Looking for a great source of various procurement, vendor management, and sourcing commentary and blogs--all in one spot?  Check out the E-Sourcing Forum sponsored by Iasta, a leading provider of on-demand / SaaS e-sourcing software and services.  With their forum, these guys have put together a formidable repository of some terrific information that procurement pros can use to their advantage.  Many thanks to them for putting it all together.  Happy reading!

        

Well, it's not really official until the Fall semester, but it's pretty much a done deal at this point.  I'll be teaching in UMUC's Graduate School of Management and Technology and the first class I'll be instructing on is PMAN 641 Project Procurement Management (assuming that enough students are enrolled).  I'm very pleased to be affiliated with a fine institution like UMUC and I look forward to equipping up-and-coming project and procurement pros with the knowledge they need to work good deals for their employers.  Note to future students of mine: apples are appreciated!

        

The obviously very astute, intelligent, and wise folks at the National Contract Management Association named my Contract Negotiation Handbook their book of the month.  That's quite a personal honor for me, getting recognition from such a venerable institution!  My thanks and gratitude go out to NCMA for their recognition.

        

I had a question on a choice of law provision recently, and just wanted to make a quick post on this...

In your "choice of law" or "governing law" contract provision, that's where you want to choose your choice of law AND the venue / forum.

Here's an example...

1.1.              Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia and the federal laws of the United States of America.  Supplier hereby consents and submits to the jurisdiction and forum of the state and federal courts in the Commonwealth of Virginia in all questions and controversies arising out of this Agreement.

As you probably already know, individuals have the freedom to contract (assuming age, competency, legal purposes), but that contracts are generally governed by state law.

You can specify in your contract whatever law you want to govern the contract.  You can also choose the "place" (forum / venue).  In the example provision above, Virginia is the governing law and the forum.  I could have chosen a different forum, such as Florida, for example.  If I did, and we ended up in a contract dispute, the Florida courts would actually apply Virginia law.

If the selected governing law is different than the state of domicile for the parties, a court would really like to see some sort of nexus the selected governing law to the transaction.  But, generally speaking, a court will apply whatever governing law was selected provided that the governing law doesn't conflict with the public policy of the forum state.

So, from a negotiations point of view, you really want your state's law to govern and you really want the forum in your backyard.  If not, you're not on your home turf, and you're going to have to travel and generally spend a whole lot more money pursuing a dispute out of state.

Usually, when two parties are at loggerheads on negotiating a governing law provision and can't agree on which domicile to use for the governing law, the next best alternatives (in order) are NY, IL, and DE.  Why?  Because NY and IL have some of the oldest and best established trade law.  DE is next because its laws are corporation-friendly and tend to be relatively well-balanced.

But don't take governing law provisions for granted!  Governing law needs to be looked at very carefully by commodity and, if necessary, adjusted.  The example provision above is great for professional services but horrible for software.  Why?  Because VA has that crazy UCITA law, which works against me.  In that case, my governing law provision looks like the following:

17.2        Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Virginia and the federal laws of the United States of America.  Licensor hereby consents and submits to the jurisdiction and forum of the state and federal courts in the State of Virginia in all questions and controversies arising out of this Agreement.  Notwithstanding the foregoing, the parties agree that the Uniform Computer Information Transactions Act as enacted in Virginia, Va. Code §§ 59.1-501.1 et seq. (“UCITA”) or in any other Commonwealth or State of the United States shall not apply to this Agreement or any performance hereunder and the parties expressly opt-out of the applicability of UCITA to this Agreement. 

        

Join me in Vegas for the IT Procurement Summit this November.  What a great time to be in Vegas--it's only a 120 degrees there in November!  But, hey, who goes outside when they go to Vegas!?

If you're in IT procurement or source IT commodities, and you haven't been to the annual IT Procurement Summit, you're definitely missing out on some great information and networking opportunities.  Of the many great sessions planned, I'll be presenting the following sessions:

- Procurement Maturity Model
- Understanding the Business Side of Legalese
- How to Manage a Vendor - a Step by Step Process
- Software Ploys & Tactics

Remember, after using your own contract templates, the next most important thing in procurement is training.  Believe me, your friendly vendor reps have gone through tons of training.  Make the time for investing in yourself and get your employer to cough up a few coins so you can attend.  More information can be found for the IT Procurement Summit here.  See you in Vegas, baby!

