There has been a volume of news this week surrounding the challenges of negotiation with regards to the supply of Covid vaccines into Europe by one of the major producers, and the volumes going to specific countries.
This, of course, is not an overnight development, and the background story is complex and involves a range of players and countries. Some of the debate gets down to the content of the contracts entered into by various parties, but there is also a strong link to the business requirements which were in place for different government groupings when they initiated negotiations.
The widely reported issue is that the agreements reached by the EU were later than the agreements reached with other countries, particularly the US and UK. Although this describes the net result, it is worth understanding what drove the later agreements. In essence, the EU had to balance both a more complex bureaucratic process, involving 27 countries sign off in the first instance and business requirements closely based on ‘business as usual’.
Stakeholder management remains central to all successful procurement activity. In this case, keeping a wide range of governments on board and individually signing agreements to progress negotiations was critical and, ultimately, destructive. The pace imposed by the approach limited the EU’s ability to make progress. Consequently, a rarely used emergency approach was invoked, which allowed the EU to create an agreement itself, and for countries to access the purchases made. This accelerated the process and delivered a deal, although later than those with more straightforward approaches.
This change to “business as usual” seems less evident in the application of other business requirements. It appears that the US has a waiver in place for liability in the event of issues with a rapidly produced vaccine. The EU wanted to maintain the tight liability clauses, which again presented a challenge in the negotiation. (The UK position is unknown, although one might guess that the liability clause wasn’t present).
In another area, the UK regulatory sign off skipped a key step: the assembly of all the documentation required into a finished format. All the information was available, but in ‘kit’ form rather than in one piece. This saved a considerable amount of time. Lastly, it seems likely that, although the EU may have agreed a lower purchase price than others, that may come at the cost of slower delivery. Given the societal impacts of slow vaccine roll-out, a vaccine’s purchase price is likely to be negligible compared to the cost of delay.
In essence, wanting to maintain business as usual requirements may have slowed down the EU’s ability to reach a final contract form.
Of less certainty at the moment is what is in the actual agreements. Some reporting suggests them to be more heads of agreement that fully formed contracts, which may be right for expediency but may well become an area of contention at a later date.
What can we learn from this and the challenges of negotiation? It reinforces the need for flexible approaches to keep stakeholders on board. It suggests that we should challenge business as usual when circumstances dictate. We should also get ready for a host of “after the fact” analyses of the issues involved, and a fascinating insight into cross-governmental purchasing issues.
For a lot more detailed analysis, please look at the excellent article on the Politico website. https://www.politico.eu/article/four-eu-states-form-alliance-to-negotiate-on-coronavirus-vaccines/
Read more about our approach to Negotiation here.
About Mark Hubbard
30+ years experience in procurement and supplier management, in line and consulting roles
Previous employment: Positive Purchasing Ltd, SITA,
QP Group, BMW, SWWS, Rover
Education: BSc in Engineering Metallurgy, MBA University of Plymouth
CIPS: Current Member