Buyers split on outlawing of ‘pay to stay’

Buyers are split on whether the practice of “pay to stay” should be made illegal.

The SM Jury was unable to reach a verdict on the controversial practice, which involves suppliers being asked to make payments or face delisting.

The issue surfaced after Premier Foods was criticised for employing the tactic, and the Labour Party has called for the practice to be outlawed.

When the Jury was asked “Should pay to stay practices be made illegal?” six members voted in favour and six voted against.

Derek Gaynor, former head of strategic procurement and compliance at Maynooth University, voted “yes”. “Good procurement is a product of competition, not coercion,” he said.

Tony Morris, procurement transformation consultant at London Luton Airport, agreed. “What are these buyers at Premier thinking? If they want to look at ways of reducing cost, start working with the suppliers in the supplier’s supply chain,” he said.

But Nic Porter, managing director at Procuring, voted “No”. “Pay to stay can be seen as a helpful revenue generation stream, particularly for organisations who are seeking to reduce their supplier roster,” he said. “Conversely it can also be seen as an investment by the supplier in order to win a larger proportion of a client’s business rather than by more traditional and expensive business development routes.”

Darren Niblo, procurement co-ordinator at Falkirk Council, also supported the tactic. “Obtaining and maintaining a position on a preferred supplier list can be a very lucrative additional reward for a supplier, and we as buyers should be fully aware of this,” he said.

“Whether this recognition is through greater commercial terms at point of payment, retrospective rebates or pay to stay, it’s not the type of deal in place that’s unpalatable and subject to this type of backlash, but whether it is reasonable, proportionate and sustainable.”

(Source: http://www.supplymanagement.com/news/2015/buyers-split-on-outlawing-of-pay-to-stay#sthash.UMzcKEE3.dpuf)