Sorrell's Comments on Procurement Reveal Opacity of Agency Billing Practices

(MoneyWatch)  WPP chief Martin Sorrell said he may not be able to meet his margin guidance this year due in part to aggressive client procurement tactics in contract negotiation.

The remarks, made to the FT at the Cannes Advertising Festival, touched a nerve at ProcurementBlog, whose commentary reveals much about the opaque, intangible nature of advertising "accountability," agency billing practices, and how far agencies must go before they are taken seriously inside clients' finance offices. In the FT:

Sir Martin blamed the increasing involvement of clients' procurement and finance functions for their more "aggressive" approach to contract negotiation.

"These are very tough times and clients are behaving in quite a tough way. And it's a pretty brutal environment, more so than it has been for some time," he said.

It's not tough enough for the procurement crowd:

Still an intangible spend area in many businesses, marketing directors also enjoy a position of power, as well as a certain influence over most CEOs.

They also happen to have ownership of a spend area which is notoriously difficult to work out any return on investment or real value calculations.

... Let's just hope that when we return to some kind of normality and growth procurement maintains its involvement in marketing spend decisions.

And, let's hope that the negotiations remain "aggressive".

Why is there such a divergence between Sorrell, who believes that clients are being "tough" and "brutal," and procurement officers, who think agencies are "notoriously difficult"? The truth is that agencies do indeed go to lengths to hide how they spend client money and bill them for the privilege. Exhibit A: Grey Group, which recently won a court order in New York to keep sealed a set of documents that allegedly describe how it handles billing in its London office.*

It's not an isolated incident. Witness testimony in a recent New Jersey case alleged that News America Marketing charged clients for ads that never appeared. And Bermuda's ad agency is currently being audited -- again -- following allegations that it over-billed the island by $1.8 million. The list goes on -- below, in fact.

If you want a taste of how far apart agency execs are from their clients, read the comments section under this item, where several folk argue that Levi's shouldn't get to know what anyone else is really paying for media.

• See previous BNET stories on questionable agency antics:
• Grey Wins Bid to Keep London Documents Secret
• News America Marketing Whistleblower: Clients Were Charged for Ads That Never Appeared
• GlobalHue Accused of Overbilling Bermuda Account; Agency Plays Race Card
• Is the TV Networks' Upfront an Antitrust Violation?
• Publicis Q4: $15.5M Army Fraud Settlement Not Noted in Its Numbers
• Trial: Did News America Marketing Group Break Into Floorgraphics' Computers?
• Leo Burnett CEO Bernardin Oddly Silent on $15.5 Million Fraud Case
• Lamar Advertising Manager Guilty of Embezzling $200,000
• Rita Sanders Advertising employee took $40K in agency credit card scam
• The Scale of the Stupidity at Leo Burnett
• Leo Burnett Pays $15.5 Million to Settle Allegations It Defrauded the U.S. Army
• Tom Seifert Made Chairman at Ogilvy; His Ex-Con Wife Is Still in Business
• Lamar Advertising Still Embroiled in Pittsburgh Ethics Scandal
• American Apparel Eyed By SEC Over "Almost Bankrupt" Emails
• WPP's In-House Commercial Production Shop Courts Controversy With Clients
• Levi's Asks for Transparency and Media Buyers Balk

* Disclosure: I was the member of the press whose motion to unseal the documents was denied. Image by Flickr user happyeclair, CC.