1. Define the term negotiation in a project management context. 2. Describe the strategies and techniques recommended by experts for successful negotiations 3. Explain what a win-win negotiation is. 4. Base on your experience, do you believe that it is always possible to achieve a win-win negotiation. Discuss. 5. Review Case Example 1: Shopping for a Car from Chapter 1 of the textbook. Explain what was done well and what was not done well during negotiations. 6. Read the attached article \"The Need for Negotiations\" and describe some of the best practice negotiation strategies mentioned by the author. Y HOT TOPICS R 12 BEST PRACTICES The Need for Negotiation It's a critical skill and sometimes an overlooked opportunity in the public sector By Darin Matthews as knowledgeable bid evaluators. They can analyze the offer to determine responsiveness, conduct a technical evaluation of the bidder's capabilities, and even perform cost analysis when needed. However, more and more these same professionals are also being called upon for their negotiations skills. As the profession sees an increased use of the request for proposal (RFP) process, there is a logical need for negotiation. A key phase of these types of procurements is negotiating the final agreement with the selected proposer. This negotiation often includes the specific terms and conditions of the contract, additional services or deliverables to be provided, as well as the final cost to the agency. Common areas for using a negotiated procurement process include architectural and engineering (AE) services, information technology projects, and software systems. Inherent to the RFP method is the government's ability to state their problem, invite solutions from an industry, and then negotiate with one or more of the top proposers. It is not unusual for a public agency to use negotiation in their final selection. In fact, many of the firms that submit a proposal are expecting just that. In a non-competitive or sole source environment, negotiation is also the preferred approach. Even though the supplier has a strong position with their unique expertise or proprietary product, the government is still the one \"writing the check. In some situations, such as a formal bid invitation, negotiation may be prohibited by statute or regulation. This helps to protect the integrity of the procurement process. Even if the procurement does not involve negotiation as part of the selection process, it is still surrounded by opportunity. After all, aren''t changes in the work schedule or product substitutions open for discussion? In many cases, the procurement professional can barter a deal between the contractor and the using department. Having strong negotiation skills will help ensure a win-win outcome. Daily interactions with other business units are often a negotiation. Areas such as agency training, procurement system enhancements, and even administrative support are prime opportunities to sharpen one's negotiation skills. Traditionally, other business units have taken the lead in contractor negotiations, with the procurement professional brought in later to formalize the agreement. While being involved with the process is certainly a start, it is ideal when procurement can lead the negotiations. If public procurement professionals are serious about bringing their \"A game\" to the table, they should realize the value of negotiation. Participating in professional training and in agency contract negotiations are invaluable. P ublic procurement professionals have long had the reputation About the author Darin Matthews, CPPO, C.P.M., is chief procurement officer for Metro, the regional government of Portland, Ore. CHAPTER 8 NEGOTIATIONS During a negotiation, it would be wise not to take anything personally. If you leave personalities out of it, you will be able to see opportunities more objectively Brian Koslow Negotiations are a form of communication. We negotiate for many things every day. You will negotiate eating out with your family. Your children will negotiate their bedtimes with you. You will negotiate a raise with your boss. You will nego- tiate the price of a vehicle. As a procurement professional, you will negotiate for goods/services on behalf of your company. Most people do not think about their everyday negotiations as \"real\" nego- tiations. Formal negotiations carry a connotation that intimidates many people. Lots of people even think negotiations are \"mind games.\" These mind games include manipulation of othersoften to their detriment. Unfortunately, pro- curement professionals often believe the same thing. At times they do whatever it takes to avoid conflicteven in negotiations for a contract. Avoiding conflict is not negotiation. It is caving in. Avoiding conflict does not get a good deal for your company and often achieves just the opposite. In this chapter, we will discuss how good communications skills lead to nego- tiations that get you the best value for your money. 165 166 Procurement Project Management Success GOALS 'What are the goals of your negotiation? You know the price you want. You know exactly what the goods or services must do. What else is there? It is rare that we will ever get goods or services for the exact price that we want to pay. So before you begin negotiations, define some other objectives to give you more options. For example, in Case Example 2: Janitorial Services from Chapter 3, you want the services at the price you can pay for them (established in the SOW by the con- tract spend for the first year: to be as high as $500,000). So your goal is to get the services for less than $500,000. You already have the specifications for the work you need done. What other objectives do you have? You want the janitorial employees to be checked for criminal records. You want the employees to actually show up and do the work. You want the supplier's employees to be easily identifiable when they are on your property. You want the work guaranteed by the supplier. You want the supplier to use their equip- ment. You want specific chemicals and other supplies used in your property. Go through the procurement plan and see all of the other objectives that you have in the janitorial services procurement. (The complete plan is downloadable as Web Added Value at www.jrosspub.com.) Each one of these objectives becomes a goal in addition to the pricing of the service. Finding additional objectives is often an opportunity to educate your stakeholders. Share with them all of the objectives in your procurement so that they understand