David Carne, executive business manager at Cardinal Griffin Catholic College, explains why he signed – and cancelled – a supplier contract on the same day to ensure his school is getting best value
This week I signed – and then cancelled – a contract in the same day. No, I hadn’t made a mistake, or been let down on day one; the service we had procured would be extremely valuable to us and, because it had been well-specified and evaluated prior to purchase, it met our requirements. So why sign it and then cancel it – had I lost my mind?
Like many contracts or service level agreements, it contains a clause which means that, unless I cancel in writing, it will automatically renew in a year. While this is standard practice, it means, potentially, all the supplier has to do to secure my business next year is – nothing. While that may be great news for their sales team, I tend to think that suppliers should have to work (at least a little bit) to retain me as a customer. So, while I am signing the paperwork agreeing to the contract, I also write to say we do not wish to automatically renew.
Having a full database of your contracts that records the renewal date, the date you need to serve notice, and the relevant information you will need to run a tender exercise is crucial for good contract management – as is planning in time to tender renewals. However, not everyone has this in place, or does it as well as they might. Increasingly, suppliers are specifying longer notice periods; the worst offenders may have notice periods measured in years, not days. Missing the notice deadline by even a day could lock you in for multiple years, which is undesirable from a best value perspective.
The advantages of serving notice at the same time you sign the contract include:
Preventing accidental auto-renewals
There is no risk of you missing the notice deadline because you have already given notice. The deadline is the minimum notice period; contracts do not specify a maximum notice period, so you are quite at liberty to give notice on day one. This also means you will only renew if there remains a genuine need for the contract.
Shifting the onus to remember the contract renewal date from yourself to the supplier
The supplier will usually be in touch well in advance of the relevant date to discuss the offer they have for you if you enter a new contract; sales teams sharpen their pencils if they believe you might genuinely go elsewhere, rather than producing a renewal price and service based on what they delivered last year, at last year’s price plus inflation.
Encouraging the supplier to work to retain your business
Knowing that they are going to have to convince you to sign up again means suppliers are more likely to deliver the current contract well and, when the renewal comes around, they know they have to be competitive with others, because you may also have quotes for comparison.
My letter does not say this is a one-time deal and then we part ways; it says that, at the point of renewal, we would be delighted to discuss options – but the default position is that the contract will end. Good suppliers are not threatened by the need to compete but use competition as part of their process of continually improving products and services for their customers. If a competitor offers something that customers’ value, they too want to satisfy the customers with similar new features and attractive pricing.
Neither is this about being transactional – quite the opposite. It is about ensuring the supplier maintains good relationships, understands our needs as a client and that we work together to inform and shape their service. When renewal comes around, if we have all done our work properly, they should have the advantage because the relationships built and knowledge gained enable them to be more competitive.
So, while you are enjoying the satisfaction of having secured that brilliantly negotiated, amazing, new contract, it might be worth considering letting the supplier know that when it comes up for renewal they will need to impress you again.
So, my suggestion here is that you cancel at the same time as signing; it is amazing how quickly you move onto the next thing and forget to do it!
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