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Tendering for the Long Term

Posted 8/17/2021

Long term contracts are an excellent means to building a supplier relationship that at its best implementation addresses continuous improvement through the term. Examples include

 raw materials and components supply to manufacturers and MRO contracts in both the private and public sectors. These types of contracts are distinct from project based or one-off type procurements.

So how to address the process when the day comes to retender long term contracts for similar goods and services?

In my opinion that process begins before signing the original contract. The RFx and resulting contract should address contract management issues such as data reporting, and clarity regarding future process as the end of contract term approaches. The data collected will provide transparency when disclosed in future tenders. Only proprietary methods of work could be considered confidential to the incumbent supplier. Disclosed information as appropriate to the tender could include:

  • ·        Total annual historical spend with disclaimer concerning future purchases
  • ·        Volume purchased by commodity or SKU
  • ·        Sales by product or menu item
  • ·        Hours worked by functional activity
  • ·        Equipment service life and condition
  • ·        Who supplies what
  • ·        Organizational objectives that are desired to be fulfilled as part of the contract such as social and community benefits
  • ·        A draft service level agreement to start negotiation
  • ·        Contract management process
  • ·        Any other information that could level the field to potential suppliers.

The end of contract process should not be a surprise to the incumbent contractor/supplier. Transparency about the beginning, during and end of contract processes when tendering long term contracts will attract competitive offers including from the incumbent supplier.