Home / Features / Procurement consultancy: franchisees and sub-contractors
Procurement consultancy: franchisees and sub-contractors
This article is designed to provide an understanding of how franchisees and sub-contractors work within the procurement consultancy industry and within the education sector
This article will give you the information you need so you can decide if appointing a consultant who operates under a franchise or as a sub-contractor is the right choice for your organisation. It offers unbiased opinion and has been written by a professional procurement consultant who is employed by a registered charity which operates a Public Sector Buying Organisation (PSBO).
A franchisee has purchased the right to trade using the name of an established business, gaining a protected territory to trade within plus the use of the brand and potentially other central support services such as marketing.
A franchise operator will advertise their service as a nationwide brand with potential customers being passed to the franchisee who has purchased the right to operate within that region.
The key benefit to the franchisee is that they are buying the reputation of an established business and business leads that are generated by the franchise operator. New businesses can take time to establish and when you are self-employed, time equals money. The initial investment to purchase the franchise can be less than the cost it would take to establish a business, which is why franchise models are attractive to consultants who want to be their own boss.
When you are using the services of a franchisee you have some comfort in knowing that they have financially invested into the brand and are motivated to making the venture a success. This means keeping their customers happy with the aim of generating future business.
What is particularly difficult in the case of procurement consultancy franchises is maintaining a similar level of expertise, knowledge and customer service across the franchisees. Personalities can be very different, as can the level of someone’s expertise. Recommendations are usually comforting for education establishments because if another organisation that is similar to yours has received a good service, then there is an expectation it will be replicated. Although if you are in a different territory another franchisee may be appointed and the service could be considerably different.
The appointed consultancy may appoint a sub-contractor to deliver the service on their behalf. The procurement industry consists of many sub-contractors whom are self-employed individuals. They undertake projects for companies who either do not have the expertise in-house to service the customer’s requirement or who simply prefer not to directly employ a consultant themselves. Instead, they take a percentage of the customers fee in exchange for sourcing the business and carrying the risk. The actual consultancy work will be delivered by the sub-contractor. Percentage levels vary but within the education sector percentages of up to 50 per cent are known to be retained by the lead organisation.
Assuming you are aware that the service is being delivered by a sub-contractor and if the procurement consultancy monitors the quality of the work delivered by the sub-contractor, it may bring an element of expertise that is not available from within your organisation.
Sub-contractor day rates can be in excess of £500 per day, excluding VAT. Should this charge be inflated as a result of the consultancy adding a mark-up, the day rate can become expensive. It is best practice to fully understand the benefits of using a sub-contractor via a consultancy, as opposed to appointing them directly. The sub-contractor may work exclusively to the consultancy because they can provide a volume of work that is acceptable to the sub-contractor.
There are a number of risks to both franchisees and sub-contractors, so let’s explore them:
1) You may not be aware that your service is being delivered by a franchisee or a sub-contractor. It’s your responsibility to fully understand the basis of the appointment and ask the right questions to be assured that you are comfortable and you have the correct level of protection should the advice and guidance received from the franchisee or sub-contractor be deemed to be negligent.
2) Should the sub-contractor provide an inadequate service and your relationship breaks down, you will need to register a complaint with the primary contractor. This could change project timeframes and outcomes because the primary contractor may not have the expertise or capacity to carry out the work.
3) Should the poor service result in your organisation receiving a legal claim challenging your procurement process/decision, then it would be your institution that is served legal papers not the consultancy or the sub-contractor! The consultancy would only be implicated if you could prove that they were negligent in their service, resulting in the legal claim. You could look to recover damages from the consultancy if this could be proven.
The consultancy would then potentially look to recover their damages from the sub-contractor. Each claim would be separate to the last and can be excessive in terms of both time and cost. Potentially very messy.
Questions to ask
Can you tell me how your business is structured and where in the overall structure the person who will lead on the project, is placed?
A procurement consultant who is a franchisee, may tell you they are the business owner, in which case you may need to ask further questions to fully understand how the business was formed and is conducted.
Should we need to escalate an issue during the project, who would it need to be escalated to and what is their position in the overall business?
A self-employed sub-contractor would have two options: they could provide the name of the business who has appointed them to deliver the service or they could avoid that and try to manage the issue themselves. You are advised to have a back-up plan if for any reason an issue does occur. A sensible back-up plan is to agree an escalation plan before the project commences. Hopefully it will be time wasted, but it might be time well spent.
What levels of insurance does the business carry? Does the insurance cover the person who will be the lead on the project?
It is particularly important to make sure that the company you are contracting with has adequate insurance against professional negligence, public liability and employer’s liability insurance. Ensure that these policies cover the work of the person appointed to undertake the work you are commissioning.
What contingency plans are in place should the project lead have to take unplanned leave during the project?
This is particularly important where a business is sub-contracting work and may not have the expertise to continue a project if their sub-contractor is unable to work.
Crescent Purchasing Consortium
CPC is a not-for-profit organisation and is owned and run by the education sector. CPC provides trustworthy deals designed for educational establishments covering a wide variety of products and services. The Department for Education recommends 13 of CPC’s deals. Tenet Education Services are part of the CPC Group and provides procurement consultancy support. CPC membership is free for all educational establishments. L