It’s been over twenty years that I have been knocking around this profession of Procurement. I have done pretty much every job that one can hold in the area of procurement, including a two-year stint where I worked in a project organization and was the requester.
I am by no means an expert, but I know my way around a set of T’s&C’s and I’ve learned a thing or two about negotiations. Heck, I’ve even taught classes to other procurement professionals.
I say all of this by way of letting you know that I’m not a rookie in this game by any means, but that doesn’t mean I’m not still prone to making big ol’ rookie mistakes.
Last week one of my most senior Procurement Heroes on my team was out on vacation, and his main backup was struck down with strep throat. My small team is very busy, so I had to get back into the game and be a backfill for these two.
This means I had to pick up a really big and fairly urgent procurement I was well familiar with, and keep pushing it along. It’s a software development deal with a small and extraordinarily finicky supplier.
Finicky is the nice way of describing them. Usually I have to refer to a certain pain in a particular part of the body.
This supplier makes great product but man are they a pain in the…finicky.
The lead tech guy and I work very well together, shoulder to shoulder, and we negotiated, squeezed, cajoled and beat down this supplier until we got them to a good place.
On Monday I sent out all of the documents reflecting the understanding. Contract, Statement of Work, tech specs, etc. All of it.
By end of Tuesday the supplier had given us back three very reasonable comments. On Wednesday after having a meeting with the client team, I made corrections for those comments, signed the contract form and sent out the full package with contract and attachments.
Boom. Done. Rock on.
But that is where I made my rookie mistake. I’m still beating my head on the desk about it several days later.
When I sent those final documents, I signed and made the contract a .pdf but I left the attachments in Word and Excel formats.
The, ahem, finicky supplier signed the contract then sent back brand new redlines on the attachments. Fairly substantial revisions. As in, shaved scope off in a lot of places.
See what they did there? The supplier made it look like they were being agreeable, but really what they did was make a counteroffer.
What I *should* have done was put every single one of the documents in .pdf format so no further changes could be made.
But I didn’t.
So after the lead tech guy blew his stack and hit the roof and a lot of other euphemisms, we walked through the changes and accepted the few that were reasonable and fired back on the many that were not.
This is still under negotiation, while the clock keeps ticking away. When this finally gets resolved, the entire document will go into .pdf for signature. No more clever tricks, please.
As of today my most senior Procurement Hero has returned from vacation and is bewildered by the fact that this contract still isn’t done. I told him the story and then I gladly handed the file back over.
Ten will get you twenty my Procurement Hero employee wouldn’t have made that rookie mistake. That’s why he’s my go to guy for the big and complicated deals.
Meanwhile I’ll go back to managering and running reports and being strategic. Thank goodness for my team of rock stars who every single day make me look good.
Image found here.
When negotiating the terms and conditions of any contract, there are always a few areas where you as the Procurement Hero just know the supplier is going to balk.
Never fails. Like clockwork.
The “always going to flinch” area most on my mind today is the acceptance clause.
I don’t mean acceptance in the spiritual sense, like “yeah man, I receive and I accept…”
No, I mean acceptance as in determining if a deliverable from a supplier is in line with engineering specifications and the terms of the contract.
Oh what a sticky wicket acceptance is. So critical for the buyer, so troublesome for the seller.
Here at The Company, we are in the process of buying some software from a fairly small supplier with a lot of expertise.
They have been developing some small bits of code for us and The Company’s engineering team works closely with the supplier. So far the supplier has hit the mark on all of their deliverables and we’re very happy with the work.
Because they have done this small work so well, we’re giving them a crack at a much larger chunk of business. The kind of large chunk that might fund a little company for a full year. Obviously, they are quite on board to get this work.
In this turn of the contract, however, we are adding an acceptance clause. What the supplier will deliver is a full software package from the ground up. It is pretty extensive and has high visibility for The Company as well. So to that end, we’ve asked for a pretty standard thirty-day acceptance term.
To a small company with cash flow concerns, thirty days seems like an eternity. They get small chunks as milestones along the way, but they can’t invoice for that last big payment until acceptance is received. While not yet a publicly traded company, they still keep a close eye on Sarbanes Oxley requirements. SOX means they can’t book the revenue until acceptance happens.
So about an hour after the Procurement Hero sent out the new documents, we got an earful from the small company’s CEO.
He took the acceptance clause as an affront. He reminded us of every time his team has hit their milestones and how closely his software developers work with The Company’s engineers. He said that the contract clause was “unpleasant” and that he didn’t think they would be able to agree to the contract if that were included.
