Contingent Labour: Low Compliance and 340 Agencies
Helios Engineering Group spends £180m a year on contingent labour across 22 countries. A central team negotiated framework rates with four preferred suppliers, but business units still place 62% of assignments directly with 340 other agencies. Compliance with the preferred-supplier channel is 38%; rate cards expired 14 months ago; 11% of statements of work have no defined deliverables or end date. Local HR teams say the preferred suppliers cannot fill niche engineering roles quickly. A spend cube shows that the top 40 sites account for 78% of spend, while 60% of agencies are used once. The CFO has asked for a category strategy that reduces cost by 12% in 18 months without disrupting project delivery. The CHRO is concerned about worker classification and fair treatment. The procurement lead has one analyst and no mandate over HR-owned agency relationships.
1. Recommend a category strategy. Explain segmentation, channel design and the first three actions.
Read the worked answer
Segment the category, not the supplier list. Use two axes: spend and criticality or time-to-fill. High-volume generalist roles such as admin, PMO and basic engineering should go through a managed service provider or neutral vendor with rate cards, margin caps and consolidated invoicing for the top 40 sites. Niche specialist roles should stay with a controlled local panel, but only after rate benchmarking, compliance checks and standard statements of work. Repeatable engineering roles can move to direct sourcing and talent pools.
The first three actions are: (1) cleanse data and make a mandatory SoW template with deliverables, end date, rate cap and worker-classification check; (2) secure an executive mandate that there is no PO and no pay, and agency onboarding only through the channel with approved exceptions; (3) pilot the top five sites and refresh rate cards with three to five suppliers per lot.
The 12% target should come from rate normalisation (4-5%), demand and tenure management (3%), supplier margin and invoicing (2%) and compliance (2%). Risks: over-consolidation slows niche fill; misclassification creates legal and ethical exposure; local HR may resist. Keep a fast-track exception with 48-hour approval.
2. How would you measure benefits and handle resistance from business units and HR?
Read the worked answer
Measure a baseline before claiming savings: spend by site, role and agency; rate variance; time-to-fill; assignment duration; compliance; worker classification; and quality. Track savings in the P&L with finance sign-off, not just negotiated rates. Distinguish rate reduction, demand avoidance and cost avoidance. Report a balanced scorecard covering savings, fill speed, hiring-manager satisfaction, compliance, diversity and legal or ethical incidents.
For resistance, co-design with HR and site leads. Give them a fast-track route for niche roles. Publish service-level commitments and run a 90-day pilot with visible wins. Avoid a blunt central mandate; use no-PO-no-pay plus an exceptions panel. Address fair treatment and classification through a joint HR and legal review. Communicate what changes for managers and what does not. Escalate only persistent bypass. The procurement lead needs an explicit mandate from the CFO and CHRO, otherwise the channel will remain optional.