These systems are used to rate each proposal on a standard set of measures to ensure an objective analysis is performed. In this context, if a response is not provided or an answer is deemed to be inadequate or unclear, the overall assessment is negatively impacted. Providers should ensure that they have adequate oversight of their bids and contracts function and that a final quality check is performed on all proposals before they are presented to the customer.

Business tactics

One method that is being used to address the financial pressures faced by some manufacturers is a bidder's auction. In some situations, each provider that has issued a proposal for a specific project or trial must participate in an online auction to win the business. During these auctions, representatives from each party that has provided a proposal are able to see the anonymous bids of the other parties and must decide whether or not to alter their bid during the time allotted. Based on the fact that the lowest bidder wins, these are frequently referred to as reverse auctions. While the outcome of this process could be considered a success for the sponsor, it represents a virtualization of the negotiation process and the potential of rendering face-to-face value discussions obsolete.

Another important dynamic is the involvement of members of senior management in purchasing decisions, up to and including the CEOs of multibillion-dollar drug development companies. In some cases this is prompted by corporate governance policies that require executive oversight of key financial decisions. The Sarbanes Oxley regulations are invoked with increased frequency to justify the position that start-up payments or deposits to suppliers are unacceptable because they allegedly represent payments for services that have not yet been rendered. This position places the burden on the supplier to provide evidence of the effort expended on behalf of the company at a very granular level.

The seemingly straightforward process of obtaining approval from key decision makers in both organizations and physically executing contracts has become more complex. As a result, both parties should agree on specific timelines and milestones and monitor them carefully to ensure they are achieved.

Cutting back

In the current environment of doing more with less, many companies have consolidated their purchasing organizations. They have done this primarily in three ways. First, some companies have aligned their outsourcing group with specific therapeutic areas. As cost pressures mount, several companies have eliminated this redundant structure and consolidated the outsourcing function into one organization that is responsible for all therapeutic areas.

Second, several companies are assessing the disparate processes employed between the United States and Europe. Given the mergers and integrations of many U.S.- and EU-based companies, a fair amount of redundancy still exists across the purchasing function. In some cases, contract templates from one side of the Atlantic can be completely different from the other. The need for translations and compliance with applicable country specific laws aside, a provider cannot only become confused, but miss an opportunity to provide services for a particular project altogether.

Finally, cost constraints in some companies have prompted a consolidation of purchasing for a broad range of services. While one department may have focused on ancillary providers and another on strategic CRO relationships, the staffs have had to expand their knowledge base to include many more services with which they may not be familiar. In some cases, the outsourcing groups have been faced with workforce reductions at the same time, making it very difficult to take on the extra burden of these increased responsibilities.

Greg Richard is senior vice president, sales & marketing, Synarc Inc., 575 Market Street, 17th Floor, San Francisco, CA 94105, email: greg.richard@synarc.com