Larry Berglund

Eating all of your enemies is not a sustainable diet. Consuming all of the resources in a supply chain is not a sustainable solution.

The holistic approach to sustainable supply chains needs to concurrently address environmental, economic and social values in all communities. Arguably, we’ve been teaching economics for 100+ years; we’ve been learning about the environmental issues for 50+ years; and we’ve been increasing our awareness on social values for ~10 years.

Each of these strategic components of western business practices were traditionally seen as being independent of each other in the supply chain. Largely because unfettered profits were good of all businesses, ergo people; whereas environmental and social interests were the responsibility of governmental agencies. This model appeared to work until storm clouds appeared in the form of smog, acid rain, contaminated drinking water, extirpation of species and other forms of degradation – much of which was non-reversible. That was the problem with this linear model – we were eating our future!

Recycling was the illusion where we could continue to consume low cost products using plastics as the main ingredient in the product and in the waste packaging. Once we were done with the products we could dispose of them and they would be wonderfully recycled. About 75% of plastics are buried in landfill sites. Recycling was a feel-good failure based on good intentions but poor science.

The problem with consumption of resources is not the fault of plastic alone – it can be traced to the design phase. Goods were designed-for-disposal. The linear economy was based on infinite resources which could be harvested in a continuous manner. Wrong! Recycling led to an increased consumption of poorly designed goods aimed at the lowest cost to produce, to increase profits. Eco-fees are another feel-good tactic to support consumptive behaviours.

The emergence of the circular economy acknowledges resources are finite; goods are designed-for-environment; energy should come from renewable sources; waste is eliminated; use of indigenous materials and local labour contribute to social values. For supply chain professionals, there is a duty to explore more responsible options which consider the total cost of ownership. For example, offshoring production to a low-cost producer which reduces local employment may not be the best trade off. While offshoring, in this example drives profits for an owner, the community which loses the jobs bears the cost – referred to as a zero-sum model. There is an economic benefit with a social value offset. Environmental responsibilities may be transferred to a region which has lax regulations. Not sustainable.

The circular economy is a long-term view where at the end of a life cycle for a product, all of the materials can be repurposed into a new product. At the design stage, products are planned for their inevitable deconstruction and use biomimicry as a template. Metals are recaptured. Toxic materials and chemicals are contained. There is a new role for recycling in the sense that it becomes the means to recover supply chain materials for reuse in a continuous cycle. The circular economy is a strategy for conservation. Supply chains in the future will be viewed as supply loops.

When we think of traditional sourcing risks we have geo-political issues as one of them. Most of our precious and primary metals are not available in domestic markets and often need to be imported from unstable political regions or involve exploitive labour practices. 75% of our energy requirements are used in the mining of materials or harvesting of resources. We’ve already spent the energy once – now let’s be more responsible and repurpose the materials we have already processed once into new products which reduces the energy demands.

To collect and segregate goods for inclusion in new products it will create an increase in domestic/local employment. This recycling activity will largely be provided by low-skilled workers in key locations. Social enterprises will play a larger role in supply chain models. Municipal organizations will fund critical infrastructure requirements to support private sector investment. Albeit, there will be a limit to the volumes and types of materials available through these centres initially but long-term they will contribute a higher percentage of materials for feedstock. Reverse logistics networks will add to the efficiencies required to collect and redirect materials.

The use of smart labeling or smart tags will help to track materials through their life cycle. This enables producers to retain control of their original materials where they choose to do so. 3D production or additive manufacturing, using locally recovered materials, reduces the dependency on imported materials or goods, reduces the associated transportation and energy requirements. Concurrently, it will address social values and environmentally responsible solutions.

While disruptive technology advances such as robotics reduces the need for labour input, the circular economy may create more employment opportunities. Increasing labour content and variable costs seems, counter-intuitive, in the long-term this may provide a transition from consumption-based economics to conservation-based economics.

Short-term it still appears cheaper to continue to extract raw resources where there is no collection and distribution infrastructure in place to adopt circular economy practices. But we can’t keep cannibalizing our future – it is not sustainable and therefore not profitable. The circular economy allows for an increase in economic activity without a corresponding demand in energy and environmental stress.

Fast fashion companies are among the early adopters of circular economy practices. But commercial and industrial players are also engaged. They can see the economic benefits being realized and can address environmental problems and contribute to social capital. Leaders such as Unilever, Caterpillar and Zara are sharing ideas to create greater value.

The circular economy doesn’t mean perfect solutions but can lead to better solutions. Better solutions meaning more responsible business practices across supply chains and increased accountability for the global resources.

Introduction

Costs and shortages, while serious, are beyond the capabilities of most organizations to control to a large degree. This should serve as a reminder that we need to do what we can, within our sphere of influence, to ensure competition is as robust as possible.

Prices are but one element of competition. Other components can be pursued to yield equitable returns. Increasing local employment, measuring supplier performance, diversifying the supply base, or innovation in construction contracts to support competitive tension. Pricing will always have an ebb and flow aspect. Healthy competition requires strategic attention by public sector professionals to avoid short-term interferences from upsetting long-term objectives.

Competitive tension

Let me cite a well-respected advocate for ensuring competition in the marketplace, our colleague Maureen Sullivan. Competitive tension is created where two or more vendors are invited to submit proposals and each is aware of the competitive nature of the process. They know that in order to win they will need to offer more competitive pricing, quality or innovations, thus driving greater value for the owner. The most advantageous competitive tension occurs when an organization has pre-vetted capable vendors responding to clear and reasonable requirements that carefully balance the risk allocation to ensure minimal contract risk to the client, while avoiding unreasonable risk premiums in the vendors’ proposals.

Supplier performance evaluations

One of the weaknesses in contract management is where the owner does not have a structured process to identify the performance deficiencies in a timely manner. In the absence of an effective supplier evaluation process, the ability to measure value for money is relinquished. Research indicates, that when suppliers know their performance will be assessed, they make a stronger commitment to meet expectations during the commission.

Supplier performance evaluations should be a shared responsibility between the end user and the designated contract management staff. Verbal complaints or undocumented perceptions about poor performing suppliers are not adequate nor defensible when trying to avoid an award to a poor performing contractor. An objective, evidence-based evaluation model indicates where poor performing suppliers can improve and good performing suppliers can be recognized as a matter of record, which assists them in future contracting opportunities. Performance evaluations have a positive ripple effect in the level of competitive tension.

Where there are multiple suppliers for similar services, the owner has a great opportunity to benchmark performance between service providers. Within the public sector there is an exponential opportunity to benchmark the same service provider between multiple organizations. A supplier of paving services may have 6 towns within their geographical service area. Benchmarking the performance between the owners could reveal opportunities for service improvements or improved competitiveness on these services.

