Philip Remedios, Principal, Director of Design & Development, BlackHägen Design

When your in-house teams are under pressure, it could be advantageous to investigate the deployment of research and development activities to an outside contractor. As with any other business strategy, the focus should be on the organizational, financial, and competitive benefits that outsourcing would bring to the organization.

Outsourcing, investigated thoroughly, can bring fresh perspectives to the processes at hand as well as empower corporate R&D managers to take advantage of a powerful industry tool. While core technology should always remain in-house (unless as a start-up business you’re looking to acquire intellectual property), correctly structured, managed, and funded, outside contractors may be able to energize the effectiveness of internal design teams.

When considering whether or not to look for an outside R&D partner, consider these questions. If you answer “yes,” you should consider outsourcing to a tested and proven partner:

Related:Plan R&D to keep pace with medical advances

Outsourcing is an Important Human Resource Strategy

Once the determination is made to look for a research and development partner, the process of identifying the right consultancy means that human resource strategies need to be in high gear. The focus should be on gaining insight into how successful the consultant will be in meeting expectations on time and on budget. To find the right team, the following criteria will help lead to the appropriate choice.

Considerations in the selection process:

Reviewing Proposal Plans and Selecting a Partner

Contacting six or more firms may seem reasonable but it will likely slow down the selection process. Outreach to three or four firms is usually ample due diligence, especially if some pre-screening precedes the request for proposal (RFP). Requesting an executive summary and Rough Order of Magnitude (ROM) budget from your candidates should provide enough data points to gain confidence on a realistic budget, development methodology, and timeframe. With this approach, the outliers will become obvious.

Solicit formal proposals from two to three shortlisted firms and structure the RFP so the responses are comparable. Look for emerging patterns on how each firm structures and budgets your project. Experienced consultants usually tackle design challenges similarly for a reason.

If the outsourcing is partial, it is usually acceptable to integrate the consultant’s deliverables into your design history file (DHF). If you plan to outsource the entire project, be certain the DHF is professionally maintained and will stand up to regulatory scrutiny, even if the consultant is ISO-certified.

Traditionally, a waterfall-style “top-down” design process is used that aligns to ISO 13485 and 21 CFR part 820 design process guidelines. Highly collaborative and often complex, this approach involves many disciplines working in parallel, relying on outputs from one to drive the next stage of work for the other. Stakeholders reassess and approve budgets and scope at formal stage-gate reviews before the beginning of the next phase. In contrast, software developers practice a “bottom-up,” Agile design process whereby work is conducted in rapid, discrete modules called “sprints” and are a good way to tackle feasibility studies. Sprints can be iteratively deployed to solve critical sub-system hurdles within a major phase of a waterfall plan without disrupting overall interactivity.

Along with methodology and absolute scope, estimated costs and timelines are terms for doing business. Few tasks in R&D, beyond the first exploratory phases, can be confidently quoted in not-to-exceed terms due to the varying directions a design can take. However, ranges can be provided for subsequent phases based on past projects with similar scope. These “budgeted” proposals ultimately require payment in terms of actual time and materials spent, with budgets, scope, and timelines provided as a guide for overall cost control.

Once all proposals are collected, it may help to create a decision matrix to determine how the finalists stack up. If you use such quantitative tools, be careful to fairly consider intangible and qualitative assets like proposal quality, personal chemistry, team enthusiasm, work environment, and ease of travel. The quantitative winner should match your qualitative choice.

Contract Development

Depending on company size, you may use a corporate Master Service Agreement (MSA) that the Consultancy must review and execute. Your MSA is written by attorneys with a preference for your company’s best interests so be flexible. Expect a back and forth with attorneys or superiors to find a mutually acceptable, fair balance, which can take days – or even weeks – to execute.

The consultant is likely to ask for a purchase order and up-front deposit to cover project-related out-of-pocket expenses and help to bridge the time from work performed to actual payment. The longer the payment terms, the larger the deposit request. If you are considered a high-risk client (for example- start-up or international), you may be asked to pre-pay for work—essentially a retainer-based set-up widely used by lawyers and some CPAs. The retainer is then refilled as it is depleted. This policy ensures the consultant is paid for services rendered.

