Summary of Negotiation Process
The process of negotiation is part of the daily procedures in the faculties of business and no exceptional in engineering. The process is a two-way initiative, a give-take setting making the undertaking an important step in the present and the future status of the company. Poor negotiation attributes can cripple and devastate business and just as swift in loosing clients (ECV 4923, ‘Lecture notes’ 1).
In the case scenario provided it is evident that the supply contract process was elaborate; that is, it involved supplying a wide range of products and encompassing a number of sub-contractors and high prospective risks. However, the managers considered it lightly. Consequently, the parties were caught up in emotions of the moment and end up overlooking their instinctual role in contemplating over concrete facts and information (ECV 4923, ‘Assignment notes’ 1).
Conversely, effective negotiation strategies involve high discipline, due diligence and confidence that is guided by solid facts and knowledge. It is only through prudent negotiation abilities that the business is sustained from decline and attainment of value-adding products and packages to either of the two negotiating parties (ECV 4923, ‘Lecture notes’ 3).
Understanding your rival negotiating party is imperative to a successful contract negotiation procedure. The fundamental aspect is that having adequate information relating your opponent allows you to utilize your strengths and capitalize on the party’s weaknesses. Your rival company must have been in the industry for a longer period and with relevant experience on previous contracts’ principles, and hence the ability to assess the consistency of the former and the latter binding agreements (ECV 4923, ‘Lecture notes’ 4).
The commercial manager ought to have conducted due diligence on the previous negotiation terms as well seek the required background information. It is important to understand the sought priorities and objectives evolving around the negotiation platform. It was advisable to refer from close business associates that must have dealt with this customer previously before delegating the negotiation process to the project engineer. Many negotiators develop predictable negotiation strategies that you might utilize to your edge (ECV 4923, ‘Lecture notes’ 5).
The aforementioned contract was both price and risk-oriented and consequently vital to base the process on practical and realistic expectations factoring all the limitations that might undoubtedly arise. These constraints might include budget confines, management inclination, and orientation, the urgency to make sales goals, and the risk bearing parameters. It is noteworthy that the negotiation objective might have shifted based on changes in scope and other unpredictable factors emerging during the settlement; however, the emergent aspects were stated as irrelevant principles, which might not have been the absolute truth. While the eventual objective must be realistic, this should not limit you from making the first bid or counterbid (ECV 4923, ‘Lecture notes’ 7).
Before the process commences, ensure that your rival party is prepared. It is clear that the customer had visualized a closed a deal, only to be stopped by the inconsistencies of the former and later binding agreements. In addition, the commercial managers ought to have concluded the negotiation terms with the customer rather than delegate the settlement to other parties, such as the project engineers, who probably are not acquainted with critical facts and information (ECV 4923, ‘Lecture notes’ 10).
The negotiation strategy is centered on your rival’s objectives through a careful establishment of real needs. The process will thus involve classification of your needs against the other party’s needs. By categorizing the prime objectives as risk bearing and cost pricing, it would have enhanced adequate research on the prevalent risk and pricing negotiation terms in advance. The final list of priorities and objectives is referred to as the negotiation plan (ECV 4923, ‘Lecture notes’ 14).
It is important to follow the objectives presented by both parties, at the initial meeting, by adhering to the negotiation plan. During negotiation, evaluate the deviations from the original plan. It is recommended that neither of the parties should bring in new information outside the original negotiation plan. Both parties must openly express concern over the adopted service-delivery approach, which must be consistent with the former negotiation plans. Consequently, any deviation compromises the integrity of the ultimate resolution (ECV 4923, ‘Lecture notes’ 16).
The core strategy is to assess your needs prudently as a company and seek to negotiate on what you want. Remember you can never get what you have not bargained for; therefore, make your initial bid bold and aggressive. The opening price must, however, be realistic and create provision and margin for a bargain. Your aim is to attain the stated offer or more, therefore it was essential for the project manager to reconsider the products’ delivery criteria rather than rushing to conclusion, affirming the rash decision (ECV 4923, ‘Lecture notes’ 18).
Mistakes and corrective approaches:
Question one: Poor background information
As a supplier, ensure you are well versed with the product or service terms and the risks that shall form the subject of the negotiation process. The commercial manager revealed his primary concerns over the aspect of risk-taking, subsequently exposing his weakness in product details. Such revelation turned to be a prime mark for a bluff that induced uncertainty and anxiety on the customer’s side. Psychology plays a critical role in the negotiation capabilities, and it is advisable to exploit this fact and use it to your advantage for the other party inadequate preparations. Therefore, a comprehensive negotiation plan must constitute a definite strategy.
Eventually, if an important decision is enacted, it is advisable to put the resolution in writing for the purposes of endorsement, physical evidence for future counter-referencing. This information would have served as hard evidence on the previous terms, rather than overtly pronounce the new approach as irrelevant; that is, the client has always born all the risks (ECV 4923, ‘Assignment notes’ 1).
Question two: Volunteering information
As a customer, restraining from disclosing unrequested information such as the need to restructure the project design at the cost of the supplier. Consequently, the supplier is quick to realize that the redesigning would stop his cash flows and the need to shift from his initial plan and adopt the responsibility of cushioning the project restructuring costs. However, this was insincere since there is no open declaration on who would take the aforementioned financial obligation. The approach renders such an agreement ineffectual and inconsistent (ECV 4923, ‘Assignment notes’ 4).
Question three: Deviation from parties’ negotiation objectives
In the first meeting involving the four relevant sub-contractors, it was essential that each of the firm would support its propositions relating to price, the scope of work and overall contribution. When the lead team was to express its operational contributions, the lead negotiator fails to defend the firm’s position. Instead, he delegates the task to the project manager who evades the pertinent question and defines the technical aspects of the contract. The project manager had deviated from the sought functional attribute embodied by the contract objectives (ECV 4923, ‘Assignment notes’ 7).
Question four: Lack of consistency
According to the previous negotiation plan, it had been stipulated that the supplier would stick to a fast product delivery process under the conditions of a bonus scheme. However, neither of the parties provided any documentary evidence that bound the two parties to the plan adopted in the former meeting. The lack of an elaborate control tool in defining the functional attributes of each party eventually compels the parties to deviate from the initial plan (ECV 4923, ‘Assignment notes’ 9).
The customer does not commit to giving the bonus and thus the agreement falls short of due validity. It was advisable for both parties to arrive at a concession and ratify it before embarking on other contract aspects. The client ought to have stated a lower premium amount than the seller anticipates and wait for a bargain from the supplier’s side. In this case, scenario, neither of the parties was willing to settle for a contract; instead, the settlement was halted.
Negotiation is a critical business management tool that may add value to the company or bring it to ruin; therefore, the process must be done in prudence and due consideration. Preparation is a prime requisite that clarifies the fundamental aspects evolving around the relevant subject, and accordingly highlighting the key objectives and priorities. By carefully highlighting your needs or objectives against your rival’s necessities, the assessment process hence enhance the adoption of a sound negotiation strategy (ECV 4923, ‘Lecture notes’ 19).
ECV 4923. “Construction Contract Management.” Negotiation. 07 Oct. 2014: 1-10. Assignment instructions.
ECV 4923. “Construction Contract Management.” Negotiation. 07 Oct. 2014: 1-20. Lecture notes.