By Ray Sison, VP of Pharmaceutical Outsourcing and Tech Transfer, xCell Strategic Consulting, LLC
While presenting a webinar on the CMO selection process not long ago, I had a moment of clarity. Even though I didn't include the following words in 36-point block letters on any slide, I suddenly discovered the essence of the lecture as I adlibbed this declarative statement:
If you control the information, you control the process. If you control the process, you position yourself to best negotiate a final deal.
This approach creates a solid foundation for selecting a CMO and negotiating a contract that best represents your company’s interests.
Contrary to how it sounds, controlling information is not about withholding key documents or facts that are relevant to the bidding process to see how the bidders react, or only supplying pertinent information if requested. In fact, it is exactly the opposite: Share all known, relevant information about your project and expectations with prospective bidders at the same time and in the same context. Where information is unknown or unavailable, put a stake in the ground by making assumptions and include a disclaimer that they may change. This makes sense if we view initial proposals as containing preliminary data sets and we have a sense of how budgets could be impacted by changes to situations and conditions.
In this article, we will focus on a 10-step framework that will set the tone for the CMO selection process. In future articles, we will explore methods and best practices to put the concepts into action.
1. Preselect the field.
Companies that outsource should always be evaluating and benchmarking the field. Do a thorough search of the marketplace through networking with colleagues, searching online databases (often sponsored by tradeshows and trade magazines), and/or attending tradeshows. If this is considered a best practice, the opposite would be to hold separate discussions with various CMOs over an undefined period (e.g., when they call and ask for a meeting at your office), followed by isolated discussions on needs, strategies, and scopes of work. This will result in proposals that cannot be compared because they have been developed on different strategies and assumptions, overtly and subtly.
2. Define the project objectives and selection criteria with your team, identify a long list of CMOs (if possible), and then gauge the level of interest among the field with a non-confidential request for information (RFI).
If the project requires specialized, hard-to-find capabilities, or if your resident expertise does not extend to the services sought, bring in outside help. Why? First, a consultant who is knowledgeable about the CMO space can save valuable time by identifying niche outfits. Second, objectivity during the bidding process is compromised if you allow any one business development rep to become your voice on issues such as technical strategy, the marketplace, and its players; in doing so, control is lost.
3. Initiate a dialogue that will evolve into a relationship.
Is there the right chemistry to build a workable relationship? Take the lead in reaching out to CMOs and staying in contact. Don’t be surprised if it takes effort to get a response. Be prepared to offer a compelling company narrative that draws attention to your business and its goals.
4. Assess the bidder’s motivation.
Organizations often reveal their priorities. Gauge the responsiveness and level of involvement with ongoing dialogue, and let it be an indicator of the fit of your project for a given CMO and its business strategy. Do not invest time with CMOs whose business objectives are not aligned with yours.
5. Evaluate technical capabilities and problem-solving approaches.
Every pharma project has its unique technical challenges. Actively listen for signs that vendors have the curiosity to ask insightful questions and the expertise to suggest solutions.
6. Get top-line budget estimates for benchmarking, internal budgets, and buy-in.
Self-explanatory, this is by far the most concrete deliverable of the selection process, but it is often met with frustration due to a less-than-disciplined foundational approach. Set your expectations fairly. The initial proposals you request are for high-level comparison only and may not be indicative of the final budget if assumptions and other factors can be expected to evolve. Incomplete or incomparable proposals are par for the course and should be both a selection screen for proposals that fall short and an opportunity for further discussion with the top bidders. Compounding the confusion for many, the sticker shock of pharma work can be breathtaking because it is both expensive to the uninitiated and can vary so widely from one proposal to another, even under the most controlled conditions.
So let's merge two key points and carry them forward. First, control the information. Second, take a disciplined approach to getting top-line budget estimates. Clearly they overlap; in fact, the other objectives also fall within this framework. We merge these points by authoring a detailed request for proposal (RFP) and initiating a bid process among a preselected group of CMOs simultaneously.
7. Distribute the RFP simultaneously.
In a well-vetted field of three to five motivated bidders, an RFP should be circulated simultaneously to create a level playing field and to broadcast that a competitive situation is in play. In the past, I've done this by emailing the document to each bidder on the same day. Lately, I am given to blind-copying (Bcc:) the field of bidders to save time, then following up with a phone call to walk them through the document. With some RFPs that have extensive technical packages, setting up a secure eRoom or cloud-based storage solution justifies the added effort.
