You can check-out any time you like but you can never leave!
We don't think the Eagles were contemplating outsourcing contracts when they wrote Hotel California. And we've not seen much in the way of "mirrors on the ceiling", or "pink champagne on ice" recently (honest). But the difficulties entailed in leaving a contract are definitely worthy of careful consideration. Particularly when the services are brought back in house, something we are focusing on in this article.
In reality, the moment a contract is signed, all parties will have obligations to fulfil at the contract's end, whether due to the passage of time or through termination. It is tempting, during procurement and especially during commercial close, to focus solely on the mutual benefits the new contract will bring about without adequately planing for exit. In the past, lengthy extension periods were built into many contracts that pushed the final day of reckoning even further away (and often beyond the likely tenure of the staff putting the deal together).
We have helped many clients manage contract exits and we have some useful tips for anyone contemplating this type of project:
1. Make sure you adequately resource the exit and transition to in house services. We know this an obvious point but it's worth making. There will be costs to bringing a contract back in house and ideally these should have been built into the original financial model and business case.
2. Design and rigorously operate a proportionate, effective governance regime to manage the overall project. You'll need to be able to inform and keep the confidence of a range of stakeholders and regular reporting is essential.
3. Don't try and combine the contract exit with transformation activities unless it is unavoidable. A lift and shift approach is less risky and still allows for transformation plans to be prepared and executed once the exit is complete.
4. Try and use your own staff to carry out the majority of the work, especially for operational service lines. Where capacity is a problem, bring in resources to back-fill staff.
5. Do seek external help for specialist areas. We would certainly include commercial support in this category but it may also include TUPE, pensions, legal and financial depending on the capability and capacity you have in house.
6. Constructively engage with the outgoing contractor. In all likelihood they will have done this more times than you (as a provider) and they can be very helpful in their suggestions and approach.
7. Be pragmatic about the exit. There will always be issues that arise which the contract doesn't address; be prepared to negotiate, understanding that in a negotiation all parties will need to make concessions at some point.
8. Finally, make sure you really understand the contract, especially those elements covering contract exit and termination. Time and effort invested here, will pay back in spades.
There will always be a few bumps in the road but it is in all parties interests to manage these kind of projects well and without rancour. Get it right and you'll be heading back out on the dark desert highway, cool wind in your hair, in no time.