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NEGOTIATION
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CHAPTER 7
had planned to use his involvement as a bargaining point.
• Due to the nature of the quotation involving sub-contractors, the supplier
could not profitably negotiate its total price down by more than R150 000
and could not drop its steel price below R4 400 per tonne.
• The supplier had quoted for detailing at R70 per tonne, which was R50 per
tonne lower than its normal fee. It therefore needed to insist that Company
A supply high-detail general arrangement drawings.
A7.1.5 THE NEGOTIATION
The actual negotiation was surprisingly easy and convivial. But this was only
achievable through a sensible win-win approach, clearly communicated at the
outset by Company A, which stated that the project hinged on quality, on-time
completion, with preparedness on its part to sacrifice low price for working with
the right supplier.
Supplier X responded that it was willing to look at all elements of the total deal in
order to secure a mutually satisfactory outcome. Careful preparation had set its
variables around the 15% handling fee, the steel price and the total project cost,
and it was prepared to offer accelerated completion and the named construction
manager as incentives to set the tone.
Company A’s opening gambit was in stating that X’s total quote was about
9% over budget. No mention was made of competitive bids. This was a clear
tactic involving LIMs, and was spotted by X, who asked for clarification on the
discrepancies. CompanyA revealed that the crux of the matter lay in the fact that
it had budgeted on the basis of minimal use of subcontractors and was prepared
to designate in-house resources to certain areas of detailing the resources to
be supplied by A but managed by the chosen supplier.
This prompted a relieved rethinking of the project by X, and details of available
resources were discussed and agreed over the course of approximately
45 minutes. The net result was that the supplier was able to reduce R78 000
off its quoted detailing costs, leaving a total price discrepancy of around
R105 000 between Company A, Supplier X and the ‘musts.’ At this point, X
cleverly offered the named construction manager and a completion date of
four months, thereby heightening the feeling of co-operation and willingness to
come to the party. Company A noted both items with gratitude, but continued
to state that its most favoured position would be a total project cost of a
maximum of R2.5 million.
Supplier X immediately countered that R2.5 million would probably not be
achievable, but ‘let’s see how close we can get.’ The parties proceeded to
explore payment terms as an option for offering further discounts. Company A
stated that it usually offered 12%, but was prepared to move if this would affect
the total price. Supplier X offered to reduce the total price to R2.59 million if
20% were to be paid up front. Company A sharply asked whether the sliding
scale of upfront payment versus discount was limitless, prompting the immediate