8. Use a FAQ sheet.
Within a week, I typically have several questions that need follow up, e.g., clarification of assumptions, missing specs, stability requirements. These are compiled into a FAQ memo with responses and blind-copied to the field. At this base level, controlling the information is again ensuring everyone has the same data upon which to build their proposal.
9. Encourage technical calls.
Technical calls are often highly revealing, demonstrating the mastery of subject matter experts and knowledge of their internal operations. Prime the discussion by exchanging a list of questions to be addressed, setting the agenda, and assuming the lead in meetings. This ensures the right panel of representatives will be present and all questions will be thoroughly discussed. Here, controlling information requires both responsibility and accountability. Remember that confidentiality agreements must be taken by their letter and spirit. Specifically, technical strategies and solutions are often considered proprietary. Encourage an exchange of ideas with each CMO but respect that proprietary information must not be shared when inappropriate.
In a recent bid, one vendor pointed out that the identified container closure system (CCS) in the RFP was not qualified on their filling line. They offered an intriguing, streamlined strategy that reduced the cost of this non-scoped service. Although component qualification was not included in the RFP, it revealed a gap/missing assumption. As a result, we revised the RFP, highlighting the assumption that the CCS was qualified. We then added a disclaimer that if the assumption was false for a given vendor, that vendor could suggest a similarly qualified CCS or itemize the out-of-scope work. Although others needed to react to this change, it would not have been permissible to share novel technical or strategic approaches suggested by one vendor with another. If you have questions about what information can be shared, consult your legal counsel.
The above example is straightforward with a clear path ahead. However, while the vendor that suggested the workaround scored higher in technical capabilities for identifying the gap and offering a solution, they were still at a competitive disadvantage in their budget compared to another vendor that already had the CCS qualified. Optional or non-scoped activities should be clearly identified in the submitted proposals and not included in the preliminary budget comparisons for benchmarking. They can be included in overall proposal costs. There will be little confusion in proposal evaluation if a disciplined process has been followed.
10. Map the RFP to the proposal.
When evaluating proposals, clearly map requirements in the RFP to line-item responses in the scope of work and budget. Many vendors continue to evolve in the format and granularity of their proposals. Recognize that an RFP requirement may map to several line items, e.g., drug product batch manufacture can map to raw materials testing, manufacture, packaging, release testing, etc. Take the lead by defining in the RFP an appropriate level of granularity.
Early in my career, when I started reviewing proposals, I'd take the most detailed submission and use it as a baseline for comparison. I now see this as unfair. I give higher scores to better quality proposals, and it works to the advantage of the vendor by way of clarity and transparency, but using their format as a basis for comparison overweighs this edge.
Create your own templates for comparison by systematically following the RFP scope. Map out the RFP to a categorized set of activities, and map them to vendor budget line-items in the proper fields. Complete the proposal exchange by having vendors fill in missing scoped activities or provide justification why they were omitted. Separately, keep score of vendor performance against selection criteria predetermined in the project assessment phase.
A well-designed RFP will return a set of complete and comparable proposals that contain benchmarks revealing the cost structure and technical approach of each vendor's operations. By controlling the information with an RFP and controlling the process by taking the lead through the best practices listed above, a company puts itself in the best position to negotiate pricing and terms. Next can be subject to a myriad of variables, but they will be based on a solid data set. This competitive bidding process will produce directly comparable proposals and detailed dialogue with several vendors over a defined six- to eight-week period, informing the sponsor on what can be negotiated in the lead-up to executing a contract.
About The Author:
Ray Sison started consulting in 2011 after recognizing a need for expertise in pharmaceutical outsourcing among the discovery- and clinical-stage pharma companies he served while selling services at Patheon and MDS. Based on his experience, he provides insight to the CMO’s business and operations, helping his clients negotiate and achieve better outcomes. Additionally, he has developed sound processes and templates to streamline CMO procurement to save time and cost. In this series of articles, as well as online webinars, he continues to share best practices and case studies helping improve the outsourced business model. You can reach him at firstname.lastname@example.org or connect with him on LinkedIn.