Legal / Contract

When it comes to negotiating, good is the enemy of great

MarkRaffan_100.jpgBy Mark Raffan, The Negotiations Ninja, International Procurement Veteran & Recognised Expert on Procurement Negotiations

"Good is the enemy of great. And that is one of the key reasons why we have so little that becomes great." - Jim Collins

People get uncomfortable when they hear this brilliant wisdom from Jim Collins.

Why?

Because I think, intuitively, we all know this to be true. We all know that if we settle for good enough, we'll never achieve greatness. Regardless of what we choose to pursue as a career or passion, how many of us push for greatness?

I find Collins' wisdom to be true in all areas of our lives, and it is especially true in the discipline of negotiation.

Hear more international insights from Mark at the upcoming Smart Procurement World Indaba in September 2021
THE NEGOTIATOR | Creating leverage in your procurement negotiations
How can you still produce procurement value in mature, regularly sourced categories in the face of rising prices?

The fallacy of discounts in software negotiations

BillHuber_100.jpgBy Bill Huber, Partner: Digital Platforms and Sourcing, Information Services Group

One of the most common questions enterprises ask about software spend is whether they should benchmark the discounts they receive from software publishers. Whether they are buying from Microsoft, Oracle, SAP, ServiceNow, IBM or others, the presumption is that a higher discount is better, which is true to a degree. However, the sales approach taken by software publishers is highly sophisticated, with less-than-transparent elements designed to maximise spend. The truth is that a premature focus on trying to get a higher discount on a software license or subscription on the part of an enterprise buyer can lead to paying too much.

Hear more IT insights from Bill at the upcoming SmartProcurement World IT Sourcing Summit on 03 June 2021
PRESENTATION | Priority Objectives for IT Sourcing Strategy

Procurement needs less processes - as they are slow, boring and self-centred

Sammeli_Sammalkorpi.jpgBy Sammeli Sammalkorpi

During the past few months, I have discussed with a number of chief procurement officers (CPOs) how they have managed procurement during COVID-19. One recurring answer was along the lines of 'we broke all of our processes and went into wild-west-mode'. Now, many said this with an interesting combination of sadness and pride. Sadness that they had to give away great processes perceived to be the basis of any professional procurement organisation. Pride and excitement at how procurement teams were able to improvise, work hard and survive.

Emergency purchasing cited for non-competitive procurement

StephenBauld_100.jpgBy Stephen Bauld

Emergency procurements are one of the most common reasons cited for non-competitive procurement

Very often there are pressing needs that make more conventional procurement methods unrealistic. Emergency purchasing procedures are followed in unforeseen situations because immediate procurement of materials or services is necessary to continue operations of an essential department, or for the preservation of the health, safety and welfare of people, or the protection of property when there is present, immediate and existing danger.

Depletion of stock through normal routine usage is not considered an emergency for the purpose of invoking such procedures, nor is poor planning.

Unfortunately, the abuse of emergency procurement is not only notorious but extensive, and it seems to be omnipresent in all municipalities in North America.

Streamlining public works procurement

BosioDjankov.pngBy Erica Bosio, Programme Manager: Growth Analytics, Development Economics Vice Presidency at the World Bank, and
Simeon Djankov, Director, World Development Report 2019

Seventeen years ago, in the inaugural Doing Business 2004 study, our team found that it took as few as 18 procedures to start a business in Algeria, Bolivia and Paraguay, or 19 in Belarus, Chad and Colombia. The same process required as many as 152 days in Brazil, 168 days in Indonesia, or 215 days in the Democratic Republic of the Congo. We argued that it should be possible to reduce the number of procedures and the time required to start a business.

We suggested at the time that this could be done in one step online, from anywhere. Today, this is exactly what entrepreneurs in Tbilisi, Georgia, or Auckland, New Zealand, can do.

