Three things procurement departments care about

Working with any company as a supplier (or vendor) the likelihood is that at some stage you’ll encounter some form of procurement process. When selling design services to small through to medium sized companies the procurement process is generally far less formal. As companies grow they tend to establish exact procurement protocols, employ procurement managers and form procurement departments.

Procurement process

Generally, the larger the company the more involved the procurement process is likely to be. While such a procurement process at first may seem daunting and even overwhelming, try not to get too frustrated. It should all eventually result in good news for you. The reason being that in doing so the company is expressing a firm interest in working with you. If you like, it’s the final step before they fully commit. As such, if and when you are invited to negotiate prices for procurement, that’s a clear sign that you have been shortlisted as a supplier.

However, once you start the procurement negotiations, on the surface it initially may feel as if the company wants to push you away. Don’t take it personally. Always keep in mind, that the main goal in any procurement process is to save money. It’s a procurement department’s and/or manager’s job, as well as in their interest, to try make you lower your prices. After all, everyone (including us web professionals) likes a good deal. While some procurement managers can be ruthless in doing so, you need not to worry, it’s all part of the bidding process. Once you understand the rules of the game, you’ll have a better chance of winning.

The problem is that procurement departments generally do not fully understand what it is we (Web professionals) do. They have a hard time putting us into a compartment and often compare our work value to other types of procurement. This is especially the case if we’re hired for a task that doesn’t have an exact definition (e.g. what is User Experience Design?).

Therefore, it’s always easier for them to estimate a value and negotiate prices when we provide them with a unit price, usually a man-day or a man-hour. The reason being it’s then much easier for them to compare these unit prices to a benchmark value — probably one from another agency, a supplier used before or from the sister company they have worked with in the past.

Meet them where they are

The way procurement departments around the world work will not change anytime soon. So if we know what they really care about, the negotiations don’t have to be too difficult. In fact, procurement is usually concerned with three things:

1. Unit price, which they will try to lower.
2. Cumulative or threshold discount, which means additional unit price discounts after X amount of units (or budget) spent.
3. Payment terms, a.k.a. net terms a.k.a. the due date for an invoice. Simply put, it specifies how long they can wait from the receipt of an invoice till depositing funds.

Procurement departments will generally try to negotiate a combination of any one of the three items above. Some will not care so much about the payment terms but instead will probably offer shorter terms and insist on a unit price discount. Others will not care as much about cumulative discounts, as long as they can delay invoice payments (often up to 60 days). You get the picture.

Depending on the project you’re bidding for and its scope — now that you know what they really care about — you can decide to be flexible on one aspect and insistent on another. Think about what you’re willing to give up on before any negotiations start and in doing so you’ll win that contract like any other sales / business professional.