1 Vendor Evaluation: Selecting for Success Dana McCormick Wells Fargo Home Mortgage Delivery Services Baltimore PCC Education Seminar April 27, 2007.

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Vendor Evaluation:Selecting for Success

Dana McCormickWells Fargo Home Mortgage

Delivery Services

Baltimore PCC Education Seminar

April 27, 2007

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Objective

Develop a methodology to objectively evaluate service providers or products, ensuring that the best one is selected for a given situation. The intent is to consider all relevant factors and minimize the subjective issues that can potentially influence such a decision.

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Vendor Definition

A third party that performs functions on your company’s behalf or provides services to your company.

Some examples include: Core Processing Information and Transaction Processing Security Monitoring System Development and Maintenance Print and Reprographics Strategic Alliances Internet Services

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The Process

Have a plan. Stick to the plan.

1. Identify your business requirements

2. Perform a due diligence via RFP, RFI, etc.

3. Evaluate the responses of each provider

4. Select a vendor

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Develop the Plan

What are the drivers for use of a third party vendor?

Factors to consider Cost reduction Improved quality/performance Increased flexibility Speeding project delivery Gaining access to expertise not available internally Providing increased availability of services

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Business Requirements

Can the vendor provide the desired results?

Services/products provided by the vendor. Core product or service Service level agreement Reporting Transition and integration Fee/cost Contract requirements Technology/security Required vendor characteristics (minority ownership,

certifications, local vs. national, etc.)

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Risk Assessment

Risk conditions include: Financial impact Legal or regulatory compliance Confidentiality Vendor connectivity to client networks Direct customer interaction Vendor mitigation of personnel changes Internal operations analysis

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The Proposal

Accomplishments: Identify critical success factors Identify barriers to success Integration of vendor activities with corporate

business strategy Legal framework of an agreement Ease of migration

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Evaluation Criteria

Ability to provide the product or service Ability to meet service level requirements Integration plan Ability to meet information security and disaster

recovery expectations Control environment Risk assessments Agreement to our contract

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Due Diligence

Components of due diligence include: RFP/RFI development and issuance Introduction and overview of desired objectives Definition of business requirements Definition of contract requirements Request for information needed to conduct due

diligence addressing the evaluation requirements.

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Evaluation

Objective: Develop a procedure to select the best service provider from a group of qualified vendors; making a decision in a fair and objective manner.

Method: Develop and utilize a weighted matrix format as a tool to fairly and objectively evaluate the options available.

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The Process in Action

Price Postage Run Rate Service Certifications

Compatibility with Operations

Confidentiality Security

What are the business requirements for selecting a presort vendor?

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The Process in Action

Meet the needs in the proposal.1. Does your company agree to our strict confidentiality

agreements?2. These are our security requirements. What will your

company do to meet or exceed these standards?3. Does your organization have any certifications or

industry leading practices.4. These are our service standards. What will your

company do to meet or exceed these expectations?5. What is the overall price structure, including postage

run rate for our mail?

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Single Function MatrixCriteria Weighting

Raw Score

WeightedScore

Raw Score

WeightedScore

Raw Score

WeightedScore

Raw Score

WeightedScore

1. Requirement #12. Requirement #23. Requirement #33. Requirement #43. Requirement #53. Requirement #63. Requirement #73. Requirement #83. Requirement #9 Weighted Total

Note: Weighting varies from "1" (least important criteria) to "5" (most important criteria).

Firm # 1 Firm # 2 Firm # 3 Firm # 4

Above scores are not actual results. Example purpose only.

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Equipment MatrixCRITERIA WEIGHTING

Raw Score Weighted Score Raw Score Weighted Score Raw Score Weighted Score

Requirement #1

Requirement #2

Requirement #3

Requirement #4

Requirement #5

Requirement #6

Requirement #7

Requirement #8

Requirement #9

Requirement #10

Requirement #11

Requirement #12

Requirement #13

Requirement #14

Requirement #15

Requirement #16

Requirement #17

Requirement #18

Requirement #19

Requirement #20

Requirement #21

Requirement #22

Requirement #23

Requirement #24

TOTAL

PRODUCT A PRODUCT B PRODUCT C

Note: Weighting ranges from 1 (least important) to 10 (most important). Scores range from 1 - 10, with 10 the highest rating.

Above scores are not actual results. Example purpose only.

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Service Provider Matrix

Above scores are not actual results. Example purpose only.

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Recommendations

Include a contract agreement with the RFP Match RFP to selection criteria matrix Create comparative scores Use wider score range for weighting Properly weigh criteria values

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Desired Result

Increase credibility Validate your selection Create a reusable method Augment the decision making process

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ConclusionChoosing the best vendor from a group of qualified service providers can be a daunting task. Determining specific requirements in advance and communicating factors for success with potential providers creates an equitable and decisive way to subjectively make a decision.

By using the weighted matrix methodology you will be sure that all aspects of the request are covered and the groundwork for a successful comprehensive agreement between parties produces the desired results.

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Vendor Selection

Questions?

Comments?

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Contact Information

Dana R. McCormickWells Fargo Home MortgageMAC X3901-0117485 New Horizon WayFrederick, MD 21703301-846-8635

[email protected]