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The 3 Procurement Contract Deadly Sins – Part 1

Procurement has some pretty bad habits with their contracts.  Most of them are results killers and career killers actually, and people aren’t even aware of it. 

Let’s go through the Procurement Contract Deadly Sins, one at a time.  This blog will focus just on the first one:

Procurement Contract Deadly Sin #1 – Leaving Contract Ts & Cs for Last in Negotiations

It’s the standard protocol.  First price, warranty, leadtime, inventory models, etc get negotiated, and then the Ts and Cs are left for last.

It’s kind of like how kids leave their vegetables for last when eating dinner, hoping to get out of it altogether. 

The problem this creates is a large one.

Read this twice:  The minute you have agreed on price, all leverage shifts from you to the supplier.   And they love you for it. 

The supplier knows they have your business now, and they know your bag of tricks is empty.  You’ve already put the ring on their finger.  You’ve already walked up to the alter with them.  It’s over. 

And guess what the supplier is going to do next?  That’s right, they will pull out their red pen and mark up your contract to death, with whatever revised language they please.

Why?  Because they can.  Because you’ve incentivized them to.  Because you introduced the contract AFTER you lost negotiating leverage.

Ts and Cs should always be negotiated before price – or worst case, concurrent with price. 

Or if doing a bid, you can send out your contract out with the bid, along with language stating that “by responding to this bid, you are agreeing to be bound by the attached terms and conditions.” 

Always know where the bargaining power levers are in negotiation.

Always make your contract negotiation moves before you put the ring on their finger.  

Always drive your biggest requirements in advance of or in concurrence with price negotiations.

Achieve everything you need to achieve before the supplier has your money, or feels like they have your money.  The day before a supplier has your money and the day after are two very different days.  

Next time we’re going to talk about Procurement Contract Deadly Sin #2.  Don’t miss it.

Now go off and do something wonderful.  Be your best!

Omid G.

“THE Godfather of Negotiation Planning”  ~ Intel Corp

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