that price is only one goal. This is an easier task if you and the stakeholders have developed the weighted evaluation criteria used in the RFP process. (When you and your stakeholders develop the weighted criteria together, they already know and understand the concept.) See an example of weighted cri- teria in Appendix C, RFP for Case Example 2: Janitorial Services. Listing all of your goals before negotiations begin is the first step in preparing for negotiations. Next, prioritize each goalis one more important than another? Some goals will have the same priority as others. Usually, however, you will find that one goal has the highest priority and several goals are in the next lower level of priority. Now look at the goals that wind up in the bottom level of the prior- ity list to see if they are actually necessary. If some of these goals can be dropped during negotiations, you will have choices available that will make your deal more valuable for your company. INFORMATION During the RFP process, you received information on the supplier's company. Your financial analyst, or you, did the research into the company's finances. You Negotiations 167 had the opportunity to ask questions during the supplier's oral presentation. What else do you need? After you have a list of priorities for negotiations, you need more informa- tion about the people who will be negotiating for the supplier. You need to know exactly with whom you will be negotiating. Ask for names and titles of everyone who will be involved in the negotiation. Find out who will have the final decision authority in the supplier's company. Who will actually sign the contract? Ask for resumes for everyone on the supplier's negotiation team. You might not get them, but asking shows that you are not a run-of-the-mill negotiator. Being very careful to never allow even a glimmer of impropriety, ask the main negotiator to lunch. You pay for lunchnever allow a potential supplier to pay for anything. Bring someone from your negotiations team and invite at least one other person from the supplier's team. Meeting during lunch is a good way to get to know each other before formal negotiations start. Ask lots of questions about the supplier's negotiation team including work histories, degrees, positions in the company, etc. Your goal here is to learn as much as possible about the other people and find commonalities. Bonding over food is traditional in most cultures around the world. If it is not possible to meet over lunch, or even face-to-face, arrange a tele- phone call. A video telephone call is ideal because you get to see the other person's face as you talk. The goal is the sameto learn as much as possible about the other team. Although you had enough financial information on the potential supplier's company to have chosen them, you need still more financial information. Make sure you or your financial analyst take a broader view of the industry your sup- plier is in. Are there imminent materials shortages? Does your supplier have reliable suppliers? Are there political situations that could adversely affect your supplier or the supplier's supply chain? Think about the supplier's business and ask yourself what could adversely impact it. Then investigate those issues to get a good idea of the risks. After that, you can ask questions of your supplier's team to get the information that you need in order to negotiate. As discussed earlier, ask questions either during the supplier's oral presen- tation or before you begin negotiations. These questions are better asked of an executive of the supplier's company than a sales person. The executive will prob- ably be more familiar with the internal workings of the company. Some questions to ask include: o How will working with your company make my business more profit- able? o What are the biggest operational challenges that your company faces now? 168 Procurement Project Management Success o What changes are you seeing in your industry in the near future? o How are you preparing for those changes? o Are there any questions that I haven't asked that I should have? You should now have enough information about your supplier's business, indus- try, and personnel to develop a negotiation strategy. STRATEGIES Although many experienced negotiators have one specific strategy that they always use, there are actually several different strategies for negotiations. One is the hardball strategy. In the hardball strategy, one side demands that everything be exactly as they want it. Hardball negotiators use manipulation and confronta- tion in order to prevail. The underlying idea is that the negotiation produces a winnerand a loser. Another strategy is the softball strategy. In the softball strategy, one side gives in to the demands of the other side in order to reduce confrontation and conflict. Again, this strategy is based on the idea that there will be a winner and a loser. Although the softball strategy is the polar opposite of the hardball strategy, it is surprising how many procurement professionals use it. Why? In our culture, conflict is seen as negative. Many people avoid it at all costs, both in professional life and in personal life. Most of the other negotiation strategies will fall somewhere within the boundaries of the hardball and softball strategies. \"Good cop, bad cop\" is one of those strategies. In the good-cop, bad-cop strategy, one person on the negotiation team acts like a bullydemanding concessions, yelling if they do not get them, etc. Another person on the bully's team then steps in, asks the bully to leave the room for a minute to \"cool off,\" and apologizes to the other team. The good cop usually says something like, \"We can get some of this agreed to before he comes back.\" The other team is relieved and wants to conclude the negotiations before the bad cop comes back. Of course, all of this was planned before the meeting started so the bad cop has no plans to return to the negotiations. Although these strategies work to one degree or another, none of them is truly successful in get- ting the best value for your company. In their book, Getting to Yes: Negotiating Agreement Without Giving In, Penguin (1981), by Roger Fisher and William Ury (reissued in 1991 with Bruce Patton), the idea of negotiation on the merits, or principled negotiations, is pre- sented. This strategy is also known as win-win. Fisher and Ury urge negotiators to \"change the game.\" Basically, they describe a strategy that focuses on coming up with solutions that give mutual gain. Often that means developing an idea