In the last post, I described how price adjustment clauses are commonly misunderstood and end up causing pricing problems between buyers and suppliers.
So, what can you do to ensure that price adjustment provisions are adhered to when math isn’t everyone’s strongest skill (especially suppliers)?
Here are some tips:
- Write out the price adjustment method in words in your RFP and contract
- Include a formula in your RFP and contract
- Demonstrate the calculation of a new price at a pre-bid meeting
- Have a specific date for the adjustment
- Sometimes index values are revised. So be sure to state that the price is adjusted on your specified date and will not be revised, even if the index is revised later.
One more tip…YOU tell the supplier what the price is, not the other way around.
Yes, we often lean on our suppliers to do certain things that we could do. After all, they are getting paid, right?
Well, some things you should do yourself. Calculating new prices is one of them.
Look, you’re going to have to do the calculation anyway to verify that the supplier got it right. And we’ve established that many professionals – even those with high levels of intellectual horsepower – suck at math.
So, don’t leave your pricing to chance. You tell your supplier what your new pricing is.
Well, that wraps it up for this series. I hope that you’ve learned some techniques for ensuring better communication with your suppliers for better supplier performance.
I know that if you apply everything I’ve covered, you will have fewer supplier problems and will minimize your chance of getting your industry’s equivalent of dog food delivered to you.