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Lack of skills or lack of communication?

March 12, 2012

Petty internal rivalries between groups and functions are often allowed to get in the way of good business judgment. Time and again, we fight turf wars, rather than work together to find a better way of doing things.

I was reminded of this by one of my colleagues, when he raised the question of whether sub-contracting should be managed by the sell-side contracts staff or by procurement. This seems to be a regular source of disagreement in many organizations. In general, the argument seems to be that those in sell side contract management view procurement contract management people as poor relations who don’t really have the skills needed to deal with anything more complex than a purchase order.

To support this position, there are usually two forms of example cited. One is where there was an apparent failure to flow through ‘back to back’ terms into the sub-contract. The other is where agrressive negotiation alienated the sub-sontractor and damaged overall performance.

On the counter-side, Procurement cites instances where ‘favored’ suppliers got the job without adequate rigor, or where company policies with regard to procurement rules were breached.

This can easily become a turf war over who should negotiate a ‘major’ subcontract versus a purchase. In some respects, it is a segmentation debate about the different skills needed to negotiate and support different relationships – for example, at the extreme a consortium or collaborative partnership rather than a purchase order.

I am sure that each side has a basis for its complaints about the inadequacies of the other. But this is really missing the point. To my mind, the real problem is that sell side contracts and buy side are often completely separate and silo’d. The truth is that they need an identical underpin of skill and knowledge (just like buy side or sell side lawyers, finance managers, project managers etc.). This battle actually reflects the insecurity of most contracts staff and their failure to communicate effectively with each other. Contract management should be a unified discipline, operating with consistent rules, methods and techniques. This regular sniping over the adequcy of one’s colleagues benefits no one.

  1. Tim, the third option that I prefere is to have procurement teams dedicated to support major subcontracting activities. That allows them to better understand and respond to the sales needs but also draw upon all to knowledge, tools and resources of procurement to meet their needs.

  2. John,
    yes, this may offer a solution – and of course it is one that you find in some organizations. But it runs the risk of yet another silo – now we have the sales contract specialists, the sub-contract specialists and the procurement contract specialists.

    I can advance strong arguments to support the idea that these dedicated teams should be within the sales contracting function. That ensures better integration with, and understanding of, the prime contract; and of course they can easily be taught the relevant basics of procurement discipline.

    But the other option – which i am proposing in my blog – is that we seek to eliminate the dividing line when it comes to contracting skills and recognize they are consistent and transferable between buy-side and sell-side operations.

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