Purchasing and Negotiation Training

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

A discussion in procurement groups on Linkedin posed this question.  “What is the major reason as to why purchasing managers are reluctant to provide feedback after a bid?” 

It generated more than 5 dozen discussion comments ranging from thoughtful and professional to knee jerk and foolish, proving, if nothing else that this question does not enjoy any single correct answer or anything near unanimous agreement.  Whether the comments spoke of bids for goods or services (see nomenclature below), the sentiments were generally the same. 

Before we delve into the answers, the goal of a post bid conference is to improve performance in the future, reduce costs, and yield better results for buyer and seller.  Do not conduct the post bid conference until after the award has been made, contract signed, and passions have cooled.  Also, do not divulge the identity of the winning supplier – the competitor likely already knows and there is little advantage to be gained in connecting suppliers with each other.

 With this as the stated goal, it is helpful to examine this question from its two poles, Reasons Why NOT to Do It and Reasons Why to DO It. 

 Reasons Why NOT to Conduct a Post Bid Conference 

1—–In general, it is a terrible idea to conduct a post bid conference if the overriding reason is to discuss pricing.  Suppliers and buyers who are disproportionably obsessed with price set themselves up for trouble.  A buying company may justifiably feel that release of price information is unethical and quite likely illegal, especially if it sets off a round of auction bids resulting in inducing or receiving a discriminatory price which is prohibited under the Robinson-Patman Act (in the case of goods).  

2—–Many organizations have prohibitions against revealing what could be sensitive information.  A zero tolerance policy has its detractors but an understandable rationale is if northing is revealed, the enterprise minimizes worry about the leak of confidential information that could embarrass or compromise a supplier or client or even instigate a lawsuit.  Conservative companies ban release of information for this reason.

3—–Some suppliers, especially incumbents, can be so distraught over the pending (or indeed actual) award to a competitor that they engage vigorously in “claw back” negotiations, to the extent that seductive offers are made with the intent to recover the wayward customer. 

Not only is this not the time for such negotiations, where were they when they could have offered these concessions while they had the business?  To entertain, or worse encourage, such negotiations would expose the buyer to potential lawsuits and certainly tell the supplier world that there is no need to bid the work, as you will conduct an auction later.  Such action leads predictably to the exodus of high quality suppliers and popularity of low value suppliers and is the direct result of the buyer’s poor behavior.

4—–Beware the supplier question, “Where do I have to be?”    Refer to the link for more details on this tell tale questions.  

As you may have surmised, there are fewer reasons to do it than not to do it.  Nevertheless, the reason in favor vastly trumps the reasons not to engage in the post bid conference.  

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 Reasons Why to Conduct a Post Bid Conference

 The only reason to engage in post bid conferences is to improve future performance and reduce the lowest Total Cost of Ownership.   Buyers and sellers will never go wrong, legally, ethically, and practically by expressing their negotiations in the language of costs.  Stick to costs – it is what commercial negotiation is all about.  Higher quality may indeed come at a higher price, but keeping all four balls of quality, service, delivery and price will always produce the best result. 

While a higher price may result in a lower TCO long term, the post bid conference must address shortcomings in delivery, service, production capacity, maybe financial standing, and other issues which raise the TCO.  If buyers develop and deploy a supplier evaluation system that includes score cards and objective “dollars and numbers” systems and includes input from stakeholders in the supply process, can point to these performance measures to help the supplier develop.

For example, if the supplier shows erratic delivery, too soon, too late, too much, too little, etc, identify what is causing these problems.  If we can identify and resolve these problems, the post bid conference has met its purpose. 

The post bid conference is also an opportunity to discuss cost reduction.  Is the supplier buying sub assembly parts that can be better purchase d and handled by us or another supplier?  There are endless possibilities with buyers and sellers who focus on cost and only one outcome for those who focus on price. 

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Nomenclature RFx 

While nothing is standard, here are some commonly used terms and intended purposes of “Requests For” ‘x’ issued by buyers. 

RFQ    Request For Quotation             commonly used for bids sought for price and delivery on goods with defined quality and service levels 

RFP     Request For Proposal                           commonly used for bids sought for services (apart from goods) and for which levels of quality, service, and delivery are either specified or subject to negotiation 

RFB    Request for Bids                                   often used in place of either RFQ or RFP 

RFI     Request for Information                        often used as a preliminary step for qualifying bidders or developing a scope of work