At times like these, don’t get suckered into overlooking quality, accountability and performance. As cash flow tightens, orders drop and credit gets squeezed, conventional wisdom focuses on the lowest bid, term concessions and fire sale prices. Don’t get so caught up in the mentality of fear that you forget your real focus: on getting things done right. All too often in this market managers focus on their own pressures. They take the low bid and then are reluctant to demand performance. They let irregularities slip by. They excuse omissions. Worst, certain that they are getting a “deal,” they accept “as is, where is” too readily and can be slipped a bag of liabilities. The “steal” is highway robbery, by the seller. Common warnings to beware of increased levels of fraud rarely address the real problem in such an environment, even when heeded.

Why? Guilt. Restricted by fear of your own cash position in negotiating and closing your transactions, you feel guilt that you have got a deal. Afraid that the good deal won’t continue if you demand too much, you hesitate to make demands. All too easily you get suckered by the times: Afraid to hear a higher price and tougher terms, you leave things to be settled later. You don’t demand the accustomed detail in the contract; you ease up on the reps and warranties. You allow vagueness, and let yourself to be lulled by verbal assurance, relying on generous understanding. In the back of your mind, fear is rationalizing that if you are understanding now, then if things should get bad and you can’t pay quite as agreed, the other side will be understanding too. Wishful thinking suggests that if you leave the terms hazy now, perhaps you can persuade the seller to go lower or longer later.

And then you are trapped. When you ask, hesitantly, for verification of the number of pallets, the grade of chemical, the quality of cloth, the currency of version or the timing of the next delivery, at first you will be ignored. Asserting yourself, you will get put off, you will hear threats that this is not what was bid on and will hear demands that the price will have to be higher if this is what you want now. Did you mean you wanted the software bug free? Debugging’s extra. Depending on who can prove who said what to whom when, one side will prevail now or at renewal, on the phone or in court— if everyone is still in business — or you can just make do with what you have got and bury the complaint in getting along. Except one side will not have got what it really needed — and paid for.

Fraud gets buried, shrinkage gets buried, incompetence gets buried– until the damage is too great. The machine fails, the landscape dies, the project sinks, and the money is gone, possibly to Brazil, or Jersey.

Worst, of course, is the case where you don’t look inside that fire sale deal and come up worse than dry. When the seller tries to persuade you that the deal’s too cheap to merit reps and warranties, look for liabilities in unexpected places. Look for the technology which is about to be exploded into obsolescence or stratospheric expense; look for the NIMBY come to call or the indispensable partner who won’t partner. Watch for the bit of deal asbestos. A fire sale deal is not worth the pennies on the dollar if you get stuck with someone else’s liabilities.

In this environment, don’t forget : there is no free lunch.

And the piper will be paid.

© 2009 Sigrid Caroline Schroder. All Rights Reserved.