UNIVERSITY OF LUSAKA

• SCHOOL OF GRADUATE STUDIES

• COURSE : CONTRACT MANAGEMENT

• Lecture : Good Practice & Contract Negotiations

• LECTURER : Eng. M.K.Nsefu

1
Tips on How to Negotiate Contracts with Vendors and Service Providers

11/3/2021 2
You Negotiate all the Time
 You Negotiate all the Time
• Getting your kids organized in the morning
• Agreeing on weekend activities
• Making consumer purchases
• Entering into business contracts
• Dispute resolution
 What is “Negotiation”?

• From the Latin expression, "negotiatus", "to carry

on business“

• It is a dialogue intended to resolve disputes, to

produce an agreement upon courses of action, to
bargain for individual or collective advantage, or
to craft outcomes to satisfy various interests.
 What is Negotiations?
• “Negotiation may involve negotiating terms
and conditions, price, social and
environmental aspects and innovations
providing they do not change the minimum
requirements set out in the Procurement
Documents. The Negotiation is about creating
extra value to the Borrower and the
Bidder/Proposer, it is not solely about trying to
reduce the price”.(World Bank,2018)
 Negotiation Skills

What is negotiation?
Negotiation takes place when two or more people, with
differing views, come together to attempt to reach
agreement on an issue. It is persuasive communication or
bargaining.

“Negotiation is about getting the best possible deal in the best

possible way.”
 Negotiation Principles and Ethics
• WB (2018) defines ethics as a system of moral
principles or values, the rules or standards
governing a person’s behavior or the
conducting of an activity. Thus, ethics
establishes the means of doing what is right,
fair and honest.
 Negotiation Principles and Ethics
• Empathy - Would I want to be treated this way if I was the
Bidder/Proposer?
• Publicity – Would I be happy if my actions were exposed to
public scrutiny?
• Professional – Would I advise colleagues to undertake a
Negotiation in the same manner?
• Impact – Will my approach to Negotiation negatively impact
how a Bidder/Proposer works with the client post contract
award?
• Complaints – Is my approach to Negotiation likely to give
rise to a formal complaint for not following an ethical
approach based on the international standard Core
Procurement Principles?
 What can be negotiated?
The following are things that can be negotiated. a) Price
b) Technical Proposal
c) Risk Transfer
d) Payment Schedule
e) Scheduling
f) Warranties
g) Service Level Agreements (SLAs)
h) Service and Maintenance
i) Training
j) Upgrades.
 People, Style & Behaviors
• Successful negotiators have a positive vision of success, fully understand the
subject matter and have a firm grasp of the Negotiation process. In addition,
they can also read people very well. Accomplished negotiators know not only
their own personal Negotiation style, but also their counterpart’s preferred style
and they use this knowledge to build a stronger relationship which will help to
achieve their goals.

• Most people undervalue the impact of behavioral styles on a Negotiation. Many

negotiators use the same approach in every Negotiation and are surprised when
they do not obtain consistent results. An approach that works well for one
counterpart’s negotiating style can create a deadlock with a counterpart who
has a different style. Everyone is different and every Negotiation is different.
People, who understand these differences and change their approach to the
Negotiation can be very effective. Successful negotiators tailor their approach to
the behavioral style and needs of their counterparts.
•

11/3/2021 11
 Negotiation Planning Steps
• Step One – Set your Objectives

• The first step in Negotiation planning is to set the objectives. The

negotiator should critically think about the objectives of the
Negotiation. When setting the objectives, the following should be
considered.
• a) What do is to be achieved?
• b) What are long-term objectives?
• c) What is the impact of achieving the objectives?
d) What are the Bidders/Proposers objectives?

11/3/2021 12
 Negotiation Planning Steps
• Step Two – Set your Negotiation Parameters
• The second step in Negotiation planning is to set the parameters.
When setting the parameters, the following should be considered.
• a) Setting ideal position;
• b) Set realistic or fallback position;
• c) Set the walkaway position. This is key if you want to achieve
what you planned otherwise it is too easy to make a mistake or to
overlook something in the heat of the Negotiation.

11/3/2021 13
 Negotiation Planning Steps
• Step Three – Identify Issues and Priorities

• The third step in Negotiation planning is to identify the potential

issues and to priorities these issues so that the negotiating team is
fully prepared. Critical and analytical is imperative at this stage.

