Thursday, 14 June 2007

Visit to Seoul, South Korea

In an earlier post, I described a period when I carried out some consultancy for Philips in Holland. During this period, there was a major railway project going on in Iraq. Hyundai in Korea had won the main contract for building the railway and Philips was one of the companies bidding to Hyundai for the telecommunications sub-contract. At that time, Iraq enjoyed massive oil revenues and, although some of us had reservations about Saddam Hussein, his regime was being enthusiastically embraced by the West. Well, we put together the major quotation in Holland and I was asked to accompany the bid team on a visit to Seoul to present the bid to Hyundai and, hopefully, negotiate a contract.

Travel had been arranged on a late afternoon flight from Schiphol via Gatwick, with an overnight at the Hilton Hotel, Gatwick. It was a strange experience to fly into England from Holland and, instead of going home, book into a hotel. I couldn't settle that evening so I skipped dinner and instead caught the train down to Brighton to look at the sea on my own. Having just arrived from Holland, I seemed to see England through the eyes of an outsider - a very odd feeling.

Next day, we flew to Seoul. I think there were five of us. Philips had arranged excellent rooms at one of the top business hotels in Seoul. The bid manager held a series of meetings in the hotel to refine the offer and discuss strategy in preparation for our first meeting with Hyundai the next morning.

All our meetings took place at the Hyundai headquarters in the centre of Seoul - a towering, modern office block. Discussions were in English (just as well - I managed 'O' Level French and Latin but I'm an exceptionally poor linguist), although the Koreans would, naturally, slip into Korean for asides to one another. As expected, we found Hyundai to be relentless negotiators, always asking for enhanced specifications but also seeking lower prices. The contract was large enough that a number of companies were bidding for the telecommunications sub-contract and it was easy for them to play one bidder against another. At the end of the meeting, we came away with a series of requests and questions. Back at the hotel, the bid manager would discuss the possibilities and do the sums, ready for the next meeting

I don't remember how many meetings with Hyundai we had. All followed the same pattern of Hyundai implying that they were really, really pleased with our offer and that there remained only tiny queries to be resolved before the contract was ours. When you've invested many weeks of work in responding to the invitation to tender, you naturally believe your offer is the best and you are reluctant to think that the job is slipping away because you can't shave just a little more off your price. Back at our hotel, we had another meeting and almost everybody was keen to discuss ways of finding a further saving. The bid manager, a man of great experience, shook his head and took out a piece of paper with a sum of money on it. It was the price we were now seeking to lower. He explained that he had written the sum down before leaving Holland. It represented the lowest sum which would make the job worthwhile to Philips, he said. There would be no further reduction. The rest of the team were, of course, disappointed but over the next few hours we realised the wisdom of his position. In the excitement of the negotiation, it's all too easy to lose sight of just how much you've given away. The bid manager knew that, even if he'd allowed a reduction, that would have been followed by a request for yet another, tiny saving.

The bid manager went back to Hyundai without the whole team to explain his regret that no further reduction would be possible. That evening, the bid manager arranged a special dinner at the hotel in appreciation of everyone's efforts and the next day we flew back to Europe, by now convinced of the wisdom of the bid manager's actions.

So, Philips didn't get the order but I learnt an important lesson. But that wasn't the end of my involvement with the Iraq railway project, because my friends at GEC Telecommunications in Coventry were also quoting for the telecommunications package. One day, I'll tell you about it.