Procurement Relationships

Written by: Jeanette Jifkins – Principal Lawyer at Onyx Legal

A business coach I work with has recommended we grade our clients. So, as part of our client segmentation for marketing, we’ve identified five core indicators and one bonus indicator to rank our clients from A-D. The idea is that you aim to get to a point where you are only working with A and B clients, and you simply don’t work with the rest.

Procurement can be like that. If the people in the Department you are working with ranked your business, where would you sit? Are you an A+ client, or a D?

We rank based on the following indicators:

Interesting work
Clear instructions
Repeat client
Pays on time
Refers others to us

Three or more is a C, four or more is a B and 5 is an A. Clients who pay invoices the same day get a +. Needless to say, we love our A+ clients, prioritise their requests and give them special attention. The way we interact with them has little to do with any written contract and everything to do with the way they conduct themselves as our client. It is relationship based.

We have clients who think they are an A, but actually they are a D. When they want to have a casual coffee catch up, we’re just not available. It’s not worth our time. An A client on the other hand, we’re there!

Do your counterparts delay in responding to your emails, not answer your calls or avoid you at industry functions? You might be a D, which could hurt your prospects for winning work.

I gave a presentation about contracts and negotiation to the Project Managers of Australia Association late in 2018 and one of the last questions asked by the audience was ‘how do you avoid conflict in project’. My answer was simply ‘Get to know the people you are dealing with. Catch up with them over a cuppa. Take an interest in their family or their hobbies. Find common ground.’ Nothing to do with written contracts.

Think about it. When things go wrong, we all start feeling concerned about who is going to be blamed, how it’s going to be fixed, when the powers that be are going to be told and so on. Your counterpart is quite probably experiencing very similar emotions. If you have built up a relationship which enables you to pick up the phone and have a chat, or simply say without any blame “well this in not looking good, any ideas on what we can do to sort it out?” you’re in a much better position, regardless of fault. When you know the person you have to deal with is not going to go flying off the handle and will actually talk through a problem with you on a reasonable, collaborative basis to help find a solution, you’ve got a much better chance of successfully completing a project.

One of the companies I work with has a very high success rate in tenders (over 70%). They work very hard to identify what is the value proposition for the procurer. It might not be what was asked for, and they submit tenders that are both compliant and non-compliant, with the non-compliant proposals including everything the procurer never knew they really wanted.

They talk to the procurer and ask relevant questions about what is important to the department and the individuals involved in the project. They work hard to identify and anticipate the procurer’s needs in a changing environment and offer options the procurer might not have even realised were possible.

What do you do to build a relationship with the people making the decisions?

Yes, I understand there are lots of rules around procurement and the standby six pack or bottle of whiskey is likely to be subject to disclosure. I’m not talking about building relationships with gifts. I’m talking about old fashioned ‘getting to know you’ conversations.

When was the last time you spoke to your counterpart as a human being with all the same stresses and concerns that you have?

Although contracts provide formal documentation of a collaboration, and impose legally binding obligations, success is still likely to depend upon the parties to the contract having a cordial relationship. All relationships require compromise. People have different ideas and priorities. The best way for a relationship to work is for each party to be willing to give and take. That is also the simplest way to avoid costly disputes that don’t solve anything in the project.

Effective communication is very important. This goes for the written terms of the contract as much as the relationship between the parties. A contract written in plain English, logically sequenced and easy to follow is much more supportive of a good relationship than something that requires legal translation before anyone understands it.

We have a client at the moment, who was complaining that their accountant spent three hours educating the accountant of a proposed joint venture partner on how the finances of a contract were going to work. This was a contract we hadn’t written and had come to us for review afterwards. On reading the contract it was very clear to me why it took so long to explain. The contracts were almost incomprehensible and didn’t include half the mechanisms for project completion that my client thought they did. Needless to say, we’ve updated those contracts and they haven’t had to have accounts explain the financial mechanisms since. It wasn’t that anything was overly complicated, it was just the way it was worded that made it appear that way.

It is possible to work with a detailed contract in the background of a project, without having to constantly refer to it, when you have people on the same page wanting to work together and feeling sufficiently relaxed about the process to just focus on getting things done.

Interview with Jeanette from Onyx Legal

Listen to this webinar to learn more about relationships in procurement and contract management from Jeanette.