Perfect delivery: the new rules for survival, innovation and growth

SteveBanker_100.jpgBy Steve Banker, Vice President: SCM, ARC Advisory Group

Customer loyalty begins with excellent service and timely delivery. Companies have come under pressure to unify their buying experience across channels, capture orders easily, and deliver them rapidly and accurately.

When it comes to gauging the loyalty of an organisation's customer relationships, the net promoter score (NPS) survey typically represents best practice. The NPS is correlated with revenue growth and calculated based on responses to a single, simple question: how likely is it that you would recommend this company/product/service to a friend or colleague?

Improve contract compliance by thinking like sales...not procurement

Kelly_Barner.pngBy Kelly (McCarthy) Barner

Call us crazy but we reckon Procurement would be better off looking at the Contract Management process the same way sales does...

If you're anything like me as a procurement practitioner, you think of our end-to-end process in a linear fashion. It usually starts with spend analysis or some other source of information (budget, ERP, BI system output, etc.) and ends with Contract Management and/or Supplier Performance Management. For us, this is completely logical because the sub-processes that we view as the most "active" portions of procurement - strategic sourcing and negotiation - have been dealt with at this point.

In Contract Management and Supplier Performance there is something of a phased handoff back to the budget owners. After all, the spend we bring under management is rarely associated with a procurement need; we are often just temporary custodians of someone else's spend.

What can SPEED do to improve your negotiations?

By Lucy Patchett

A negotiation model has been developed encompassing steps to ensure that procurement professionals think "more broadly and deeply" about the process.

Colin_Linton_100.jpgColin Linton, Director at business training and consultancy firm Gidea Solutions, spoke to CIPS in the podcast SPEED Negotiation Process about the model that he has developed through his research into contract management.

Linton identifies a negotiation model he has called SPEED, based on the stages Strategy, Planning, Execution, Evaluation and Delivery.

He notes: "It's easy to assume that negotiating the contract falls broadly into three distinctions: before, during and after the negotiation is concluded. However, the risk of only looking at these three separate stages is that you may miss out on key steps that could help with preparation and enhance chances of reaching a better conclusion".

Managing Supply chain cyber risks

VenishaNayagar_100.jpgWhen companies think about security, it is usually about securing their networks, software and digital assets against cyber-attacks and/or data breaches. But, in supply chain - whether it is a vendor used for facilities management or for cloud hosting - almost every organisation depends on a growing supply chain of services, creating an eco-system of dependency. As this eco-system grows to include fourth- and fifth-parties, it becomes more vulnerable to security risks. Recent major cyber-attacks were as a result of third-parties being compromised.

In this month's SmartProcurement, Venisha Nayagar, Director at Crypt IT Information Risk Management, takes a look at supply chain data risks.

Opinion survey: are you tired of receiving sub-standard proposals and tender responses?

Survey_110.jpgHave your say to help suppliers improve.

Recent international research shows that:

• Buyers are increasingly frustrated by the quality of proposals that they receive
• Early engagement between buyers and potential suppliers is becoming increasingly important
• The proposal document is becoming more crucial in the evaluation process

Do you agree with these statements?

Procurement in a pandemic: top tips for tricky issues

AmyRyburn_LisetteHood_200.pngBy Amy Ryburn and Lisette Hood, from commercial and public law firm Buddle Findlay

Procuring organisations (buyers) are currently grappling with a number of tricky issues arising from the COVID-19 pandemic, including issues relating to both live and planned procurement processes.

Buyers who are facing significant uncertainty, or who are without the resources to effectively staff procurement processes at this time, are faced with difficult decisions, such as whether to continue with live procurement processes or whether to commence new ones; what to do if procurement processes are cancelled or delayed; and whether and how to address the influence of COVID-19 on tender documentation (in relation to the tender process itself and the contract that is released - in particular any proposed force majeure clauses).

SMME Clinic | Financial compliance for small business is the key to support - Session 21

SMME Clinic interviews Annie McWalter, Managing Director of SAICA ED and the Hope Factory, who shares great insight into how the COVID pandemic has shown the importance of compliance for SMMEs.

