- You never seem to have enough staff to stay on schedule and maintain quality of output.
- You cannot get consistent quality or creativity from your internal team and need fresh thinking to stimulate new innovation.
- You regularly need part-time expertise not possessed internally.
- Staff recruitment takes an eternity to place and train those individuals, while also significantly burdening you and your senior engineers.
- Your company has the R&D budget but is reluctant to increase staff, or is burdened with red tape and loss of urgency (but you are constantly reminded that time is money).
Be Thorough with Your Partner Search
Finding the right team is critical and the following criteria will help lead to good choices:
- Is the firm’s size suitable for your project/company? A classic mistake is partnering with a consultancy too large to give your project its deserved attention.
- Ensure the firm has capability in the core services you are outsourcing. Is your project a good match for their experience? Can they demonstrate successfully completed projects of similar budgets and complexity? Do they regularly work with clients larger and smaller than yours? Ask for references on similar projects.
- Stability is important—would you benefit from establishing a long-term relationship?
- Do you require an ISO-certified quality system or is self-certified “compliance” acceptable to your quality stakeholder? If the outsourcing is partial, it is usually acceptable to integrate the consultant’s deliverables into your design history file (DHF). If you plan to outsource the entire project, be certain the DHF is professionally maintained and will stand up to regulatory scrutiny, even if the consultant is ISO-certified. In either case, consider some level of quality audit.
- Execute a non-disclosure agreement (NDA) before initiating any conversation. It’s too easy to accidently breach confidential information.
- Become familiar with how they conduct business—are they flexible with terms, yet firm on operational structure? Respect that a successful consultancy protects its interests.
- If possible, meet and spend quality time with the critical team members. Chemistry is extremely important and consider the team as an extension of your staff.
- Do they sub any of their work out to other firms or contractors? If so, ensure they have appropriate contracts and security measures in place. There are advantages to a consultancy that also outsources to broaden or selectively deepen their capabilities, but this should not be structured in an ad-hoc manner.
You may wish to contact six or more firms for a new effort, but the down-selection process will be slow. Requesting just an executive summary and ROM budget will help both sides through the selection process efficiently and give enough data points to gain confidence on a realistic budget, scope, and timeframe. It should be relatively easy to dismiss the outliers.
Solicit formal proposals from two to three shortlisted firms and structure the request for proposal so the responses are as “apples-to-apples” as expected. Look for emerging patterns on how each firm structures and budgets your project; experienced consultants usually tackle problems similarly for a reason.
Traditionally, a waterfall-style “top-down” design process aligning to ISO 13485 and 21 CFR part 820 design process guidelines is used. Highly collaborative and often complex, this approach involves many disciplines working in parallel, relying on outputs from one to drive the next stage of work for the other. Stakeholders reassess and approve budgets and scope at formal stage-gate reviews before the beginning of the next phase. In contrast, software developers practice a “bottom-up,” Agile design process whereby work is conducted in rapid, discrete modules called “sprints” and are a good way to tackle feasibility studies. Sprints can be iteratively deployed to solve critical sub-system hurdles within a major phase of a waterfall plan without disrupting overall interactivity.
Along with methodology and absolute scope, estimated costs and timelines are terms for doing business. Few tasks in R&D beyond the first exploratory phases can be confidently quoted in not-to-exceed terms due to the varying directions a design can take. However, ranges can be provided for subsequent phases based on past similar projects. These “budgeted” proposals ultimately require payment in terms of actual time and materials spent, with budgets, scope, and timelines provided as a guide for overall cost control.
Once all proposals are collected, it may help to create a decision matrix to determine how the finalists stack up. If you choose or are forced to use such quantitative tools, be careful you also fairly weigh intangible and qualitative assets like proposal quality, personal chemistry, team enthusiasm, work environment, ease of travel, etc. Hopefully the quantitative winner will match your qualitative choice.
