Establish the Contract

Abstract

We discussed the Five Rules of Vested Outsourcing in chapter 4. The fourth rule is a properly structured pricing model that provides incentives for the best cost and service trade-offs. One of the difficulties about choosing the right pricing model is that often there is confusion in the team and especially among the contracting members about the different models used to construct a Vested Outsourcing agreement. This confusion is due to the lack of consistency in how terms are applied to specific contract elements. This chapter helps to clear the fog around pricing models by providing a basic vocabulary and set of definitions that companies can use to determine which pricing model and incentive types are best for them. In addition, it provides a framework for helping organizations understand the key attributes of pricing models and determine which model to apply to which type of contract.