I gently reminded the CEO that thirty days is a maximum time frame. If their code really is good and really is on time and they really do work closely with The Company’s team then why is this even a concern? Turn in good code, get it quickly accepted and send the invoice.
To the supplier, I said bluntly, “If you are sure of your work, then acceptance should be quite…well…acceptable.”
Things got pretty quiet after that. Our lead engineer is fully onboard with having acceptance in the contract and made sure to back my play. Right now there is silence on the email and phone lines, and we wait.
If pushed, we might agree to reduce the time frame a little, but not much. For us acceptance really matters, and we’re not going to back down.
Acceptance must be acceptable. The time frames and how it works can be negotiated.
Side note: Is there ever any better Procurement Hero experience than sitting at the negotiation table with an end user who not only “gets it” from a business perspective, but also backs procurement’s play?
The supplier loses a lot of leverage simply by not being able to divide and conquer. Magic!
Image found here.
My terms, your terms, our negotiated terms, some other terms, this country’s law, that countries law, and who in the heck owns all of the intellectual property?
Gah! The life of a procurement professional writing contracts is a winding labyrinth of contractual issues.
Obviously at the core of any Procurement Hero’s life is negotiating the terms of a contract and hammering out some sort of agreement that both sides of the table can live with.
Sometimes this is easy as pie. Sometimes it is as difficult as pi to the ten billionth digit.
A lot of how the process goes depends a lot on the culture of each of the parties involved. Do the lawyers want to make a deal or do they want to mitigate every tiny bit of risk?
Does the company have several “no go, no way, no how” terms or are there fall back positions?
At the end of the day, both the sales person and the procurement person really just want to close to deal. Both always have plenty of other work piling up on their respective desks while they argue ad nauseum about the merits of shipping an item FOB destination or FOB origin.
This whole contract negotiation process and the many puts and takes involved has been on my mind a lot lately because one of the rock star buyers on my team has encountered the immovable force. The rock wall. The supplier that simply won’t budge.
And I mean vehemently won’t budge on what I would classify as a medium important item for them and an utter show stopper for us.
Discretion prevents me from stating the whole story and all of the dirty details aren’t really the point.
The point is, how does a procurement professional overcome these kinds of obstacles? And when do we scoot our chairs back from the table and walk away?
I am proud to say that in over twenty years of working in the procurement function, there have been only three times where I have advised my client that the supplier was absolutely not the kind of supplier we wanted to work with, and we couldn’t even if we tried. Three times I just couldn’t close the deal.
Considering the sheer number of contracts I have completed in my time, three is a statically insignificant number.
But this one deal really has me boggled. I have no idea how we are going to get past this hurdle.
Anyhow, talks continue. Lawyers are being prepped. Executive ecalations have begun.
Wish us luck, fellow Procurement Heroes. I know you have been there too.
Feel free to share any stories about meeting the supplier’s brick wall in the comments section. I’d love to hear from you.
At the end of a competitive (or sometimes not so competitive) procurement action, many unsuccessful bidders will ask for a debrief.
While many Procurement Heroes dislike doing debriefs because they feel like they are walking on eggshells, I actually like them. I consider a quality debrief to be an investment in the future.
By giving suppliers the opportunity to know what they could have done better, they can (hopefully) listen to and apply the feedback they received to the next proposal.
Competition is good. Competition among many well-qualified suppliers is even better. Getting quality proposals is key. Any supplier worth their salt wants to get better and they want to know how to get your business the next time around.
But what about the reverse? Have you as a procurement professional ever asked an unsuccessful bidder what you could have done better?
You might be surprised at the answers you get.
This morning I had such a chance. A well-known and much valued supplier decided to no-bid a quite hotly contested RFx. Here in the procurement team, we had thought they would be a front-runner before the RFx ever hit the street.
It was our utter surprise to receive a notice of no bid the day before proposals were due.
We could easily have let this go. Whatever will be will be.
Instead I set up a call with the main players at the supplier, just a half hour of their time, to dig into the details of why they chose to no-bid valuable work that was right in their wheelhouse.
Their response was measured but thoughtful. They talked us through their thought process and I took a lot of notes. They had very good business reasons and in short order, I understood their point of view perfectly.
When they were done explaining, I asked, “And was there anything we at The Company could have done better?”
There was a long pause on the call. The supplier seemed rather taken aback by this question.
There was a long exhale and then, “That is a really good question.”
