Negotiating framework agreements

Key-account managers must be very careful about this. Often, central purchasing divisions that lack realpower begin negotiations with suppliers on the basis of «framework agreements». Days are spent negotiating «hot air», as nothing buthypothetical business is discussed. Either the buyer has a significant project underway or can commit to definite volumes leaving you tonegotiate, or else he is trying to negotiate speculative prices, in which case it is better not to discuss.

Michel, KAM for an IT services company:
I remember negotiating consultant/day prices for a framework agreement with the purchasing division of a major high-tech and military manufacturing group. The buyer consistently refused to commit herself on volumes... We ended up giving ground on our prices, banking on an increase in volumes purchased. Not only did these never come through, but for the first major significant project for a subsidiary, the local buyers tried to renegotiate the rates of the framework agreement. When I went back to the buyer at their head office I was told: «but, you must know that a framework agreement is meant to be renegotiated». I have refused to negotiate such agreements ever since.If I am asked to, I reply in substance: «I am your framework agreement.My company is investing 15% of my time for me to manage relations with you. So we have already shown our goodwill. We are more thanwilling to discuss the matter further as soon as you have something solid to offer Ultimately, that goes down very well because peoplewanting to negotiate a framework agreement are seeking legitimacy but have no real power.