美国国防采购策略
Contract Pricing Reference Guides
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Ch 3 - Negotiation Preparation
, 3.0 - Chapter Introduction
, 3.1 - Tailoring The Negotiation Team To The Situation , 3.2 - Identifying Negotiation Issues And Objectives , 3.3 - Identifying The Contractor's Probable Approach To
Negotiation
, 3.4 - Assessing Bargaining Strengths And Weaknesses , 3.5 - Identifying Negotiation Priorities And Potential
Tradeoffs
, 3.6 - Determining An Overall Negotiation Approach , 3.7 - Preparing A Negotiation Plan
, 3.8 - Presenting A Negotiation Plan To Management , 3.9 - Preparing A Negotiation Agenda
3.0 Chapter Introduction
Procedural Steps. The following flow chart outlines the steps in negotiation
preparation:
Need for Preparation. Thorough preparation is the most important prerequisite to
effective negotiation. Neither experience, bargaining skill, nor persuasion on the
part of the negotiator can compensate for the absence of preparation. , In general, thorough preparation improves the likelihood of a win/win
negotiation that will produce a quality contract and set the foundation for
timely and effective contract performance.
, Specifically, thorough preparation produces tangible rewards, including:
o Fewer contract modifications because the technical requirements are
well conceived and well defined;
o Better technical performance because requirements were well defined;
and
o Cost estimates closer to actual contract costs. Contractor Preparation. Structure is forced upon the contractor by the proposal
preparation process. To complete an effective proposal, the contractor must:
, Understand contract requirements before beginning proposal preparation;
, Establish and use an estimating system designed to meet contractor and
Government requirements;
, Identify assumptions related to contract performance (e.g., current
competition, market alternatives, possible performance problems, and
effect of the market on contract costs);
, Evaluate performance alternatives and determine the most effective way to
meet contract requirements; and
, Structure a proposal to meet Government technical and pricing
requirements.
Government Preparation. To be effective in negotiation, the Government's
preparation must mirror the depth and intensity of the contractor's.
Thoroughness is important because contractors are typically well prepared.
Government representatives must:
, Conduct market research to understand the product, the technical factors
affecting contractor performance, and the market factors affecting product
price;
, Prepare or review contract documents (e.g., solicitation, contract, or
contract modification) considering the current market situation;
, Analyze the contractor's proposal based on the current market situation and
specific contract requirements:
, When necessary, use exchanges to clarify information received from the
contractor and support further analysis; and
, Develop a negotiation plan based on that analysis. Available Information. Without adequate information, you can neither prepare
for nor conduct effective contract negotiations. As you prepare for contract
negotiations, you should already have:
, The solicitation, unilateral contract modification, or any other document
that prompted the contractor's proposal;
, The proposal and all information submitted by the contractor to support the
proposal;
, Information from your market research concerning the product, the market,
and any relevant acquisition history;
, Any relevant field pricing or audit analyses;
, In-house technical analyses;
, Your initial analysis of the proposed price and, where appropriate, of the
different cost elements.
, The results of any exchange(s) with the contractor.
3.1 Tailoring The Negotiation Team To The Situation Potential Team Size. Normally, you should use the smallest team practical to
efficiently and effectively formulate and attain the Government negotiation
objectives.
For smaller less complex contract actions, the contracting officer or contract
specialist may be the only Government representative participating in the
negotiation.
As the value and complexity of the contract action increase, you will likely
need additional experts. However, a smaller team is normally better unless the
additional member(s) can make an effective contribution. As the team size
grows:
, Team control during negotiations becomes more difficult;
, Team communications become more complex; and
, The personnel cost associated with the negotiation increases. Potential Team Members. The table below identifies common roles in
negotiations and potential team members to fill those roles. Note that the roles
and potential team members are identical to those identified for face-to-face
exchanges. However, you should also note that actual team membership on the two teams may be substantially different.
