Tip Sheet 5 – Salami Slicing
© 2010 Richard Pryor & Associates
Intended Audience – This tip sheet is for the assistance of people involved in the procurement or the supply of ICT products and services.
What is salami slicing?
Imagine you hold a stick of salami. From time to time I take a slice of your stick. Each salami slice may be quite thin and you are happy to give it. However, after a period of time you look down and see that you no longer hold a stick of salami but only hold a stump.
In the context of negotiations, salami slicing involves a process of dealing with issues one at a time. If a party effectively undertakes a salami slicing process, it can result in a significantly more favourable agreement than if all issues are tabled from the outset. Conversely, a party that allows the salami slicing process to be imposed on it may fail to achieve a deal much better than the salami stump.
Why should I consider using a salami slicing approach?
- Control of negotiations – If a process is adopted that controls the sequence of discussion of issues, this gives the party with control of the issues considerable control over the entire negotiation process.
- Pressure on other party – The salami slicing process places pressure on the other party and puts it off balance in the negotiations. This can be exploited, particularly when the approach is used by a customer in a competitive procurement and the preferred supplier is under constant threat that the customer will revert to negotiations with an alternative supplier.
- Adding issues – If a party has not disclosed its full list of issues, then it is in a position to add new issues at any stage without disclosing to the other party that the issue is new.
- Freedom to reverse or modify position – As the discussion of selective issues progresses, it may become apparent to the party controlling the salami slicing that it should reverse or change its position on an issue which has not been disclosed to the other party. The other party will have no awareness of a change in an undisclosed position. Where the full list of issues is tabled at the outset, a change in position can generate protests and create difficulties.
- Increased prospects of a better outcome on each issue – Where an issue is discussed in isolation a better outcome may be achieved than if an issue is considered with a full awareness of the position which will be taken by the salami slicing party on other related issues.
How is a salami slicing process adopted?
- Control of process from outset – In order to apply the salami slicing process, the party wishing to do so will need to be in a position to control the process from the outset. Generally customers conducting an attractive and competitive procurement process are in the best position to take control of the process.
- Issues to be dealt with one at a time – The party adopting the salami slicing process should stipulate the rules which will govern the process including requirements that (a) the issues will be dealt with one at a time; (b) that party will provide the agenda for the issue or issues to be discussed at each negotiation session; (c ) the parties will strive to reach agreement on each issue; (d) each party must be represented at the negotiation session by someone with authority to make all necessary decisions to close the issue; (e) the meeting will be adjourned if agreement cannot be reached; (f) the party may withdraw from negotiations and (in the case of a customer) commence negotiations with an alternative supplier if an issue is not satisfactorily resolved.
- Mix of issues – Issues should not be raised in order of importance or in any other obvious order. Issues should be sequenced so that no clear pattern emerges.
Should I always try to adopt a salami slicing process?
There are many circumstances where a salami slicing process should not be adopted. These include the following situations:
- Lack of negotiating power – If a party is unlikely to have sufficient negotiating leverage to take control of the process, then an attempt to salami slice will probably fail. For example, if there is only one potential supplier of a solution then the customer will have insufficient leverage to impose a salami slicing process on the other party.
- Risk of antagonising the other party – The intent of a party in adopting an obvious salami slicing approach can be very transparent. Adoption of the process or an attempt to adopt the process can result in an adverse reaction by the other party which may prejudice the entire process. This is particularly the case when the A List, B List permutation of the salami slice is attempted (see below).
- Complexity of interrelationships between issues – If the issues are complex and interrelated, it may be dangerous for a party to try to resolve each issue in isolation rather than dealing with the issues collectively.
- Inability to plan and manage process – The planning and management of a salami slicing process requires careful planning and management. If the required rigour cannot be applied and maintained throughout the process, then it may be unwise to apply a salami slicing approach.
Are there variations on the basic salami slicing approach?
- The A list and then the B list – The most common alternative version of the basic salami slicing approach is an approach where a party tables an initial list of issues (the “A List”). Both parties then proceed to negotiate on the terms of the A List as if it is a complete list of issues. The other party makes concessions on the basis that it understands the complete situation. Following discussion and resolution of all or most of the issues identified in the A List, the party then produces a second list of issues (the “B List”).
The B List or any further list of issues is often presented with an excuse or explanation. The most common excuse is based on the requirements of someone else within the organisation. The requirements might be attributed to a legal review, board or Cabinet review.
The introduction of a B List will usually cause annoyance and may result in protests, withdrawal of concessions or suspension of negotiations.
- Tabling contract documents at a late stage – A party may table contract terms and conditions at an advanced point in the negotiations which are inconsistent with the terms apparently agreed during discussions. The party tabling the agreement may present it on the basis that it is a standard document and it cannot be varied.
This situation often arises where a prime contractor is negotiating terms with a customer but the transaction also involves critical third parties. For example, the prime contractor may be the implementation services provider and one or more software licensors may be key third parties. The software licence agreements may contain provisions which undermine the effect of provisions which have been agreed between the customer and the prime contractor.
How do I resist a salami slicing approach?
The application of the salami slicing process can cause delays in a procurement process or even force a party to abandon the process with a particular supplier and restart the procurement process with an alternative supplier.
In order to avoid or minimise the risks associated with the salami slicing process, the other party should be asked to provide a written list of all issues and to confirm in writing that the list is a complete list of all issues arising under the agreement.
In parallel with this, the other party should be required to confirm in writing that it will have obtained all necessary internal approvals relating to negotiations and any agreement which may be reached between the parties during the negotiations.
Similarly, the other party should also be asked to confirm in writing that it will ensure that it is represented at negotiation sessions by a person who has authority to commit that party to any matters that are agreed during the negotiations.
If a party is unable to provide the list of issues and these assurances prior to commencement of negotiations, consideration should be given to deferring the negotiations until these requirements are satisfied.
© 2010 Richard Pryor & Associates – The content of this tip sheet is subject to copyright and may not be translated, adapted, reproduced, broadcast or transmitted in whole or part without the express written permission of the author.
Important disclaimer – This tip sheet provides general comment. It does not constitute advice on any matter. No reader should act on the basis of any content without obtaining and considering professional advice upon their own circumstances. Richard Pryor & Associates and its officers and agents hereby disclaim any liability to any person with respect to the consequences of anything done or omitted to be done in reliance upon any of the content.
For further advice on ICT procurement and supply negotiations, contact Richard Pryor – richard@pryor.com.au