158 / 252
NEGOTIATION
146
CHAPTER 7
SYNOPSIS
This chapter places negotiation within the context of procurement and describes
it as a process by which parties attempt to resolve a conflict or reach an
agreement. In all negotiations the parties involved have varying degrees of
power, but no absolute power over each other. This means that there is always
room to manoeuvre. Negotiations are only possible where the parties involved
are willing to move from their stated positions and when that willingness is
expressed at some point; they are therefore about the movement of opposing
parties towards each other and towards a mutually acceptable position.
This chapter is a practical guide to negotiating within the procurement context.
It explains how to prepare for the negotiation by, among other things, itemising
all potential issues that may be discussed in the negotiation. The actual
negotiation strategy is important and should be written down and agreed upon
by the negotiation team. Although there can be no substitute for experience,
this chapter presents a number of topics that will be critical throughout the
negotiating process.
7.1 INTRODUCTION
The negotiation process is a much-neglected but vital part of successful
procurement, and typically will take place once initial bids have been received
and a short list of bidders has been drawn up. The intensity and degree to which
parties negotiate can differ across purchase requirements. However, negotiation
will also feature in on going supplier relationships to establish performance
targets, correct non-conformance, perform contract reviews and widen the
scope of services or products delivered by individual suppliers.
The goals of procurement should be to:
• Reduce fixed and recurrent costs.
• Allow the organisation to focus on its core business.
• Gain access to supplier skills and technologies.
• Provide flexibility.
• Reduce cycle times.
These goals will be made easier with a network of suppliers that enjoys working
with an organisation and are aligned with its goals, not just their own. Negotiation
can make or break this network.
7.2 NEGOTIATION OVERVIEW
Negotiation is a process by which parties attempt to reach agreement about a
set of issues. All negotiations have one thing in common: the parties involved
have varying degrees of power, but not absolute power over each other. And,