Negotiation Team Selection
Team Role Potential Team Member Team leader
, Contracting officer
, Contract specialist Technical analyst , Engineer
, Technical specialist
, Project or requirements manager
, End user
, Commodity specialist
, Inventory manager
, Transportation manager
, Property manager
, Logistics manager Pricing analyst , Auditor
, Cost/Price Analyst Business terms analyst , Legal Counsel
, Administrative Contracting Officer
, Administration Specialist Team Leader. In contract negotiations, the ultimate team leader is the
contracting officer responsible for the contract action. The contracting officer has
ultimate responsibility for the negotiation, because only the contracting officer
has the authority to bind the Government to a contract.
The contracting officer may act as the day-to-day team leader or delegate that responsibility to a contract specialist after considering factors such as the:
, Dollar value of the contract action;
, Complexity of the issues involved in the negotiation; , Contractual and operational importance of the contract action; , Policy of the contracting activity; and
, Experience of the assigned contract specialist. Principal Negotiator. The principal negotiator is the person who represents the Government during contract negotiations and does most of the bargaining. The
team leader is normally the principal negotiator because the team leader has the
broadest perspective of key negotiation issues. However, the team leader may designate others to fill the role of principal negotiator.
, Another individual may be designated as the principal negotiator because of
that person's particular expertise in analysis and negotiation. For example,
a price analyst may be designated to serve as the principal negotiator when
the price analyst is the most informed and capable negotiator. Of course,
the team leader is still responsible for the results of the negotiation.
, To take advantage of varying kinds of expertise, different principal
negotiators can be used to bargain different issues. For example, an
engineer might negotiate technical issues (e.g., labor hours) while a price
analyst negotiates indirect cost rates. When using this approach the team
leader must be particularly vigilant to assure that the various negotiators
share information and work toward the same objectives. Other Team Members. Individuals should only be selected for team membership
when they can add to the efficiency and effectiveness of team efforts to formulate
and attain negotiation objectives. In particular, additional team members may be
required when their expertise is needed to:
, Support Government efforts to understand the contractor's position; or
, Explain the Government position.
Questions and responses on key issues generally continue throughout the
negotiation process. Expert support:
, Is generally only needed until the differences between the Government and
contractor positions are clearly defined. After that, expert support may
actually be detrimental to the negotiation. The experts on both sides may be
so convinced that their position is correct that they will consciously or
unconsciously sabotage any efforts at compromise.
, May be needed throughout the negotiation whenever certain very important
and very complex issues are discussed. Mutual understanding on such
issues may be critical for successful contract performance.
3.2 Identifying Negotiation Issues And Objectives Identifying Issues. An issue is any assertion about which the Government and the
contractor disagree. In contrast, nonissues are assertions about which both
parties agree.
Typically, issues arise when the Government and the contractor make
different assertions based on the same or related facts. Differences occur
because the two parties have different perspectives and interests in the
negotiation. , A nonissue can become an issue if it is challenged during the course of
negotiations.
, An issue can become a nonissue if the assertion is no longer challenged.
Sources of Issues. In contract negotiation, an issue can come from any challenge
to an assertion made by the contractor or the Government. Generally, an
assertion made in the contractor's proposal is challenged based on:
, The field pricing report;
, The audit report;
, The in-house technical analysis;
, Your cost or price analysis;
, Exchanges with the contractor; or
, Another type of Government analysis.
The issue may also be related to a contractor challenge of Government
requirements as stated in the solicitation, contract, or contract modification.0
Issues and Objectives. Issues are the bases for the differences between the
Government and contractor negotiation positions. For example, the positions on
labor rates might differ because the Government challenges the contractor's use
of a particular labor index to estimate future direct labor rates.
Because issues are the bases for differences between the Government and
contractor positions, you must identify the key issues that effect those positions
before you develop your prenegotiation objectives. If you do not, there is a good
chance that your objective on one issue will not be consistent with your
objectives on related issues. For example, if the Government challenges the use
of a particular index to forecast direct labor rates, that challenge should effect all similar rates estimated under similar conditions. Prenegotiation Objectives (FAR 15.101 and 15.402(a)). Your objective in any contract negotiation should be best value for the Government.