Management of the Project and the Consultant

A succinct proposal may form the basis for the formal Project Plan but may not reflect all the protocol-driven checkpoints and approvals required. At the kick-off meeting, establish these additional requirements and integrate them into the Plan.

Communication protocol is essential to manage outsourced projects. While it may seem reasonable to direct all communication through yourself, it will quickly become a losing proposition that unnecessarily slows the project. Regular online meetings should be arranged with only critical players to minimize the budget burden. Written meeting minutes should be distributed to all team members. Reviews may initially be required on a weekly basis to coordinate on multiple levels and ensure resource availability in a timely and predictable manner. Eventually, the project will settle down into an implementation phase and interim design reviews can be less frequent.

Determining how and how often to communicate is the backbone of ensuring an outsourced program’s success. As services are provided remotely, there’s no opportunity to walk through a department and gain an accurate assessment of progress with minimal interaction. However, an over-abundance of meetings stifles creativity and pressures the budget. Seek to achieve a balance that maintains adequate oversight but demands thorough written reporting as verbal communication often cannot be retrieved.

Cost and Schedule Control

Engineers will tell you engineering takes a finite amount of task time. It is also true that problems can be solved with varying degrees of complexity. Technologists, by nature, often gravitate to the best—and not necessarily the easiest—solutions, a process often called “creeping elegance.” Therefore, it is incumbent on project management to balance risk/cost with levels of complexity/performance.

Establish project objectives in order of priority (cost, risk, size, weight, speed, reliability, etc.) and keep the team in sync with reminders. This is particularly important when you may not see output for weeks at a time. Keeping a consistent focus on project objectives will aid good decision-making and keep the project on course and generally on budget.

Time and materials projects or phases should be monitored closely to ensure scope remains relevant since there is typically only a loosely defined statement of work. Weekly reports are necessary that include expended budget and next steps/expected budget burn. It can be easy for project expenses to spin out of control quickly, especially during periods of intensive travel and prototype fabrication. Predicted costs should be provided to ensure appropriate spending.

Leverage the formal stage-gate reviews to assess progress against the original plan. If deliverables or the output’s quality are not keeping pace with the expanded budget, you can pull some tasks back in-house for closer control, adjust the design process methodology in an attempt to catch up, or worst case, seek more time and budget if there is tangible evidence that unforeseen challenges have affected the original scope assessment. Always reserve budget and time buffers with your stakeholders for when things don’t go as planned. Negotiate 10-20 percent buffers, with larger margins for innovative and higher risk programs that expect some trial-and-error activity. It is advisable to identify and conduct these types of activities at the beginning of the project to ensure they are solvable before progressing with the overall development. By reviewing and adjusting methodology, scope, and resources at each stage-gate, mismanagement nightmares that often result from non-intervention and compounded overruns at the project’s end,  can be avoided.

Outsourcing can be a Winning Strategy

Successful R&D outsourcing can be achieved by working with a partner who matches project needs, corporate culture, and individual chemistry. Establishing a robust and collaborative project plan with stage-gate reviews, coupled with effective communication, will minimize surprises and enable plan adjustment along the way to maintain expectations. Furthermore, completing the first successful outsourced project will allow even greater efficiency due to less up-front due diligence and a reduced learning curve. Corporations that fully embrace outsourcing can afford to reduce their corporate staffing overheads while simultaneously boosting their ability to respond effectively to new challenges as well as peaks in resource loading. 

Philip Remedios is Principal and Design Director at BlackHägen Design, an R&D consultancy focused on medical device innovation. With a combined design and engineering background, Remedios has spent most of his 35-year career in executive consulting roles, developing project plans and managing integrated technical teams, schedules, and budgets. Philip has a Bachelor of Science in Industrial Design/Transportation from the Art Center College of Design in California and is a named inventor on 34 patents to date.