Buyers go for more regular reviews

22 January 2004
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22 January 2004 | David Arminas

Most big purchasers now renegotiate contracts every six months rather than wait three to five years, according to a report from software firm Ariba.

Eighty of 100 procurement directors surveyed in the UK, France, Germany, Spain and the Netherlands said they were moving to half-yearly reviews and renegotiations because they felt they could get better deals.

Nearly three-quarters of respondents said the renegotiations were based on getting a better quality of service rather than reducing unit costs.

Cleone Robst, Ariba UK marketing manager, said more frequent discussions were occurring because improved enterprise spend management software gave purchasers and suppliers more detailed and accurate information, helping them fine-tune their relationships.

"I don't believe that purchasers are hopping around from supplier to supplier for the best deal, simply using the information on service levels and spend to leverage better terms with suppliers," she said.

Respondents noted that the more frequent negotiations were often with suppliers for less critical services and supplies rather than with specialist suppliers, for the obvious reason that there were fewer of the latter and thus fewer alternatives in the market.

Nigel Shaw, a construction procurement consultant and member of the CIPS contracts management group, said renegotiation every six months seemed to be excessive.

"It all depends on what is meant by renegotiation," he said. "A good partnership with a supplier should mean the relationship is constantly reviewed."

He warned that constant renegotiation to share profits could ruin a good business relationship.


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