The truth about procurement negotiations in PR

by Jono Marcus

I admire procurement officers.  They are normally very level headed, with great attention to detail and a firm but fair manner.  However, increasingly I am finding that procurement officers on one side and those proposing the budgets on the agency side are operating based on a completely different set of parameters.  So with all the goodwill in the world, it is hard to find a mutually beneficial agreement without ripping up the current way of doing things.

The current concern of Procurement is with the cost per hour and the number of billable hours; and the agency’s concern is with getting the SOW fulfilled or “job” done in a way that will create strong enough results for the client to keep employing them year after year or project after project, for a worthwhile price.

The current way Procurement and agencies come to an agreement is very confrontational entirely focused on placing an agency rate card against how long each person on the rate card will take to complete the proposed work. The procurement officer then argues that each item of activity will take less time than the agency proposes it will take and therefore the proposed overall price needs to come down.  If this fails to result in a conclusion, both agency and client will try and erode the mandate of the SOW to justify or create the lower price. Then against this lower price are placed higher KPIs than the agency initially proposed, which can either be argued against or accepted.

If still no conclusion is reached Procurement will point out (true or not) how they may be aware of other agencies with a lower rate card and may ask to see timesheeted evidence of how long certain activities took in previous years; in return, the agency may press the client for disclosure on what their PR / social budget actually is for that year, and come armed with old timesheets full of over-servicing evidence.

At the heart of the problem is the fact that Procurement are dealing with the “billable hour”, when the billable hours are less and less useful for modern PR/social agencies, and the focus on them involves this inherently confrontational haggling over hours here and hours there.  Industry leaders such as Coke and Proctor and Gamble, have moved to the value-based billing model; entirely replacing hourly rate proposals. This value-based model involves the agency saying from experience how much it believes work will cost (rather than by the hour) and also factoring in the value the work will bring to your business.