Units, Sizes, Questions and €’s

Outsourcing and contracting of software development projects and maintenance continues to be a difficult task for many organizations. They struggle to determine which questions they need to ask in the ´Request for Proposal (RFP)´ phase. These organizations wish to find the questions that would enable them to compare the bidding suppliers in an objective, yet meaningful way and they wish to select the right supplier based on this comparison. In practice, the industry sees many RFP’s that seem to achieve this goal at first glance, but which offer a comparison which is not objective and meaningful at all. As a consequence, in many cases the wrong supplier is selected, which can (and often does) result in a failing project. Repeatedly, suppliers argue with client organizations about the objectivity of the reasons for missed offers and sometimes they even start legal action.

It’s therefore necessary to use general accepted units and sizes to have a mutual understanding of these. In the latest guideline (Mini Guide for RFP Questions) of the Nesma, the Nesma zooms in on RFP’s in which Function Points and derived metrics, such as productivity of the development team and quality of the development process, are used. Nesma presents this guideline to help client organizations ask the right questions during the bid phase and the contracting phase. But it is also meant for the supplier organizations, which it gives directions on which data of completed projects should be collected and analyzed  and which metrics should be calculated, stored and benchmarked. Furthermore, Nesma gives its vision on which metrics to use and how to use them during the contract phase, also to be used in an Outsourcing situation. With this document, Nesma wishes to facilitate the industry in order to make the next move towards professionalism in outsourcing contracts. It is meant to be a reference for both client and supplier organizations.


Request for proposals (RFP’s)

In many cases, RFP’s are also submitted to select outsourcing partners (or ‘preferred suppliers’) for a period of time. During this period of time, the supplier may or may not do any work agreed upon in the contract. In this guideline the focus is on RFP management for a single software development project, but the same principles apply for framework agreements as well.

 In general, the company that sends out the RFP has to provide all the necessary information to the potential suppliers for them to be able to draw up a sound proposal. In general, the following information has to be submitted for an RFP on a specific project:

  • The functional requirements that have to be delivered in the system to be delivered;
  • The non-functional requirements that have to be satisfied, like for instance security requirements and development language to be used;
  • Decision criteria that the client organization is going to apply to select the most appropriate proposal.

 It is very important that the information provided is up-to-date and detailed. Especially in the case of fixed-price bids, the proposal offered by the different suppliers usually also have a legal status. This means that when the client selects a specific proposal, the supplier is obligated to deliver the proposal against the price stated in the proposal.

When preparing an RFP, the client organization also has to think of the criteria on which it will judge and select the most appropriate outsourcing party. This usually means that they will have to think of the most important characteristics of the project itself and of the party that will realize it. Characteristics that are usually considered are (not limited):

  • Price;
  • Quality;
  • Productivity;
  • Duration;
  • Supplier creditability;
  • Supplier references;
  • Solution details.

 Supplier organizations compete against each other to score the highest on the client’s decision criteria, in order to win the contract. As most of the typical questions asked in RFP’s are related to metrics expressed in function points, it is important for supplier organizations to have an experience database with historical project data sized in NESMA and/or COSMIC function points. Without this database, it is quite difficult to answer the questions above, and it is even impossible to defend the answers given objectively.

There is a fundamental problem going on nowadays in the IT outsourcing industry. In many cases, unrealistically optimistic proposals are granted by the outsourcing organizations, resulting in failing projects. If the IT industry is not able to evolve into a higher degree of maturity, this practice will not be likely to be better in the near future.

 Only when both buyers and suppliers are going ‘to speak the same language’, proposals will at least be comparable and therefore ‘assessable’. The first thing outsourcing organizations should do is therefore to give as much information about the project as possible (including a detailed functional design) and to ask the metrics based question in such a way that it will be possible to compare the proposals. And also in such a way that it is possible to assess the reality value of the proposal with the use of industry tools or industry data.

Outsourcing can be a success if clients submit realistic RFP’s and suppliers submit realistic proposals based on mutual agreed units, sizes and the right questions.