, In a competitive negotiation, the objective in negotiating with each
contractor should be a final proposal revision that provides the best value
based on the contractor's proposal, the solicitation criteria, and the
conditions affecting the contractor's operations. The Government can then
, In a noncompetitive negotiation, best value is a contract with a responsible
source that: award a contract to the firm whose proposal provides the overall best value.
o Will satisfy Government requirements in terms of product quality and
timely delivery:
o Has a fair and reasonable price:
o Fairly apportions risk between the Government and the contractor;
and
o Satisfies Government socioeconomic goals (e.g., small business
set-asides).
Technical Objectives. Government technical objectives are based on
Government's requirements and its evaluation of the contractor's technical
proposal based on those requirements. Technical objectives should center on
whether the contractor can effectively and efficiently meet Government
requirements. Typically, technical objectives deal with the:
, Acceptability of the contractor's technical proposal. For example, the
Government may maintain that a larger motor is required to meet an
equipment requirement.
, Performance risk associated with the contractor's technical proposal. For
example, the technical proposal may propose to perform the required
service with individuals who may not be qualified.
, Technical factors that may unreasonably affect cost -- often referred to as
"gold plating." For example, the contractor may be proposing stainless steel
nails to build wooden cabinets. Common nails would work just as well at a
fraction of the cost.
Cost or Price Objectives. Issues related to technical issues and issues related to
rates and factors will eventually effect cost and price objectives, because the
"total package" under consideration will in part determine what price is fair and reasonable.
Whether your negotiation involves price analysis supported by cost analysis or
price analysis alone, you must establish an overall price objective. Without an
overall price objective, negotiations will often flounder and result in settlements that can be neither explained nor defended. Negotiating cost element by cost
element can be risky unless you understand the affect of these agreements on
overall price.
Objectives such as "the lowest price we can get" or "a price about ten percent lower than the proposed price" do not qualify as acceptable objectives because
they are not in the win/win spirit and are too vague. Price objectives should be
planned in terms of a definite dollar amount reflecting a reasonable evaluation of
contract requirements and the methods proposed by the contractor to meet
those requirements.
Objectives May Change During Negotiation. Your prenegotiation objectives represent your best judgment based on the information available prior to
negotiations. As more information becomes available, your objectives may
change.
When you must obtain management approval of your negotiation objectives,
that approval should address the latitude that you will have to adjust your
objectives during negotiations. Depending on your contracting activity's policies
and the situation, you may have complete latitude or you may be required to
obtain a new approval any time your objectives change. A requirement for a new
approval is most likely when a change in your objectives will probably lead to a higher contract price.
3.3 Identifying The Contractor's Probable Approach To Negotiation
Need to Identify the Contractor's Approach. You have identified issues and the objectives that will drive the negotiation. Now you need to learn more about the contractor's objectives and the road map that the contractor's negotiator will
likely follow in attaining those objectives.
Information Sources. Information on how the contractor might approach the
negotiation can come from a wide variety of sources. Some of the most important
include the following:
, The contract proposal and all information submitted with the proposal
should clearly explain the contractor's approach to contract performance
and contract pricing.
o A well supported proposal may indicate that the contractor expects to
negotiate a contract close to the proposal.
o Minimal support may indicate that the contractor is not firmly
committed to negotiating a contract.
o Poor support may mean that extensive negotiations will be required to
attain a quality contract.
, Previous proposals and contracts for identical or similar products may give
you an idea about how flexible the contractor is during negotiations. Many
contractors expect to lose a certain percentage of the proposed price during , Price negotiation memoranda (PNMs) with the same contractor for similar negotiations. To compensate, they may include "padding" in their proposals
work should provide detailed information on where the contractor is likely to so that they can negotiate it away and still have an acceptable contract.
be flexible in negotiations and where the contractor is likely to be firm. , Contract administrators, negotiators, and other Government employees
who have had previous dealings with the contractor can provide more
personal information on the company's negotiating style and the approach
taken by individual negotiators.