Performance appraisals support competitive tension where there may be few if any competitors. Rural towns and communities are often in this situation. Awarding business based on a local address may invite complacency, collusion, or reduce the competitiveness in the absence of performance evaluations.

Vested outsourcing[1]

Kate Vitasek et al outlined the innovative approach of vested outsourcing to services which quickly found admirers in the private and public sectors. The outsourcing of custodial services in BC health care, as an example, arguably was to privatize these services and reduce unionized staffing costs without necessarily improving services. The status quo was for a public facility to describe their existing scope of work, which they had been providing through their unionized workforce and then have potential bidders respond to an RFP, using a priced-based criteria. Services remained unsatisfactory.

The vested outsourcing model suggested that the hospital may not know the best way to provide custodial services and can use the RFP process to invite the potential bidders to respond with their vision as to how to provide these services, plus do so, where there is a paid incentive to meet or exceed KPIs. The financial incentive is shared amongst the custodial staff to give them a vested interest in doing a good job.  Performance-based criteria result in improved services and an increased level of competition for all parties.

Strategic unbundling

One critical observation from the pandemic was the risks associated with having all your eggs-in-one-basket. Assurance of supply is a key part of having a resilient supply chain. Having a redundancy was seen as unaffordable up to March 2020. While having more suppliers share in your demand may cost a few % points on pricing but it also provides an additional level of competition between the suppliers. They know that if one can’t supply, the lost orders will be filled by capable back up suppliers.

Supplier diversity is achieved in part by intentionally unbundling larger commodities or services and developing a broader supply base. This is part of a long-term plan to ensure equitable access to government business opportunities and contribute to economic and social development. Public organizations should revisit their all-or-nothing approach to competitive bidding.

Market sounding

When a community needs a new road plus a new school plus a new swimming pool plus expanding a hospital, these intentions typically inflate the cost of labour and materials during construction. Market sounding considers the overall competitiveness of contractors in a market prior to issuing bid documents. This includes projected cost estimates and capacities.

Per Rory Kulmala, CEO of Vancouver Island Construction Association, as stewards of our tax dollars, public sector buyers must ensure a standard of fair, open and transparent bidding processes that eliminates any favouritism or improper influence while promoting the widest participation from as many companies capable of performing that work. This contributes to a competitive process that ultimately yields the best value for any money spent while fostering a resilient and capable construction sector. Within this overheated sector, all the basics for competition still apply.

Summary

Good competition is good for all parties. When procurement have done their homework and have assessed market conditions, they can expect that the bidding results will reflect true market value in a competitive market.

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[1] https://link.springer.com/book/10.1057/9780230105232

How to Take Charge in a Negotiation Even If You Believe the Other Party Has More Power Than You.

When I speak with clients about upcoming negotiations at some point we talk about power and assess which party has more power and why; and in most cases, my clients believe that the other party has the power over them. They see their opponent as someone who is much bigger, has much more influence, is a tough negotiator and often gets the better deal. They feel they have less power and are unsure of what to do to negotiate successfully.

They look at the negotiation like a David versus Goliath. Only that David the courageous shepherd boy has been able to battle a giant that many have been so fearful of and demonstrated that size does not always matter. David won the battle as he was not scared, he was confident and prepared. He was in control of himself and did not let anyone influence him by their fears. He had a strategy and he stuck with it, he decided against heavy armor as he knew it would slow him down.

By studying Goliath he understood his strengths and weaknesses and could therefore use this knowledge to shift the perceived power in his favor.

When I speak with my clients about their negotiations they often find themselves negotiating against such giants which can be any powerful opponent; a big brand, a big retailer, or any big corporation which makes them believe that they are the underdog and have to play by their rules. But as Malcolm Gladwell writes in his book ‘David and Goliath: Underdogs, Misfits and the Art of Battling Giants’, ‘giants are not what we think they are.’ Giants also have weaknesses, pressures, motivations and goals because at the end of the day we are all people and we all have certain aspects that motivate us. The key is to understand that and then figure out how you can shift the perceived power in your favor.

When we talk about power in a negotiation we refer to two types of power, actual power and perceived power. Actual power relates to the position and the capacity of the negotiator that enables the negotiator to get the better deal.

Perceived power is not objective, it is the perception one party has of the other as to how much power the other party has in the negotiation.

If you believe that the other party has more actual power than you then you need to work on building perceived power, just like David did when he took on Goliath.

Preparation is the key to success here. Through preparation an understanding of the strengths and weaknesses of the other party is gained. You then need to understand the motivations, desires and pressures of the other party and work out a negotiation strategy with that information. Think about how they will behave in the negotiation and why they behave the way they behave. Negotiating with an experienced opponent could mean that there is a negotiation history which can be obtained by talking to people who have dealt with that party before. Most people are creatures of habit meaning that their negotiation tactics and styles can be predicted which gives a huge advantage.

Once you have researched the other party and have gained an understanding you can look into the Power Toolbox and develop your strategy.

The tools we discuss here are Silence, Questions, Pause, BATNA and Conscious Competence.

Silence

In any negotiation information is power. The more you talk the more likely you are to give vital information to the other party that can then be used against you. We tend to feel uncomfortable with silence, but silence is a powerful tool in negotiations. You have the upper hand if you let the other party speak as they might give you important information that you might be able to use in the negotiation against them.

Asking Questions

Asking the right type of questions is a skill that can be learned. Closed questions are questions that ask for a yes or no answer. They are ineffective as they don’t give any information, they need to be avoided. The type of questions that need to be asked are open questions, questions that require the other party to answer in one or more sentences. Ask questions that start with what, why or how. And if you didn’t get enough information the first time then just re-phrase the question and ask it again.

For example: Why are you selling? Then re-phrase: What is the biggest reason for you to sell? By rephrasing the question and asking again you will get additional information as your counterpart will think about an answer differently again.

Answering Questions

While you need to exchange information in order to build trust and get to a deal, you don’t need to answer every question the other party asks you. Think carefully which information you can give and what you need to withhold. There are several techniques to avoid answering questions. You can answer by asking them a question in return. For example, if you are asked: ‘What calibre of clients do you have?’ you could answer: ‘That is an interesting question, what impact would that information have on the negotiation?’

Secondly, you can be open and say that you cannot answer this question at this point in time. A third technique is just to be silent and not say anything. This often requires some practice as this can be quite awkward. Another way to avoid answering a question is to just talk about something else. I call this the politician tactic as they do that very well in interviews, they hardly answer the questions that are being asked by a reporter.

