The latest Catch-22: Approved Vendor Lists

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September 24, 2002 // UPDATED 1:31 pm - April 30, 2007
By: Elana Centor
Elana Centor

Or, how your company can spend more money and restrict free enterprise

It's a classic scene: the dashing young salesperson walks into the office unannounced and tries unsuccessfully to get past the gatekeeper -- the boss's over-protective, plain-Jane assistant. The charismatic salesman with the Ben Affleck grin spends some time teasing and flirting with the attention-starved gatekeeper, and before you can say "Mr. Johnson can see you now," the salesperson is being shown into the boss's office.

Oh, for those good old black-and-white movie days when gatekeepers were actual people. Not today. Today, the gatekeeper is most likely to be a list -- the "approved vendor list," to be exact. Getting past that list is no easy feat.

"Approved vendor lists are the rage," said Sid, a vendor consultant. Sid works for a Downtown-based company that helps other businesses with their approved vendor lists.

"The original intent of the approved vendor list was to provide companies with a way to get a handle on who their vendors are, streamline their costs, and eliminate their good-old-boy networks," explained Sid.

"Do they do that?"

"Usually not," conceded Sid. "You could say they are a necessary evil."

"What's the problem?"

"For starters, approved vendor lists completely stifle competition," he replied. "Once you're on the list, you're in. Everyone becomes complacent. It's human nature. Without competition, people take it easy."

"Can't you just add companies to the list to increase competition?"

"Easier said than done," Sid said. "It can take months, even years to add new vendors. The whole idea behind an approved vendor list is to restrict the number of vendors."

"Let me get this straight," I said. "Are you saying in American businesses today, that if a new company comes in with an innovative idea, a better process, a better price, and better service, that organizations won't talk to them?"

"They can talk, but procurement probably won't let them get hired. There are exceptions, of course, but the majority of companies that use approved vendor lists don't make many exceptions," Sid said.

Just ask Judy. "I wanted to try some new ways to deliver my training. I researched vendors. We didn't have anyone on our list that offered the service I was looking for, so I came across someone who offered a high quality, unique service at a fair price."

"So what did you do?"

"I asked procurement what I had to do to get the vendor approved," explained Judy. "They said, 'you can't...the list is closed.'"

"Then, I asked if they could make an exception. Again, they said, 'no, the list is closed.'"

"What if you followed the maxim, 'better to ask forgiveness than to ask for permission?'" I suggested.

Judy said, "If I tried to submit an invoice for someone not on the list, our department would be fined $10,000."

"I take it you didn't get to use the new vendor," I said.

"Actually, I did. After three weeks of bouncing from one division of procurement to another, someone finally told me that I could have the vendor put on the 'temporary approved' vendor list. I didn't even know there was such a thing."

"So was it worth all the effort to get the vendor approved?"

"Yes and no. Yes, because we added $35,000 to our bottom line that wouldn't have been possible without the new vendor. No, because it delayed the project three weeks, and by the time I finally got the vendor approved I had lost a lot of interest in the project. The fight just took too much energy. I'd never do it again."

Hoping that this story would have a happy ending, I asked, "Was the vendor eventually able to move from your temporary approved list to the permanent list?"

"Of course not. Our vendor list is closed. That vendor will never make the list, and now the temporary approved list is gone."

"Are you saying that no new vendors are ever allowed on the list?" I asked, wanting to make sure I understand the full implication of what Judy was saying.

"That's what I'm saying," confirmed Judy.

"How can that be?" I asked, truly stunned. "That seems to violate everything our economy is based on -- like free enterprise."

"Not according to our procurement department. If asked, they'll tell you, 'we have all the vendors we'll ever need.'"

Judy paused a moment and said, "Aren't we lucky?"

Elana Centor is a former Downtowner with a Minneapolis writing/marketing company. If you have a workplace dilemma or just a good story to tell, please contact her at ecentor@mn.rr.com. You can remain confidential, as can your company.