How to Strike the Best Deal with Contractors

Jun 16, 2016

It is difficult enough for corporations to spend valuable resources working to make the best deal with a handful of outside contractors and project vendors - it is entirely different to have to work out agreements and suitable contracts with hundreds or thousands of subcontractors.

Fortunately, outsourcing experts have created a list of ways large corporations can effectively strike agreeable deals with out-of-house workers, including:

Treat time as a valuable resource

According to research by Negotiation Resource International, 62 percent of managers and corporate supplier negotiators spend less than one hour preparing for contractor deals, and 68 percent of people recognized that more preparation for a deal would have produced a better outcome for both the corporations and the contractors.

Plan for contractor negotiation, but remain flexible

Corporations are responsible for finding the best-suited outside vendor for specific jobs and projects, but special care must be put into doing behind-the-scenes work to ensure the contractors are properly licensed and exhibit supplier compliance to lessen risks. During negotiations, it's best to ask open questions, change the negotiation course when necessary and not rely on a strict outline or plan.

Prepare an opening statement

Opening statements have the potential to set the tone for the entire negotiation. Although it should lay the foundation for discussions from both parties, it may also play a part in getting information in the open regarding contractor expectations and compliance requirements.

Set comfortable and well-defined negotiation parameters

Knowing the best time to push or walk away from a negotiation may be imperative for corporations to maintain control of the situation and not waste resources. Skilled negotiators may also benefit from basing deal discussion tactics on the type of contracted work required and the vendors' personalities, all of which require extra behind-the-scenes work for better understanding.

Although supply chain negotiation strategies vary by corporation, deal type, industry and job functions, there are several mistakes corporations can avoid. According to Mike Inman, a negotiation instructor and adviser, two of the biggest mistakes to avoid are being too competitive and putting too much focus on price and/or margin.

When a company is too competitive, it doesn't rest until it wins - even if what it wins is a poor deal that has the potential for even poorer consequences. Spotlighting price and/or margin more than other details may ultimately affect the quality of service or timeline the supplier is able to provide, especially because outside contractors have to consider market price of their services to remain competitive.

Although this may seem like an overwhelming task for corporations that need to negotiate with numerous out-of-house contractors on a regular basis, some of the duties may be eliminated by getting help from outside compliance specialists like BROWZ, which may be able to spot potential service and compliance problems before negotiations begin.

Maintaining contractor relationships throughout the prequalification and hiring process is especially important. Is your contractor safety program strengthening your contractor relationships? Find out here by downloading the full eBook.