I'm in a unique role that gets exposed to a lot of different types of supplier contracts.   On one hand, I'm negotiating my company's own rates/fees/terms with our customers, and then subsequent to that, I am helping negotiate those clients' agreements with their suppliers once we start working on their behalf.   We've seen it all when it comes to contracts, both the good and the bad.

There are plenty of articles/whitepapers/blog posts that help procurement teams and legal teams with putting "best-in-class" contracts together with their suppliers, so I won't bother trying to regurgitate that information.    Most importantly, procurement professionals and negotiators (on both sides of the table), must remember one simple thing: Don't ask for the unreasonable in a negotiation.   Treat it like the golden rule; treat others like you would like to be treated yourself.   Sometimes procurement teams forget this in their drive to hit their savings metrics or to prove "what a good job" they did.

It's a very simple concept that most people can't grasp.  Simply, put yourself on the other side of the table.  Has your reverse self just asked or demanded something of you something that you wouldn't agree to if you had to comply with those terms?   Remember, a negotiation consists of two people (or groups) that are trying to find a mutually beneficial middle ground; the person across the table is not your opponent in which you want to "win" the negotiation over.    This means, that while sometimes, in rare circumstances, ultimatums are necessary; they should be limited only to things you absolutely cannot live without.  Else-wise, always provide your counterpart (not opponent) the opportunity to offer a compromise if a term doesn't work for them.  Try to understand where they are coming from, don't just get caught up in a term, clause, or demand without understanding why they might object to it.

So this was a very short post (given my rambling history), so I'll leave you with some unordered rambling examples of unreasonable negotiation and contract requests that I've seen.   Please feel free to add some of your own into the comments.
  • A customer demanded a staffing firm that if they terminate a new hire (provided by said firm) within 120 days that all fees would be refunded.   That itself is a bit harsh (usually you just require a new candidate), but in this case, the customer demanded that if for “any reason” they terminated, then the fee wouldn’t be paid.  This was inclusive of if they closed the business, eliminated the role, outsourced the department (which was actually very likely, as we knew they were on the market to outsource procurement) or presumably tortured the candidate.   So basically, the staffing agency was being asked to work for free.
  • Force majeure clauses that require the customer to continue paying for services as much as 18 months later when products or services aren’t being rendered and the supplier has no cost liabilities.
  • Exclusivity terms that forbid the supplier from selling their product or service to your competitors.   These ONLY are reasonable if you can bring huge demand to their product line, but if you are just a small consumer; you are wasting your time.
  • Favored nations clauses.   They just suck.  Be honest, saying that you want guarantees that you got the best “price” is absolutely ridiculous.   The supplier can sell the same thing under a different part number.  They could easily define that the bundled solution isn’t the same as what you bought.  Or they could point to different demographics (like quantities of purchase or your location) as differential points.  Just stop with the favored nations clause already!
  • Termination for convenience clauses that don't allow the supplier to recover their start-up investment or on-boarding costs.
Have at it, add some in the comments.

Share To:

William Dorn

Post A Comment:

0 comments so far,add yours