1. You are the Project Manager of a company that has just won a very big Government contract to build a state-of-the-art facility with stringent deadlines and very high-quality standards. As part of the contract, a new Data centre needs to be built and the project has allocated $11,000,500 and 42 weeks for this portion. In the planning stage, you determined that the company would build this Data Centre using company resources. However, you wanted to explore outsourcing this task to more specialized companies. After sending the RFPs to three different suppliers, you could summarize their proposals as follows:

Alternative	Price	Lead time	Reputation	Quality	Comments
Supplier #1	$12,000,000	40 weeks	High	High	The scope of work is Finished. Your company will not need to complement this supplier.
Supplier #2	$9,678,900	45 weeks	High	High	The scope of work supplied by this alternative is not finish and your company will need to provide all of the major equipment which cost a total of $2,000,000. Lead time will need to be extended 10 weeks more for coordination purposes.
Supplier #3	$8,000,000	42 weeks	Low	Low	Supplier claims to have everything that is required in the SOW. However, you consider a high risk of this supplier not meeting quality and delivery standards.
Build within company	$11,000,500	42 weeks	Company	Company	This is the alternative that was budgeted and it includes 10% of contingency reserve and 1 week of buffer.

After having this summary, you decide to enter into negotiations with Supplier #1 taking into consideration that:

• Price may be negotiated and reduced to be below or within budget.
• Considering the supplier's reputation, it may reduce the risks of failure in that particular portion of the Government contract.
• It may allow you to focus on other important activities.

Before starting negotiations, you want to determine your BATNA. What is your BATNA?

	a.	Subcontracting Supplier #3
	b.	Subcontracting Supplier #2
	c.	Build within company
	d.	Subcontracting Supplier #1

2. As the Project manager for your company negotiating with Supplier #1, you are trying to determine the best- and worst-case scenario (Buyer's Settlement Range). What would be the desired price on this contract with Supplier #1? And what would be the highest price you would be willing to pay to Supplier #1?

Please explain your train of thought and calculations (if any).

3. Supplier #1 was informed and contacted to attend negotiations regarding the Data Centre subcontract. This supplier has the highest reputation in the market and has little capacity to take any other contracts. Due to this, they considered an extraordinary 35% profit margin and 10% contingency reserve to calculate their price of $12,000,000. On the other hand, although they considered that this Data Centre can be built in 35 weeks, they added 3 weeks extra due to their capacity restrictions and 2 weeks as a buffer.

Supplier #1 is also negotiating another private contract for $30,000,000 with a lower profit margin of 10% and 3.5% contingency reserve. This project is more complex, takes longer to execute and the customer has a long history of working together with Supplier #1 in several projects. Nevertheless, the customer acknowledges that Supplier #1 is almost at full capacity and will understand if they decide not to work with them at this time.

Based on the above, Supplier #1 has the following considerations before entering into negotiations with your company:

• Supplier #1 has only worked with private customer in private projects. This would be their first participation in a Government project. They would like to have the visibility by government officials to consider taking up in future government contracts based on their performance.
• Supplier #1 has met all of their targets for this year and does not require any more projects to satisfy their shareholders expectations.
• It would be the first time Supplier #1 works with your company.
• Taking any of the projects would also pose a risk on their ongoing projects performance.
• Even though shareholders are happy with the current Supplier #1 performance, they would be willing to accept a higher risk for an additional profit of at least $3,000,000 on any additional project.

Before entering negotiations, what would Supplier #1's BATNA be?

	a.	Not to take any of the projects
	b.	Focusing on winning the $30 million contract with their long-known customer as they would meet the additional $3M in profits.
	c.	Focusing on getting the $12 million contract with your company.
	d.	All of the above

4. Supplier #1 is now analyzing their numbers before going into negotiations with your company (Seller's Settlement Range). What would the desired price be for Supplier #1? What would the lowest price be for Supplier #1 to accept the contract with your company?

Please explain your train of thought and calculations (if any).

5. Based on your previous answers for this negotiation exercise, is there any ZOPA? If there is, what is the bottom and top values for this ZOPA?