Author(s): Cryptocorn
Category: PEP Governance Change
Asking Amount: Variable
Summary:
Vendors can approach the DAO and ask for high rates for their services. There is no formal mechanism in place to negotiate with vendors, leading to the DAO potentially paying more than we should, and the community feeling acrimony towards vendors and management for overpaying.
POCCET looks to create a management system to negotiate with vendors more efficiently, leading to savings for the DAO.
Problem:
While some services for POKT are controlled by PNF and we assume they negotiate on the DAO/their own behalf to lower costs, the PEP mechanism currently in place to directly approach the DAO for funding has no person or group identified to negotiate on the DAO’s behalf and so few if any attempts are made to negotiate a better price for the DAO.
Industries such as Advertising, Conferences, Product Sponsorship etc are well known to have high ‘rack rates’ or published rates, and then offer substantial discounts (70, 80% or more in some cases) to clients who negotiate for their services.
Our current system of vendors asking for their rack rate from the DAO for their services and then a binary Yes/No vote on using that vendor via a DAO vote is inefficient and brings poor ROI to the DAO. Several recently passed proposals for $100k/yr (PEP-69), $25k/yr (PEP-71), are proposals which potentially fall into this category.
Without a ‘point person’ or entrusted negotiator to advocate for the DAO’s best interests, we will continue to be placed in a binary situation where the DAO receives poorer value for money that could be obtained.
Solution:
For DAO requests over a certain amount ($8k would be this proposal’s recommendation), there must be a DAO appointed negotiator to advocate for the DAO and report back to the DAO before a payment can be made.
Either an individual from PNF should be appointed as lead DAO negotiator, or a trusted group of community members should be allowed to volunteer (or rotate amongst them) to work on the DAO’s behalf. Volunteers should be compensated, and a maximum amount they can be compensated should be capped (as a percentage of the asking amount of the proposal) so that the DAO receives value for money from its own negotiators as well.
This proposal is not designed to bring excessive friction or deter potential vendors from approaching the DAO and offering their services. Often a simple ask to lower the price can result in significant savings and benefit the DAO.
Deliverables:
This proposal will start as a pre-proposal to gain community feedback and shape the parameters suggested. If then approved, the proposal will need a mechanism to suggest valid community members to join the pool of negotiators, and an appropriate payment structure. The additional cap percentage of a proposal’s asking budget will need to be approved, as will the threshold amount needed to automatically trigger a negotiator’s involvement.
Budget:
$100/hr has been the ‘going rate’ for knowledgeable community involvement, and would be suggested for this proposal.
Dissenting Opinions:
‘This will waste money’
While there will be some expense to pay community members for their time, it is capped to keep expenses reasonable and the cost savings should far outweigh the costs of paying negotiators. For a $25k contract, the cost of a few hours work ($300) Vs the potential reward of cutting the cost by 20% ($5000) would offer significant value.
‘This will upset our relations with vendors and deter vendors from offering their services’
This proposal is not designed to be antagonistic or hurt relations with existing or potential new vendors. Businesses in these sectors are well used to and expect negotiations over price and as such shouldn’t be offended or lose enthusiasm to work with Pocket solely because Pocket will expect to negotiate the price of contracts.
‘How will you choose negotiators for Pocket DAO’?
We will ask for applications from existing members, stating their prior experience in vendor negotiations. Final pool of applicants could be decided by PNF and reviewed quarterly if complaints arise.
‘Could the negotiators exploit the system?’
Potentially a negotiator could write a fake request for a very high amount ($250k), then hope to be selected to be the lead negotiator for the contract and further submit fraudulent hours up to the cap, which would be high due to the value of the contract. To deter this, negotiators could be chosen at random, PNF could have a final oversight of payment, and those chosen to become negotiators will be long term community members whose reputation would be irrevocably damaged by doing so, giving a high cost to attempt to act fraudulently.
‘POCCET?’
If anyone can suggest a synonym for ‘Correctly’ beginning with K, 1 shiny POKT will be theirs.