11/3/2021 14
 Negotiation Planning Steps
• Step Four – Set your Targets
• The fourth step in Negotiation planning is to set your negotiating
targets. There should be clarity in terms of short term value or
establishing long term relationship.
• There is need to set up a SWOT analysis. Think of the real external
opportunities and threats as the walk away positions on both
sides. True power in any Negotiation is having developed a good
walk away alternative. Understanding this may not get what is
required, but it will prevent agreeing to a not so favorable
outcome. At this stage, the Negotiator should. a) Determine what
is the worst-case scenario for each issue identified; b) Determine
what is the best-case scenario for each issue identified; and c)
What is the combined and / or cumulative position.

11/3/2021 15
 Negotiation Planning Steps
• Step Five – Calculate the cost of Concessions
• The fifth step in Negotiation planning is to calculate the cost of
concessions. This helps determine when to agree to concessions
being offered or to give a concession. Below are things that should
be considered.
• a) Be precise as small figures, compounded, can make a massive
difference to the overall deal;
• b) Convert percentages into a monetary value;
• c) Consider the impact of internal costs as well as external costs;
d) The costs of concessions are not always financial they can set
uneasy precedents that have further impacts at later stages of the
Negotiation.

11/3/2021 16
 Negotiation Planning Steps
• Step Six – Identify the BATNA

• The final step in Negotiation planning is to identify the Best

Alternative to a Negotiated Agreement (BATNA). To identify the
BATNA the first thing that should be done is to list everything that
could be done if agreement is not reached. Then explore each of
the options and try to improve on them and then finally choose
your best option which is the BATNA.

11/3/2021 17
 Common Barriers to Successful
Negotiations
• Viewing Negotiations as a confrontation

• Trying to “Win” at all costs

– It’s a solution that should benefit both parties not a win lose
confrontation
• Being Emotional

– It’s important to maintain control

• Not trying to understand the other person’s perspective

• Blaming the other person

 FACTORS AFFECTING (YOUR) NEGOTIATION LEVERAGE

Negotiation
Skills Physical
Knowledge Condition

Emotional
Timing
State

(YOU)

Positional Culture /
Power Upbringing

Make the Deal Happen

19
 Types of negotiation
• i. Verbal form
• This verbal form of negotiation is an interactive type. It could take
place in the form of face to face discussion where the negotiation
parties sit across the table to negotiate or use electronic medium,
such as the telephone including the chart mode on the internet but
excluding the e- mail.

• There are some basic Dos and Don’ts during face to face
negotiations. These are: Spell out underlying points that form the
background, Clearly refer to the last meeting points on the issue, Be
clear in the thoughts and perceptions, Remove ambiguities,
Sometimes play ignorance so that opponent talks more, and Be a
good listener.
11/3/2021 20
 Types of negotiation
• Negotiation over the telephone
• This is the most common tool used by many negotiators. Telephonic
negotiation (tele- negotiation) is usually employed as a follow up to
written medium like fax, e- mail or letter has been issued for an offer.

• Know what the options with you are, Analyse the options and chart
out plans of action, Prepare your contingency plans, Make sure the
written proposal reaches the destination right on time,

• Put the time limit for the response and if the response does not
come in time make direct contract to know the reaction.

11/3/2021 21
 Types of negotiation
• b. Mixed negotiation
• Generally the negotiations are not always either in verbal form or
written form; they are in a mixture of both. One has to know when to
resort to which form.

• The negotiation is the ultimate of all earlier approaches to form an

understanding on a subject. When the understanding reaches a point
from where the two sides must resolve their differences is the point
from where the negotiators must start to do so.

11/3/2021 22
 Recommendations

• The entire Project Team Members who have the responsibilities for contracts, must
be aware of the negotiation process; the suppliers must be well informed about the
terms, conditions and other factors necessary to enhance effective negotiation on
sourcing of materials.

• It should be noted that the negotiation process should creates a win – win situation
where both parties will have a fair deal to reflect on the principles of total quality
management.

• The organization must also ensure that adequate training and information are
made available to the negotiation team. This will ensure maximum benefit to the
organization.

11/3/2021 23
24
 Recommendations

• On big and complex projects, the negotiation team must comprise of the following:
• Team leader
• Critic
• Relator
• Expert
• Builder
• Observer

11/3/2021 25
 Negotiation Skills

Factors for success

• Legitimacy of your case
• Confidence in presenting it
• Courtesy to the other party
• Adaptation to the other party’s style
• Rapport
• Incentives and trade offs
• Research the bigger picture
 Operationalisation

Enterprises that do their “homework” before

negotiation will typically obtain pricing that is 15
percent to 25 percent better than those that do not.

11/3/2021 27
 THE END

• THANK YOU

28