You have won the tender (and enjoyed the celebrations) and are about to go into contract negotiations.
“What points will they want to negotiate?”
“Where are our weaknesses?”
“Have we allowed enough time to deliver the project?”
“Is our pricing strategy too high or too low?”
“Have we chosen the right stance on our key issues?”
“How will they behave?”
All of these thoughts are going through your head as your team waits for the government negotiators to arrive. Wouldn’t it be great to know what they are thinking? Or to use poker jargon, would it help to know what cards they were holding? Well, having chaired a few negotiating teams let me give you a few tips.
The big one first
Let’s get one of the big issues out of the way first – price. Having selected you as the preferred supplier you can be confident your bid represents the best value for money so they may not push too hard for price reductions. In all likelihood they will focus on getting a better understanding of your pricing model so they know exactly what they are getting for their dollars. Government negotiators are very wary of being caught out by tricky arrangements around licensing and maintenance costs or low upfront prices that trigger hefty variation costs each and every time a change is made. The lesson – be clear on your pricing model and be prepared to articulate how it delivers value for them.
The majority of negotiation issues will be drawn from their risk assessment of your proposal. Such issues might revolve around warranties and liabilities, methodologies and deliverables, Intellectual Property, insurance cover or response times during a breakdown. Perhaps they have concerns about your project team in terms of their skill, experience or availability. While the issues may be many and varied they generally fall into three broad categories
- Completion and timeframes. Can you get the job done within the allocated time and how will you handle any delays that may occur? There are often expectations about getting the project in place by a certain date to meet a commitment made by the Minister or senior management. In these situations your responsiveness and ability to deliver is particularly critical. The lesson here is to be alert to possible delays and go into the negotiation process with a flexible and innovative mindset on project management and delivery timeframes.
- Methodology. Be prepared for questions about your methodologies and how you can get the work done to suit their timeframe. Remember, the negotiating team is looking for comfort that you can actually deliver the solution you have promised.
- Governance.What are the decision making processes associated with your company and this project? What checks and balances do you have in place to ensure you deliver the promised outcomes and that you will operate in accordance with good probity practices. How do they know your company will survive for the duration of the contract? In short, they are asking themselves “can we work with these people and will they keep us off the front page of the Sydney Morning Herald and out of the 6 o’clock news?In my experience government negotiating teams start from a position of good faith and in some cases even give you a list of their issues before discussions get underway. If your proposal is well drafted and addresses their requirements then negotiations should be relatively straightforward. If you keep your end goal in mind, are clear on your negotiating boundaries and remember the tips above you should emerge with an outcome that delivers value for both parties and just might lead to a long term business relationship.