Steps to Functional Service Provider Success


Applied Clinical Trials

Applied Clinical TrialsApplied Clinical Trials-08-01-2008
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Outsourcing fundamentals for this pick-and-choose model so that both sponsors and service providers win.

Outsourcing clinical trials has become standard practice in the biotech and pharmaceutical industries as companies strive to develop greater efficiencies while reducing costs, resources, and timelines.1 As the industry's experience with outsourcing has grown, two basic outsourcing models have emerged: the Preferred Provider (PP) relationship and the Functional Service Provider (FSP) relationship.


The Preferred Provider model has been widely adopted by most sponsor companies when planning to fully outsource a study to one clinical research organization (CRO). The Functional Service Provider model is beginning to gain popularity, as many sponsor companies are tasked with finding creative outsourcing strategies that will gain efficiency while saving valuable research dollars.

Initially, the functional outsourcing model was employed for just a few functions (e.g., monitoring or data management).2 Today, however, FSPs provide far more than just monitoring and data management. Rather than outsourcing a complete trial to a single CRO, a growing number of pharma and biotech companies are opting for this outsourcing strategy in regulatory document preparation, investigator contract negotiations, site identification and initiation, biostatistics, medical writing, and more.

Benefits and pitfalls

Because project ownership remains in-house, companies that use functional outsourcing may experience higher levels of quality control yet have access to specific services at a lower overall cost. Sponsor companies benefit from being able to ramp up and draw down resources relative to their development activity levels without affecting their internal head count.

Figure 1, however, illustrates an often overlooked component of the FSP model: some operational costs, such as project initiation and study setup, will increase due to the multiple service providers involved. Each provider will need to incur costs associated with familiarizing themselves with the project scope, the protocol, and attendance at startup meetings. It's important to take into account the increase in both project management hours and costs resulting from the effort required to oversee and manage functional outsourcing providers.

Figure 1. As this clinical study resource and cost report demonstrates, companies utilizing multiple service providers on a study should plan to account for duplicate or overlapping costs for operational elements such as project initiation and study set up.

In some cases, companies have effectively collaborated with functional service providers by negotiating strategic staffing transfers (i.e., they have transferred some of their internal employees to the employ of the FSP team). This arrangement produces a provider team that is already steeped in the sponsor company's culture, processes, and systems. Most companies also find that by focusing on their core competencies and outsourcing other noncore functions, they can better allocate internal resources and operate more efficiently.3 Another advantage is that once companies are relieved of personnel worries, they can give greater attention to their clinical development strategies.

Cultural fit is a major factor in successful sponsor–FSP relationships. Be wary of the vendor with a knight on a white horse attitude. "We know what you want, we are the experts, now leave us alone to deliver," is not a philosophy that fosters collaboration. And collaboration is essential for a partnership to manage changes such as implementing new technologies. A successful partnership requires consideration and assessment of each party's interests; these are essential to addressing such issues as: What happens when the sponsor requires a quick ramp up by the FSP provider due to new development activities? What if there are lulls in the pipeline when the FSP may receive no work? These are issues that require advanced planning and mutual trust.

Here's an example to illustrate the ramifications of advanced planning. A mid-size biotech deployed the FSP model for selecting a vendor for EDC. The sponsor was careful to evaluate potential FSPs months prior to implementing EDC on a specific program or study. They sent comprehensive RFPs six to nine months prior to final selection, scheduled capabilities demos, and selected a short list of preferred vendors on whom they performed complete vendor selection audits to ensure due diligence and appropriate fit within the organization. The sponsor requested pricing on a full program (four studies) in order to see if they would obtain cost reductions on subsequent studies due to the efficiencies gained. These efficiencies were seen in database development and programming, eCRF screen designs, and several other data management services where the EDC provider could provide reduced pricing by recycling the previous study material with minor modifications for the subsequent studies.

Once the right FSP vendor was identified, they negotiated the Master Service Agreement terms carefully to ensure that they established balanced obligations and a clear definition of all parties' roles and responsibilities, appropriate governance for issue resolution, and communication between the two organizations. This upfront evaluation process ensured that they selected the right vendor for the best price and that they wasted no time on vendor selection activities when they needed to begin work on the first EDC study.

A mid-sized pharma company used a similar approach. "When our organization made the decision to use FSPs for data management, we did so in a structured and deliberate way. The head of the Data Management Group knew the capabilities, skills, and cultural profile that he needed in a provider for this approach to work effectively for his team and the company overall. He identified potential providers and carefully evaluated them from multiple perspectives. Face-to-face interactions were essential to the evaluation and final decision. The importance of understanding providers and how they work in their own environments cannot be overemphasized."4

No partnership is perfect, so occasionally the effort to work with an FSP results in a negative experience. This can sour future prospects for using FSPs in other functional areas throughout the whole organization. The solution, however, is not to abandon this outsourcing strategy but rather to reexamine and refine the provider selection process to ensure better choices as well as communicate lessons learned to other functional areas in real time.

