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Procurement Perspectives: Proper negotiations are required to resolve procurement issues

Stephen Bauld
Procurement Perspectives: Proper negotiations are required to resolve procurement issues

Negotiators always need to remember that any fool can make the situation worse; it takes patience, planning and very often a thick skin to make it better. It is virtually impossible for the negotiation to proceed unless there is at least some common understanding as to the rules that will be followed during the process.

Ideally, the rules governing a negotiation should be settled either before negotiation starts or as one of the first items of business. Negotiations should not be allowed to proceed in an unstructured environment, first because this approach so often fails, and second because the failure to settle the rules can lead to unnecessary disagreement even when negotiations proceed.

Rules serve both a normative function, in that they tell the parties how to behave, and a predictive function, in that they tell each party what they can expect from the others. The rules should be such that all parties will perceive them to be in their collective interest.

Common rules include the following:

  • Appointing representatives and agreeing as to the role and authority of representatives;
  • Advising each other as to the steps that are required in order to approve proposals that are put forward during negotiations;
  • Establishing a time frame for the overall negotiation process, for the submission of proposals and for reply to proposals;
  • Securing mutual undertakings not to backtrack on negotiations that have taken place. Nothing undermines confidence in negotiation more than the belief that the other side is a moving target, that constantly changes position. If the demands of one side escalate or keep changing, then confidence will usually sag;
  • Settling the extent to which negotiations and other communications between the parties will remain confidential;
  • Settling the process of approving any tentative agreement; and
  • Getting agreement by the parties to deal with issues on an individual basis, so that each issue between the parties may be dealt with separately. Parties may reserve the right to trade concessions on different issues, and they may insist that any agreement be comprehensive (a process known as linkage), but such reservations should not delay negotiations from moving forward so that possible settlement offers can be discussed concerning individual points. Linkage is acceptable in negotiation, but it is impossible to deal with everything at once.

While commitments of this kind may be difficult to conclude in extreme cases (e.g. peace negotiations and similar conducted in very hostile environments), if these commitments cannot be secured in a business setting, it is doubtful that negotiations will proceed smoothly to any kind of resulting agreement.

For most negotiators, there is one critical question that dominates their thinking: how can a deal be concluded? The purpose of negotiations is to reach an agreement, not to achieve some abstract level of fairness. However, unless each party concludes that the offer on the table at least meets its minimum conditions for settlement, that offer is unlikely to appear attractive. Thus, while fairness in some absolute sense is not the goal, negotiations must be conducted realistically, to have any hope of success.

Although it is neither necessary nor advisable to make repeated unilateral concessions, it would be wise to consider the risk of undermining the other side’s negotiator by staking out unrealistic demands or by refusing all overtures that the other side makes. The signals that each side sends to the other are likely to influence the progress of negotiations. The appearance of an aggressive, harsh or punitive approach on one side will often result in a similar response from the other. The psychological element of negotiations should never be forgotten. It is crucial for all parties to think about their own behaviour and the messages that they are sending.

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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