All communication consultancies periodically encounter Procurement before contract sign-off and embarking on the fun stuff with a client.
I am not a fan of Procurement.
They always claim to be there to help the agency and make sure everyone — both the agency and the in-house PR department — enjoy a “happily ever after.” Yet, the behavior leans into a different story, one where the overarching objective is to squeeze the agency and lower its price.
Procurement from an existing client sent the following note to me (removed the name to protect the guilty) earlier this year:
“I have seen two dozen proposals over the last 18 months, and this is a normal practice to include items of additional value to XXXX. Typically, if we meet certain spend thresholds, there will be additional services added. Or I am working with 5 PR agencies for our China region and these items are included in all their proposals and most are very creative. When I am not able to get any further price reductions, then I will always ask for additional value items. I do this when I purchase a car. So I am disappointed to hear that you don’t offer the same. I am sure that if you have large strategic clients that you are providing them more competitive pricing for certain services or perhaps you are willing to include another service at a significant cost reduction.”
Do we really want the buying experience of PR to be like a car?
It got me imagining what it would be like if a heart surgeon had to go through procurement before surgery. I imagine the conversation going something like this.
Procurement: We need you fill out the spreadsheet with the billing rates for you and your team.
Heart Surgeon: I’m sorry, but I’m trying to understand how this information is useful and leads to the best possible outcome for the patient.
Procurement: Fair question. We take pride in being transparent. As you know, we’re also negotiating with Dr. Abbott and Dr. Costello who have completed the spreadsheet. Once you provide your data, we can compare rates and make an informed decision.
Heart Surgeon: So you plan to pick the surgeon with the lowest price?
Procurement: No, no, no. That’s not how we do business.
Heart Surgeon: Then why the spreadsheet?
Procurement: We want to make sure the surgeon we select delivers value that’s within market norms. Of course, let’s say your going rate as the lead surgeon is $800 per hour and your competitors charge $700 per hour. Not a big deal. But maybe we find your anesthesiologist charges $400 per hour and another surgeon’s anesthesiologist charges $200 per hour. And our analysis shows your perfusionists are at $300 per hour and your competitors’ perfusionists are $150 per hour. All of a sudden, a pattern emerges showing a 50% delta. We would be foolish to not take this into consideration.
Heart Surgeon (begrudgingly): OK, I’ll share our billing rates, but I still don’t see how this has any real meaning since we price our surgeries at a flat fee.
Procurement: We really appreciate your flexibility. You’ve been great throughout this process. If things don’t work out with this patient, we have plenty of other patients with clogged arteries that you can bid on.
Heart Surgeon: Are we done?
Procurement: I just a few more questions.
Heart Surgeon: Go on.
Procurement: When does your volume discount kick in?
Heart Surgeon: I don’t follow.
Procurement: If we provide you with multiple patients, at what point would you discount your rates? Let me provide you with a hypothetical. Let’s say we commit to 10 coronary artery bypasses and five replacements of a faulty aorta, how would you discount your rates?
Heart Surgeon: We don’t discount our rates.
Procurement: C’mon, everyone discounts their rates.
Heart Surgeon: We don’t.
Procurement: You are a tough and shrewd negotiator. I’m going to tell you something that I probably shouldn’t share. The patient likes you the best. If you can give me something to show management you met us half-way, I’m confident that I can get this transaction done.
Heart Surgeon: We don’t discount open-heart surgeries.
Procurement: I understand. Here’s an idea. If we commit to 10 open heart surgeries over the calendar year, can you throw in repairing one aneurysm for free? Technically, it wouldn’t be a discount.
Heart Surgeon: No, we’re not going to do that.
Procurement: OK, let’s put the discount to the side and address the final area, your supply chain.
Heart Surgeon: My supply chain?
Procurement: Exactly. We’ll need documentation from each vendor in your supply chain that they adhere to ISO 22301, ISO 27001 and ISO 14001 standards. The last thing we need is some bad actor from Russia hacking our CFO’s pacemaker.
Heart Surgeon: How do you define supply chain vendor?
Procurement: We want to empower you to make this call.
Heart Surgeon: Sure.
Procurement: I will say that we learned one of your competitors was drinking coffee from beans that originated in Guatemala with the field workers picking the beans and putting them in paper bags. Did you know it takes four times as much energy to manufacture a paper bag as a plastic bag? Needless to say, this surgeon’s supply chain did not fare well.
Heart Surgeon: I don’t drink coffee.
Procurement: Excellent! Puts you at a distinct advantage.
Heart Surgeon: Does that cover it?
Procurement: Yes, just make sure the information gets uploaded to the portal.
Enough said (for now).