PROCUREMENT NEGOTIATIONS

Module 4Ken Hogan

Question

Which strategies and/or tool-sets will empower you to go past cost savings target to also enhance relationships and qualitative goals in your negotiations with suppliers, internal departments, colleagues and other stakeholders?

Preparation

When engaged in procurement contract negotiations where your skill as a negotiator may prevent losses and increase the gains for you and your organization, significantly increase your capability to: prepare effectively understand and consider the needs and interests of all

parties manage the impact of your personal negotiation style

per engagement generate greater value through creativity successfully address all key elements of the negotiation

cycle through optimal preparation, engagement and review

Framework

Developing a framework based on a combination of sound academic theory and significant practical business negotiation experience to provide you with a due diligence framework that will ensure that you are able to: understand and improve each individual negotiation relationship ensure full understanding and application of total cost of

ownership avoid leaving value on the table identify and counter negotiation tactics recognize and successfully manage potential conflict move from claiming value to creating value apply a principle-centered, collaborative approach to purchasing

negotiation learn effective team management and development strategies successfully facilitate team composition

Negotiate Contract

Use an agreement provided by your organization not the vendor

Include a contract scope of services based on the project SOW, which defines the criteria for approval of and payment for deliverables

Assemble your negotiating team, including project manager and an attorney with system procurement experience

Identify, prioritize and share negotiation issues with vendor

Obtain and evaluate vendor response Prepare fallback response and share with vendor Narrow issues to short-list and conduct face-to-face

negotiations

Use a checklist Identify the primary supplier to negotiate with. Identify your second-best option in case you cannot reach agreement with your primary supplier. Determine the format (i.e., face-to-face, phone, etc.) and location of your negotiation sessions. Invite the primary supplier to negotiate and learn who the supplier's principal negotiator is. Ensure/insist that the supplier assigns a negotiator with decision-making authority. Assess your leverage over the supplier. Determine your overall negotiation strategy (e.g., hardball, collaborative, etc.). Identify all the terms that you will negotiate. Set targets and least acceptable alternatives for each term. Determine your negotiation tactics (e.g., threatening to use another supplier, emphasizing the

benefits to the supplier of doing business with you, etc.). Decide what to concede if necessary to reach agreement. Develop a timeline for the negotiation process. Identify the risks to achieving your terms, timeline, and other goals and plan to mitigate those risks. Develop and share internally a communications plan stating who must be updated on negotiation

progress and what information they must keep confidential. Review notes from previous negotiations, courses, etc. for tips for success. Anticipate your supplier's reaction to each tactic. Create an agenda for the negotiation and practice. Start the negotiation confidently. Document agreements made and share with the supplier throughout the negotiation process to

ensure that no misunderstandings later derail a negotiation in which you have invested much time. Self-assess after each negotiation session and adjust strategy and tactics if necessary. At the end of the negotiation, help the supplier feel positive about the new relationship rather than

feeling like it lost the negotiation.

Conclusion

What could go wrong?