The Smart Way to use Input, Output and Outcome Specifications to get the Most from your Suppliers
Byon July 3, 2018
Large contract relationships are notoriously difficult to predict. Many will make it through to a successful conclusion, some will fail spectacularly and others will quietly underachieve. A common influencer across all of these relationships is the strength of the communication during the procurement process between client and supplier – something as simple as a small misunderstanding, or the misalignment of aspirations and expectations with the specification, can quickly become a big problem.
Clarity is traditionally considered to be the primary defensive weapon in any client’s armoury. However, it is how this clarity is applied that can mean the difference between constricting your suppliers and causing issues that you’ll ultimately be responsible for, or freeing them up to be the professionals you selected them for in the first place.
Project Specifications – their purpose and potential
The specifications you create for your suppliers will form the foundation of their view of your expectations of them. While it’s true in most cases that clarity works for you and ambiguity against, it’s always important to remember that a balance must be struck between the two – allowing your supplier the room to apply their own professional expertise to the relationship.
The purpose of a good specification is twofold:
1. To accurately and effectively communicate what you want your supplier to do, to achieve and to provide.
2. To quantify this ‘want’, ‘achievement’, ‘provision’ in order to measure milestones, the achievement of quality standards and ultimately whether the relationship has been a success or failure.
Traditionally clients have taken on the role of the ‘expert’, developing detailed specifications for suppliers to follow to the letter. However, the evolution of suppliers into niche specialists means that, on many projects, it is now far more beneficial to allow them a well-deserved seat at the strategic table.
The difference between Input, Output and Outcome Specifications
A simple way to think of the fundamental difference between these three specification types is that they answer the questions ‘how’, ‘what’ and ‘why’ respectively.
How: Traditional specifications fall under this category as they explain in great detail how a client expects their supplier to achieve their goals – identifying clear technical standards to be met, accompanied by detailed plans, drawing, blueprints, projections, bills of quantities and so forth.
Pros – Clarity in the extreme. Suppliers or contractors provided with such detailed specifications will undoubtedly do their best to meet the standards and milestones required of them where physically possible, i.e. you’ll probably get what you’ve asked for, depending on the ability of your supplier.
Cons – BUT, is what you’ve asked for what you really need? The problem with being too dictatorial in your specifications is that it stifles creativity and innovation. Your suppliers were selected for their expertise and, while you may have a great deal of knowledge, they will no doubt be even more adept than you in certain areas of the project and should be allowed to contribute to the development of the specification. Also, with an Input specification you will take full responsibility for the fitness for purpose.
What: An Output-orientated specification steps back from the specifics of how a client expects a supplier to achieve their goals and provides them with what the output is expected to be. This gives suppliers the freedom to assist their client in developing the best route to the specified end result. Output specifications do not need to be any less informative or detailed, they simply take a different tack.
Pros – Innovation is encouraged to flourish and niche expertise is released to create more efficient solutions and added value. The responsibility for success has now shifted to sit squarely on the single or managing supplier’s shoulders.
Cons – Clients will need to relinquish more control than maybe they are comfortable with, trusting in the ability of their supplier to achieve their end goals by whatever route they consider most appropriate. Output specifications provided in multi-sourcing supplier relationships, do not shift nearly as much responsibility to the suppliers as in single supplier relationships. In these circumstances, as the success of one supplier may be tied up in the achievement of another, it can be difficult to determine who was ‘most’ at fault when things go wrong, meaning the buck ultimately stops with the client.
Why: Explaining why you are looking to undertake a project – the purpose of the product or service supplied is never, on its own, going to be enough. However, it adds important context to a specification and should be included even if your project best suits an Input or Output specification.
The business case you develop for commissioning a required product or service will clearly state the ultimate business objective and outcomes, right? This needs to be communicated to the supplier so they can determine a solution that will be the best fit for its intended purpose. Of course, you can guide the supplier with inputs and outputs but you need to make it clear that you are contracting for the intended outcomes.
While clients are often adept at communicating the inputs and outputs, we have found that many struggle to quantify expected outcomes and often leave it to chance that whatever they buy will achieve those outcomes.
When you are reliant on the expertise of a supplier, it is the context of the outcome, and the context of the objectives, that need to be expressly worded so the supplier knows how to put together the right inputs and outputs.
When you are utilising the services of a managed/outsourced service provider you can contract for quantified outcomes. When you are purchasing a project/product you can contract for the tool that allows you, the client, to achieve those outcomes.
Pros – Supplier has a better understanding of what you are trying to achieve and takes on a greater proportion of the responsibility.
Cons – It’s often hard to step away from focusing too much on the inputs and outputs and to properly quantify what the expected outcomes are.
Real world example for context
So, how do input, output and outcome specifications look in the real world? A simple example would be the instruction of a construction firm to build a bridge.
- An Input specification would talk about the materials that would be used, their depth and consistency, the volume of asphalt required, the British Standards regulations for these materials and the methods of preparing the surfaces along with a detailed bill of quantities, plans and schedule.
- An Output specification would describe what you want – a bridge that has a hard surface, which is 2m wide and has a warranty of workmanship and materials.
- An Outcome specification, on the other hand, would simply explain why you are commissioning this project in the first place. You want to provide the shortest and most convenient means of pedestrian access from the main road to the entrance of an office block which would allow 500 pedestrians to use it simultaneously between the hours of 06:00 to 19:00 on working days.
The importance of responsibility demarcation
Robust contractual obligations and duties will need to be established from the outset to ensure that the expected end results are achieved, no matter which specification type you decide to go with. However, one very important consideration between them, as already mentioned earlier in this article, is where responsibility for the success of a project lies.
Input specifications, those with more explanations as to how a supplier or suppliers should go about their role, will ensure that responsibility gravitates towards a client. Output and outcome orientated specifications, that rely on suppliers’ expert advice more heavily, will swing the weight of responsibility towards them.
Which specification type works best for your relationship?
The fifty million dollar (convert for local currency) question therefore is, what should you do? The answer, rather irritatingly is that there is no simple answer.
The client needs to be clear on where his or her own expertise lie, and be comfortable with contractual responsibilities.
Rolls Royce, for instance, may purchase a spare part for one of their jet engines using an input specification. They have invested huge amounts of money in R&D and they are best suited to know what will, and will not, work for them. If, on the other hand, the client has no expertise in what they are purchasing, such as an outsourced payroll service, but all they know is the outcomes they are trying to achieve – then an outcome specification is for them.
To get the most from your suppliers it’s important to know when to encourage innovation, commitment and engagement, how to maximise your exploitation of their specialist skill set and when to provide a more intricate client-side specification.