        

At my company, many employees are my internal customers--and job one is to make sure my customers are satisfied (balanced with the needs and requirements of the company, of course).

In addition to business goods and services, many of my vendors also sell goods and services to end consumers.  Consequently, that puts my procurement department in the perfect position of negotiating employee discounts.  Sure, these aren't the huge mega deals with tons of glory, but my internal customers get a great benefit, I get a lot of great press for my department, and, in many cases, I get a royalty back from the discount providers based on volume spend.  So, it's worth the investment in time.

I almost always focus on suppliers with a national presence and where obtaining the discount is easy (like using a promotional code online).  Currently, I have over 70 vendors participating in my company's employee discount program, and the discounts range from the usual (like flowers, computers, hotels, and rental cars) to the unusual (like fitness equipment, truck rentals, paint, and carpet cleaning).

I have a page on our company intranet where I describe the programs and how employees can get the discounts.  For the larger programs, I even include a testimonial and a picture of someone who has used the program--it's a great way to generate excitement around a particular discount program.  Additionally, the vendors usually have great ideas around generating excitement.  For example, this week, Ford Motor Company (one or our most popular employee discount programs) will be bringing nine or so of their latest vehicles to our headquarters campus, along with door prizes, for our employees to check out.

So, if your company doesn't have a employee discount program, get started.   If your company does have one (and HR runs it), get involved.  To make things easier for you, I'm attaching the contract template that I use for documenting discount deals: National Discount Relationship Agreement

Happy discounting!

        

I've had a couple of readers send e-mails to me, and I've had more than one vendor approach me, on the subject of fuel surcharges.  One of my best vendors came to me recently and ask that I voluntarily increase my order sizes--or possibly be subject to fuel surcharges.  Just like all of the global warming hype (What's global warming?  It's called "Spring"), there's a lot of hype around fuel.  And vendors are not immune from the hype.

When my vendor approached me with this, I said absolutely not, that I would not voluntarily increase order sizes.   To do so impacts my employer negatively...  Opportunity cost due to cash out of pocket, higher carrying costs, you name it.  Just like the next person, I want to save the planet and help out with the energy crisis, but I'm not going to cave in to hype.  I asked the vendor whether the voluntary order-size be reduced if fuel costs go down--the answer was no.  I asked the vendor what they're doing to reduce fuel costs--no real answer.  I asked whether I was going to see salary adjustment surcharges in the future--the answer was "of course, not."  The price of electricity is going up, so am I going to get an electricity bill surcharge from my vendor?

So what is a surcharge, exactly, and why should I be subject to it?  My employer's costs in certain areas go up, but we don't charge a surcharge--we bake it into the costs of goods / services sold (if we can't make the cost go away or reasonably reduce it).  When vendors start nit-picking with this whole surcharge nonsense, you need to point it out and not just cave into them.  If they insist or your price goes up, the U.S. is generally a free society the last time I checked and you're entitled to look for another vendor that can do a better job of controlling / absorbing costs.  Instead of charging me the entire fuel surcharge, why doesn't the vendor suck up a little bit of the margin in the interest of solving the energy crisis and in the spirit of a Kum Ba Yah partnership?  But I'm not going to fall all over myself and open up my employer's pocket book because my vendor can't control their costs.

The funny thing about all of this?  According to the vendor, I'm the only customer, out of thousands, that has refused to voluntarily increase my order size.  At least, that's what the vendor says...

        

In Ocala, I'll be presenting the first formal roll-out of the Procurement Maturity Model to a group of fellow procurement pros that work in Florida (the Florida Conference of Cooperative Supply Management Professionals).  Some of my blog readers may know that I'm a Florida native, so I'm pleased to say that Florida is where I'm rolling the Procurement Maturity Model out.  While I love Washington, DC, it's nice to be back here in Florida, particularly in horse country!  I drove the back way from Orlando International to Ocala where the conference is taking place, and I really enjoyed the sights, particularly the oaks dripping with moss, the orange groves, the palmettos, and the palms.  If you look for it, the "old" Florida of Marjorie Rawlings and Marjory Stoneman Douglas is still there and is very beautiful.

