Short-term thinking can reduce the value for money that the public sector as a whole is able to derive from markets. There are many examples where we have mandated unreasonable payment mechanisms, applied unreasonable terms and conditions and/or sought unsustainable cost reductions. This can create a bias towards low quality and can increase the probability of contract failures. In addition, suppliers may exit the market to the point where competition is severely weakened.
The fundamental principle is that contracts should be profitable. Fair returns and expectations need to be reasonable for suppliers to remain interested and for the market to be sustainable.