Working With Contractors and Consultants

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Improving Technical Productivity

PRODUCT ENGINEERING - R&D - I T - SCIENTIFIC

Working with Contractors and Consultants

Gary C. Hinkle - President, Auxilium, Inc.

Independent contractors, consultants, and contract service businesses can be an effective way to get work completed without increasing headcount. Unfortunately many companies avoid using contract services because they don't believe the benefits will outweigh the costs, or they have experienced problems getting the expected results when hiring a contractor for product development work.

Some companies also have difficulty integrating contractors with a team of employees because the employees perceive the contractors as outsiders and don't like training them, are envious of their compensation, don't like the fact that they leave with company IP, etc. The following guidelines will help to get the full benefits that contract services can offer your organization.

Find the right person or business for the job

Assess the work that you want accomplished and write a Request for Quotation (RFQ) with sufficient detail explaining the work assignment. Use the RFQ to solicit bids from several sources and/or as an interviewing tool when screening candidates who would be hired through an employment agency.

Consider several alternatives. For example, contract engineering service options include independent contractors hired directly, contractors hired through an agency, and contract service companies who provide the resources. Options for consultants are similar. Technical or management consultants may operate independently, may be associated with a network of associates, or may be employees of a consulting firm.

Some professionals use "consultant" and "contractor" interchangeably, either because they offer both types of services, prefer to be called "consultants" because it's more prestigious, or because they don't know the difference. A contractor provides labor and deliverables based on generally well-understood predefined needs, while a consultant provides expert advice about how to approach a problem, improve processes, develop a strategy, etc. Since each requires a different skill set that a single person or business may or may not be able to provide, be sure to identify the proper type of resource for the assignment.

The contract

A common mistake is to use a standard company agreement for all contract service engagements. Unless you are sure that a prewritten agreement is appropriate for the situation be prepared to either modify it to serve the need, or start from scratch. Don't assume that prewritten corporate contracts must be used as-is. The hiring manager responsible for the results must be certain that the contract contains the details necessary to ensure success. If company policy requires use of a standard contract that is not entirely adequate you should be able to append it with the necessary adjustments.

The service supplier may also have a contract for someone at your company to sign. It is common practice for each party to execute a contract to protect their interests. You, as the customer want to ensure that you receive the expected deliverables, protect your intellectual property, control the costs, etc. and the supplier is interested in limiting liability, getting paid, establishing rights to intellectual property, and other similar interests.

There may be some redundancy between the two contracts, but that's not a problem. Try to avoid a lengthy negotiation process and keep the number of people involved to a minimum unless it is a very large contract with a lot at stake. A brief, clean negotiation process gets the work started quickly and prevents any bad feelings that may get the work off to a shaky start and perhaps strain the relationship for quite a while.

Managing deliverables

Ensure that the expected deliverables and the schedule are clearly stated in the contract and understood. The best way to ensure that results are delivered when expected is to structure the contract so that there are several milestones defined with payment delivered after each milestone is completed. This works for either fixed price or "time and material" contracts.

For contractors hired through agencies where the worker gets paid an hourly rate by the agency, it may not be possible to negotiate holding pay for completion of milestones. In this case manage performance by reviewing progress after short time intervals such as weekly, every two weeks or monthly. If performance is not meeting expectations you can either request the agency to provide another worker or work with another resource to provide the service. When contractor performance issues are not promptly addressed by management it is not only a waste of time and money - company employees notice and it will often create negative attitudes toward contractors, constraining your chance for success going forward.

Some contract employment agencies require a 90-day minimum agreement, but like most everything it may be negotiable. Avoid committing to 90-day or similar minimums unless you are very confident in the agency's ability to provide contractors who will fit your needs.