Then they told us. They gave us some very useful feedback on how some of the actions of the Procurement and Technical teams were perceived. What we had thought was simple and concise turned out to have been anything but when viewed from the eyes of the supplier.
It set me back in my chair a little. I expressed much gratitude to the supplier for being candid and said I would take their feedback to heart. The feedback was applicable not just to this, but to all procurements we do as continue down the road.
As a long time manager but fairly new to this organization, I’m always looking at ways to improve our work.
This no-bid bidder just gave me an extraordinarily large key to understanding how we are viewed from the outside, how we are viewed from the supplier community, and how we can better run future procurements.
That kind of feedback and be hard to hear, but is impossible to place a value upon.
So give it a try. Procurement Heroes everywhere, next time you do a debrief with your suppliers, ask them to debrief your side of the house too.
And be willing to listen to the response.
Image found here.
I don’t often give the Sales People and Sales Weasels of this world much help. It’s my view that it is up to them to figure out how to earn my business.
But every once in a while the sun and the moon align just perfectly, I get some much needed rest while on holiday, and I find a place in my cold dark Procurement heart to feel benevolence toward the other side of the table.
Yes, I am here today to provide aid and assistance to the Sales Folk of the world looking to do business with The Company.
This advice is so easy, simple to follow, and really works.
It comes in two parts:
1) Don’t be smarmy
2) Don’t embed documents in your RFP response
Step one should be pretty self evident, but in case it’s not, here is what I mean: be genuine, be responsive, tell me there is a problem before it becomes a problem, talk to me like a person not an account, and avoid business speak.
If you don’t know what I mean by business speak, here’s a good place to start.
Laminate the list and tape it to your little traveling wheelie laptop bag.
Common sense, right?
Now the second item on the list may not be as widely understood and appreciated.
I know that bid and proposal teams love to send across a total bid package that has all the logos and looks shiny and neat in one perfect document.
And to that end, it’s become popular for supplier to choose to not send across each individual document, but to embed the files into either a single Word document or a single Excel spreadsheet.
Here’s the real deal: It never works. Never.
Your Procurement Hero who is jumping and running and working on parsing and distributing incoming RFP responses does not want to stop, open an email, and ping you to say “could you send the individual documents please? I couldn’t get them to open.”
This wastes time. Wasting time makes Procurement unhappy.
You wouldn’t like Procurement when they are unhappy.
I am not even exaggerating how important this can be.
Just a few days ago, one of the Procurement Heroes on my team received several bids for a quite hotly contested RFP. Great, we love good competition!
As the responses came in, the Procurement Hero began sending out sections to the right people on the buying team to begin evaluations. We’re on a tight project schedule.
Except, oops! About 75% of the proposals had embedded files. Full stop. The Procurement Hero had to go back to several of the bidders and ask for the individual files because in most cases, some or all of the embedded files didn’t work.
The proposals that didn’t have embedded files were sent out to the evaluation team poste haste.
That means those proposals were read first.
That means they set the bar for every proposal that comes after.
No embedded files means your proposal ends up toward the top of the stack and not the bottom.
Also, when it takes a day or two for the sales person to respond with each individual document, the evaluation team begins to wonder about the efficiency and responsiveness of your company.
They begin to wonder if your attention to detail is top notch.
They begin to wonder…
This isn’t good.
Look, I want the best supplier to win the award, always, every time.
That means that if the best supplier stumbles over something so minor as broken links and embeds that don’t work…well…then that is a loss to both sides of the RFP process.
Just something to think about.
Now back to my regularly scheduled Procurement crankiness. You are on your own from here.
Image found here.
Ok, I’m only kidding (kind of) with that title. The holiday season does certainly bring with it some moral dilemmas about what a Procurement Hero can and can’t accept as a gift from a supplier.
A lot depends on the relationship with the supplier and the nature of the gift. Generally speaking, consumable items (like food) are best as they can be shared with the entire office and that helps assuage a little of the guilt of accepting a gift from a supplier.
I was thinking about this the other day while trying a Sprinkles cupcake that I found in the break room. It was part of a gift to one of the Procurement Heroes who works over in Facilities. I was more than happy to help her feel *much* better about accepting that gift as I am in no way affiliated with Facilities. So kickback yum.
I’ve seen a lot of good and a lot of not so good supplier Holiday gifts over the years.
And so, with all the joy of the season in my heart, I am reposting my favorite story of supplier gifts.
Originally published December 21, 2012
As the Holiday season draws to a close, just three days now until “The Big Day” those of us at work come together for our annual “What Did You Get From The Suppliers?” comparison event.