, Information from exchange sessions may indicate where the contractor's
position is firm and were the contractor may be more flexible. , Other information from contract files may indicate how proposals compare
with contract performance. For example, during negotiation, the contractor
may constantly point out the high risk in performing certain contract
activities. Then immediately after contract award, the contractor uses a firm
fixed-price subcontract to shift that risk to a subcontractor.
Key Questions to Consider. As you collect information on how the contractor
might approach the negotiation, ask yourself the following questions: , What objectives and priorities has the contractor probably
established for the contract negotiation?
Identify the contractor's contract objectives and related
priorities. Consider stated and readily apparent objectives
along with the contractor's unstated needs. While contract
price is always important, every negotiation includes
non-price objectives.
, How will the contractor's general business objectives and priorities
affect the negotiation?
Determine how the proposed contract action will affect the
contractor's ability to meet its general business objectives.
Most contractors look at a contract as part of the firm's sales
mix. Each contract has its own requirements and potential
rewards, but is also related to the other business of the firm.
Possible objectives might include increasing market share,
entry into a new field, improved cash flow, avoiding
, How will the individual objectives and priorities of the contractor's unnecessary cost risk, or continued Government business.
negotiator affect negotiations?
Identify factors that may cause the negotiator's objectives
and priorities to differ from those of the contractor. For
example, a new negotiator may feel a need to prove his/her
capabilities by refusing to compromise. A negotiator who
receives an incentive based on the profit/fee rate
negotiated, may be willing to concede costs dollars to keep
that profit/fee rate high.
, What negotiation styles and tactics will the contractor's negotiator
likely use?
Collect information about how the contractor and the
projected negotiator have negotiated in the past.
o Company negotiation strategy and tactics will affect negotiations no
matter who represents the firm. For example, some contractor's may
have a policy of providing the minimum price-related information
possible to the Government. If you need more price-related
information to determine price reasonableness, that policy may limit
your ability to obtain it.
o A particular negotiator's style can also be important. For example, if
the negotiator is prone to use win/lose tactics, you should consider the
use of effective countermeasures to put the negotiation on a win/win
path.
, What pressures and constraints will affect the contractor's
approach to negotiations?
Learn what pressures and constraints will affect
negotiations. For example, some contractor's give
negotiators little or no latitude in negotiation. Such
restrictions can make it difficult to reach agreement. Early
knowledge of this restriction may permit you to use a
win/win approach to encourage the contractor to give the
negotiator the flexibility needed to reach an agreement.
3.4 Assessing Bargaining Strengths And Weaknesses Bargaining Power. Bargaining power is relative. It comes in many forms and is
never totally one-sided, because both parties have bargaining strengths and weaknesses. Recognizing the relative strengths and weaknesses of the parties
involved in any negotiation will help you achieve a win/win result. , The Government may have bargaining power because it is the only
customer for a particular product. However, that power may be offset
because the contractor is the only supplier.
, A world-renowned scientist may have bargaining power based on expertise
and reputation. However, an experienced technical analyst may be able to
offset much of that power.
, Contractors often enjoy bargaining power because the Government lacks
knowledge about the existence of potential competitors or substitute
products. However, the Government negotiator's knowledge of Government
requirements may offset that power.
, An experienced negotiator may have bargaining power because of a
reputation gained over the years. However, knowledge of the negotiator's
approach to negotiation may offset much of that power. Bargaining Power and Perception (FAR 31.201-3(a) and 52.243-1). Bargaining power has to be perceived by the other party to have an effect on negotiations.
In fact, the power does not have to be real as long it is perceived. For example,
many Government negotiators believe that contractors have far superior
bargaining power in negotiations to definitize a unilateral contract modification.
They point out that the contractor can drag out negotiations while continuing to
perform the modified contract and incurring actual costs. However, they do not
realize that the Government also has substantial power in that situation.
Contracting officers are prohibited from accepting unreasonable actual costs. If
an agreement cannot be reached, the contracting officer can make the equitable
adjustment by using a unilateral decision. Of course, the contractor can dispute
that decision, but it will likely take months or years before the dispute is resolved. Legal fees may be more than the disputed amount. Obviously, a negotiated
agreement is in the best interest of both the Government and the contractor.
