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    Situation

    • Category negotiates SOW's with consultants that include investments credits that apply to bottom line of overall projects costs specifically within the consulting scope. It reduces company costs and has a direct positive P&L impact.

    Complication

    • YoY (historical baseline and current year spend) is not easily defined. This is due to large volume of SOW's and projects that the category does not disclose due to project confidentiality and/or is managed directly by the business that Procurement does not have direct access to. 
    • Complicated if different roles used vs. prior year on a project.

    Question

    • How do we evaluate if an investment credit is reportable productivity if the credit is not easily defined in baseline/current year and is applied to several projects (both in prior and current year)

       

    Recommendation

    • One-time credits don't count as productivity, because: they are non-recurring, and baseline comparability isn't consistent.
    • It is Productivity only if there is a reduction of effective Cost per Unit vs PY. There should be a clear mechanism to establish a baseline. The fit, form and function should be the same and it should be of recurring nature. 
    • If baseline cannot be established and a comparison doesn't exist, report as cost savings or cost avoidance.