BigCo 1

Here is a type of situation that comes up often.

You are a small service business. Some of your customers are very large businesses with procurement departments.

You have been doing business with one of these large companies (let’s call it BigCo) for seven years, and each contract with BigCo has provided that, if BigCo wants to exit, it has to give you 6 months’ notice. The existing contract is due to expire in 2 years’ time.

BigCo has a new head of procurement, and that new head wants all suppliers to be on BigCo’s new MSA. You say OK in principle, let’s have a look at your MSA.

The MSA arrives, and it gives BigCo the right to exit on 30 days, not 6 months.

You respond with a “Get lost, our contracts have always had a 6 months’ notice period”. BigCo replies with “3 months is our final offer”.

What are your options?

1.   You decide to agree to the 3 months. You’ve been doing business with BigCo for 7 years, and any set-up costs have long been recovered.

2.   You say OK, but the 3 months termination won’t kick in until the present contract term has expired (another 2 years) by which time BigCo will have been buying your service for 9 years (and any set-up costs have long been recovered).

3.   You say OK, but BigCo will have to pay a termination fee for the missing 3 months.

4.   You say OK, but my pricing reflects a 6 month notice term and, if we are going to switch over to 3 months, I will have to increase my pricing accordingly.

5.   You say OK, but on the basis that you have reviewed the whole MSA and can find elements in the MSA that you can change in your favour. In other words, you concede on the 3 months but change elements of the MSA so that overall, you are no worse off or, possibly, better off.

6.   You say No, I’m sticking with 6 months.

There is no right or wrong here (though option 3 – termination fees – will get the most hostile response), but the most critical factor is understanding what is driving Procurement.

If it’s a tick box exercise (eg. no termination beyond 3 months), and the buyer wants to show her new boss that she is competent, then you are better conceding the point and trading it for something that is not on Procurement’s tick box list.

22 April 2025