The following article was prepared by Mike Taylor, C.P.M., for distribution to ISM affiliate newsletters


Negotiation: An Art of Details

Negotiation is more than a formal confrontation between teams of high energy people trying to squeeze the last penny of a megabuck deal.  Negotiation is a subtle review of hundreds of details connected together to form a long lasting and solid agreement.  Forget an important point or start the process without preparation and it's likely that the final outcome will be a major problem.

In its most valuable form, negotiation ensures an optimum contract where neither side looses and both sides win. 

Here's how to get started.

  1. Start by picturing the final product:  e.g.: A comprehensive contract where the contractor completely understands our requirements and will successfully meet our needs in the most favorable terms available under the circumstances. The contract also includes contingencies for typical problems which could arise.
  2. Review a contract checklist to determine which contract elements might be relevant to this specific transaction.  The key here is to include all elements which need to be discussed, as well as those which might add value or mitigate potential problems. Mark the most likely subjects of hot debate for special preparation and attention. Keep a list of common contractual elements, issues and concerns handy to use as a pre-procurement checklist.  You can find a sample list at: 
    www.mltweb.com/what.htm
  3. For each applicable element, identify an optimum position, seek to understand the conflicting viewpoints and prepare a negotiating strategy. Be sure to include all of the issues unique to the requirement as well as general contracting elements.
  4. “Negotiate” with the contractor to address all of the elements and issues. Some might be resolved simply by asking questions and some might require a formal negotiation. Before signing the contract, review the checklist to see if anything was forgotten or should be added.
  5. Discuss all of the things that could go wrong & add terms to mitigate.
  6. Ask probing questions; don’t make assumptions.
  7. Focus on the issues not the people; the contract has to stand alone. Details that aren’t written into the agreement aren’t worth the paper they are (not) written on.  
  8. Seek problem resolutions in advance, not penalties after the fact.

The key is doing a thorough job of preparation before starting the process.  It's not just the megabuck deals that will benefit.  A systematic review of all the contractual elements, potential issues, concerns and circumstances will help improve the value and stability of each contract and purchase order no matter how small.  Consider all of the ways to improve the contract before award.  Don’t get hung up thinking that negotiation is a major exercise and only about price. 

Attention to detail is the mark of a negotiation artist.

Read more articles about negotiation and creative contract solutions in the Purchasing Toolbox at http://www.mltweb.com/prof/tools.htm and in the BuyTrain news article archive at http://www.mltweb.com/tools/buytrain/index.htm

 

Negotiation Tips

1. Great buyers negotiate more than just the price. 
 http://www.mltweb.com/tools/negotiate1.htm

2. Expand your focus. You are negotiating with a person/organization/vendor/supplier/contractor that has past experience, concerns, doubts, beliefs and assumptions. Those must all be addressed as part of the negotiation before a lasting agreement can be reached.

3. It’s never too soon to start getting ready
http://www.mltweb.com/tools/toosoon.htm

4.  Issues To Consider Negotiating
http://www.mltweb.com/tools/what.htm

5. Win – Win Negotiation; Who is the Opponent?
http://www.mltweb.com/tools/win_win_oponent.htm

6. The buyer and the supplier are negotiation partners and a poorly formed or incomplete contract is the enemy.
http://www.mltweb.com/tools/negotiate1.htm

7. Note to new buyers: A concession isn't always price.
http://www.mltweb.com/tools/negotiate2.htm
http://www.mltweb.com/tools/negotiate4.htm

8. Evaluate Past Performance
http://www.mltweb.com/tools/buytrain/pastperform.htm

9. Develop a better way to characterize issues and use language to diffuse the situation and steer the discussion.
http://www.mltweb.com/tools/negotiate3.htm

10. Ask Leading Questions. How you ask is as important as what you ask.
http://www.mltweb.com/tools/leading.htm

11. Make sure problems are addressed by the “problem owner”
http://www.mltweb.com/tools/serve_the_ball.htm

12. Negotiate the "Full Meal Deal"
http://www.mltweb.com/tools/fulldeal.htm

13. The Whole is sometimes greater than the Parts
http://www.mltweb.com/tools/whole.htm

14. Don't Be Afraid To Negotiate
 As long as you are being fair and honest with the supplier, it doesn't hurt to ask.
http://www.mltweb.com/tools/fraid.htm
 

More References:

1. The Negotiation Skills Company
http://www.negotiationskills.com 

2. The Negotiation Institute, Inc.
Negotiation Seminars Negotiation Training Negotiations Consultants Negotiating

3. Program on Negotiation at Harvard Law School:  “A resource center for people interested in learning and teaching about negotiation and alternative dispute resolution.”
http://www.pon.org/catalog/index.php

4. Ross Reck’s Weekly Reminders
http://www.rossreck.com/nl/browse.asp

5. The InterNeg© Group:  “Research and training, and develops materials and systems for decision making and negotiations.”
http://interneg.org/interneg/overview/index.html

6.  S.A.B. Negotiation Enterprises
http://www.sabonline.com/
 S.A.B. Negotiation Enterprises Test of Negotiation Skill
http://www.sabonline.com/test.php

7. Machiavelli’s Workshop:  “defines its business as the secrets of power and persuasion packaged as fun. It develops games of negotiation strategy that enable people to test and improve their strategic negotiation skills in a fun and time-flexible environment. Online negotiating games. Corporate training games & workshops”
 http://www.machiavellisworkshop.com/index.htm

8. The Negotiating Edge:  “a global consulting company that provides training and consulting services” Order free negotiating white papers
http://www.negotiatingedge.com/index.shtml
http://www.negotiatingedge.com/additionalreading.shtml

9. Shapiro Negotiations Institute:  ”SNI creates customized negotiation seminars and corporate training based on The Power of Nice: How to Negotiate So Everyone Wins, Especially You!"®.
http://www.shapironegotiations.com/
Negotiating Your Next Raise
http://www.shapironegotiations.com/Uploads/Docs/getaraise.pdf

Hope this helps,

Mike


Read more articles about negotiation and creative contract solutions in the Purchasing Toolbox at http://www.mltweb.com/prof/tools.htm and in the BuyTrain news article archive at http://www.mltweb.com/tools/buytrain/index.htm


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