The Contracting Dark Side of Procurement Outsourcing & Supplier Management: Alienating Strategic Suppliers

I'm not a conspiracy theorist. When I hear undertones of it in conversation I bristle. But alas, as Joseph Heller said in Catch 22, "Just because you’re paranoid doesn't mean that people aren't after you."

Or in this case, after your time. Could it be that one of the most attractive incentives to outsource and pay others to minimize your supplier risk is that the process sucks time like a black hole consumes matter?

Here at Spend Matters we wax incessantly about how vital supplier management is to organizational sustenance, growth and success and how outsourcing parts of the process to procure a myriad variety of goods and services with aplomb is key to being lean and profitable (e.g., even a cloud-based procurement application loaded with content is a form of “outsourcing”). But here on the street, I've become increasingly aware that in practice, the job of tactically executing these processes can involve inane repetitive cycles of re-negotiating boiler plate service agreements.

Those who’ve worked with Spend Matters commercially are likely to know that one of my responsibilities involves negotiating client agreements. It's mostly fun and exciting (really, it is!)

What's more rewarding than when two organizations enthusiastically join together for mutual benefit? Though a recent experience with a creative and seasoned client organization (among others) has given me pause. Much to their credit, they drink their own Kool-Aid by outsourcing various services. Which in this case involved deciding to engage various providers (ourselves included) as well as their outsourcing partner.

After we nailed down all the particulars and I submitted a contract, I was informed that the contract and other aspects of the engagement would, according to the client's corporate policy, be handled by third-parties. The project had an important timeline and numerous weeks went by before I received a barrage of paper work including a five page, fine-print double column Professional Services Agreement, various SOWs, etc. As with many Master Services Agreements, the PSA was all-inclusive and had little to do with the actual client engagement and was deemed mandatory.

Without exaggeration, 14 emails and 8 phone calls transpired on a single day to finally and successfully communicate that the sub-contractor's adjunct agreements were irrelevant to the service we were to provide to the end client. But before reaching this stage, we declared that the engagement was simply not worth the time it was taking to process and that we would prefer to withdrawal our original proposal.

Those were the unfortunate magic words (and we uttered them in desperation). Henceforth, the requirement to execute the irrelevant supplemental agreements was quickly withdrawn and the engagement was on.

All of which raises the issue that outsourcing can dramatically increase the risk that the best provider opts out and the originating client ends up doing business with an inferior vendor for the service or product required. Perhaps one of the outsourcing partners in this case said it best in a conciliatory note following the contracting dance: "Sometimes there are too many people involved and things get lost in translation. I apologize for the confusion."

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