Intangible services may be among the most difficult things to procure. As a result, one must be careful when contracting these. If you are not, you may get stuck with an incompatible supplier for an unprofitably long period of time. Here are some tips for service procurement risk management:

We’re picking up from the article, where we referred to “intangible services” as “work whose quality you can’t experience before the performance.”

Examples of intangible services:
  • Advertising services – Just because an ad agency created an effective TV, radio, or print ad for another client doesn’t mean that the one that they create for your organization will result in a spike in business.
  • Product design services – Just because a research and development firm designed a high-quality product for another client doesn’t mean that the one they design for your organization will result in a competitive advantage.
  • Physical security services – Just because another client had no security problems when it hired a security firm doesn’t mean that your organization’s experience with that firm will be as good.  The quality of physical security depends on the specific personnel deployed and the situation in which they are working.  There may be a higher chance of disaster if inexperienced security guards are deployed at a socially divisive rally than experienced security guards deployed at a Neil Diamond performance, right?

Procurement risk isn’t equally high for all intangible services.  A few of the general variables that affect your degree of risk include similarity to previously done work and frequency of performance.

Examples:
  • If you were procuring voice-over services, the chances are that if you heard recent samples of the voice-over talent’s work on projects that are similar to yours, quality should not be dramatically different.
  • If an interior designer who you are hiring to design the interior of your company’s new facility has designed hundreds of office spaces, results should not vary too much if you have a decent specification for the work expected.

But it’s those intangible services where the work you want is not similar to what the supplier has done before and/or is not something done frequently that can give you those procurement headaches for the ages.

Bottom line: Be careful and use the three tactics described in the article when you procure these services.

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