Getting the most from FSPs

It is important to determine which functions best suit the FSP model. According to an executive at a Top 20 sponsor company, "Functions that are best outsourced are those that are well-defined within the scope of the work and don't rely on the provider for strategic agility, though the provider may use some creativity within well-defined parameters. Functions that require a high level of strategic thinking are not well-suited for functional outsourcing not because the provider isn't capable of strategic thinking but because the provider doesn't have insight into critical information and day-to-day operations."5

Other tips for successful outsourcing to FSPs include:

  • FSP selection

• Use an "opportunity analysis" to determine which functions should be turned over to functional service providers. This is a gap analysis of core competencies within the sponsor company to determine which areas of expertise are considered core to the organization versus those the organization either does not wish to develop as core or for which it has no internal expertise. These latter ones comprise the areas that are good candidates for functional outsourcing.

• Use a formal sourcing process to identify potential vendors. Look at capacity, systems, geography (if close oversight or frequent meetings are desirable), therapeutic expertise, financial stability, and the vendor's long-range plans in order to choose a selection pool. Most companies send a Request for Information to a whittled down group, followed by a Request for Proposal to the final group.

• Ensure this evaluation process and the vendor selection decisions do not impact the timeline for initiating studies that are on the critical path.

• Choose an FSP whose size meets your needs. Ideally, you will want a company that appreciates your business without being totally dependent on it.

• Closely pair vendor competencies with needs for the service. This allows your company to be more flexible in allocating your own resources.

  • FSP implementation

• Develop a Master Service Agreement that spells out detailed requirements so that you can quickly come to terms with new vendors on project scope once a study has been awarded.

• Improve quality of services by outsourcing functions to companies for whom that service is a core competency.

• Determine how the outsourced function will fit into your overall outsourcing strategy but choose a vendor that can be adaptable should you desire to expand the relationship.

• Develop close relationships with FSPs. This is worth the effort because it gives you a better feedback loop and a better escalation pathway in the event of problems.

• Ensure you establish key personnel at all levels within both the sponsor and FSP organizations and within the governance committees. Meet often to review the project status and incorporate lessons learned from one study to the next. A key benefit of using an FSP model is to gain efficiencies as both companies continue to establish best practices over the lifetime of the relationship.

• If sensitive information must be given to an FSP, make sure the vendor understands the ramifications of confidentiality.

Caveats for all outsourcing

The decision to outsource should be approached strategically and in alignment with corporate goals and objectives. So, whether you choose functional outsourcing, preferred provider relationships or a hybrid model, you should be aware of the impact that the relationship between you and the vendor can have on your own staff. This is most significant when your strategy results in a new business model for the organization that changes the roles of existing team members. Prepare your people before the move to each outsourcing model, not after. Sponsors need to adopt a different management style as they move from managing their own resources to working with partners.

No matter how well they've prepared, a company cannot always expect that things will go smoothly from the start. In one smaller company that opted for functional outsourcing to concentrate on core competencies, lower level staff were let go, staff above were bumped up to higher responsibility, and functions were outsourced to fill the gaps. Initially it was a difficult transition while people got used to their new roles. In the beginning, it was hard for some to release control over functions they had formerly managed. People had to come to terms with a shift in skill sets. At the start of the relationship there were no immediate improvements in efficiency or time savings, but as the relationship matured improvements did appear. An unanticipated benefit was that the vendor suggested improvements in the processes that sponsor staff had not considered. Today, the company is satisfied with the model they have chosen and will continue to use it with future projects.

Successful relationships need nurturing and attention. This can be achieved through:

  • Setting clear expectations

  • Ensuring mutual understanding of responsibilities and assumptions (see Figure 2)

  • Managing performance through metrics and key performance indicators

  • Providing face-to-face time

  • Teaming up for relationship governance

  • Communicating, communicating, communicating.

Figure 2. One key to successful outsourcing, which is even more critical with multiple service providers, is a clear understanding among all parties as to which party is responsible for each task associated with the study.

To avoid unnecessary conflicts, anticipate the possibility that something might go wrong and craft an escalation process for that contingency. Most plans start at the team level and move up the chain of command until the problem is resolved. If they have multiple studies with the same provider, many companies have operational steering committees that meet on a regular basis across studies to ensure things are running smoothly.

Don't set up vendors for failure. An FSP that does a great job in a functional role in their core area of expertise isn't necessarily qualified to take on a fully outsourced project. Remember why you chose your vendors and be careful when deciding to expand their scope unless you know they can handle it.

In summary, FSP outsourcing demands special attention to several key areas to ensure the best chances of success. And like any other activity involving outside parties, success will also depend on some of the key principles of outsourcing. Those principles include: clear and ongoing communication between both the sponsor company and the outsourcing vendor(s); sharing of the strategic vision among all organizations involved; and constant creativity and innovation in looking for the right outsourcing solutions for your organization.

Kristin M. Lucas is senior director of clinical services for ClearTrial, LLC, 900 Oakmont Lane, Westmont, IL 60559, email:


1. Tufts Center for the Study of Drug Development, Impact Report, 8 (1) 2006.

2. A. Gehrke, E. Faulkner, C. van Dijk, "Reverse Auctions: Crusade or Curse?" Applied Clinical Trials, January 2007, 38-43.

3. K. Getz, "CRO Shifts in the Outsourcing Market," Applied Clinical Trials, May 2007, 35-38.

4. Personal communication, Director of Outsourcing, midsized pharmaceutical company, March 25, 2008.

5. Personal communication, Director of Development, Top 20 pharmaceutical company, April 3, 2008.

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