1. Of course, it’s the economy:
Without a doubt, the economy plays a major role in the movement of deal pricing, especially when Black Swan events such as COVID-19 can throw away all previous estimates on the futures of pricing rate cards. The pandemic forced many enterprises to ask for short- to mid-term invoice discounts while others used it as an opportunity to renegotiate their existing contracts. As markets rebound, talent scarcity and restricted travel are resulting in upwards movement in pricing at all types of FM services
2. RFP versus sole-sourced deals:
First, there is nothing wrong with a sole sourced deal. It can be more efficient, shorter in duration, and deliver greater value compared to an RFP-led scenario, given you have a trusted relationship with a vendor of choice. By introducing competitive tension into the overall bidding process, an RFP can often be more effective in getting the best pricing. However, due to excessive price undercutting, the quality during delivery may not be what was promised during the talks or negotiations (No surprise there..)
3. Cross subsidization of accounts:
Often, service providers subsidize their loss-making accounts through their profit-making ones. This is why it’s so important for buyers to benchmark regularly to see how prices compare against market peers and the overall industry
4. Enterprise and sector financial performance:
The performance of the industry or the sector as a whole can widely influence tender pricing. Public Sector Sectors do not have very high margins usually have visibly low delivery costs or managed services pricing compared to enterprises in well-performing verticals such as professional services, life sciences, retail, banking and finance. While paying less in low or underperforming sectors is not guaranteed, clear trends point to this practice
5. Buyer persona:
The sourcing team can impact the negotiations in ways buyers often can’t fathom. For example, a senior purchasing manager who has worked across a range of sectors and seen at least the last two recessions will bring a different experience into negotiations than purchasing resources who are newer in their careers and have worked in the cash-rich internet, high-tech, or e-commerce sectors, which can impact the price and length of the tenders
6. Transformation versus technical upgrade:
If embarking on a complex transformation engagement that involves multiple elements such as change management, business consulting, workplace design, and a longer procurement cycle, it is highly likely you will engage a Tier 1 systems integrator or consulting heritage vendor for the entire scope of work. Expect such engagements to cost as much as two and a half times more than a normal outsourcing effort
7. Contract terms and conditions:
Service levels, service credits, and penalties can have a major impact on pricing without enterprise procurement realising it. In our experience, most all the holdback or fees at risk the buyer asks the provider to commit to are baked into the deal as contingencies. So, if you are planning to have the most stringent service levels and fees at risk for your next tender think twice about whether you need it