Negotiating Tip #28:
Dealing With a Poorly Performing Sole Source
Unfortunately, problems with a sole source rarely correct themselves. Left unchallenged, lower performance standards and higher prices soon become the new normal. Letting “minor” issues slide can be part of an insidious syndrome: one part inertia, one part fear of the unknown, one part misplaced or exaggerated loyalty.
When a sole source appears to be falling off, the right thing to do is to confront the problems before they grow. Sometimes that means just pointing out the issue to the other side without insisting on a correction. But usually the better approach is to put your heads together to come up with a solution, such as probing ways to shave costs.
If problems grow instead of shrinking, one useful tool is a “should cost” or “clean sheet” analysis. Firms like McKenzie can be hired to break down any product or component and determine within a narrow range the item’s true cost. If a sole source is gouging, the clean sheet will tell the tale.
Another technique is a market test. Let’s say you intend to stick with your sole source but want to gauge the market and keep the source honest. You put your next contract out to bid, just to see what comes in. (A caveat: If bidders know you’re just fishing, they may deliberately underbid to embarrass the vendor of record.)
Almost always, you have more power over sole sources than you think. People are painfully conscious of our own needs and vulnerabilities. We’re less attuned to the stress points of others.