Scope Fees & Value Drivers: Scope of Work Management Series, Part 5

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Posted by Richard Benyon on Aug 3, 2015 2:35:00 PM

Scope-of-Work-management

 

Scope of Work: Visibility & Variability 

 

A well-controlled Scope of Work program is an integral part of a robust framework for planning and communication between client and agency.  

Probably the most contentious part of the SOW process is when it comes to extrapolating the fee and determining whether it is set at the correct level. There is probably more press on this topic than any other in the agency management field.

A range of influencing factors could be incorporated in any model that assists building or reviewing the fee component. They depend on the level of sophistication of the marketing procurement / agency supply management function. As well as the constraints around budget, there are two key dimensions that underpin the fee level.

What is the value of the output being delivered, and what is the cost to produce it?

Value Drivers

 

From a value perspective we have already looked at the underlying strategic nature of the work being produced and its creative or media-related impact. Another key aspect in value is looking at it from a sourcing perspective - what is the uniqueness of the service being delivered and how does it fit into the competitive landscape? By this we mean, is the service unique, does it involve a high degree of IP transfer and is the impact of switching to a new provider high? On the other hand can this service be delivered by a wide range of competitors (at the same level of quality), does it have a fairly minimal IP component and is the impact of switching providers fairly low? Using a “Boston Matrix” approach the example below categorizes perceived value into 4 segments from low to high $ - $$$

Scope-Value-Drivers

Cost Drivers 

 

From a cost basis as well as looking at the resource mix (in terms of both experience and skill level) it also helps to understand the complexity of the work that is being undertaken. How much re-work is expected? Is it projected that there will need to be exploration of new ideas? How much management will be needed and in reverse how strong are the processes on the client side to handle information transfer (briefing and approval)

One should be careful not to over-engineer the SOW process but at least the above points should be reviewed and some form of rigor applied to identifying these fee drivers. By adopting a balanced look at these two aspects, it allows marketing, procurement and the agency to discuss the fee in an appropriate manner

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