Setting Up the Contract
Depending on company size, you may have a corporate Master Service Agreement (MSA) that the Consultancy must review and execute. Remember your MSA was written by attorneys with obvious preference for your company’s best interest—be flexible and expect to go a few rounds with your attorneys or superiors to find a mutually acceptable, fair balance. It can take days to months to execute.
It is normal practice for the consultant to ask for a purchase order and deposit up front to cover project-related out-of-pocket expenses and bridge time from work performed to actual payment. The longer the payment terms, the larger the deposit request. If considered a high-risk client, you may be asked to pre-pay for work—essentially a retainer-based set-up widely used by lawyers and some CPAs. The retainer is then refilled as it is depleted.
Managing the Project and Consultant
A well-written proposal usually forms the basis of the formal Project Plan but may not reflect all the protocol-driven checkpoints and approvals required. At the kick-off meeting, establish these additional requirements and integrate them into the Plan.
Communication protocol is essential to manage outsourced projects. You may initially feel compelled to direct all communication through yourself; that structure will quickly become a losing proposition, overloading you and unnecessarily slowing the project. Regular online meetings should be arranged with only critical players to minimize budget burden, and written meeting minutes distributed to ensure communication and decisions reach all team members. These reviews may initially be weekly to coordinate on multiple levels. Eventually the project will settle down into an implementation phase and interim design reviews will be less frequent. Determining how and how often to communicate is the backbone of ensuring an outsourced program’s success because services are provided remotely. You cannot simply walk through the department and gain an accurate assessment of progress with minimal interaction. That said, too many meetings stifles creativity and burdens the budget, so seek to achieve a balance that maintains adequate oversight but demand thorough written reporting as verbal communication cannot be retrieved later on.
Cost and Schedule Control
Engineers will tell you engineering takes a finite amount of task time. It is also true that problems can be solved with varying degrees of complexity. If you accept that technologists, by nature, gravitate to the best—and not necessarily the easiest—solutions (a process often called “creeping elegance”), it is incumbent on project management to balance risk/cost with levels of complexity/performance. Establish the project objectives in order of priority (cost, risk, size, weight, speed, reliability, etc.) and remind the team at every opportunity. This becomes more important when you may not see output for weeks at a time. Keeping consistent focus on these objectives will help in good decision-making, which will keep your project on course and, hopefully, on-budget.
Time and materials projects or phases must be monitored very closely to ensure scope remains relevant, since there is typically only a loosely defined statement-of-work. Request weekly reports that include expended budget and next steps/expected budget burn. Project expenses can also spin out of control quickly, especially during periods of intensive travel and prototype fabrication. Predicted costs should be provided to ensure appropriate spending.
Leverage the formal stage-gate reviews to assess progress against the original plan. If deliverables or the output’s quality are not keeping pace with the expended budget, you can pull some tasks back in-house for closer control, adjust the design process methodology to attempt to catch up, or worst case, seek more time and budget if there is tangible evidence unforeseen challenges have affected the original scope assessment. Always reserve budget and time buffers with your stakeholders for when things don’t go as planned. Negotiate 10-20 percent buffers, with larger margins for innovative and higher risk programs that expect some trial-and-error activity. By reviewing and adjusting methodology, scope, and resource loading at each stage-gate, you can avoid the mismanagement nightmares that result from non-intervention and compounded overruns at the project’s end.
Successful R&D outsourcing can be achieved by working with a partner who matches project needs, corporate culture, and individual chemistry. Establishing a robust and collaborative project plan with stage-gate reviews, coupled with effective communication, will minimize surprises and enable plan adjustment along the way to maintain expectations. Furthermore, completing the first successful outsourced project will allow even greater efficiency due to less up-front due-diligence and reduced learning curve. Corporations that fully embrace outsourcing can afford to reduce their corporate staffing overheads while simultaneously boosting their ability to respond effectively to new challenges as well as peaks in resource loading.
Philip Remedios is principal and design director at BlackHägen Design, an R&D consultancy focused on medical device innovation. With a combined design and engineering background, Remedios has spent most of his 33-year career in executive consulting roles, developing project plans, and managing integrated technical teams, schedules, and budgets.