Sources of Bargaining Power. The following are some of the factors that you
should consider as you assess the bargaining strengths and weaknesses of each
party involved in a particular negotiation:
, Competition. The availability or lack of competition may give one side the
upper hand.
o Sellers enjoy more bargaining power when available sources or
alternatives are limited.
o Buyers enjoy more bargaining power when multiple sources or
alternatives are available. Bargaining alternatives exist even during
sole source negotiations. The Government may be able to gain
bargaining strength by researching the practicality of other
alternatives, such as:
o Performing the required effort in-house;
o Changing requirements to encourage competition;
o Developing new source(s) by providing start-up funds to other
contractors;
o Postponing contract award until other sources become available; or
o Breaking out and separately competing components. , Knowledge. The cliché "Knowledge is power" certainly applies to contract
negotiation. The more that you know about the negotiation issues,
objectives, priorities, and the parties involved, the greater your bargaining
power. Thorough preparation is essential. , Time Constraints. Time constraints affect every negotiation (e.g., time
available for negotiations, time available for contract completion, date when
work must start, or the expiration of funding). Time constraints become a
source of power when the constraint appears to affect one party and not the
other. Do not be fooled though. A time constraint that appears to affect only
one party may actually affect both. For example, expiring funds place a
constraint on the Government. If the contractor has substantial business
alternatives, the time constraint on the Government may give bargaining
power to the contractor. However, if the contractor needs the contract, the
time constraint applies equally to both parties. Relative bargaining power is
not affected.
, Bargaining Skills. Many contractors have personnel that specialize in
contract negotiation. Their bargaining experience and expertise can give
them both the perception and the reality of bargaining power. However,
applying the concepts presented in this text should improve your bargaining
, Importance of the Contract to Each Party. As the table below shows, skills and your confidence in your ability to negotiate effectively. Your
successful negotiations can reward both the organization and the individual. bargaining power should increase accordingly.
The importance of the Government contract to each side is determined by
how much the rewards benefit the organization and the individual
participants.
Organizational Individual
Rewards Rewards Money/Profit Increased
Self-Worth Unique Product or
Service Safety
Property Prestige Information Rights Self-Esteem
Privileges Self-Actualization Commercial Security Opportunities
Reputation Future Business
Increased Pay Product Control
As with other forms of bargaining power, perception is the
key. If a negotiator perceives that a contract is more
important to the other party, the negotiator may be less
willing to make concessions. , Contract Risk. Every contract involves risks and both the Government and
the contractor have an interest in assuring that those risks do not preclude
effective and efficient contract performance. However, one negotiator may
gain power by taking action to reduce the risk exposure perceived by the other party. That power can be real, even if the negotiator taking the action
o There are many methods that you should consider for reducing and does not perceive the same level of risk. controlling contract risk. Among the most important are the
appropriate use of:
o Fixed-price or cost-reimbursement contract pricing arrangements;
o Clear technical requirements;
o Government furnished property; and
o Other contract terms and conditions.
o While you can reduce or control contract risk you cannot eliminate it
completely. Trying to eliminate risk entirely may actually weaken your
bargaining power by presenting an image of weakness rather than an
image of cooperation.
3.5 Identifying Negotiation Priorities And Potential Tradeoffs Prioritize Issues. Rank potential negotiation issues in relative order of importance
to the Government. After ranking, determine whether each issue is: , Nonnegotiable issues or "must points." These are the issues where you
cannot make concessions because of their importance to the Government
position.
, Issues open to concession or "give points." These are issues that have
relatively low importance to the Government but may be valuable to the
contractor. As a result, they are projected for probable concession during
negotiation. Hopefully concessions on these issues will win concessions
from the contractor.
, Issues to avoid during negotiations or "avoid points." These are
issues that you do not want to discuss during contract negotiations. For
example, they may be controversial or weak areas in the Government
position.
, Issues open to bargaining or "bargaining points." These are issues
where the Government may be willing to make meaningful concessions in
return for meaningful concessions by the contractor. For example, in a
noncompetitive negotiation, price is a bargaining point. The Government
and contractor typically reach agreement on a dollar value somewhere
between the two opening bargaining positions.
