NDA stands for “non-disclosure agreement.” An NDA is a contractual document between two parties where one or both agree to not share certain information provided by the other party.
As a procurement professional, you are always exchanging information with individuals outside of your organization, mostly suppliers. And that’s OK. But there is some information that you need to protect more carefully than other information.
Here are four situations where asking your supplier to sign an NDA might be a good idea. Of course, you should consult your legal department to decide for sure as this article should not be construed to be legal advice.
Situation #1: When sharing proprietary specifications. If your organization’s proprietary specifications got into the wrong hands, your organization could lose a competitive advantage or be subject to some other risk. Therefore, when sharing these specifications, there may be a need for the recipient to sign an NDA. This may be required even before you issue an RFP/RFQ to prospective suppliers.
Situation #2: When a supplier visits your facility. During a supplier visit to your facility, that supplier may observe proprietary processes or other things that you wouldn’t want outsiders to know about. As such, getting the supplier to sign an NDA may be a good idea.
Situation #3: When collaborating on new product/service design. Launching a new product or service is a key way that organizations stay ahead of their competition. The sooner competitors know about a new product or service that your organization has developed, the sooner they can copy it and recapture market share. Therefore, an NDA should be considered.
Situation #4: When engaging in consulting with a supplier. When being consulted in the hopes of making improvements, an organization is likely to reveal certain information not intended for public knowledge. Therefore, you may want to require the supplier with whom you are consulting – even if that supplier is not, by definition, a consultant – to sign an NDA.