A Most Memorable Negotiation

I have handled more than a few major negotiations during the course of my career, but none as memorable as one in particular.? This project involved almost every major department in the company and required almost a year of planning before RFP launch.?

The $30MM project was to have three distinct phases.? The first was the RFI phase (Request for Information) where we asked for proposals but no pricing.? The second was our RFP phase (Request for Proposal) where pricing was required.? The third, and final, phase was an online reverse auction where the RFP pricing for each bidder was used as their starting bid in the auction.

My manager and I discussed strategy at length and decided to try a couple new tactics.?

As with most such projects, the proposed contract language was included in the RFI with a request for each bidder to “mark it up as if they were the winning bidder”.? The intent was to understand the amount of work required should that bidder be successful.? What we did, and what made this project unique, was to take every bidder’s proposed edits and work with our attorneys to combine as many of the suppliers' edits as possible into one unified contract.? We then included the revised proposed contract in our RFP phase of the project and, again, asked the suppliers to mark it up.? The final version was sent out with the reverse auction invitation and every supplier was required to sign the proposed contract as their “ticket” into the auction.? Incumbent suppliers with a contract that had less than 18 months left in the term also had to execute the new language.? No signature, no participating in the auction.

This piece of the puzzle created some angst and one incumbent supplier was eliminated at this stage (much to their shock, but that’s another long story!).? Another incumbent supplier demanded they be permitted to further negotiate three clauses after the auction should they come out on top.? We agreed as they were the primary provider of these services to one large and influential department.

A second new tactic involved how we priced the services (black and white statement printing).? In the past, pricing varied by supplier.? Several priced per job.? Others per page.? And the one who wanted to renegotiate “just three” clauses, was charging per percentage of ink coverage per page (REALLY??? How on earth can you audit that?).? We asked for an average page price across all jobs.? We provided samples of each job being bid so that the suppliers would have a pretty good idea of volumes, turnaround times required as well as “ink coverage”.?

The reverse auction went off without a hitch and primary/secondary suppliers were selected.? Several suppliers began work (or transition work) almost immediately since they had already signed our contract and we only needed to countersign.

About 6 weeks later, I received an unannounced visit from the supplier who wanted to renegotiate three clauses.? This supplier rep got on a plane to see me and I thought it odd that he hadn’t checked with me first.? Regardless, I sat down with him and thought we’d get down to talking about contract language.? No such luck.? His purpose to was tell me why, in great detail, they could not honor their auction pricing.? They wanted to go back to their completely opaque “percentage of ink coverage” model.? There was no mention of the contract language at all.? I listened to his pitch before denying their request and escorting him out of the building.

This started protracted, nasty conversations and escalation to top executives at both of our companies.? Internally, the Sourcing team was aligned and sought the political assistance of the Chief Procurement Officer.? The primary business partner using the services of this supplier, however, was uncooperative even though they stood to save several million dollars and would be able to properly audit invoices.? They refused to switch to another supplier and allowed the incumbent supplier to continue to charge them at the old (higher) rates. The CPO deferred to the business. ?Disappointingly, our internal legal counsel was unwilling take on a supplier who refused to honor their auction pricing.?

By the time I left the company 2 years later, this supplier was still performing work for the business partner, although several smaller internal businesses ultimately switched to a lower cost bidder.

This negotiation has stuck with me for years and, even in retirement, I stop to wonder what else could have been done!