Brexit means we in the UK will soon be replacing our red European passports and reverting to blue passports and a contract is now out. The Home Office is looking for a contractor for the design, print, assembly and associated services for new passports and the contract is worth around £490 million over 13 years. But what of the existing contract? With Brexit not foreseen by many politicians, it is probable that there is an incumbent supplier of passports with whom the Home Office will have to terminate a contract.
We often think about commercial negotiation as a moment for winning contracts, but procurement professionals are often called in to negotiate disputes and from time to time, they will need to negotiate the terms of early termination due to a change in company policy or, as in the case of passports, “the will of the people”.
Just like any negotiation, preparation will be key. Facts about the contract such as how long has it got to run, what is the value left in the contract and what exit clauses are there are essential. A good procurement professional will also be looking at the market and judging how easy it would be for the supplier to find alternative business, how much has it cost in outlay, what are the employment issues, rental agreements, consequences further down the supply chain and so on.
If you are a supplier, do not assume you can just claim the outstanding value of the contract; you will have to justify every penny you claim, so you must be equally prepared.
In the private sector, a contract could be amended to reflect a change in specification and pricing and may be sufficient to keep both supplier and buyer happy. However, in the case of public procurement such as this, a new contract has had to be advertised as there is a material change to the contract, and all suppliers should be given an equal chance to bid.
Another hidden cost of Brexit.