Pause

Make sure you pause often. Pause after you have asked a question and give the other party time to respond. Pause once you have made your demands and pause once you have placed your offer. It makes you come across as composed and being in control.

BATNA

BATNA stands for Best Alternative To A Negotiated Agreement. The more alternatives you have the less you are under pressure to come to a deal. The more BATNAs you have the more power you have. It is therefore imperative that you do your research on your BATNAs before you go into the negotiation.

Conscious Competence

When you prepare for a negotiation make sure you think about power and assess their levels of power and yours because you will often find that you do have more power than you think you have. Think about your strengths and weaknesses and how you react under pressure and in stressful situations; how you handle uncomfortable situations. You need to be conscious of your weaknesses, so you can work on them. Some people tend to talk more than they would normally do when they are in stressful situations, others tend to show that they are under stress through their body language. Any skilled negotiator is able to see these signs of weakness which put you in a powerless position.

The key here is to be conscious competent meaning that you are aware of your weaknesses and consciously work on them so that they don’t work against you in a negotiation.

Thinking about power before going into a negotiation is vital. If the other party does have the power than it is important to think about ways that will enable you to shift the perceived level of power in your favor. This gives you confidence and confidence helps you to take on the Goliath and negotiate a favorable outcome because at the end of the day they are also people and have motivations, pressures and goals just like you.

What to Be Aware of when Negotiating Over Email

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Digitalisation has enabled local businesses to become more global. A local business no longer relies on the local community, digitalisation now provides businesses with global opportunities, not only to sell their products and services but also to source, manufacture and find staff.

With globalisation the way we negotiate is changing as it is no longer possible to always negotiate face to face due to the geographical challenges, hence e-negotiation has become a major part in business with e-mail being now one of the major means of communication in business.

E-negotiation is different to negotiating face to face and therefore has its own challenges and tactics but it also creates new opportunities for success.

Increased Toughness

People tend to hide behind emails and can be tougher in e-mails than they would be if you met them face to face. Firstly, the physical distance makes people more detached from the other party and it is therefore easier to play tough and make tougher demands. Secondly, if you are tough with the other party you don’t get an instant reply, which you need to deal with right away. You have time to ponder over your response.

Dana Carney from the University of California found that e-mail makes it easier to mislead and lie to the other party due to the distance, as the distance we have from someone makes us care less, we are detached, and the behaviour becomes contentious.

You can work against that by using the law of reciprocity. What I mean by that is that if you add some personal details about you or the other party in the email to make it not only about the issue you are negotiating over, you are creating attachment and a warm climate and show that you care. In return, the other party might feel obliged to do the same. This creates a great foundation for negotiating over email.

Be conscious of how the other party may interpret your emails. Re-read it and check with someone if possible before pressing send.

Less Cooperation

When we communicate we not only communicate verbally we also use our body language and our tone to bring a message across. Albert Mehrabian, a professor at The University of California found in his studies on how we communicate that only 7% of our communication is done verbally, with the words we say. 55% of our communication, on the other hand, is done through non-verbal communication, our body language and 38% is communicated by our tone, the way we say it.

When negotiating over e-mail we only capture 7% of the total cues which leaves the email open to interpretation by the other party. This indicates that it can be much more difficult to interpret the intentions of the other party which invites room for wide interpretation which is not always productive to the negotiation. Contentious issues that are being discussed via e-mail are also easier to abandon and or letting them drag out which can be disastrous. Imagine you are negotiating over extra charges that have come up with a client and the client is dragging the negotiations out. This can become costly not only in a monetary sense but also to the relationship. It can destroy a relationship and future business opportunities.

In order to overcome such situations, you need to be collaborative in your email. Ask them what is important to them, show some interest and try and acknowledge their point of view which does not mean that you agree. You need to show some empathy showing your understanding of their situation.

Lack of Focus and Commitment

When both parties meet at the negotiation table they have made the commitment to come together and negotiate to try to come to a deal. For the time they meet they are focused on the negotiation on hand. That focus, however, can get lost when negotiating over e-mail as people multitask and get interrupted, meaning it can deliver mediocre results.

The way to overcome this is to keep the other party engaged and not to leave too much time between emails. Try to be focused when you prepare your e-mail and even re-cap previous e-mail exchange that you had and summarize the points.

While communicating via e-mail defies geographical boundaries and can save time, the absence of body language and tone makes it harder to interpret the message and can change the course of a negotiation if there is no awareness of the pitfalls when negotiating via e-mail. It also requires more effort to develop trust and to keep the other party engaged to arrive at a good outcome.

Does toughness in a negotiation pay off?

Does being cold and indifferent in a one-off negotiation get you the best deal?

There are two schools of thought on how to approach one off negotiations where price is the main variable and where you never see the other party again.

One side believes that you should take a firm, cold and arrogant approach when negotiating over price as this would give you the best deal. It is believed that this approach makes the other party feel uncomfortable and they are then more likely to concede as people are not comfortable with uncomfortable situations.

The other approach is the warmer approach, building rapport but still being tough, sincere and challenging on the issues however warm on the people. The important point to make here is that just because you are warm on people does not mean that you can’t push hard to get the best deal.

At Octalo we support the second approach for several reasons. While this is a one-off transaction and you technically never see the other party again, you never know what the future brings and there could be the chance that you might need the other party again. Secondly, negotiation is a people’s business and people deal with people. Research has shown that people tend to be more likely to make a deal with people they like; so do you think you get a better deal by being cold, tough and arrogant or by being more collaborative? I will leave that up to you to decide but here is a story that recently happened to me.

True Story

I recently bought a second hand car from a dealer. It was a one-off transaction and at the end we haggled over price. I did not need to buy the car at this particular dealership as there were a lot of alternatives around.

Before the negotiation, I did my research and devised a strategy. I set my maximum acceptance point, meaning the absolute maximum I would want to pay and lined up my BATNAs, my alternatives. I was ready to negotiate. Before I went into the negotiation I decided to take the second approach, being tough and sincere on the issues but building rapport with the people. The intention of my approach was to build rapport, so I could get the best deal.

On my way to the car dealership, I thought through possible negotiation scenarios and statements and what their responses could be.

The car was advertised for $25,500. I went in and gave them my offer of $17,546. I deliberately used an un-round number to make it look like as if I had thought about my offer long and hard and calculated every cent and dollar I had. The car sales agent looked at me and said ‘that is too far off’.

I looked at him and said nothing because I had nothing else to say. He then said, ‘look I can do 23,500$ that is the best I can do’. He conceded 2,000$ in the first 5 minutes, which indicated to me that there was definitively more room.

