START  YOUR EIGHT STEP

“PREFERRED PROVIDER PARTNERING PROGRAM” ( P)

 

 

In your contracts management activities, it is likely nowadays that you will eventually be asked by your employer to creatively and proactively try to further improve activities with some of your entity’s  preferred providers of products and services.  “Preferred providers” are a pre-qualified  and select group of vendors that have been approved by the buyer for quality, on-time delivery, and other factors.[1]  In my thirty year contracts management career, I have been asked to perform such a proactive and creative activity several times.  As a result, I have developed, out of necessity, what I call an Eight Step “Preferred Provider Partnering Program “ (P).   Set out below are the eight essentials of such a P activity:

 

1.   Identify your entity’s preferred providers with whom your entity would like to build a  stronger relationship.

2.   Ask one (or more) of those selected preferred providers to submit written ideas to you on how the preferred provider and your entity could further improve their existing relationship and further enhance:

 

1. Communications (e.g. doing mutual site visits, having mutual open house activities, creating mutual FAQ’s, creating mutual relationship managers, establishing vendor and customer stewards, having  mutual workshops, causing mutual paperwork reduction, doing mutual long term planning, making mutual referrals to customers,  doing co-marketing, creating joint ventures, discovering mutual passions, not having warm fuzzy feelings but rather discovering mutual synergies, creating team attitude, fostering mutual respect, developing non-adversarial attitudes, discouraging us – versus - them mentality,  being willing to mutually invest for mutual success, establishing initiative governance mechanisms, improving diversity, insuring integrity, clarifying business ethics, having a party, etc);
2. Innovations (e.g.  developing impactful ways to do things that could not be done before, creating reward systems for impactful innovations, making advancements to increase efficiency and quality, discovering advancements to reduce risk, optimizing processes, increasing economies of scale, etc);
3. Appropriate technology improvements (e.g.  establishing electronic billing, sharing appropriate knowledge capital, developing a mutual extranet, creating a quick payment process, developing mutually rewarding technology solutions, etc;
4. Preferred provider performance (e.g. creating gain share incentive type activities, creating budget based incentive type activities, doing periodic preferred provider assessments, etc;
5. Your entity’s performance (e.g. having periodic assessments of your entity done by preferred providers, hearing the preferred providers’ perception of what other suppliers think about your entity’s performance, receiving objective observations and performance recommendations from preferred providers. etc;
6. Your entity’s risk reduction (e.g. creating methods for enterprises and projects to efficiently identify, assess, avoid, reduce, transfer or intentionally retain risk as well as planning, implementing, reviewing, assessing, and evaluating risk management plans, etc;
7. Preferred provider’s risk reduction (e.g. doing risk sharing, starting mutual incubator activities,  avoiding traps, etc; and
8. Spend reduction / cost savings by your entity in acquiring the preferred provider’s products and services (e.g. improving demand management, using contract labor, improving budget due diligence, reducing project cycle time, improving project management, considering discounted secondment, using alternative billing arrangements based on performance or budget compliance,  off-shoring, near-shoring, outsourcing, etc).

 

These topics for solicitation of ideas from preferred providers are certainly not the only topics to consider.  They are just topics that are among the most important.  So, encourage the preferred providers to submit other ideas that may not fit into one of your listed topics for ideas.  Also, there is a natural tendency for buying entities to place the greatest importance on topic  “H -  Spend reduction /cost savings by your entity in acquiring the preferred provider’s products and services.”  This is certainly understandable.  However, while spend reduction /cost savings ideas are certainly important, don’t overlook the potentially very high values that could result from good ideas related to communications, innovations, technology improvements, performance enhancements, and risk reductions.

 

3.   Establish a written P agreement with the selected preferred provider(s) that (among other things) states that:  (i) none of the P information submitted by the preferred provider to your entity will be considered as confidential information; (ii)  your entity is free to use none, any or all ideas suggested by the preferred provider with any party without any restrictions or compensation whatsoever; (iii) your entity’s details of any resulting initiative from the P activity will be confidential information of your entity;  and (iv) your entity and the preferred provider are not creating any employment relationship, legal partnership, joint venture or other business entity in implementing selected initiatives .

4.      From the ideas submitted by such a selected preferred provider, your entity could pick and choose what specific initiatives (if any) suggested by the preferred provider that your entity wanted to implement with that preferred provider.

5.       Develop the implementation details of the selected initiative with the selected preferred provider.

6.       Implement the selected initiative.

7.      Monitor the performance of the initiative.

8.      Periodically perform written assessments of the success of the initiative to provide to the preferred provider.

 

Buying entities are increasingly relying on preferred providers to help meet the buyers’ visions and goals.  In today’s environment, creating partnerships with these preferred providers is necessary for success.  The traditional view of buyer and vendor relationships needs to be replaced with the view of preferred suppliers as business partners with a vital interest in the success of the buyer.  Preferred providers functioning in such a partnership can be viewed as an effective extension of the buying entity.  The key to creating such partnerships is for the parties to be proactive and to develop a “can-do” attitude.

 

Buying entities need to realize that some of the most important people in their respective industries are – their preferred providers.  When buying entities get to know the preferred providers better, the buying entities are amazed at what the buying entities and preferred providers can accomplish together.  Call and visit preferred providers  just to talk.  Some of the best resources for solving many of the tough problems that buying entities experience can be found within their preferred providers.

 

Likewise, preferred providers need to develop a genuine interest in their buying entities that results in a deep commitment to their buying entities.  The preferred providers need to think of partnering as an extension of value-added thinking that focuses on making the buying entity better by providing viable solutions.  This is how buying entities are absolutely blown away by dedicated preferred providers.

 

Proactive can-do win-win partnering opportunities are endless.  The P activity described in this article is a great way to get the ball rolling toward a viable partnering relationship.

 

The distinguished US scientist Linus Pauling once said: “The best way to have a good idea is to have lots of ideas.” [2]  The goal of such a P activity is to facilitate a win-win relationship between your entity and your preferred provider(s) by generating a lot of ideas – some of which may turn-out to be good ideas.  Obviously, a P activity could also be conducted with any of your other non-preferred  suppliers and service providers (where appropriate).    This P activity is certainly not the only way to improve relationships with preferred providers.   However, if you routinely use all or part of this P activity as one of several resources when you attempt to improve relationships with preferred providers, you will be pleasantly surprised with the large number of substantive and material communication-enhancement, innovation, technology improvement, performance-enhancement, risk-reduction, and cost-saving/spend-reduction ideas that will be surfaced for possible implementation.

 

JOHN (“JOHNNY”) E. MILLER, a Texas and Missouri attorney, is a contracts management consultant who has worked in contracts management for many companies in the last thirty years.  He is a member of the Greater San Antonio Chapter of NCMA.  Send comments about this article to cm@ncmahq.org.

 

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