To take a leadership role within the contract negotiation process, procurement needs to have a solid understanding of the legal implications of each agreement. Mastering the procurement negotiation process is multi-faceted: procurement needs to know how to balance the requirements and perspectives of internal stakeholders, when negotiating with suppliers.
At the past few ISM Conferences, I have had the pleasure to meet a master negotiator and lawyer, Mark Grieco. In addition to his whirlwind personality, he also offers top-notch procurement negotiation strategies to the ISM audience year after year. At the 2017 ISM National Conference in Orlando, Florida, he offered the following tips to speed up the procurement negotiation process.
Meet the Supplier in Person
Face-to-face negotiations can speed up the process tremendously. They build rapport, relationships, and trust much easier than is possible over the phone or through an email. Face-to-face negotiators have the opportunity to read non-verbal signals and body language while also decreasing the likelihood of miscommunication. And those relationships pay off in the long term, in some cases allowing for better collaboration between procurement and suppliers.
Revamp your Nondisclosure Agreements (NDA)
Procurement professionals can use the NDA as a chance to negotiate before the actual negotiations. Mark suggested removing important sections from the business contract and placing them in the NDA. That way, procurement can speed up the contract process by pre-negotiating the NDA.
Align Procurement and Legal
If your company’s legal department slows down the procurement process, then they are slowing down your negotiations. Usually, buyers will know more about the parties involved than the lawyers. Lawyers are there to facilitate the process, not hamper it. Procurement should use lawyers’ time wisely (and sparingly).
Here are two suggestions for how to accomplish this: 1) Have your attorney create a book of contracts and clauses. 2) Have your legal department meet with and train procurement regularly.
Start Electronic Contracting
If your company has the ability, start putting your contracts online and have suppliers sign all documents online. Suppliers should sign a ‘Digital Transaction Agreement’ which says that parties to the contract have the right to conduct business in a digital manner, including the signing of contracts.
Define your Statement of Work (SOW)
Procurement must fully understand the needs of internal stakeholders so each Statement of Work (SOW) is clear and concise when defining deliverables.
Apply a skills test
Create a way to evaluate suppliers before they enter the bidding process, let alone negotiations. Here, we are looking for qualitative indications that the supplier is professional and open to collaboration.
Complete due diligence
Diligence was another major theme during the ISM sessions on negotiation. Do the work in advance; all work done on the front end speeds up the process at the back end – when time may be more critical for everyone involved. Engage with internal customers and stakeholders to understand their needs and create a playbook documenting which clauses are available for future use.
The more options procurement has open to them during contract negotiations, the better the end result will be. Steps such as building strong internal relationships, ensuring a good cultural fit with prospective suppliers, and completing all possible due diligence up front not only improve the final terms and conditions, they help all parties involved reach that point sooner.