        

As I've progressed through my career, I've come to realize that things like training, certification, and career involvement are extremely important.  Using those same examples, if you don't get constant training, don't strive for certification, and don't get involved in procurement as a profession, advancement (whether experiential or career level) is not going to come easy.  But those examples are basic blocking-and-tackling obviousness.  I think I've finally discovered the secret keys to success as a procurement pro.

These "secret" keys may sound simplistic at first glance, but they're really not.  If you don't have these things going for you, no matter how hard you try, you'll be impossibly limited and restricted in one way or another in your career and self-actualization.  So here they are, the secret keys to success as a procurement pro:

1. Work for a superior employer.
2. Work for a superior leader.
3. Surround yourself with superior staff.

Work for a Superior Employer

It just so happens for me that I've finally struck the gold trifecta.  When I mean a superior employer, I mean an enlightened and progressive organization.  I've worked for some very large Fortune 100 corporations, some OK and some not.  My current employer, a not-for-profit trade association, is the most mission-focused, intrapreneurial, customer-focused, staff investing organization I've ever worked for.  In the Washington, DC area, my employer has a stellar reputation and we even attain national recognition (Computerworld's Top 100 Places to Work in IT).  Consequently, we're staffed with experts in their professions, many of who are industry-recognized, speak on their profession, and write articles in national publications or write books.  My employer encourages and supports the staff to better themselves and become experts.  Here's a small example...  Most companies offer tuition reimbursement, which is great.  My employer steps it up a notch by paying in advance for tuition--if you don't have an advanced degree, you certainly now don't have a $$$ excuse.  Another example is where other companies are queasy and timid about their employees blogging, speaking, and writing articles and books.  Not my employer.  Of course, there are parameters, but my employer gets behind people who get outside of their box.  Talk about some smart, motivated people who force me to step up my game!  While we're not always perfect as an organization, we're generally moving in unison to complete our objectives and it's just amazing and awe-inspiring to participate in.  And we always seem to be on the leading (not bleeding) edge of many new and exciting things.  For example, we use Facebook as a viral mechanism to create excitement about what we do and the causes we support.  If this doesn't sound like your employer, you need to re-think whether there's a fit.

Work for a Superior Leader

My employer demands leaders, pure and simple.  In fact, the performance of leaders is closely and quantitatively measured.  For example, we use the Gallup Employee Engagement (or "Q12") Survey (more on that in a future blog post) to measure leadership performance.  At first I was skeptical, but I now realize that the Gallup survey is a brilliant tool--seriously.  With my employer, the 75th percentile for managers is an expectation and the 90th percentile is a desired result.  Got low Gallup scores two years in a row?  Sorry, but it's someone else's turn to try.  It sounds cold and prickly, but it's actually very healthy for the organization.  Hey, if you can't lead, why should the organization carry you?  As a result of this tough philosophy, we have very strong and forward-thinking leaders who really care about the organizational mission and the staff.  I remember interviewing with my boss before I came onboard, and then afterward thinking that they brought this guy in to shake up the organization.  Wrong.  Despite the fact that this guy knows the latest management buzz and bust, he's been there 30 years!  I thought I knew what executive support and backing was.  Wrong.  Now I do, though, and my boss has been behind me every step of the way.  Not to say that he doesn't challenge me--in fact, I'm probably challenged more on issues and positions more than ever.  But it's done in a pragmatic and ego-less way.  If your boss isn't behind you, or is standing in your way it's time to start considering alternatives...  P.S. As progressive as he is, my boss doesn't scan my blog on a daily basis, so I know I'm not going to win any brownie points here.  These just happen to be the facts.

