How to Choose a Contract Laboratory

No lab is able to fulfill all business needs all of the time. When those needs outside of the lab’s capabilities arise, the lab manager needs to secure the services of a contract lab to fill those gaps. Choosing the right lab can be a daunting task, particularly when time and, usually, money are short. This article provides some guidance on the key issues the lab manager needs to think through when choosing the right contract lab partner.

The most critical part of this process is to think through in depth what problem you are really trying to solve when you need to reach outside your organization for support. Spending time up front to articulate what your needs truly are can make all the difference in both choosing the right contract lab and setting the relationship up for success. Defining your needs is also critical to managing expectations inside your own organization. Key items to consider include:

1. Will this need be ongoing for a period of time or is this a one-off request? For an ongoing need, more time needs to be invested to create the right partnership with the contract lab. Elements of this partnership will be discussed below. For a one-off request, the lab manager can focus on finding a lab with the specific skills and experience to address this one problem. The greatest attention will be needed on output expected.
2. Will this need supplement internal capability or provide a skill the lab cannot deliver with existing personnel or equipment? If you are supplementing existing capability, you have the luxury of transferring methods and expertise, balanced by the need to assure consistency with internally generated data. If the contract lab is providing a skill not existent in your lab, you have the challenge of verifying the quality of the work.
3. Will the contract lab be performing a standardized activity or performing more investigative work? Accreditations and conformance data can address the former while the latter requires significant engagement from qualified personnel in your organization to have confidence in the investigative techniques and interpretations.
4. What are your time and budgetary constraints? Knowing these parameters is critical to negotiations not just with the contract lab but also with stakeholders in your own organization. If the true nature of the need does not match with your time and budgetary constraints, either the problem needs to be redefined or the constraints relaxed. Having the detailed information on the trade-offs is needed for those negotiations.

“You must establish and agree upon the work processes between your organizations and the output before work begins.”

Once the lab manager has defined the need, the next step in developing that checklist for conversations with potential contract lab partners is to articulate what kind of relationship is required with the lab. The type of relationship will determine a number of items on that checklist. Some questions to think about regarding that working relationship include:

1. Is the relationship transactional or a partnership? A transactional relationship involves a one-off need for a standardized test or procedure. A partnership would include any type of ongoing work, whether the request is based on a written standard or not, and any investigative or non-standardized work. A transactional need will generally require less up-front qualification time and cost.
2. What kind of accreditations/certifications are required? In some cases, ISO 9000 or 14000 accreditation may be enough and, in the case of a transactional need, you may not even need to conduct an audit. In other cases, you may need accreditations for specific tests or procedures and you may need to conduct on-site safety and quality audits.
3. What are the lab’s processes and commitments around delivery? Consider how your lab would deliver the output you are requesting from a contract lab if you had the equipment and expertise required to deliver. What are the steps you would follow? How do your processes inform what expectations you would place on the contract lab? For example, how do they handle material or sample submissions, including chain-of-custody? What information do they provide to you up front on delivery commitments and communication with your lab throughout the process? Will they provide a firm turnaround time, or at least a target and process for negotiation/remedy? Will they provide access to raw data?
4. What are the qualifications of their personnel and what equipment do they have available? For transactional needs, these questions are of less importance. The lab’s accreditations require the right training, expertise, and ability to deliver a quality result based on the definitions in the standardized procedure. For a partnership, particularly around investigative work, knowing the qualifications of the personnel and the equipment that will be used is critical in understanding the lab’s ability to produce the output you need.

If all of this sounds like a lot of work, it is. As noted, this up-front qualification work is much less for a transactional need. However, if you don’t invest in this up-front thinking for a partnership, you run the risk of a range of problems when the work is being done. You must establish and agree upon the work processes between your organizations and the output before work begins. You also need to agree upon the steps for addressing problems as they arise, particularly if a given problem results in a cost overrun. Having all of these pieces understood before signing a contract not only ensures a smoother project, it provides a detailed understanding for your stakeholders. If a lab is not willing to work with you on providing this information, keep looking.

There are a few more steps to consider to ensure a smooth working relationship with your contract lab partner. This topic is explored more fully in a companion Lab Manager article. A few tips are summarized below.

1. Establish a point person in your lab to work with the contract lab. That person may end up being you, but there needs to be one person in your organization who has responsibility for this relationship. They will be the primary contact for the contract lab as well as the person within your organization who will always know the status of the work. This person will help resolve any conflicts, address any needs that arise, and ensure the process runs smoothly. This is the person who will get any status updates and raise any red flags early.
2. The 1:4 Rule. A general rule of thumb is to devote one FTE (full time equivalent) of your personnel to supporting this relationship for every four FTEs that you are outsourcing. Depending on the size and complexity of your contract, you may need to devote only a fraction of one person’s time or you may need a whole team. Outsourcing does not mean no engagement.
3. Establish those rules of engagement up front. Get those deliverables in writing, including a commitment on turnaround time and a conflict resolution process. There is always a risk that the scope of the work will change. You must have firm agreement before the work starts around how you will handle those unexpected issues. This is critical with your internal stakeholders as well, since you may need to negotiate internally for more money or time. If everyone understands and agrees with these rules of engagement up front, then handling those discontinuities becomes a bit easier.

Contract labs are a necessary part of the lab infrastructure across industries. All lab managers, at some point, will need to identify outsourcing partners to meet some needs. Taking the time up front to think through your needs and qualify the right partner will make all the difference in whether or not the relationship is a success.