Another topic has gotten a great deal of feedback in the Strategic Sourcing & Procurement Group on LinkedIn. A member asked:
“Is post tender negotiation acceptable? To what extent? Please share from your experiences what are the advantages and the risks of conducting a negotiation after a sealed-bid tender.”
Touchy subject to say the least, so the viewpoints expressed by the Group members provide a bit of perspective on how this impacts their organizations and relationships. A few of the highlights:
State your intentions up front:
“What does the tender say? Is negotiation talked about, at all? I would expect having some clause in the tender starting with ‘We reserve the right to negotiate with all/short-listed/top X proponents…’, that clause would tell you what you can do without having any issues.”
Costs savings sometimes have a price:
“I have seen a key project fall down because sealed bid tenders did not produce savings anticipated (and promised up the chain) and so the buyer tried to negotiate with the winning bidder – whilst it reduced the cost of the project it caused service levels to be compromised and opened leeway into the specification. Key learning in the post evaluation – any negotiation will always be 2 sided.”
Check the regulations:
“If you go by World bank Procurement policy, it is not allowed. If the said buyer is Government entity, than you will have to check Govt. Norms. In India for eg. Post Tender Opening, negotiation with L1 is not allowed. However, if you are not sure about the L1 price that you will get in Sealed Tender, you can choose to go for Reverse Auction.”
It can work…very well:
“From my experience? Procurement was forbidden to negotiate at all and just accepted bids. I became a procurement manager at the end of a contract cycle (just after contracts were signed) and noticed one supplier’s prices were way out of line with the others. I called the supplier and told them, and they said “we know, we’re going to lower them.’ That was a $300K phone call that took 30 seconds.”
Consider other approaches:
“If you want to negotiate than why limit to one Bidder, You can very well negotiate with L2, L3. If you are aware of market rate than why not go for Reverse Auction. If you are not aware of the same, than it is better that you go for Tender & heavily promote the tender such that more & more bidders participate & competitive drives the price down.”
What have been your experiences? Do you have any insights that might help other Supply Excellence readers or LinkedIn Group members?
Join the LinkedIn Strategic Sourcing & Procurement Group here.
Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.
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