Preferred Supplier Agreement: The Pros & Cons

Posted on October 2018 By Speller International
Preferred Supplier Agreement: The Pros & Cons

​Having recently entered the recruitment world I have encountered a number of challenges with various suppliers and their individual ways of dealing with external recruitment.

The one I seem to face the most are companies that have enlisted the services of a select few recruitment firms to handle every need that organisation may have when trying to find SAP personnel. This is called a Preferred Supplier Agreement (PSA).

I do personally understand the use of preferred suppliers, as I can see it was originally intended to streamline the process, build relationships and reduce the administrative headache of recruitment for a company. But, as the number of recruitment companies grow in Australia, including large numbers of small, specialist, niche agencies like ourselves, it is difficult to say definitively whether a PSA is in the best interest of the company.

Below I have listed the pros and cons of being a preferred supplier.


  • It forms long-term relationships between client and supplier. This creates a greater understanding between the client and the recruitment agency leading to better quality recruitment

  • Reduce time spent by a company’s HR team or in-house recruitment team

  • Lower fees may be agreed to be a part of the preferred supplier list

  • It can provide a solid voice for your company with a real understanding of how the organisation operates and a firm grasp of the company culture

  • Creates a structure internally for recruitment and eliminates additional paperwork for using multiple agencies

  • The quality of candidates is known


  • A limit to the number of agencies used will ultimately limit the number of candidates. This could then result in a lower caliber of candidates, extended time in search for the ‘right fit’ and the possibility that the agency doesn’t have the reach for find the person for that role.

  • A client struggling to find a candidate may reject a suitable one on the basis that he is not represented by a preferred supplier. This could remove a great candidate from the process, which is not effective.

  • Agencies may become comfortable over time. They are often working for a reduced fee which means the quality of the candidates is likely to diminish over time.

  • Specialist positions may mean that agencies on your PSA are not capable to deal with every position you need to fill. This is particularly evident in generic agencies without expertise in specialised or unusual roles.

  • There is a greater opportunity without a PSA to find new and possibly better partnerships, which can mean less stagnation and reliance on old connections that may not be working to the best interests of the company any longer. It would also open up the doors to new connections, experience and knowledge in the specialised market.

Being a preferred supplier or using a PSA can be useful in many ways, but it is important to be aware of the limitations they could be placing around your recruitment.

In my opinion companies today that use PSA’s should seriously consider a much more flexible framework: one which allows the occasional deviation to find the best personnel.

What’s your experience with PSA’s, and do they work for you?