Furniture Contracts: The Art of the Deal
- By Amy Milshtein
- March 1st, 2005
Loose and fuzzy may sound like a cozy winter robe, but if furniture companies use these adjectives to describe your requests for proposals (RFPs) or contracts, you’ve got a problem.Professional purchasing agents know what they need and how to get it, says Larry Wonder, vice president, Sales, Virco.Sometimes, however, you deal with someone who is a great educator but not so good in business. That, he points out, is where the problem set in.
So just what kind of RFP makes manufacturers cringe? Vague language, outrageous budgets and impossible timelines all add to the shudder factor. How can your school avoid these pitfalls and make the paper pushing and number crunching a bit easier?
The More Buttoned Up, the Better
I’ve seen some real loosey-goosey RFPs and some so inconsistent or fraught with errors that it is difficult to respond, says Barry Swanquist, vice president of Marketing, Education Markets, KI. Considering the hours companies put into responding to RFPs, it only seems fair to put our a clear, consistent document—or be willing to answer the inevitable questions.
A two-week response time to RFPs appears standard. We try to give manufacturers that amount, says Brian Rounsavill, CPM, associate director of Purchasing, Princeton University. However, if your RFP generates more questions than quotes, extra time needs to be built in. We sometimes get requests that ask for proposals within a week, says Swanquist. But we’ll have questions, and the company says they’ll get answers to us in two weeks. Scenarios like that make it hard.
How can you avoid that back and forth? When putting out a RFP for furnishings, the more specific the better. Materials, design specs, colors, quantities, warrantees, delivery dates and installation should be in the RFP, says Wonder. All of these factors affect the price so the more information we have, the better the quote will be.
Leveling the Bidding Field
To be as clear as possible, the best RFPs include a brief description of specifications and a few manufacturers’ model numbers of products that fit the job’s needs. This lets companies know exactly what you are looking for and levels the bidding field. While it is great for a manufacturer to be named in the RFP, it doesn’t mean that said company will automatically get the business as an approved equal will also be accepted.
How does a college find that approved equal? Don’t rely on a picture in the catalog, advises Wonder. We will happily supply samples so people can compare products side by side.
Savvy agents take them up on that offer. I’m sitting in a sample chair right now, admits Rounsavill with a smile. And I get kicked out of it every now and then so other people can take it for a test sit.
Up for the Job
Penalty clauses represent an expected part of any contract. When laying them out, it’s best to think each detail through. For instances, sometimes furniture will come early. This could be a problem if the goods are for a facility that isn’t built yet. Not every school has a place to store a truckload of beds or desks, says Linda Birkner, vice chancellor of Finance, University of Arkansas Community College at Morrilton.
Early delivery is just one example of non-performance that might be covered by a penalty clause. Schools can take a flat fee or percentages from the budget to cover these problems. The penalty must be high enough for the bidder to take seriously, says Wonder. One hundred dollars a day on a $100,000 job is not proportional; $1,000 per day is a meaningful penalty.
Hammering out penalty clauses, warrantees and liability often sets off a dance knows as the battle of the forms. This is where vendor terms conflict with purchasing terms and each is trying to incorporate their conditions by being the last form sent. This last shot rule is generally accepted in courts. We take a proactive stance with this, says Rounsavill, by making our terms readily available and pre-signing on agreements.
Costs Over Time
Budget, of course, remains a compelling factor in any RFP or contract. Multiyear deals, however, don’t always have a clear bottom time, and asking for a fixed price over a span of time can create conflict. A customer may want a set price for five years, but costs go up and down over that time, says Swanquist. Do manufacturers get down and dirty to win the business or hedge their bids to protect themselves?
Swanquist presents a third option. Allowing a price escalator that is tied to a nationally published price index is a fair option, he says. And that’s what contracts are about. The best contract develops relationships beneficial to both parties, not gain upper hands.
Those relationships often grown into better deals down the line. Lots of states allow schools to award contracts to multiple manufacturers, Swanquist continues. We call this a ‘hunting license’ because it lets schools pick the cheapest deal, but it doesn’t foster good business relationships. We just don’t bid as aggressively on these.
Not surprisingly, price does not represent the bottom line in awarding contracts. It doesn’t always go to the lowest bidder, reveals Rounsavill. It has to be the right product, delivered at the right time in the right quality.