My Approach

My approach was to built rapport, so I told him what I needed the car for weekend trips I had planned and somehow we ended up talking about The Yarra Valley and red wine. I then gave him my next offer of $18,754. He then said that he really liked to sell me the car but he can’t do it for under $21,000.

I then said if he throws roof racks in I offer $19,728 and a bottle of Shiraz from a particular winery in the Yarra Valley. And then there was silence again and it was uncomfortable for both parties.

It seemed like an eternity when he broke the silence and said that he will need to speak to his boss.

He disappeared into the office and came back after 5 minutes telling me that he can’t go below $21,000. I thanked him for his effort and said that I am not in a hurry and he could give me a call if the car hasn’t sold at the end of the month. I demonstrated that I was not desperate to buy the car, I had time up my sleeve.

A couple of days later I got a phone call from the car dealer, he asked me if I am still looking for a car. I told him that I am still interested in the car plus roof racks and that my offer of $19,728 plus a bottle of red still stands.

After some more back and forth we did come to a deal. I got the car and a set of roof racks thrown in which cost me all up $19,728 plus a bottle of red.

Contentment

I left the car dealership being very content with my deal and the car dealer was happy to receive the bottle of wine as a deal sweetener. Over the course of the negotiation, we developed rapport and a relationship despite me being firm on my offer. Being tough on the issue does not mean that you have to be tough on the people.

A couple of weeks later I jumped in the car and realised that the battery of the car was dead, it was due to be replaced, something I should have done already but did not get around to it. I was stuck, so I rang the guy who sold me the car and told him that I had a flat battery and said to him that I would be delighted if he could do me a quick favour and come over to jump start the car. Since he was only ten minutes away he had no problems coming over and helping me out.

If I had taken the dismissive, arrogant and tough approach when purchasing the car, we would not have had a relationship and I doubt he would have wanted to help me out.

Five Tactics You Can Use to Negotiate With Someone More Powerful Than You

  1.   Control the Conversation by Using Framing

Framing is a technique that relates to how the way you describe your offer strongly affects how others view it. Framing is also how you can create a conversation around a specific point of the problem.

Did you know people tend to resist compromises — and to declare impasse — when these compromises are framed as losses rather than gains?

Here is an example: Suppose a company offers you, as a recruit, a $20,000 increase over your current salary of $100,000.

Now, if the offer is presented to you in that fashion, rather than as a $30,000 decrease from your request of a $150,000 salary, it seems much more appealing. Here, the company is focusing on presenting the advantage rather than the disadvantage. The salary increase is a gain. The fact it is less that you asked for, is a loss. This is how framing can change the way your negotiation is heard by the other party. Stressing what the other party would gain rather than lose can be an important use of framing in negotiation.

Another use of framing is using the “yes and yes” response. For example, you might be negotiating over a start date for changes to be made within a company. You say, “Do you want to start implementing these changes at the end of the quarter, or do you want to do it at the end of the month? Your choice.”

Those two last words are much more emphatic and certain than, “What do you think?”

  2.   Give and Give Again

When it comes to negotiation, it’s simply not the done thing to give things away. However, if you offer expertise and solutions, you will be seen as someone who is genuinely there to help. This does not mean give away what you are there to negotiate. Rather, it’s all about leverage.

Let’s look at the example of a vitamin water brand that is giving away free bottles of water — but when you are given one, you are asked to fill out a survey.

Compare this to being asked to “spare some change.” Which option are you more receptive to? They’re both pitching for your attention. And it would be less time consuming to hand over some change. The difference is you are getting something back in return for completing the survey. Being willing to give makes a difference in a power negotiation dynamic.

  3.   Be Firm and Use Gentle Strength

In my program Feminine Art of Negotiation, I discuss being assertive when it comes to negotiation. However, I also stress that you need to do this without resorting to aggression. This is where you can use gentle strength, which is when you know what your bottom line is and stand firm on it without being adversarial or abrasive.

This dovetails nicely into the importance of knowing your B.A.T.N.A (i.e., your best alternative to a negotiated agreement). For example, if you saw a pair of shoes you loved in one shop, you would go and check them out in another store to compare the price. However, you are also taking into consideration every other factor included in those prices. The cost to get to the store, are the shoes available immediately, are they in the color you want? This all plays into your B.A.T.N.A. What is the best alternative outcome for your purchase? I talk about this in my programs, and also in my blog post titled Know Your B.A.T.N.A. Before Bargaining.

  4.   Allow Yourself to be Underestimated — And Leverage It

Canadian journalist Malcolm Gladwell discusses in his book David and Goliath: Underdogs, Misfits, and the Art of Battling Giants how a lowly shepherd boy defeated the biblical giant.

Their story is told in the Old Testament. Powerful warrior Goliath was said to stand more than 7ft tall. David was a small, skinny boy with no experience in battle. Their respective armies, to decide the victor and avoid widespread bloodshed, pitted the two against each other.

On first glance, you would cast Goliath as the victor, with his ginormous physique and heavy armor. However, what is not mentioned is that research has suggested it’s likely the giant was suffering from the hormonal disorder acromegaly, a condition associated with gigantism that also affects vision and can cause the afflicted person to see double. Plus, Goliath was expecting to face down someone like him in expertise and fighting strength.

What the giant perceived as weaknesses were ultimately David’s strengths. Nimble on his feet and with no heavy armor, he was well practiced at taking down lions with his slingshot. He was able to run at Goliath and was right under the giant’s nose when he took him down, with a stone hitting his forehead at what was estimated as the same force as a bullet. Goliath didn’t stand a chance. David was able to leverage what was perceived as weaknesses and use them to his advantage. They became his strengths that allowed him to win.

It can be intimidating to approach the negotiating table when you think you’re coming in as the weaker force. But by following these steps, you turn your vulnerability into a position of power.

Here’s an example: You have created a startup company that provides a communication system between organic farmers around the world to work together on fulfilling supplier needs, and you have been approached by an investor. However, the acquisition team is very shrewd, and they know they have the power of a conglomerate behind them.

In the instance of this company, they already have global networks in place, but not the technology to allow instant communication between them. Their team knows you want what they have, which is an investment.

One way to gain leverage is to see what their problem is and solve it. Put yourself in their shoes. During your meetings, ask why they are interested in your company. What do they envisage you can solve for them? What challenges are they facing that you can help with?

Know your worth and your worth to them. This puts you in a position of power irrespective of whether they are a multimillion-dollar company and you are a one-woman band.

  5.   Bring Them Around to Your Thinking 

This may appear to be a daunting prospect if your counterpart has more power. So, you need to create some bridges to connect both sides.

