This contract tip is about vendor requests to negotiate the terms and conditions attached to the purchase order (aka PO terms).
Companies have different approaches, but my personal preference is to avoid doing this if possible. Most companies are not set up to manage negotiated versions of the PO terms.
When someone in a company wants to issue a purchase order, they enter some basic data about the vendor, the item purchased, the price, and other details into the company’s management system. The system then generates a purchase order with the company’s standard terms attached.
These management systems track that basic data and incorporate it into finance, planning, and other systems. But these management systems typically are not set up to flag the changes to the PO terms.
Here is my approach -
If we need to negotiate a few commercial things, we add them to the notes on the cover of the PO. But if we need to negotiate more than that and the team purchasing it supports investing in negotiations, I work off a stand-alone contract template.
With most companies, we end up with a messy documentation trail when we start negotiating PO terms. I find life is better when I limit our negotiations to stand-alone signed agreements.
What’s your approach to negotiating PO terms?