Need for Tradeoff Positions. You should have an objective for each negotiation
issue. You should also identify several tradeoff positions that you would consider
, In a competitive negotiation, you can use these positions to evaluate the accepting.
contractor's final proposal revision.
, In a noncompetitive negotiation, you can use these positions to develop
counteroffers and establish your negotiation limits. Tradeoff Positions. As you identify tradeoff positions for each issue, there are
three questions that you should consider.
, What result do you feel is most reasonable based on the available
information?
Use your answer to establish your negotiation objective.
, What is the most desirable result that you could reasonably expect
to achieve on this issue?
Use your answer to establish one limit to your range of
acceptable tradeoffs.
, What is the least desirable result that you would be willing to
accept on this issue?
Use your answer to establish the other limit to your range of
acceptable tradeoffs.
Tradeoff Positions On Price. Price is an issue that must considered in every contract negotiation. Many contracting activities consider tradeoff positions on
price so important that they require negotiators to obtain management approval
of their minimum, objective, and maximum positions on price prior to the start of
all major noncompetitive contract negotiations.
, Objective Position. This is your best estimate of a fair and reasonable
price based on your price/cost analysis. It is the price that you want to
negotiate. Other positions should help you reach your objective.
, Minimum Position. In a win/win negotiation, your minimum price should
be the lowest fair and reasonable price. When used as your first
counteroffer, your minimum position should provide room to negotiate.
o Establish your minimum position based on a reasonable price for your Never offer a price lower than your minimum position, because such an offer
anticipated best-case scenario of contract performance. That scenario would be unreasonable.
must be based on a reasonable analysis of available information. It
must not be based on an unlikely "pie in the sky" scenario.
o The use of an arbitrary "nice low figure" as a minimum position is
neither appropriate nor defensible. Using an arbitrarily low minimum
position is not in the win/win spirit and may even be
counterproductive. For example, an indefensible or unreasonable
opening position may cause the Government to lose credibility and
make attaining a win/win outcome difficult or even impossible.
o When you use cost analysis, you should establish a minimum position
for each major element of contract cost and profit/fee. , Maximum Position. In a win/win negotiation, your maximum price should
be equivalent to the highest fair and reasonable price.
o Establish your maximum position based on a reasonable price for your
anticipated worst case scenario of contract performance. That scenario
must be based on a reasonable analysis of available information and
not an unrealistic scenario.
o There may be other limits (e.g., the availability of funds or a ceiling
price) on the maximum contract price. Such limits provide a defensible
maximum position even though the amount is less than the highest
price that could be considered fair and reasonable.
o When you use cost analysis, you should establish a maximum position
for each major element of contract cost and profit/fee. Tradeoff Positions On Other Issues. Price is not the only important issue in
contract negotiation. In most contract negotiations, you will also need to develop
tradeoff positions for several other key issues, such as: , Contract type;
, Warranties;
, Delivery schedule; or
, Other business terms and conditions
Base Tradeoff Positions on Clear and Consistent Criteria. A win/win outcome is
practically impossible if negotiation positions are not based on clear and
consistent criteria. Remember that a win/win outcome is a mutually satisfactory
outcome and a mutually satisfactory outcome is a matter of perception. The best
way to maintain the perception of a mutually satisfactory outcome over the long
term is to base your positions on clear and consistent criteria.
Without clear and consistent criteria, the negotiation will almost certainly turn
, Negotiators will be encouraged to use win/lose tactics. into a win/lose or lose/lose situation.
, The party that stubbornly refuses to concede anything will usually win. If
both parties refuse to move, both sides will lose.
, Even if the outcome is fair and reasonable, one-or-both could eventually
feel that they were treated unfairly.
3.6 Determining An Overall Negotiation Approach Plan the Order for Addressing Issues. Carefully plan the order in which issues will
be addressed during negotiations. There is no one right approach.
, One approach is to start with the least important issues and proceed to the
more important ones. Concessions on several less important issues may
limit or eliminate the need for concessions on a more important issue.