Going back to your startup, your counterpart already has an investment in the outcome, but you don’t want it to be an “us vs. them” competition. Instead, you need to make sure they see you are both in ittogether. So, point out what you both have in common.

The more things they know you have in common that demonstrate your worth, the smaller the power gap. It’s no longer “us and them,” it’s “us” and how you can make it work for “both of you.”

Remember, one of the worst things you can do is negotiate against yourself. Understand what you, your services, or your mission is worth, and don’t undersell or second-guess. If you aim high, you won’t be disappointed when you meet somewhere in the middle.

It would be wonderful if every time we went into a negotiation, it were an even playing field. But that’s not always the case. All too often, you find yourself heading into a negotiation where the other side holds more cards.

To move them closer to what you want, you’ll need to make sure they know what they are invested in. Help them get over their “us vs. them” thinking and instead start thinking about how the deal they want will impact your company. Appreciate the position the other side is in and show them some respect. The deal that you wish for will then come naturally.

In conclusion, you never need feel intimidated if you go into a negotiation with someone who you perceive to be more powerful than you. You have the ability and the skills to be successful in your argument and achieve your goal. And if you use these five tactics as and when you need them, you can feel confident in your success.

Want to make a deep-rooted difference in your career?

Step 1: Adopt a social procurement strategy for your organization.

Step 2: Implement it!

Social procurement was a nascent idea which resonated with supply chain professionals across the public sector. Rather than focusing on and defending the lowest cost for goods and services, buyers could add value and contribute to local social and economic development. Adding value does not cost more money. Social procurement leverages the current and future demand for spending. The spend is inclusive of a broader set of values, which all stakeholders agree, makes sense. Social procurement is intended as a means of purchasing for the purpose of social and economic development. Buyers aren’t losing sight of the importance of cost but are aiming at a more positive social impact when redefining value. Shrek realized that Fiona was best as a swamp-dwelling ogre – being a princess only benefited one stakeholder, Farquaad.

Buying at the lowest cost was intuitive and it worked for years, until it didn’t. Fast forward to the present and we see oligopolistic markets which control the price and supply in most sectors. The pandemic epoch exposed the problems with this short-term thinking using a price-based model. Material shortages are due in a large part to a lack of resiliency in sourcing. What got us here, won’t get us out of this situation.

Social procurement is a value-based strategy. Social impacts are measurable outcomes which go beyond the conventional transactional role of buyers. To do this, procurement adds social criteria and appropriate weighting in its decision-making. Rather than alienating small, medium businesses (SMEs), there is a renewed commitment to ensure they have a fair and equitable opportunity to compete for government business. Local is good.

Social enterprises (SEs) are a part of the supplier community which are often over looked. SEs are a mission- or purpose-based organization which can provide goods or services. SEs compete with all other forms of business and can respond to competitive bids and provide a wide variety of services, from IT to hoarding cleanup and everything in between. Every community has an SE. The demand side of government has so many opportunities to connect with this integral part of the supply side.

Measuring and reporting out on social impact increases the transparency and objectivity of supply chain strategies. Examples of outcomes can include the # of people who face systemic employment barriers being hired; the # of hours of work for youth-at-risk; the # of contracts awarded to local SMEs; the # of contracts awarded to First Nations’ contractors. Having contractors track these types of KPIs, helps with the measurement and accountability.

Supplier diversity programs can be an important component within a social procurement strategy. The seminal work done by Paul Larson[1] Ph.D., on supplier diversity indicates a great many benefits to private and public sector organizations. These can include:

• Increased competition among vendors, leading to better pricing and more innovative products and services
  • Increased flexibility and just-in-time delivery from vendors
  • Building the most-qualified supplier pool
  • Reducing supply chain risk, by engaging multiple, capable suppliers
  • Increased access to ethnic or diverse markets
  • Community relationship building
  • Building economic capacity and prosperity in the community
  • Building stakeholder relationships and goodwill

Social procurement views diversity and inclusivity as complementary components-not competing interests. Supplier diversity implies a multiple-sourcing strategy which supports a resilient supply chain model. Increased onshoring will likely be attributed to the need for improved availability of goods and services. Food security is better addressed through agreements where local produce, meat, and poultry is encouraged in contracts with lesser reliance on imports.

Living wage (LW) programs are often adopted by leading organizations which initiate social procurement strategies. When LW rates are paid, as opposed to minimum wage rates, to contractor employees, there is an increase in the spending by these employees with local businesses. This redistribution of wealth in the local economy largely offsets the out-of-pocket costs between these wage rates. From the first LW city of New Westminster in 2011, there are now dozens of LW cities across Canada. Another sign of the emergence of social procurement.

Fair trade (FT) programs demonstrate the difference between conventional procurement and social procurement practices. Buying bona fide FT products ensures the environment is being protected and the workers in the industry are receiving better incomes, with improved working conditions. Using a city as an example, this means that at every civic function, FT products should be served. Conventional buying, in this case, favours one service provider to provide open market coffees, teas, all under one large contract to get the lowest price for the products, coffee dispensers and urns. Very efficient. Under a social procurement policy, the city has the option to buy FT products from the many local roasters and brewers across the city for these events which supports local catering and employment. This strategy will favour local SMEs and SEs. Very effective.

Trade agreements are often cited as being barriers to social procurement or the broader issue of sustainability within the supply chain. This is an inaccurate characterization of the many trade agreements which actually support social initiatives. All trade agreements have exceptions, exemptions, and exclusions which enable contracting with SEs without necessarily running a competitive bid. These waivers provide more latitude and professional discretion to work with local SEs. Direct awards can be made to an SE without contravening trade agreements or compromising best practices. Increased public sector demand helps to build the capacity of SEs in the market while receiving good value for those goods and services.

Social procurement is not without its challenges. However, implementing these strategies is very gratifying professionally as you can see the direct impact. Increased local employment and contributing in a meaningful way to community development is a role which supply chain professionals should leverage to make a real difference. If Shrek can, you can too!

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[1] https://umanitoba.ca/asper/asper-school-business/faculty/paul-d-larson

Organizations need to respond to stakeholder expectations. One of the more effective means to do so is to develop environmental and social governance (ESG) policies in the supply chain.

ESG includes evolving practices such as social procurement; supplier codes of conduct; environmental responsibility; supplier diversity; resilient supply chains; and balancing local benefits within a global market.

ESG in supply chain policies and practices should align with the United Nations Sustainable Development Goals (UNSDG). These internationally vetted outcomes directly impact supply chain strategies and business practices in the public and private sector.

