Say a buyer pays a software supplier $2.4 million a year. Clause 14 promises that no similar customer will pay less. The clause is common.
In year two the supplier wins a competitive bid with a 6% discount. By the clause, the buyer is owed that 6% too. On $2.4 million, that comes to $144,000 a year. Nobody ever claims it.
We think a price promise you cannot check is a hope with a clause number. The buyer cannot see the other customer's invoice. The supplier can. A category manager who has signed this clause three times knows the trade felt good in the room and did nothing afterward.
Why the supplier gives it away so easily
Picture the end of the deal. The buyer pushes for one more point of discount. The rep says no to the point and offers the clause instead. The buyer signs on a Friday feeling protected.
The rep has given up nothing she expects to pay. She knows her own price list. She knows the buyer would have to ask, and she knows how the buyer would find out. To her the clause costs some paper.
We call this paper protection. It protects on paper and pays nothing until someone tests it. Treat it like any other term a supplier hands over cheerfully, and ask why it came so easily.
Compare the two offers. The point of discount was worth $24,000 a year, or $72,000 over three years, and it arrives on every invoice. The clause is worth $288,000 if someone tests it at the right time. Untested, it pays zero.
Why nobody claims it
A supplier's other contracts are confidential. A buyer has no way to learn a rival customer's price. So the buyer cannot tell whether the clause was breached, and what you cannot tell you cannot claim.
Suppose the clause says the supplier will certify compliance on request. Requesting takes a person, a date and a reason. Your calendar probably has no row for it, so the request goes out in month 34 of 36, if at all.
The supplier's deal desk knows which contracts carry the clause. It checks before it approves a discount. Your clause sits in their spreadsheet and not in yours.
How a supplier stays inside the wording
The first move is the word "similar." A customer buying 5,000 seats is not similar to one buying 500, so the discount goes to the larger one and the clause stays quiet.
The second is the bundle. The price per seat holds for everyone, and the other customer gets implementation hours thrown in. We have argued that a bundle hides its price, and here the same problem arrives with a clause attached.
The third is timing. A discount signed the day after the certificate date shows up on nobody's paper. None of these breaks the letter of the clause. A buyer who reads the clause only at signing will never see any of the three. The rep who wrote it sees all of them every quarter.
A price protection that only one side can check protects that side.
Write the clause so you can use it
Three edits make the clause usable. First, define a similar customer by objective bands. Annual spend within 25% of yours and a term of the same length is a fair start. Second, require a certificate signed by the supplier's finance lead, on a date already in your calendar. Third, state the remedy as a credit on the next invoice, so nobody has to open a negotiation to collect.
Some suppliers will push back on all three. That push tells you something too.
Put the certificate date in the same record as the renewal date. We would set it 90 days before renewal, so a finding arrives while you still have something to trade.
If the supplier refuses the certificate, ask what they expect the clause to do. Their answer tells you what the clause is worth. Price it that way.
What a breach is worth
The arithmetic is short. Take your annual spend and multiply it by the gap between your price and theirs. Here, $2.4 million times 6% gives $144,000. Over the last two years of a three-year term, that is $288,000.
Do this for every contract that carries a price clause. You can probably list them in an afternoon by searching your contract store for "most favored" and "no less favorable." Sort them by spend. The top five are where a certificate pays for the hour it takes to request.
Ask your counsel whether your wording allows a back claim for both years. We cannot tell you, and the answer changes what the claim is worth. Raised 90 days before renewal, a claim gives the supplier a reason to want a quiet renewal.
Do not wait for the cash. We think the claim is worth more as a trade at renewal than as a dispute afterward.
A clause belongs in the plan, next to the renewal
In Commercial Intelligence, Whispor keeps your contracts next to your spend and supplier history. We think a price clause belongs in that same record, with the date it can be tested.
When you give Whispor a renewal goal, the plan lists what Whispor does, what your team does and what it leaves alone. Asking for the certificate is your team's job, and we would put it at the top of that list. A clause nobody tests is a concession you made for nothing.
The Whispor team
Related: The account manager is the interface. The deal desk is the counterparty. · A bundle is a price you cannot check. · The escalator clause negotiates every year. You negotiated once.