Displacing Incumbent Suppliers

An interesting piece by Mike Robertson of POD Procurement.  Wonder what you think?

Displacing Incumbent Suppliers

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Displacing Incumbent Suppliers
You’ve invested a lot of time and money. You may even have staked your reputation on backing a supplier. So when is it time to replace them? At a recent executive meeting, the subject of incumbent suppliers arose.
View this on Podprocurement >

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Raj Sharma
Public Spend Forum
Washington DC
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Replies

  1. Mike Robertson’s piece on POD Procurement’s Blog poses some very germane questions to consider when deciding whether to move toward displacing an incumbent supplier.  If one represents an entity in the public sector, there are typically additional factors which must be considered.

    If one reaches the conclusion there are significant potential benefits to making  a change in the public sector the first important question is can you do it within the terms and conditions of your contract with the incumbent?  If the contract is about to expire, or is up for renewal the option is clearly there. However if the incumbent was the sole awardee of contract that will not expire for a significant period of time, the ability to change may be limited to “Termination for default” or “Termination for Convenience”.  In the later case, the ease of taking the “off ramp” built into the termination for convenience agreement may depend on factors such as how much advance notice is required and whether the supplier will receive compensation for early termination.

    The decreased ability to easily change suppliers in the public sector can be a significant problem in a world of rapid changes.  That is why the T & C’s in the public sector contracts are so important.  

    Some of the solutions which may be utilized include:

    – Increased use of multiple award contracts where the option to use more than one provider is built in. (Not practical for all cases)

    – Incorporation of trigger events into contracts to enable re negotiation of contract elements in response to changes in the marketplace and or technology.. 

    – Updating procurement and contracting related regulations to accommodate changes in technology and to promote more agility.

    Building more flexibility into public contracts can benefit agencies and high performing suppliers alike.  Incumbent suppliers can benefit from opportunities to leverage the benefits of new technologies without violating the terms of rigid inflexible contracts. Contracting agencies can benefit from continuous access to improved products and services.  

    Use of outcome based (performance) contracts can redefine success and provide an less complicated off ramp for contracting agencies when suppliers fail to perform, or do not perform up to expectations.

     

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    Hal Good
    President & CEO of Procurement Pros Group, LLC
    Valencia PA
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    Original Message:
    Sent: 11-01-2016 03:55
    From: Raj Sharma
    Subject: Displacing Incumbent Suppliers

    An interesting piece by Mike Robertson of POD Procurement.  Wonder what you think?

    Displacing Incumbent Suppliers

    Podprocurement remove preview
    Displacing Incumbent Suppliers
    You’ve invested a lot of time and money. You may even have staked your reputation on backing a supplier. So when is it time to replace them? At a recent executive meeting, the subject of incumbent suppliers arose.
    View this on Podprocurement >

    ——————————
    Raj Sharma
    Public Spend Forum
    Washington DC
    ——————————

    0
  2. Should I stay or should I go…

    Deciding on changing suppliers should always be an informed decision based on factual analysis. Same applies to staying with incumbents. Complacency should have no space in the decision!

    Some of the factual elements:

    – switching costs: extra inventory to manage transition, qualification costs, onboarding of new suppliers..

    – risks: you know how the incumbent performs. You do not know how the new one will… there will be probably a “learning period”, plan and provision for it!

    Changing (suppliers) is not easy and risk-aversion is a well known/documented bias in the decision-making process. But, there are ways to manage it. For example, when/if possible, use the new supplier and the incumbent in parallel (double source). It allows to “test” the new supplier in real conditions while keeping the incumbent active in case… 

    Obviously the sourcing process that lead to the decision has to be thorough to maximize chances that the new supplier will fit and will deliver.

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    Bertrand Maltaverne
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    Original Message:
    Sent: 11-01-2016 03:55
    From: Raj Sharma
    Subject: Displacing Incumbent Suppliers

    An interesting piece by Mike Robertson of POD Procurement.  Wonder what you think?

    Displacing Incumbent Suppliers

    Podprocurement remove preview
    Displacing Incumbent Suppliers
    You’ve invested a lot of time and money. You may even have staked your reputation on backing a supplier. So when is it time to replace them? At a recent executive meeting, the subject of incumbent suppliers arose.
    View this on Podprocurement >

    ——————————
    Raj Sharma
    Public Spend Forum
    Washington DC
    ——————————

    0
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