Building Better Vendor Relationships

By G.C. Skipper, Contributing Editor | September 28, 2010

Erle Potter, Virginia Dept. of Transportation, VDOT

When a public fleet uses the private sector as a business partner, there is ample opportunity to test the ebb and flow of vendor relationships. In state government, for example, things have to be done a certain way with little or no wiggle room. And by the same token, there are vendors in the private sector who have their own standards for doing business and don't like to deviate from their chosen paths. According to Erle Potter, CEM, state equipment manager for the Virginia Department of Transportation (VDOT), when public and private meet and it's not a match, one of two things can happen.

“As far as we're concerned, either the vendor goes back to his management to find exceptions that allow the vendor to work with us, or they go find other business,” he says. “The bedrock of a good vendor relationship is attitude.”

Potter has proven his point over and over again using a vendor-relationship strategy that creates a win-win environment. That best-practices approach has led to many successful long-term relationships in the private sector and, along the way, has brought VDOT public recognition from numerous industry organizations, including the Association of Equipment Management Professionals (AEMP), which awarded VDOT the 2008 Fleet Masters Award for Public Fleets.

Potter's strategy is based on establishing a culture that doesn't breed “we-they” confrontations, but rather establishes open communications in which both parties are comfortable expressing their opinions when issues arise. It also includes measuring performance on the delivery of agreed upon equipment, parts, supplies and services so improvements can be made from the perspective of both parties.

To develop a mutually beneficial business relationship, Potter recommends you start with the contract.

“We advertise specifications that we require on a piece of equipment, and vendors bid based on the specs,” he says. “You have to clearly define your requirements for the products or services so vendors who are bidding understand your needs and can respond appropriately. It's probably a little more difficult in state government because we have to stay within the restrictions set by state law. There are certain things we have to do in a specific manner, and all that has to be spelled out in the contract.”

Once the bids are received, bid packages are thoroughly reviewed to make sure all VDOT specifications have been met and, if necessary, a visit is scheduled to examine the equipment and make sure it meets the specs. The vendor is then selected based on price from all those that met specs.

“It's relatively cut and dried,” says Potter. “The vendor either meets our specifications or he doesn't.”

Before the contract is signed, however, Potter schedules a face-to-face meeting to explain VDOT's expectations.

“That lays the groundwork for creating a win-win relationship for both parties,” he says. ”If there are any issues or concerns from our side or the vendor's, we can work them out at that point. We find using low-bid selection criteria doesn't require as much time. It's also completely straight-forward.”

VDOT also uses requests for proposal (RFP).

“We like to see proposals on how different vendors would go about filling a specific need,” says Potter. “When we use an RFP vendor selection process, the selection isn't based entirely on price. It also takes into account the vendor's ability to meet certain additional criteria. Depending on what the product or service is, a panel is formed with representatives from VDOT. It sometimes also includes representatives from other state agencies or from other organizations. The panel reviews each vendor's proposal to see if they have an implementation plan that fills our needs.”

Once that's done, panel members give each proposal a score and the scores are compared.

Potter then meets with the vendors before a contract is awarded.

“You visit with them, hear presentations, ask questions, verify issues and negotiate,” he says. “Sometimes a vendor even proposes a better, less expensive alternative.”

Creating an environment that eliminates the “we-they” atmosphere can be difficult at VDOT, because of the seemingly endless government requirements involved in the process.

“It's a very structured process,” says Potter. “And sometimes it's hard to convince vendors you're trying to partner with them. It all comes down to attitude. You have to explain that most of the complications are created by state law and it has to be done that way.”

Making sure vendors meet specific requirements is critical to improving the partnerships and strengthening the relationships.

“When it comes to equipment, it's simple,” says Potter. “The requirements are in the specifications, and you can measure to see if the equipment meets the required dimensions.”

Another consideration is delivery dates. VDOT's contract requires that a certain number of machines be delivered by a specific date. Many times the agreements include incentives for vendors if they meet the deadlines and penalties for failing to meet them.

Measuring performance is a little more problematic. But, says Potter, there are ways to do it—productivity, for example.

“Measuring productivity will require a test of the equipment in actual working conditions with the required payload,” he says. “But other areas are more subjective.”

One measure of performance for vendors is how soon they are paid.

“They have a huge investment in manufacturing, buying or selling the equipment,” says Potter. “They also know the Virginia Procurement Act won't let us pay them until we receive the goods. After the goods are received and accepted, it's another 30 days before the vendors are paid.”

Measuring services can be difficult, but Potter puts the wherewithal for doing so right in the contract. In some cases, for example, services must be completed by a specific date.

“We measure other things, as well, such as outsourced repairs,” he says. “We look at factors such as downtime, repeat repairs and number of preventive maintenance items completed on schedule.”

Creating a harmonious relationship between fleet and vendor is good for all parties involved. Keeping it that way requires continuing communication.

“When a contract is up for renewal, talk with vendors you've worked with previously to find out what kinds of problems they've encountered and what things they'd like to see done better,” says Potter. “They may have suggestions that result in a better contract.” And a better contract goes a long way toward establishing a positive vendor relationship.