Organizations contemplating outsourcing their health benefits and pension programs should heed those words, understanding not only where they’re going, but also where they’re coming from—and how the choice to outsource will improve their business. There are important considerations to be made in creating a request for proposal (RFP), selecting a provider and outsourcing benefits administration.

The first step, selecting the right outsourcing model and provider, need not be a difficult process. But it’s easy to get it wrong: a recent study by Deloitte Consulting found that 70% of North American companies that have outsourced benefits or HR functions had “significant negative experiences” with outsourcing projects. That may be a daunting statistic if you’re about to conduct an RFP to outsource benefits administration. However, as outsourcing becomes more prevalent and as the market matures,there is a growing body of knowledge available that can help you avoid the problems and pitfalls that have plagued other organizations.

Here, therefore, are some strategic insights into how to approach and conduct a successful outsourcing RFP, and how to select the right provider:

Even though the drivers for outsourcing are almost universal— to improve efficiency, to improve employee service, to leverage technology, to free HR for more strategic functions—most plan sponsors fail to adequately measure the true cost of their administrative infrastructure.

No two organizations or benefits programs are identical, so it’s important to start with a clear understanding of existing “people, processes, technology and costs,” says John Sanders, managing consultant, Hewitt Associates in Toronto. Not only is understanding these elements crucial to the business case for outsourcing, says Sanders, but “doing your homework” is the only way to establish what type of outsourcing support you need, and to understand the economics of outsourcing as they apply to your unique situation.

If you’re looking to outsource, you’ve made a strategic decision to change your business processes. Whatever you want the future to look like, you’ll need to articulate your vision so that internal stakeholders and prospective providers have a clear understanding of your needs, what you expect to gain from outsourcing, what type of outsourcing you need and what types of expertise you require from an outsource vendor.

This is generally a complex undertaking, so Randal Phillips, executive vice-president at Morneau Sobeco in Toronto, suggests: “Organizations should take time in advance to meet with prospective providers, to better understand the strategic capabilities that they offer.”

Conducting an RFP is one of those instances where the quality of the process usually determines the difference between success and failure. Start by assembling the requisite internal stakeholders (HR, finance, purchasing, IT, and legal), advises Angela Goodchild, client sales executive with ExcellerateHRO in Mississauga, Ont. “Many RFPs stall because there isn’t clarity or buy-in.”

Map out a project plan that permits ample time to assemble information, to develop your RFP itself, and for the analysis of proposals. If it’s not possible to appoint an experienced project manager internally, most experts concur with Morneau Sobeco’s Phillips, who recommends engaging a professional advisor to steer the process.

Finally, allow as much time for decision-making as possible: for myriad reasons, it will take longer than you think.

Your RFP needs to do more than just ask the right questions; it also needs to supply detailed program information and administrative data to support accurate proposal pricing. Just as the process of conducting an RFP is not inexpensive, the job of assembling a proper proposal represents a significant investment for prospective vendors.

It’s in the best interests of all parties to get things right the first time, and providers can only work with what you provide them. So avoid the garbage in, garbage out syndrome by being specific about your needs, by providing detailed plan descriptions and administrative data(about your covered population, and as much transactional information as possible). The more thorough you are in describing your programs and projected needs, the less providers will need to rely on arbitrary assumptions in their approaches to pricing.

Here’s a useful tip: invite vendors to ask questions, and publish all responses to all bidders to ensure consistency— and to maintain a level playing field.

Perhaps more so than with many other vendor relationships, successful outsourcing depends on partnership. Seek a provider you can trust to operate as an integral arm of your business. Look beyond prerequisites like experience and expertise for cultural fit with your organization, strategic vision, flexibility, adaptability, capital resources, and a commitment to technological advancement and innovation.

Make sure any face-to-face interviews of prospective providers you may conduct are more than just a formality. As Goodchild of ExcellerateHRO says, you need to size up providers and ask yourself, “Are we going to be able to grow together?” Don’t stop at finalist presentations either; take the time to conduct site visits to see where your prospective partner lives, and how your plans will be administered.

Thorough documentation throughout the RFP process is the best way to avoid problems when the process moves from selection to implementation. Be clear and specific about your requirements, and demand equal rigour from prospective vendors in their proposals, service agreements, and implementation and operational plans.

Ask for and vet sample service agreements from providers, and ensure that your legal, purchasing, finance and IT departments do the same. Once you’ve selected a vendor, Sanders advocates a “post-RFP discovery” exercise so that both parties can understand and document in detail each other’s processes, capabilities and expectations, and ensure these are reflected in the service agreement and pricing.

Whether you see the process of benefits outsourcing and vendor selection as an exciting project or a necessary evil, it is a complex undertaking that demands a business orientation, a methodical approach, solid project management, and appropriate due diligence. Most of all, it requires the ability to envision new ways of managing a key element of your rewards and compensation program.

Jeffrey Schmidt is an independent consultant based in Stratford, Ont.