Customer-Supplier Relationships Can Be Improved Through Partnering

NSIAD-94-173: Published: Jul 19, 1994. Publicly Released: Aug 29, 1994.

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Pursuant to a congressional request, GAO reviewed various cooperative, private-sector business relationships called partnerships, focusing on the: (1) decisionmaking process for forming partnerships; (2) partnerships' management practices, particularly contract terms and accountability and risk safeguards; and (3) private-sector partnerships' benefits and the potential benefits for the Department of Defense.

GAO found that: (1) companies enter into partnerships when, after evaluating their needs and goals, they believe they can benefit from such a relationship and the benefits outweigh the costs; (2) partnerships cannot be developed with every supplier and customer because they require resource investments or are inappropriate; (3) companies that have achieved benefits from partnerships have common characteristics, including strong top management support, an organization culture that values cooperative behavior, and a commitment to work toward mutual benefits and long-term goals; (4) partnerships can pose risks, such as becoming too dependent on a few suppliers, complacency in upholding the partnership's goals and accountability standards, and noncompetitive prices; (5) partnership management practices to ensure goal achievement and minimize risks include clear contract terms, intensive management involvement, performance monitoring, internal controls, problem-solving procedures, and periodic evaluations; (6) successful partnerships have reduced companies' costs and improved their service and quality for both partners; (7) the Army Corps of Engineers and the Navy Fleet Ballistic Missile Program have developed partnerships with their contractors and the resulting cooperative relationships have reduced costs and schedule delays and improved performance; and (8) DOD could expand partnerships under certain circumstances and with appropriate management controls.

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