Negotiating Rates With Suppliers
Negotiating rates with suppliers can be challenging. Watch this short video to learn how…
Hi. I’m Devin Deen, Content Director here at Projectmanager.com.
In today’s whiteboard session we’re going to learn a little bit more about negotiating rates with your suppliers. Now there’s four key points that I go through when I’m negotiating these rates on the projects that I manage.
First off, really know what you need. Second, know what the market rates are.
Thirdly, get a hold of your bargaining chips when you’re working with the suppliers. And lastly, it’s really important to get some help from procurement.
Now in the first part, knowing what you need, it’s important to weigh out, do you need a contractor or do you need a consultant from a consulting organization. Both provide a good level of service but they are to be used in a way specific for your projects. So consultants you’d bring on for example when you’ve got a high level of risk on your project or it’s an area of expertise that the general market doesn’t have available.
Contractors are really good for general skills. You can generally get them for a lot cheaper rates than consultants, but once again, they’re the type of people who fill up the masses, fill up your project team, and you wouldn’t want to use them on your high risk areas in your project. So know what you need before you go after it.
Next, know the market rates. You can talk to some recruiters, maybe in some of your networking sessions with other project managers. Discuss outside of work some of the rates that they’re getting from suppliers. Really it’s important to know what your market rates are so that when you enter into that negotiation with that supplier, you have a good firm foundation in which to start.
Bargaining chips. Now there are a lot of bargaining chips. I’ve worked as a project manager. I’ve also run professional services firms. So I’ve seen it from both sides. These key bargaining chips are important to keep in mind when you’re working with your suppliers.
First off, you really want to know what sort of work you’re going to give your supplier. So, is it just a person on a project team or is it a couple of bodies, a couple of key resources for your project team? How many project team members do you need from this one supplier? Or, how many project team members does this supplier have working in your organization?
Those are key factors that weigh into the rates that you’ll be able to negotiate with the supplier. Likewise, is the project work going to be contiguous so that you allow your supplier some good continuity on your resources and allows them to plan over time, or is it going to be sacado, a week here, a week there, and maybe a week a month from now.
If you’ve got longer contiguous work, you’re definitely in the running for having a better lower rate from your consulting organization or your contracting body. Sacado work always gets the higher rates.
Get help from procurement. Now this is a key part. You want to be careful about this. Procurement are used to dealing with suppliers everyday. That’s what they do for a job. But when you bring them in to help you with negotiation, they may come with a certain requirement from their bosses on what rates are acceptable or not.
Be careful when you go into procurement. Make sure you tell them what sort of are your key success criteria for negotiating a contract with your supplier. Please be aware that it’s not a good idea to bring procurement in if you’re just looking to screw down your consulting organization or your contracting body on rates. If you’re going to pay peanuts, you’re going to get monkeys. Make sure when you bring procurement in, they’ve got a clear brief on what you’re looking for.
With all these factors in play, you should be able to negotiate good rates that are fair with your suppliers and be able to assemble the best possible project team that your money can buy.
For more whiteboard sessions and all your project management needs, come see us at Projectmanager.com.