Tom Bodkin, commercial partner at law firm Borneo Martell Turner Coulston in Northampton.
A solid procurement process can deliver surprisingly beneficial results. Commercial solicitor Tom Bodkin explains.
……………………………….
Published in association with
IN SUCH a competitive economic environment, never has it been more important to secure maximum benefit and best value for money on all your supplier contracts.
Robust contracts that add value to your business do not happen by chance. They are the result of planning, due diligence and skilled negotiation.
As the busy owner of a SME, it can be easy to overlook the importance of procurement and you may think that you do not have the buying power of a much larger business or that you have little influence over your suppliers.
You may be surprised how beneficial an effective procurement process can be.
“From a profitability perspective, achieving marginal cost savings on the supply side can lead to significant gains on the bottom line,” said Tom Bodkin, a partner in the commercial department at law firm Borneo Martell Turner Coulston in Northampton.
“However, and perhaps even more importantly, good procurement leads to stability for your business in all manner of ways; from prevention of fraud to mutually beneficial supplier relationships with certainty of resource and supply, leading to long-term sustained success.”
Tom highlights key procurement tips to enable you to boost your procurement game and stay one step ahead of the competition.
Clarity of requirements
Whether you are seeking a new electrician for minor works, a new IT support service, a supplier of raw materials or a company to carry out a major construction project, it is worth spending time to clarify exactly what it is that you are wishing to purchase.
Providing a written brief for the work required will help the supplier to quote accurately and will enable you to compare quotes from different suppliers more easily.
Contract negotiation and alignment
In addition, your approach to the type and form of the contract should be nuanced and adaptable. In broad terms, there are three common types of contract that you will routinely come across in business:
Supplier standard terms and conditions These tend to be issued by large companies and, as a general rule, tend to be non-negotiable. For example, your utilities, business insurance and business broadband contracts.
Buyer standard terms and conditions of purchase These are the purchases in which you can mandate your own terms by utilising a standard form contract.
Negotiating bespoke contracts You should be ready, willing and able to negotiate bespoke terms when the contract justifies or requires it – perhaps as a result of deal complexity, outright value or business importance.
Paying attention to detail
Be aware that a written contract between two businesses is binding when signed.
Courts like to uphold business-to-business commercial deals, more or less irrespective of their terms. Accordingly, it is important that both you and your lawyer review the details. There is often a reason why certain terms are buried in the small print.
There are certain types of contract clauses that routinely go overlooked. Just looking out for these clauses can give you a greater degree of protection when dealing with new contracts.
Some examples include:
Auto-renewal clauses These can be a trap for the uninitiated, leaving you burdened by a fresh contract term that you did not intend.
Price increase clauses These clauses can take various forms, from stepped price increases to index-linked (RPI or CPI) increases or to supplier own cost base inflationary increases. As always, the devil is in the detail.
Termination on convenience clauses These clauses are a double-edged sword. If they are in your favour, they can be very convenient in getting out of a bad deal quickly. However, where they are in your supplier’s favour, they can distort the power balance, particularly whereby you have a critical supplier who is not easily replaceable.
HOW WE CAN HELP
Our commercial solicitors can help you with all procurement matters from contract negotiation, preparation of heads of terms, review and drafting of both bespoke and standardised contracts, together with all related advice. Contact Tom Bodkin on 01604 622101 or email .
……………………………….
Stay connected with Northamptonshire business through Business Times. Join our exclusive community for the latest news, insights, updates, features and thought leadership.
Stay informed – subscribe now at bit.ly/437DsSm. Unsubscribe at any time.
