Monday, October 5, 2009

What's Your Best Offer?

Working for a consulting company, negotiating pay rates with consultants is a regular part of my job.  It's not my favourite part (at all), but it's gotta be done.  Unfortunately, there are a lot of unethical companies out there; consequently, a lot of consultants are wary when it comes time to negotiate.  This wariness overtakes them and rather than negotiate they ask for our best offer, and they'll either take it or leave it.  I don't blame them (I really don't blame them, companies can be ruthless), but this isn't a question I can necessarily answer.

For much of our contracting work, our company has rate ceilings that are locked in with our main client - the federal government.  Though we can't go any higher, we can often offer discounts.  Generally speaking, we want to offer discounts.  The environment today is incredibly competitive, and we're competing on price as much as we are on quality of proposal.  Even if we had the leeway to offer the moon, we wouldn't want to as there would be little chance that our proposal would win.

However, if I explain this, a consultant might only hear me obfuscating - refusing to answer a straightforward question in the attempt to wring as much profit out of the proposal.  Such an inference is reasonable (and, when dealing with some companies, accurate).  So, when faced with such a blunt question, I give a definite answer, but - here's the thing - in all likelihood, I won't actually give the person the best offer I possibly could.

I'm not trying to play games, and I'm not being spiteful.  On the aggregate, giving out "the best offer we can" is not feasible for the company.  With our fixed and variable costs, there is a particular margin we need to maintain on our bids (granted, a lower percentage margin can be better if it leads to larger gross margin across the board).  This does not mean that each proposal we send out must have the same margin (either in percentage or actual income).  We'll never take a loss, but sometimes we'll make very very little profit if the circumstances dictate  It's better that than no income at all, but I'd be making no friends with my supervisors if that was how I always operated.

When cornered, I have to balance the demands of the company and the demands of the particular proposal.  Likely, the result will be a sub-optimal proposal or a sub-optimal rate for the consultant.  It also means that if I am dealing with multiple consultants for one opportunity, someone with more flexibility will have a greater chance winning the day.

There doesn't seem to be an ideal solution to this.  I could try to engage the consultant in negotiations anyway, but I can't tell them that I am giving them my best offer and then come back with a better offer; that will play into their existing suspicion of consulting firms.

The best of times, generally with consultants with whom I have an established relationship, there will be no debates about the pay rate; there will be a discussion.  When consultants are unwilling to discuss the rate, I will give them best offer I can, considering the constraints they are placing on me.

But when we don't discuss the rate, odds are none of us will wind up too happy.

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