BAFO's Can Sweeten a Deal for Both Clients and Suppliers

'BAFO' stands for Best and Final Offer. It’s a tactic employed in the final stage of negotiations which can be helpful in large scale, complex buying processes where so much more is at stake than just the price.

When we work with clients through a strategic sourcing process they’re often amazed at just what’s involved in landing a deal. The level of surprise seems to peak at what comes out of a BAFO process, on the occasions we elect to run one.

Typically we only use a BAFO where we are confident that a better proposal is really available without creating undue margin pressure. It’s also useful where two solutions are close and the evaluation teams are struggling to separate the proposals.

During BAFOs we’ve seen it all, from ‘you have our best offer’ to ‘here’s a $1.5m discount on the year one costs’ for the same client on the same deal. It shows how differently companies (that appear very similar in the market) approach shaping their offer and their prices. In a different case, we’ve witnessed a $10k per annum price difference become a $100k per annum price difference. Over a five year term that’s a cool $0.5m to the client’s bottom line – just because they asked for a BAFO.

Whilst a client will often feel miffed that they didn’t get the best price through the sourcing process, the BAFO process can deliver real gold to all parties. When I was selling a BAFO was considered a great sign. It gave us a chance to sweeten the deal with the elements that we had discovered through the negotiating process were of real value to the client. We’d aim to strengthen those elements and to take away parts of the offer that were not valued. That way we could control costs and tweak the offer to really resonate with the client. Nothing comes for free, of course, and we would always ask for something from the client in return for the BAFO – perhaps a longer term, easier trading conditions or additional services.

Consider a BAFO in a complex, high stakes negotiation. It’s a great negotiation technique that delivers real benefits to both parties.

To discuss the topic further, please get in touch with the author, Julia Dol , on 021 458 542.


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