Linking

In procurement there are a number of situations where linking occurs. For example, a Buyer can require that a supplier bid on all items. A Supplier can provide their form of linking by bidding
“all or none” so the buyer must accept all of their proposal and not individual pieces. Either the Buyer or the Supplier could set an expectation on linking all the terms of the agreement in a negotiation by noting that nothing is final or agreed until such time as everything is agreed. That effectively links the terms together so a change in one may allow you to re-open something that you may have given preliminary agreement. Another form of linking can be between agreements. For example, in a divestiture where you have both buying and selling between the parties you could demand that you link the two agreements so that what terms you buy under are the same you sell under or vice versa.

Both Buyer’s and Supplier’s may attempt a form of linking against a separate agreement between the parties. Supplier’s will usually try to link to the Buyer’s Company’s sales terms in hopes of getting something more consistent with the Buyer Company sales terms than the purchase terms the Buyer is demanding.

Supplier’s may also try to link to an industry standard or trade practice. Buyer’s will usually try a form of linking where they link to a prior agreement and use prior precedent to support their arguments, or link to benchmarking or industry standards.

If you want to use linking, you need to set and expectation that the items are linked and explain why. If you don’t want linking to occur because it is to your disadvantage, the first time there is an attempt at linking you need to set the expectation that there won’t be linking and why the specific circumstances don’t support it. For example if a Supplier wants to link to terms agreed in another agreement, you should be able to provide them reasons or explanations why that does not apply to the current negotiation.

Use linking is when during the negotiation you discover something new that would change what you agreed or are being asked to agree to something that is naturally linked to something you may have previously agreed upon. In that you would highlight that to agree to what they are currently asking the other term to be different. For example, assume that you had agreed to a delivery term that was ex-works the Supplier’s dock. You are now negotiating acceptance and the supplier wants to limit the acceptance period to thirty days after delivery. This would mean that all of the in-transit time would be counted against your period to accept giving you a much shorter period or even no time to perform acceptance. If you link the two terms you can tell them that if they want a thirty day acceptance period, a) the delivery term need to be changed to a delivered based term, or b) that clock needs to run from when you receive the product not when it was transferred to you at their dock, or c) the acceptance period needs to be at least the thirty days plus the routine transit time.

One of the best reasons for using the “nothing is agreed until everything is agreed” approach is that neutralizes suppliers from negotiating concession after concession, reducing the total value of what you receive. Under total cost, you can keep a scorecard of the value of each, and demand price concessions for everything that reduced the value.

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