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Negotiated Supply

Posted 1/9/2019

There are good reasons to invite suppliers to enter negotiations to supply for some supply contracts. A decision to adopt this supply strategy should always be carefully considered and a robust planning process incorporated to move the project forward.

Why negotiate a supply contract? A negotiated supply contract could apply to projects that are of considerable financial and strategic value to the buying organization and there are unique and unknown factors requiring flexibility to develop the supply contract. In addition to contract value, buyers should consider:

  • ·        The commodity and maturity of the marketplace for that commodity;
  • ·        Whether to use “Contract A” request terms or not[1];
  • ·        What the negotiation process will address and how it will progress;
  • ·        Whether to use a single or two phase procurement process;
  • ·        Whether or not to engage the services of a fairness advisor/monitor.

Decisions resulting from the consideration of these factors will set the direction for other decisions to be made in the planning process and before any request is issued to the marketplace. For example, if not utilizing a “Contract A” process all parties should agree on the terms and process of negotiation. If using a “Contract A” process the negotiation terms and process will be stated in the request and must be followed. Either way a continuing contract management process should be a component of the negotiations.

Clearly then, a negotiated supply request should not be rushed, should be carefully planned and the buying organization will need to be prepared to assign appropriate resources both financial and personnel to the project.

Done well, a flexible negotiated supply request will result in a win – win contract that could lead to an ongoing partnership to the benefit of all parties.

No matter the selected process to supply, whether a quick quote or a negotiated supply, the terms of the request must be clear to all and the process must be fair and transparent.

[1] The reader should do more research, reference ; are places to start