Today I had a talk with a family member who has considerable knowledge within procurement and service contracts in the public sector. We talked back and forth, for instance about cleaning services. I must do my utmost to remain a man of patience when I hear real-world stories like this:

"Let's force the company responsible for cleaning elderly homes, to reduce their prices with 30%." ... the rationale? "It should give them incentives to do the necessary improvements". Right? Wrong!

Go down that path, and you have apparently never heard the stories of how the American automotive industry tried to reduce costs on spare parts by putting pressure on the suppliers to the extend where they almost went bankrupt. This kind of behavior will be perceived by the supplier as a threat to their existence. And thus, they will react by survival instinct, which means extreme precaution, zero tolerance and distrust. It is impossible to have a prosperous partnership when one party is trying to take advantage of the other. And it is very hard to come up with creative
solutions for lowering prices in an environment of distrust.

A different (and better) approach for improvements could be to ask the supplier to work on increasing quality without increasing costs. That is not a threat to the existence of the supplier, thus they can respond with creativity instead of hostility and distrust. Hmm.. how can we increase quality without increasing prices? .. Maybe you are already bending your mind trying to figure that out.

In the software industry someone once faced a challenge like this, and then came up with the concept of Automated Testing -- Result? Increased quality, lower overall cost. Today we take it for granted. Naturally, this kind of innovative thinking can be applied to any domain.

By Sune Gynthersen