The Demand side in the public sector sets objectives and standards which the Supply side seeks to satisfy. Lowest cost was good; but not good enough. Best value takes ESG into consideration and on to the next level. The next level is where we are going and where price is still important but less critical as an out-of-pocket metric as a determinant of value.

In the long-term, the next level is where supply chains meet ESG within the circular economy. This interactive webinar will look at where and how public sector supply chain leaders will need to adapt to be effective resources to their communities.

Learning Objectives

• Explore ESG as the means to transform the definition of value
• Identify the next level as a driver in a long-term supply chain strategy
• Discuss the raison d’etre for ESG in supply chains
• Differentiate between lowest cost and best value in today’s market
• Examine the intersection of the UNSDG and supply chain strategies

To appreciate the shift towards Environmental and Social Governance (ESG) practices, we need to look at earlier business strategies. First, was the Corporate Governance mandate to make money. It turned out that generating profits was being conducted by any means possible with the unfettered zeal of shareholders to maximize their returns.

These returns were often at the expense of the environment and were indifferent to social responsibilities, beyond paying taxes. Corporate Social Responsibility policies were drafted as a response to appease critics of the profits only mandate; however, CSR appeared to be more of an attempt to address image rather than have a social impact or mitigate environmental degradation.

The E for environmental, in ESG, has been the focus with a shift in direction towards social values. Stakeholder capitalism (community interests) is not displacing shareholder capitalism (corporate interests), but it is gaining leverage to balance these competing objectives. Social procurement policies stem from the S in ESG.

All businesses and governmental operations have supply chains and budgets as a common denominator. By extension, ESG should be a part of supply chain strategies across these sectors. The largest player on the demand side is public sector procurement. Public procurement is the means by which all levels of government monetize policies when sourcing goods and services.

If the weighting on ESG criteria is lesser than that of pricing, the supply side will not move the needle. If government policies don’t incentivize higher commitments to achieving measurable social outcomes or reducing harmful emissions in their competitive bidding documents, the supply side won’t invest in more sustainable solutions. Sustainable solutions don’t necessarily equate to higher costs.

An example is the demand for school buses in Canada. The status quo is to continue to buy new gas/diesel powered buses. Quebec-based Lion Electric makes e-buses and in BC, the Riise EV company is converting internal combustion engine (ICE) vehicles into e-vehicles (EV), which could include school buses. This $30B dollar bus market favours the ICE models and the dramatic payback for converting to EV buses is being discounted. The payback on conversion reduces capital costs by 50% along with 75% lower operating costs. The education sector can contribute more to the various governmental emission reduction programs, support new jobs in Canada, advance the transition to renewable energy, and realize savings in their budgets says Dean Kneider, President and CEO of Riise EV. Buying groups sourcing ICE models remain less than objective and not assertive on scrutinizing e-bus options. Government can be more proactive and prioritize the ICE to EV conversions concurrent with buying new EV buses and vehicles.

The private sector is cognizant of stakeholder interests; however, post pandemic pressures such as extreme inflation and across-the-board shortages are downplaying ESG as a priority. Globe and Mail writer Jeff Jones, stated in a July 2022 article that “in good times, we can afford everything; in tough times, we reset our priorities.” We are facing wars, inflation, economic uncertainty, political polarization and therefore, ESG interest abates.

ESG, while not a panacea, is a stronger commitment by corporations to participate in solutions to global problems. Issues such as climate change, human trafficking, workers’ rights, renewable energy, inclusivity, reducing inequality, and poverty. These social externality costs are being factored into the private sector policies. ESG practices are a means of validating the social license granted to companies in free markets. The UN Sustainable Development Goals are being adopted by forward looking companies as a framework for their ESG policies. Consumers, customers, and communities are a critical part of the demand side, and will buy products labelled as being socially or environmentally responsible.

Compounding the challenges to ESG from a private sector perspective, is the lack of evidence that there is a correlation between improved financial performance and ESG policies being in place. There are a few claims of shareholders having satisfactory returns where companies have adopted ESG policies but they are the few, not the many. Stating this in another way, investors want their corporate governance expectations to continue and environmental and social issues are a distraction.

Adding to the ESG perplexity are the reporting metrics. Self-appointed, 3^rd party agencies use their own methods for calculating results. Without a recognized set of reporting outcomes or definitions, it is difficult to find credibility in reports and support increased pressure for the supply side to improve. Scope 1, 2, and 3 emissions, supplier diversity, green products, green operations, anti-corruption, or carbon offset project returns can all be part of this reporting miasma.

Despite the difficulties in measuring and reporting on ESG progress, these should not be seen as an excuse to avoid best practices in environmental and social governance in our supply chains. When we take on these challenges, we get better at creating solutions. We increase our awareness; which leads to advocacy; which leads to actions.

Per Darren Gee, CEO of Peyto Exploration & Development Corp out of Calgary: “There is a rush to create a system of governance on supply, which has no impact on demand. While the latter is what we want to change.” Per Larry Fink, CEO of BlackRock Inc., “The power of capitalism is driven by mutually beneficial relationships between you and the employees, customers, suppliers, and the communities your company relies on to prosper.” This statement captures the reason d’etre for ESG.

Purposeful leadership, with accountability, will drive the changes in the market to achieve the intended outcomes. Technology and social conscientiousness in business decisions will result in sustainable economic returns. Science should have a loud voice at the ESG table and have the ear of the supply and the demand sides in the conversations which ensue.

Supply chain professionals should lean in and ensure ESG is in their policies and deployed in their practices. They are the demand managers for the goods and services we all acquire. The supply side and consumers will respond accordingly. What’s in your school bus?

Talent

Hiring and retaining staff with supply chain competencies is a growing issue for procurement in Canada. Not only have many people left the field, but those who remain are being s-t-r-e-t-c-h-e-d to the limit. The expectations of organizations to deliver value for money is approaching unrealistic levels. Material and labour shortages across all supply lines are exasperating operational conditions. These situations tend to favour the seller, but the public sector has not tempered its plans for moving ahead on so many fronts. These fronts include: affordable housing; infrastructure development; supplier equity and diversity; human rights; trade agreement revisions; and global warming strategies, to name a few.

Skill sets in the public procurement sector around construction projects is underwhelming. There is more attention paid to getting cheaper consumable supplies than developing the best strategy for a costly construction project. The former is quite intuitive for most buyers; the latter has received insufficient attention by supply chain training organizations and industry. The emerging strategy of Integrated Project Delivery models is relatively unknown. Design-Build and its cousin the Design-Bid-Build models are the status quo in most governmental strategies, with an inequity in risk transfer paid for by the taxpayer.

