Trump Blasts Boeing – A Random Tweet or a Clever Negotiation Strategy?

Donald Trump fired a warning shot – or should that be a warning ground-to-air missile – at Boeing last week when he Tweeted that the price of the new Air Force One Presidential Aeroplane was too high.

“Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!”

Ironically, Boeing had just pledged $1 million for Trump’s inaugural festivities – a generous gesture, or all part of the lobbying that I seem to remember Trump said he would stamp out? Boeing denied anyway that the project would cost as much as $4 billion, but the source of all truth, the Daily Mail claimed they had documents that showed it would be at least that.

One side issue here – is this an interesting example of negotiation conditioning via social media? Is this something procurement professionals should be thinking about? Imagine coming up to a big annual negotiation with an outsourced IT service provider. A well timed Tweet might be interesting and get the provider in the mood to make concessions; “Going in to negotiate new IT contract tomorrow with xyz plc – they haven’t performed well this year”.

Anyway, back to Trump. The 747 Airforce One case is a very tough procurement project in several ways, and it is easy to see why the buyer might feel that they are being exploited by a supplier. Firstly, there is no market for this product; no comparative prices from other suppliers and little opportunity to benchmark the price in any useful way really. You can’t look up an online marketplace - “AirForceOneCompare” - to see if what you have agreed to pay is a reasonable price.

Secondly, and it is linked, is the totally bespoke nature of the product. That means limited economy of scale for the supplier, not just for the whole item but even for many of the component elements. It also adds to that difficulty for procurement in terms of establishing a “fair” price of the work. The lack of market competition probably leads to some sort of “cost plus” contracting model, but arriving at a reasonable price for complex and possibly even unique security products that will form major elements of the overall cost drivers for the project will not be easy.

Then we have the political significance of the purchase. Of course, suppliers love anything that a client must buy, is in the public eye and has a time constraint. That all weakens the buyer's position, and enables a supplier to extract more value through the process. The officials responsible for the purchase, contract management and commissioning of this new plane (or two) will need to make sure the programme is very structured and clear, and resist attempts by the supplier to drive greater payments “to make sure we stick to the deadlines” or “to cover all those extra points for say you need”.

So maybe Trump’s intervention is not that silly. Perhaps to knows this is going to be tough, and of course, if he comes back with even a small concession from Boeing, he will no doubt tell us all what a brilliant negotiator he is.

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