‘Negotiation of Embarassment’ Leads to £800m Government Savings
The UK government used a “negotiation of embarrassment” to help make savings of £800 million from its major suppliers.
Bill Crothers, the Home Office Commercial Director took part in contract renegotiations with the government’s largest suppliers, which started last year.
Negotiation teams looked at separate pieces of business done with the same companies in Whitehall and found that some suppliers did £800 million of business or more with central government each year. They were then able to look at margins being made across departments and compare them with supplier’s profits as published in their accounts, to see whether the government was getting the best deal.
“When you look at the scale of business, when (the government) was acting as a single customer, and you looked at the margin that was being enjoyed and then compared that margin to some smaller private sector clients…you would then say, ‘this does not seem fair – do you understand that?’ The conversation was transparent and they would say, ‘oh, ok, we understand’, and then make a contribution,” Crothers said.
“In some ways, it was a negotiation of embarrassment, in that (cabinet secretary) Francis Maude took a position that we were not trading anything. This was not us negotiating in a traditional sense, in that we’ll give a contract extension in return for (better terms).”