimer:
The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.