Higher Education Procurement Contracts: Creating Win-Win Agreements Between Buyer and Supplier

Much of procurement in higher education involves requests for proposals with stringent rules and regulations that match institutional policies. While areas like competitive sourcing, supplier diversity, equal opportunity, and fairness may not be negotiable, there are other areas where flexibility can produce better outcomes for both buyers and sellers.

A McKinsey study across multiple sectors revealed that organizations that regularly collaborate with suppliers reported lower operating costs and better results than those that did not.

What Prevents Better Collaboration in Procurement?

There are several factors at play here, not the least of which is time. Procurement teams handle a high volume of transactions, and it can be challenging to develop supplier relationships beyond transactions, especially when negotiating new procurement contracts.

There are often rigid guidelines in place, which procurement teams do not have the authority to alter. This can create an almost adversarial relationship that focuses solely on cost. Yet, this negates the potential value a supplier may bring beyond price.

Creating Successful Collaboration for Better Value

McKinsey also identified five key areas that help fuel collaboration and create better procurement contracts.

1. Strategic Alignment
   The key to any successful negotiation is strategic alignment. When both parties have shared goals, it can help shape a procurement contract where both supplier and purchaser can benefit. For example, suppliers may have other products, services, or solutions that fall outside an RFP, but are limited in how they shape responses.
2. Cross-functional Engagement
   Procurement starts with understanding the needs of departments. Sometimes, the best-fit solution may be different from what is initially discussed. For instance, a department may want a specific type of software, but other platforms provide similar features but also have robust tools that can expand capabilities.
   Cross-functional teams create a more comprehensive view of institutional objectives to help identify potential new areas for suppliers to add value beyond the parameters of an RFP. Suppliers gain deeper insight as well, allowing them to tailor responses and create more value.
3. Value Creation and Sharing
   The traditional procurement relationship centers on getting the lowest price. However, this can incentivize suppliers to cut corners and reduce services to protect margins. Shifting the focus to shared value creation can improve outcomes for both parties in procurement contracts.
4. Communication and Trust
   None of these strategies work well without establishing trust and enabling communication. Suppliers often have valuable insight that can help shape discussions, but lack of dialogue may not reveal this expertise.
   Procurement teams and suppliers need an easy way to communicate effectively due to the volume of transactions they may be handling and transparency to build trust.
5. Organizational Governance
   Formal governance builds accountability for both sides in a procurement contract. The right foundation can help shift procurement strategy from managing transactions to establishing supplier partnerships that provide greater value.

Creating Win-Win Agreements

The process of creating win-win agreements starts at the earliest stages of procurement to provide suppliers with the information they need. By cataloging both the scope of procurement needs and the frequency of purchasing, you can help suppliers find economies of scale that can result in greater savings.

A clear definition of the procurement process, its parameters, and how decisions will be made helps provide transparency in the process. Being open to feedback on requests from potential suppliers can also help craft better RFPs and result in a more valuable procurement contract.

Other strategies include:

• Establish performance and fulfillment metrics, including any reporting requirements.
• Focus on the total cost of ownership rather than the lowest unit prices.
• Create contracts that encourage flexible solutions, giving suppliers the confidence to invest in relationships.
• Explain clearly how dispute resolutions will be handled before any penalties will be applied.

Accelerating Purchasing and Lowering Costs

Not every contract needs to be a drawn-out process. Many purchases are simply transactional. In that case, finding the best price for the quality goods or services you need may be less labor-intensive. As a member of E&I Cooperative Services®, you have access to hundreds of competitively solicited, ready-to-use contracts exclusively for the education sector.

Leveraging the bulk buying power of its 6,000+ members, E&I generally gets better pricing and more favorable terms than most higher education institutions can negotiate on their own. Costs, terms, and conditions are all transparent, fostering accountability and making decision-making easier. This can accelerate purchasing and lower costs, freeing up procurement teams to work on higher-value agreements and collaborate more closely with suppliers.

Discover the benefits of becoming an E&I Cooperative Services member and see how you can streamline your procurement process, lower costs, and create win-win contracts with suppliers. There is no cost to membership and no obligation.