The other side of the talent coin is remuneration. Many public sector organizations have not adjusted salaries to reflect market conditions. Senior procurement positions have been vacant for months in some cases, which defaults to decisions being made by staff with lesser experience and qualifications. The organization’s financial responsibility is exacerbated with an acknowledged risk due to the talent gap.

Digitalization of everything

Artificial Intelligence (AI) is about converting all operational requirements into a digital format. This digital transformation enables technology to replace people in routine and more complex jobs. If factories are running slower due to a lack of employees, then it simply fuels the need for increased use of robotics for volume and accuracy. Public sector procurement strategies need to catch up to this nascent evolution which is changing how goods are made or services are being provided as the physical locale becomes more agnostic. Disruptive technologies have only begun to impact public sector sourcing strategies and their social consequences.

Digitalization may contribute to onshore supply for more goods and services. This model can be scaled to meet demands easier than hiring and training a labour force which is already in short supply. Many entry level jobs in the recycling and recovery of materials, as one example, have been replaced by robotics.[1]

The challenge around digitalization is to ensure it’s not another form of the race to the bottom enabled by public procurement. Which goods or services should be attained at the lowest cost and still provide value to the Canadian taxpayers?

Supplier Performance Evaluations

There are public sector organizations conducting performance evaluations but they are in the minority. One of the best means to assess value for money is to measure the level of satisfaction received by stakeholders as to how the work was performed or as to how the project met the deliverables.

We can learn from success and failure. Performance evaluations acknowledge that leading suppliers are giving full value and encourage others to raise their performance. Benchmarking performance sets expectation standards and has a ripple effect across the sector. Good suppliers like objective feedback. They take pride in their staff and the ability to meet outcomes within the contractual conditions.

ESG

Environmental and Social Governance[2] practices are driven in the supply sector by the largest player on the demand side, public procurement. If the weighting on environmental and social values continues to be overshadowed by pricing, the supply side will not move the needle. Whether they are a small municipality or the Department of National Defence, if governments don’t demand a higher commitment to achieving GHG reductions, waste free water supplies, or resource conservation, the supply side won’t invest in more sustainable solutions.

Sustainable solutions don’t necessarily translate into higher costs. They do contribute to environmental initiatives and social values being realized, which is the long-term desired outcome. We don’t sacrifice safety over cost – why would we try to save money at the expense of other sustainable practices?

Stakeholder interests are growing in the private sector. The challenge is to leverage this shift in favour of more sustainable solutions resides in governments ensuring ESG practices are included in the criteria evaluations with an appropriate level of weighting.

Policies

Procurement policies are the means to communicate the values of a public organization internally and externally. Policy defines how values will be defined, measured, and assessed. With staffing shortages, multiple procurement requests, and resource deficiencies, policies generally receive a lower priority, and yet, represent the mandate for procurement professionals.

This means making apolitical commitments to achieve the organizational objectives following best and leading practices. Procurement plays an oversight role to assess potential risks along with ensuring value for money which aligns with the policy. This challenge requires a working knowledge of competitive bidding obligations, case law, trade agreements, business ethics, concurrent with procurement competencies.

For example, without defining what social procurement means, within a policy statement, it’s subject to interpretation by individuals with good intentions where decisions may not achieve the collective goals and lack accountability.

Summary

Arguably, the challenges to public sector procurement could include more “keep-you-up-at-night” issues. These challenges are not independent of each other. You can’t address one or two and expect overall results to be better from a procurement perspective. There is no expectation of perfection in procurement. There is an implied message that all reasonable best efforts will be taken.

It is encouraging to know that there are procurement professionals who do deliver full value based on their experiential knowledge. There are many procurement professionals available in the market too.

This may be part of the solution for challenges facing procurement – a hybrid version with organizational procurement staff to meet daily exigencies, complemented by external expertise for strategic and specialized services.

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[1] https://zenrobotics.com

[2] https://www.thomsonreuters.com/en-us/posts/tax-and-accounting/esg-supply-chain/

A Brief Look at Trade Agreement Obligations

There appears to be some confusion amongst colleagues and clients about trade agreement obligations for disclosure of RFx weighted criteria. This is largely a concern on the demand side for the public sector, although the private sector responds to bid documents from the supply side. This article will try and provide clarity on the issue.

One policy out in the municipal sector, says that they will include the criteria but not the weighting in RFx documents. Another City posted their RFx with no reference to the weighting on the criteria, under the evaluation process. I inquired as to why and was advised “we get better proposals and then decide which one to go with.” Really? Really! This inconsistency is confusing for potential bidders and may be in violation of several trade agreements.

The respective spending thresholds give us some guidance. Under the CFTA for goods and services >$105,700; and on construction >$264,000, the evaluation criteria and weighting must be stated. This is covered under the CFTA Article 509.7

Under the NWPTA, the reference to criteria and weighting is silent. No mention of criteria at all. The spending thresholds for the NWPTA is >$75,000 for goods and services; and >$200,000 for construction.

If a city wanted to award a 3-year service agreement for landscaping services, they have some options to consider. If the city has a social procurement policy, the options could be expanded. First issue, what is the total value of the 3-year contract?

Option 1.

If the contract is worth ≤ $2900 per month, they would need to comply with NWPTA, and no weighting of criteria is mandated. If the estimate is inadequate, they may inadvertently reach the CFTA threshold. Unsuccessful proponents could make a serious challenge on the contract award and the evaluation process. The ceiling on $2900 per month over 3-years is $104,400, which is less than the $105,700 limit.

Option 2.

If the contract was ≥ $2937 per month, they would need to comply with CFTA and all its requirements. The ceiling for the contracted value would be $105,732 over the 3-year contract. The total value of the contract determines which trade agreement applies, not annualized values.

Option 3.

If the city wanted to negotiate with a social enterprise, they would be exempt from all trade agreements obligations. Spending thresholds do not apply. The NWPTA and the CFTA have exceptions when dealing with people facing barriers to employment, as an example:

NWPTA Part V C. GOVERNMENT PROCUREMENT

2. Procurements:

(a) from philanthropic institutions, prison labour or persons with disabilities

CFTA 504 s. 11 (v)

Non-Application

• This chapter does not apply to…

(i) procurement of goods and services… 

(v) from philanthropic institutions, non-profit organizations, prison labour or natural persons with disabilities

Summarily, the CFTA is clear that criteria and weighting must be made public prior to the release of an RFx. The NWPTA does not state that specifically, however, best practices in public sector procurement would be to disclose the criteria and weighting. This ensures the process is fair, open and transparent which leads to better value for money. The evaluation process, including the criteria and the respective weighting should be fully disclosed before approaching the market. This disclosure of the process does not require additional work for the procurement team.

