PROCUREMENT PERSPECTIVES: The art of the deal when negotiating

PROCUREMENT PERSPECTIVES: The art of the deal when negotiating

by STEPHEN BAULD Jun 30, 2015

At some point in major construction projects negotiation will take place.

Disputes of many types will crop up after the contract is awarded through a formal RFP or tender process. The most important aspect to know at this point is the art of negotiation, for the contractor, or representing the municipality.

When I talk to the top negotiators, there is one critical question that dominates their thinking: how can I get this deal concluded?

The very purpose of negotiation is to reach an agreement, not to achieve some abstract level of fairness. However, unless each party concludes that the offer on the table at least meets its minimum condition for settlement, that offer is unlikely to appear attractive. Thus, while fairness in some absolute sense is not the goal, negotiation must be conducted realistically, to have any hope of success.

Over the years I have dealt with many municipal disputes that needed to be negotiated so that the contract would get completed and stay on track, while we were dealing with the issues at hand. Although it is neither necessary nor advisable to make repeated unilateral concessions, it is wise to consider the risk of undermining the other side's negotiator by staking out unrealistic demands or by refusing all overtures that the other side makes.

The signals that each side sends to the other are likely to influence the progress of negotiations. The appearance of an aggressive, harsh or punitive approach on one side will often result in a similar response from the other. The psychological element of negotiations should never be forgotten.

I feel that it is crucial for all parties to think about their own behaviour, and the messages they are sending. If that behaviour and those messages are not compatible with a successful outcome, then such an outcome is unlikely to occur. There is a tie between the things that are said, and the manner in which they are expressed. The terms that are used all tend to influence heavily the probability of a successful outcome.

In my experience in general, negotiators tend to be affected in fairly predictable ways by the frame or form in which ideas and information are presented during the negotiation. If ideas are presented and explained in terms of opportunity for mutual gain, they are more likely to appear attractive, than if those same ideas are presented as mutual concessions. There is a natural tendency upon the part of negotiators to avoid what is perceived as the appearance of a loss. Therefore, it is necessary for negotiators to anticipate how people will behave in response to the way in which a given idea is presented.

Further concerns relate to the willingness of each party to the negotiation to assume risk, and the extent to which each views particular issues as matters of principle.

In a sense, the concessions that each party is called upon to make are the investment that each makes respectively to secure the benefit of an eventual agreement resolving the dispute. That fact should be made clear to the other party. In no circumstances, should one party permit the other to assume that the concessions have been offered simply as the admission price to negotiations.

In the bigger picture, a window of opportunity for settlement exists only where there is some overlap between what each of the parties to the dispute considers to be an acceptable outcome.

As I have noted above, it is not always desirable to attempt to negotiate an agreement which conclusively resolves all issues.

Initial negotiations are often conducted solely to explore the question of whether agreement is possible. Where the minimum conditions of a party cannot be satisfied through negotiations, the delay involved in negotiation may simply protract the dispute.

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com.

Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.