2/26/2021 Negotiation Techniques in Procurement

Negotiation typically follows a set process with the following five key steps:
1. Preparation and planning
Both parties will prepare and research the information needed to confirm their position. They also
need to consider the history of the negotiation – how they got to where they are today. It is
important to consider what the desired outcome will be but also to consider the starting position
for the negotiations – price, terms, etc.
2. Defining ground rules
Each party needs to know what is expected of them, for example, by deciding:
- Where the negotiations will take place.
- If there are any time constraints.
- If there are any issues not for considerations or off limits.
- What will happen if an agreement is not reached.
3. Exchange information: clarification and justification
Each party explains their position. In the case of a supply contract negotiation, the buyer will
describe what they want to purchase, and the seller will describe what they offer and what the
benefits will be for the buyer. Having prepared thoroughly for the negotiations each party should
have all the information required to educate the other party.
4. Bargaining and problem solving
This is where the ‘give-and-take’ of negotiation happens. It needs to be an open exchange with
both parties seeking a solution that will be worthwhile for each other.
Eventually, they should agree on an outcome.
The ideal solution should be a ‘win-win’ situation where each side feels they have achieved
something that satisfies both parties’ interests; in this case, they may build a lasting and productive
relationship.
However, where the buyer has the power and there is an alternative supplier that will fully meets
the buyer’s needs then there is nothing wrong with a win-lose for the buyer. Not all transactions
require collaborative and long-lasting relationships.
5. Close: commitment and implementation
This step is about clarifying the agreement and starting to put in place what has been agreed by
recording the details, including the timescale, and how it will be implemented.
In a business environment there is likely to be a contract which each party will need to sign. There
may be some further negotiations over detailed terms of the contract that may not have been
covered in the main negotiation process.

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