You're getting good advice but you feel handcuffed. Fire this vendor/employee as soon as you can. In re your last comment about tactics for dealing:
Do you have any managers or team leaders who can put "peer pressure" on this bad apple? If the whole team explains how everyone is suffering, that they can't do their job until this guy does his...that may have a more positive effect than you or some other boss just threatening.
Can you incentivize this guy to work on time...or rather, impose penalties for missed deadlines? If you keep him on and keep paying him, there's no reason for him to change his behavior. Rather, make sure you set proper milestones and then explain the cost of missed deadlines in make-up work, overtime pay, lost opportunities, other vendors schedules, etc. and penalize him the real costs of missing deadlines.