Rules vs. discretion in public procurement

EricaBosio_90.jpgBy Erica Bosio, Programme Manager: Growth Analytics, Development Economics Vice Presidency, World Bank

The trade-off between rules and discretion has been a central topic of research in public procurement. Kelman's (1990) early work stressed the costs of rigid regulation in United States government procurement and made the case for discretion. Since then, research on the benefits of discretion has progressed rapidly in Europe. New research confirms that politicians do not trust the bureaucracy, even in countries with high human capital and efficient institutions.

My new paper (joint with Simeon Djankov at the London School of Economics and Professors Ed Glaeser and Andrei Shleifer at Harvard) adds to these studies with a broader geographic and theoretical focus. We cover 187 countries and the complete path of the procurement process.

The theory delivers a basic prediction: that procurement regulation is more valuable when the incentives of the bureaucrats are not closely aligned with support for social welfare. Properly motivated bureaucrats require fewer rules. Countries with weak bureaucracies need strict laws to regulate them; countries with strong bureaucracies can allow the regulator more discretion.

Face protection masks could inject at least US$1.5-billion annually into the African economy

DouglasBoateng_100.jpgOn 27 June 2020, MarketWatch reported that the global disposable face mask market size was anticipated to reach US$23.81-billion by 2027.

On 30 June, Goldman Sachs released an extensive economic analysis of why the wearing of a face mask is a must. By studying the link between coronavirus infections and mask mandates in US states and overseas, the reputable global investment bank estimated a national directive could cut the daily growth rate of confirmed cases by one percentage point to just 0.6%.

According to the bank, the reduction could prevent the need for lockdowns that could wipe 5% off of US gross domestic product (GDP). The implications of not wearing a mask and the associated health and socio-economic consequences are no different in emerging and developing economies. The coronavirus (SARS-CoV-2) and associated COVID-19 pandemic has, however, resulted in the emergence of a face protection mask (FPM) industry.

In Africa, this rapidly-evolving sector could contribute approximately US$1.5-billion annually to the continent's economy. This is according to supply chain and industrialisation expert, Prof Douglas Boateng.

Which region regulates procurement the most?

Regulating_procurement_100.jpgBy Marko Grujicic, Analyst, Growth Analytics;
Joseph Lemoine, Analyst - Growth Analytics, Development Economics Vice Presidency; and
Greta Polo, Private Sector Development Analyst, World Bank

It might be assumed that public procurement is most heavily regulated in high-income countries, given that they have greater public sector capacity, more efficient institutions and longer traditions of regulation. This assumption is further supported by the fact that weaker institutions, informality and business activities outside of the scope of law are prevalent among low- and middle-income countries.

However, an analysis by the World Bank shows that this assumption is not true: high-income countries regulate public procurement less than low- and middle-income countries do.

Is COVID-19 a force majeure event?

Tanya_Waksman_100.pngBy Tanya Waksman

Does coronavirus (COVID-19) have any effect on the rights and/or obligations of parties in contractual relationships under South African law? Tanya Waksman, of legal advisory firm, Eversheds Sutherland, considers this question in this month's SmartProcurement.

Supply chain management toolkit among the support measures launched by SAPICS

COVID-19_125.jpegTo support supply chain professionals and to ensure that they have the resources they need to maintain supply chains during the coronavirus crisis, supply chain management professional body SAPICS has launched a number of special support initiatives to aid the profession. This includes a supply chain management toolkit, helpline and collaboration platform.

Why standard contract terms can be bad for you

KateVitasek_100.jpgBy Kate Vitasek

If your company is like most, it promotes 'boilerplate' contracts or, at a minimum, pushes for standardised terms, such as contract length, warranties, a 30-day termination of convenience clause or 90-day payment terms. While this may make your lawyer and Chief Financial Officer (CFO) happy, Russell Korobkin suggests that using standard contract clauses is a bad idea.


 

 

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