Monday, December 6, 2010

Using Quotes, Bids and Requests for Proposals as part of Negotiation

A big part of negotiation is setting and managing the Supplier's expectations.  Once you understand that you also will understand that what you say in requesting a bid or quote or what include in your quote, bid document or request for proposals can be a big part of setting the Supplier's expectations. The expectations that you want to set are:
  • What you need.
  • When you need it .
  • How you want to buy it.
  • That it is competitive.
If there is information that would limit it to one Supplier, to maintain competition consider allowing:
  • Alternative schedules to be proposed. That way a Supplier who knows that only they can meet the desired date will know that you may consider alternatives, especially if the price is right.
  • Alternative materials such as including "or equal" to broaden the potential options.
  • Alternative Supplier proposals or options.
If you just send out a RFP with a proposed contract without setting the right expectations, don't be surprised if what you get back is a sea of red changes. One of the expectations that I like to set is that the decisions will be made based on the total life cycle cost of the purchase and that changes to the contract terms will be taken into account in determining the life cycle cost.  What it tells the Supplier is that if you want to make substantial changes to the contract that adds to the Buyer's costs and risks, that will be taken into account so you will need to be that much cheaper than the competition to offset that.

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