Surround Yourself with Superior Staff

Finally, you need to surround yourself with superior staff.  I certainly have.  My employer uses a recruiting technique called "top grading," which is a tremendous tool.  I wish this tool existed 10 years ago... Most companies interview by consensus, with many different interviewers evaluating a candidate.  With my employer, there's an expectation that there be very few interviewers--just the hiring manager is preferable.  The thought is that the hiring manager needs to take ownership of the hire.  If the candidate goes belly up, it's not on the "committee" that hired the person, it's all on the hiring manager.  My employer really believes that "B" (or lower) players don't hire "A" players.  If there's a sense that a manager is hiring less than "A" players, it comes back to haunt that manager (hiring decisions gone wrong are very much scrutinized).  As a result of all of this, and more, I have some of the best procurement pros in the business.  Certified and / or highly degreed.   In fact, one of my staff, who has a telecommunications background, is a co-inventor on the patent for VOIP!  Sorry to be a snob, but it's my duty to hire only the best.  Consequently, our service and work product speaks for itself.  Plus, managing my staff is extremely easy.  In fact, I have the inverse of the problems most managers have.  I actually have employees who work too many hours, and who I have to stay on top of to get them to have some sort of work / life balance.  One employee works so late and so often that the Director of Building Operations came to see me with the building access report just to make sure nothing strange was going on.  By the way, he does "have a life" and is an expert ballroom dancer.  My staff are a bunch of overachievers.  And sure, my staff challenges me--they're "A" players--just like my boss, and I'm better for it.

In a Nutshell

So, after about 15 years in procurement, the above are what I've discovered to be the secret keys to success.  There's no magical formula here.  Sure, there are other important things to consider and accomplish, but without the three keys above, it just won't be the same.  Trust me, I've been there and I'm here now, and I can tell you there's a night-and-day difference.  And you really do have control over each one of these.  The question is whether you're willing to do something about it or not.

        

A couple of the metrics that I like to capture around vendor performance is "Number of Pricing Iterations" and "%age of Discount."

Number of Pricing Iterations or "NOPI" is a metric that I like to see on the low-side.  What NOPI measures is the number of times I go back and forth with a vendor on price.  The higher the NOPI, the more time and effort I've expended interacting with the vendor on getting to a reasonable price.  A high NOPI directly translates into wasted time and wasted resources.  If I have a vendor with a high NOPI, I have a vendor that doesn't give me "best and final pricing" the first go-around.  Instead, I have an opportunistic vendor that throws out high-sided pricing in the hopes that the price sticks.  Then, I go back to the vendor and appeal to their sense of fair play and reasonableness, only to have the vendor adjust their pricing slightly.  Then, I go back to the vendor with empirical / benchmarking data as to why their price isn't competitive, only (again) to have the vendor adjust their pricing slightly. In some cases, I have to go back and forth multiple times.  Of course, a lot of this back-and-forth can be eliminated through the competitive sourcing process (where a vendor like this wouldn't make it onto the short list).  But, in some cases, I have an incumbent / entrenched vendor that I have to deal with or a vendor that my customer has fallen in love with.  NOPI is just a nice measurement and piece of data to have available which is an indicator of the difficulty of doing business with a particular vendor.  It also opens up a conversation with the vendor about how to drive efficiency into the relationship through the vendor providing more realistic pricing the first go-around.

%age of Discount or "POD" is also a metric that I like to see on the low-side.  That may seem counter-intuitive at first...  POD is the discount from the original pricing that the vendor proposed to me.  Why wouldn't I want to get a significant discount?  Well, a high POD is similar to NOPI in a way--it indicates that the vendor has set a high price (in the hopes that it sticks) and then later offered a substantial discount--after I've "worked" for it.  A high POD combined with a high NOPI is a fairly good indicator of a vendor that could use some "coaching" from me.

What I strongly prefer is that a vendor give me their most competitive pricing the first time.  I make it clear to my vendors that, if they do, I'm not going to go after them on price.  While one of my performance measures is cost savings, I would much rather explain to my boss why my cost savings target should be lowered (because I'm getting competitive pricing on the front end) than to have a high cost savings result because my vendors are sand-bagging me on price.  I have vendors that have low POD / NOPI metrics that don't hear a peep from me on price (assuming that they also perform).  These are the vendors that I try (and do) drive business to, not the ones that offer me huge discounts after an initially high price and multiple back-and-forths.