Buy Now, Buy Later
- By Julie Sturgeon
- June 1st, 2000
Stacy Klippenstein wanted to start his promotion to assistant director of residence life at Northern Arizona University in Flagstaff with a splash. That opportunity came six months into the job when the annual bunkbed bid rolled around, and the department began its usual chore of redeveloping the specs and processing the vendors’ submissions through the purchasing department. Colleagues in California suggested a sound solution: multiyear bid contracts.
The multiyear version does exactly what it says: honors furniture contracts through a term anywhere from three to seven years. During the agreed time span, Klippenstein need only refer to the correct number on a purchasing memo, and the bunkbeds appear effortlessly. “It’s made my job easier,” he notes.
Students say they enjoy the consistency they now expect from dorm to dorm. This same uniformity means Klippenstein reduced his inventory of spare frames, headboards and baseboards previously needed in storage to match the various styles from the vendor-of-the-year approach.
Savings speak loudly as well. Because the vendor agreed to a flat fee despite rising oak prices, Klippenstein estimates he’s saved between $5 and $6 per bunkbed the second year, which translates to at least $5,000 on the 1,000 units ordered under this contract. And that’s only for the bunkbeds -- he also implemented multiyear contracts for desks, dressers, hutches, mattresses, refurbishing and door and furniture refinishing. The purchasing staff loves him.
NAU’s results are no fluke, assures Gary Link, director of purchasing at the University of Kentucky in Lexington and president of the National Association of Educational Buyers. “Suppliers invest something in a long-term contract bid, too. They like to spread that investment over a number of years -- that allows us to pay less than market price and they have guaranteed business,” he says. The Wildcats have relied on the multiyear strategy throughout the last decade.
To duplicate these universities’ success, consider these tips from the trenches.
Develop your specifications wisely. Measure, prod, plan and use brand names if matching existing decor; however, if not matching an existing product, don’t write specifications that are so restrictive as to lock out competition, Link advises. For example, his state evaluates bids on best value, which means he can consider a number of conditions besides price. Should technology improve over the contract’s duration, you’ll want the flexibility to purchase under the contract the improved upholstered version rather than an inferior piece that fulfills the letter of the law.
Klippenstein insists on his prerogative to examine samples in this section of the contract. He spells out that vendors must deliver these models to his personal office at no cost to the university -- including shipping and handling fees -- within a specified time frame (usually 10 days from his request). This move allows him to judge the vendor’s customer service in action. “And it assures I’m awarding the actual bid quickly. Vendors don’t like to be hung out to wait, either,” he says. Paradoxically, samples prevent a hasty decision because Klippenstein can summon university experts to grade how well a piece meets specs. “If everyone bids $170 for a desk and someone comes in with $130, I’m suspicious,” he admits. “I want proof it has the French dovetail joints that work.”
Explain yourself. Rarely will a university and vendor agree on a five-year firm, final price contract. So establish those ground rules for your partner in the bid: For a five-year term, consider fixing the price for two or three years with one-year subsequent renewals. Link recommends no less than five years -- vendors need to spread any initial design costs and staffing over a period of time -- and no more than seven to 10 years for maximum partnership potential. Remember, vendors crave versatility in their overall business stories, too.
In exchange, know your own 10-year plan and estimate honestly how many units you anticipate purchasing. This doesn’t preclude a clause excusing you from bowing out of that quantity, depending on occupancy, budget, revenue and so forth, but it sets a cooperative tone. “It’s unfair to a vendor if a housing official just throws out arbitrary numbers without a plan, just to get a multiyear price lower,” Klippenstein says.
“Personally, I try to stick to the amount I say I’ll spend.” Balance the scales by stating upfront that you have the right to question any price increase. “If the cost shot up 17 percent, I’d definitely want to talk,” he explains. “But most vendors won’t do that. They want to continue the contract so they avoid making us mad.” To date, he’s encountered only a two percent increase for the dressers and desks.
Additional escape routes to include in this section: quality checks along the way that ease your exit from the contract should this road lead nowhere. In fact, Link suggests you spell out all termination clauses within the contract -- for instance, termination for convenience, nonperformance or both.
Cover all bases. Upfront work on a multiyear bid contract should be detailed and time-consuming -- up to three months in the writing stage -- Link says, especially when you do it right and define where you stand on these issues:
- Design and installation services -- your responsibility or the supplier’s?
- Storage -- how long should the vendor expect to inventory your order and at whose cost? “It never fails; the dorm isn’t ready when the furniture arrives,” Link notes. “Without discussing this first, you’re looking at a potential conflict.”
- Delivery requirements -- drop ship, deliver and install, or install after hours? The range varies, so be clear.
- Shipping conditions -- should furniture be cartoned, blanket-wrapped, tagged?
- Damaged goods -- how should they be returned for credit, and who’s responsible for them?
- Insurance -- should the supplier be required to provide it?
- Price adjustments -- will you base price increases or decreases on consumer price index, adjustments in the manufacturer’s suggested retail or list price?
- Price increase -- should you require specific documentation for any increase?
Solicit help with your negotiations. Sit down with your purchasing department to ensure they understand your intent. Link advises that residence directors tackle this task at least six months before a likely purchase.
“Perhaps I might find a cheaper price going with a new company every year. But when you’re happy with a company, why not stick with them if you can?” remarks Klippenstein.