As I started my career working for the government, I rather enjoy being in private industry where we can accept small tokens from the companies we work with.
Now let me just say, I’m usually the big loser in these competitions because I work mostly in the telco commodity. Those companies are as cheap as the day is long.
I thought I had a pretty good entry this year for Worst Present. I got this tacky plexiglass picture frame that sits in a weird base with the supplier logo, and when I put the plastic part into the base, it immediately broke.
And then, I got ANOTHER one in the mail the next day. Their sales team clearly didn’t coordinate.
So I brought that out along with the broken item and declared it the worst gift of 2012.
But I got trumped and trumped hard.
“Oh NO!” I heard from the corner. “I can beat that.”
Beat that, she did.
Now, it helps to know that the recipient of this present is a very classy, stylish girl from San Francisco. She’s quite Coco Chanel and Jimmy Choo.
To make this gift even more charming, it was handed to my coworker while still wrapped in the plastic shopping bag from the Dallas airport.
Obviously I had to concede the race. I reboxed my broken plexiglass frame in defeat.
By the way, the lady with the worst gift is also the winner of the most and best gifts too. She works in temporary staffing. Those suppliers fall all over themselves to give stuff away at the holidays.
I need to consider working in a new commodity group. One that gets better kickbacks. This annual defeat, even in the worst category, is gosh darn humbling.
And for as ungrateful as I may seem, I really do enjoy the little trinkets our suppliers send.
Especially when it is a box of See’s candy…(hint, hint)
In my over twenty years in the Procurement profession, I’ve noticed that there are rolling trends in which contract provisions bring pushback from our suppliers.
Sometimes it’s Limitation of Liability. Everyone wants something different. For a while it was Intellectual Property. That’s always a hot topic.
The recent trend we’re seeing, and by trend I mean three open contracts currently sitting on Procurement Heroes’ desks right now, is Governing Law (sometimes called Choice of Law).
Ah, my old friend Governing Law. Everybody wants their own. Well, by everybody I mean every lawyer. This makes sense, right? In-house counsel wants governing law to be a state where they are licensed to practice. They know and understand the law. The laws of other states can be tricky and time consuming to research.
Here’s where the head-to-head happens at the negotiation table. As the buyer, I want my state to govern. As the seller, they want their state to govern.
This issue goes away by doing business with local businesses.
This issue becomes orders of magnitude more complex in international deals.
But dealing with a supplier who exists in a different one of the 50 states than The Company can be challenging. A few suppliers will get really worked up on this issue.
If you are a buyer and your supplier does this, get worked up in return.
To be perfectly honest, the buyer and seller need to look at the procurement. Where will the product be delivered and used? Where will the service take place? Where are each of the entities incorporated?
At one corporation that employed me, the inside counsel had passed the bar in several states, so we had a few choices and could usually find something that worked for all.
If you don’t have the luxury, then you need to fight for this. You, as the buyer, are paying the money. You, as the buyer, are receiving the service. You, as the buyer, are taking delivery of the product.
Your stuff, your money, your laws.
Don’t back down off of this one. That’s my mentoring advice.
However….here’s where the caveat comes along…
One of the three open deals that a Procurement Hero on my team is fighting the good fight is worth the sum total of $11,000.
Now really, we have spent hours, cycles and effort to negotiate this term for an $11,000 deal where we’ve already agreed that the limit of liability is the value of the contract.
I am currently trying to get approval from my legal to just let it drop. Just let it ride. Honestly, if something goes wrong, we can just cut them check and walk away.
I say let it ride for very small value, low-risk deals if the proposed governing law is one of 47 of the 50 United States.
Louisiana – They work under a partial version of the Uniform Commercial Code and it can be tricky to litigate there.
Maryland and Virginia – They have adapted a revised version of the Uniform Commercial Code called UCITA that heavily favors the software OEM and not the buyer.
Do some research if you are not familiar with UCITA, as it can matter a lot. I am not an expert. My advice is that it is always best to just avoid governing law in those states.
So when it matters, fight for it. It could matter a whole lot down the road. When the deal is low risk, see if your Legal and Risk teams are ok with just letting it ride.
And one possible final solution is to have the contract be silent on choice of law. Sometimes when you’ve fought and fought and neither side will budge this is the best answer.
The upside is you can settle the deal and move on. The potential downside is if something goes wrong in the deal, one of the first thing the lawyers on both sides will have to fight is choice of law. That means a few more hours paid to litigating counsel. But that may be ok too.
Ok, now get out there Procurement Heroes and close some deals!
Image found here.