Negotiating with suppliers is often overlooked within the public sector, with too much confidence placed in the power of a competitive market. Methods Consulting discusses the Negotiated Procedure.

In the private sector, you often hear this refrain when the pen is poised over the contract, and it’s usually followed by a request for a further price reduction. Suppliers know it’s coming, and the buyers know they know it: it’s part of the game.

In the public sector, however, the majority of deals go through with little or no negotiation over price, trusting that competition will drive suppliers to propose the best possible deal first time round. Clearly, you should be using the Negotiated Procedure in cases where you are buying high-value, highly-complex goods or services where the specification (and price) are developed jointly during the tendering process. But what about the more common Open and Restricted Procedures? Once the potential suppliers have submitted their offer, can you go back and ask for improvements to the deal?

I was involved in a project in a large central government client where the procurement specialists were polled on whether or not they held post-tender negotiations under the Restricted Procedure. There was a stunning lack of consensus, even within the same parts of the organisation. At one extreme, I recall a procurement specialist saying “The law is quite clear: no negotiation on price is allowed and the only discussions permissible are on clarifications on the offer”. At the other extreme, one of her colleagues said “of course – anything you can do in the private sector, we can do here”. This diversity is also reflected in the views of procurement lawyers.

In my opinion, you should always build in a round of post-tender negotiations in any procurement exercise. Remember the suppliers are half expecting you to ask for lower prices and not to do so leaves money on the table.

There are differences between private and public sectors. You must be transparent about the process: tell the bidders as early as possible (in the ITT/RFQ or even in the advert) that the process will involve a round of negotiations post-tender. Whatever you do, don’t spring negotiations on them unannounced: a bidder could refuse to take part and you have opened yourself to a successful challenge if the bidder loses, something that all public sector buyers dread. Secondly, don’t discriminate between bidders – you must open negotiations with all bidders that pass a pre-set threshold.

Contrary to popular opinion, negotiations are won and lost not in the meeting room but in the preparation. It’s said that the person with the most thorough understanding of the facts wins, and buyers should contemplate using an external specialist if price build-ups or supply chain analyses are outside their experience.

Even if you don’t feel comfortable haggling over the price, there are other sources of value to be gained from post-tender negotiation. Delivery timescales, product quality, logistics support and access to future products are all areas in which the buyer can increase the value of the offer at relatively little cost to the supplier. And if you don’t ask, you certainly won’t get.



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Martin Farncombe has advised the European Commission, the Ministry of Defence and the DWP on procurement matters as well as a number of FTSE 50 companies. He is a Member of the Chartered Institute of Purchasing and Supply.