With the potential for trade agreement challenges and loss of stakeholder confidence if not disclosed, perhaps you won’t mind weighting after all.

When did the rust in trust start to build up?

A recent Edelman Trust Barometer (www.edelman.com) reports that less than half of the people they surveyed, aged 25 to 64, trust business to do what is right. The cumulative and compounding number of corporate transgressions contributed to the rust in trust culminating in the 2008 financial debacle. We can no longer rely on what business leaders say, instead, we need to see how their organization acts. The “video needs to match the audio”. Per Edelman’s report, trust-building attributes such as operational excellence have taken a back seat to engagement, integrity, products and services, and purpose.

Trust is the engine of business. Deontological theory expects us to “do good.” We trust each other to act in ways which achieve the greatest amount of good because people benefit from the most good. Trust is the currency of a business professional. Fiduciary trust goes beyond a moral or ethical obligation where a breach of fiduciary trust may result in legal proceedings between parties.

Internationally Canada’s public sector can do better. According to the Corruption Perceptions Index, Canada consistently lags behind many western countries. Corruption offsets much of the good which can be done in developing economies.

Trust is affected by capitalism, science, and technology, borrowing from Yuval Harari. Value is based on their ability to meet community expectations.

Should business ethics be an imperative?

Studies have shown that companies which perform well against their competitors often have a strong sense of commitment to values and ethics. As stated in Good Company, typically the best performing companies outperform the overall stock market. Over several years, companies within the same industry which adopted many of the trust-building attributes outperformed their competition.

Social capital refers to relationships in business and extends to the information you access, the ideas which you advocate, and your business acumen. Relationships are built on trust.

Organizational leadership affects personal conduct

Studies by Kouzes and Posner reiterate the importance of trust. They found honesty is a key virtue which leaders utilize to inspire others to follow. Followers will do so where they can trust the leader. Responsible leaders set the ethical expectations of staff and communicate through ethical messaging and conduct.

In the case of Timberland, CEO Jeff Swartz was made aware of the sourcing of hides for leather from the Amazon rainforest. Swartz expeditiously worked with Green Peace to release a policy requiring its suppliers to not purchase cattle which were raised in newly deforested areas of the Amazon. This policy had a significant affect on leather, beef, and other products sourced in Brazil. Any cost implications were completely secondary to doing the right thing to ensure brand protection and retain the trust of its customers.

Are codes of conduct really effective?

Codes of conduct are a guide at best. They set acceptable parameters within which decisions should be made by individuals. The SCMA Code of Ethics reinforces the professional behaviour and conduct which a supply chain professional should exhibit in practice. The Code serves as guidance for its members and reflects on the profession as a whole. While it may not prevent all acts of indiscretion, it provides an appropriate level of response where the behaviour or conduct of an individual may detract from the integrity of the profession.

The electronics industry has its Electronics Industry Citizenship Coalition Code of Conduct. Many of the larger electronic brands are signatories to the code. While the intent of the EICC code is good, it has not prevented the questionable practices of sourcing raw materials such as coltan from the Democratic Republic of Congo. We could surmise that cost pressures necessitate securing the materials first and applying the code second.

The Canadian government participates on various OECD committees. In 2008 the OECD Guidelines for Multinational Enterprises states, “observance of the Guidelines by enterprises is voluntary and not legally enforceable.” It asks that MNCs meet the softer expectations of society while promoting commercial interests. In other words, the OECD trusts the companies to do the right thing.

The slippery slope to professional misconduct

Harvard professor Max Bazerman’s research led to an acknowledgement that once the ethical line has been crossed, an institutionalization of corruption can occur in which unethical acts become a part of daily activities and people often have a vested interest in remaining quiet.

Unequivocally the research showed that incremental steps of unethical behaviour largely went unnoticed. This may cause individuals to escalate these activities, unintentionally with no malice to defraud, until it must be dealt with.

In 2008, a former Imperial Tobacco employee admitted to the decade-long scheme to ship tax-free cigarettes into the US where they would be smuggled back into Canada for sale. In 2018, Canadian retailers admitted to price fixing on the price of food staples such as bread. The penalties do not seem to be effective. We can’t seem to trust them to do the right thing.

The cost of ethical failure

In 2013 SNC Lavalin paid a significant price for its unethical conduct. The World Bank barred SNC and 100 of its subsidiaries from bidding on any of the Bank’s development projects for the next ten-years! This was an outcome of SNC bribing foreign officials. The slippery slope indeed!

In the Canadian Federal budget of 2018, deferred prosecution agreements (DPAs) were introduced. Many corporations have lobbied for DPA legislation as they say the penalties for illegal practices have been unfair. If the DPAs become part of the bargaining process for corporate misdeeds, the DPA becomes a proxy for a “get-out-of-jail-almost-free card.” The effect of a DPA is to reduce the penalties which were levied and let a guilty corporation have its mea culpa conditionally – where, if in future they agree to behave in line with the laws of Canada, they can conduct business as usual. The day after the DPA was announced SNC Lavalin’s stock rose in value.

DPAs are used in other countries. Therefore, having DPAs in Canada evens the playing field is the argument. This author’s opinion is that a DPA lessens the deterrence factor and invites a continuance of bending the rules. The principle of the ethic of care is to do what is right; the principle of ethic of justice is to only do what is legally required.

Promoting ethical conduct

In-house training sessions should reinforce the executive commitment to ethical conduct. Many organizations hold regular safety training sessions to promote safe work place practices. Much the same should be done with corporate ethics and values. Harassment, in its many forms, needs to be eradicated.

Where transgressions occur within an organization, action reviews should be taken to evaluate the cause and effect of such instances. Appropriate actions to mitigate the consequences and prevent further instances needs to taken. Hiding or dismissing inappropriate actions leads to inevitable reoccurrences.

Messages for procurement professionals

Bid-rigging and price fixing practices are alive and well in Canada. The fines levied by the Competition Bureau seem to do little to deter unacceptable corporate behaviour. The crooks become more creative; or may accept the fines as a cost of doing business.

Supply chain professionals play a role in mitigating and preventing bid rigging and other forms of illegal trade practices. It requires an increased level of due diligence to ensure market pricing is conducted in a fair and competitive process. An over reliance on competitive bids to set market prices, without looking for the signs of collusion, contributes to the problem.

Trust in the market should be earned and not assumed. Fortunately, most suppliers are good corporate citizens. The good should be rewarded for their conduct; and the bad should be fully responsible for their misconduct. I trust you’ll do the right thing!