, Another approach is to address issues according to the anticipated ease of
reaching agreement. Early agreements hopefully will create an atmosphere
of agreement that will continue as you proceed to the harder issues.
, Normally, contract negotiations follow a building-block approach:
o Basic contract requirements are addressed and resolved before
contract price is addressed.
o Tradeoffs between contract requirements and contract price are
addressed after resolution of other technical issues.
o Contract price is not finally resolved until all other issues are settled,
because contract price must consider all the other elements of the
contract. The result should be a fair and reasonable price for each
contract item, not an element-by-element agreement on contract
costs.
Identify Potential Concessions. Flexibility is vital to win/win negotiations.
Negotiators expect to gain something as a result of their negotiation efforts.
Refusing to make concessions will frustrate the other negotiator and may lead to
a lose/lose situation, no matter how reasonable your position.
A concession may be accepting a different interpretation of existing facts
(e.g., accepting that production hours per unit will not be reduced as fast as you
estimated in your previous pricing position) or it may be an action to change the
facts (e.g., change the contract type). As you consider possible concessions, you
should identify: , Potential concessions that you would be willing to make in response to
projected contractor concessions.
, Concessions that you would expect from the contractor in response to your
potential concessions.
Plan Bargaining Tactics. Your selection of negotiation tactics should depend on your personality and the results of your research on the tactics that will probably
be used by the contractor's negotiator.
, Avoid the use of win/lose tactics. Government negotiators should
always pursue a win/win outcome.
, Do not try to be someone you are not. A tactic that works well for another
negotiator may not work for you. However, that does not mean that you
should never try something new.
, The successful application of any negotiation tactic requires a great deal of
planning. The negotiator must be prepared to respond in a manner that
protects the Government and makes progress toward agreement. This
preparation is accomplished by anticipating the probable contractor tactics
and developing countermeasures in advance.
3.7 Preparing A Negotiation Plan
Draft a Plan. Draft a negotiation plan. Contents may vary based on agency and
contracting activity requirements, but the plan should include information such
as the following:
, Background (e.g., contract, contractor, and negotiation situation);
, Major and minor negotiation issues and objectives (both price and
non-price);
, Negotiation priorities and positions on key issues (including minimum,
objective, and maximum positions on price); and
, Negotiation approach.
Review the Plan. Review the negotiation plan with key negotiation team , Present the plan to the team. members. , Encourage input from others on the team to identify weaknesses and
alternatives. Normally, you should give special attention to input from those
with more experience in negotiations with the same contractor. , Revise the plan as necessary.
, Define the role each team member will play in putting the plan into action.
, Ensure positions and the overall plan are fair and reasonable.
Team Member Plans. Assure that team members have individual plans designed
to support the overall negotiation plan.
, Emphasize:
o The Government's commitment to a win/win approach to contract
negotiation
o That the Government's principal negotiator's role is the principal
speaker and "chairperson" of the Government team. Other team
members must realize that the principal negotiator is the only
individual authorized to negotiate with the contractor.
o That other team members are at the negotiation to provide support,
listen, and evaluate information provided by the contractor. They must
not address the contractor's negotiator(s) unless directed by the
Government's principal negotiator.
o That, during negotiation sessions, other team members must not
openly disagree with the Government position on any point under
discussion. If they have a concern, they should discretely
communicate with the principal negotiator. If necessary, the principal
negotiator could call for a caucus to address the concern. , Assure that each team member understands his/her specific role in the
negotiation session.
o Identify any issue that the team member should be prepared to
address during negotiations.
o Assure that the team member understands the related Government
position.
o Review their anticipated role (e.g., present the Government position,
answer contractor questions about that position, or both).
, For all negotiations, warn team members:
o Not to communicate with contractor personnel outside the negotiation
conference on issues related to the negotiation.
o To safeguard information on the Government position from contractor
personnel and other unauthorized persons.
o About ethical considerations (e.g., no free lunches or favored
treatment).
, For competitive negotiations, warn team members not to engage in conduct
that:
o Favors one contractor over another;
o Reveals a contractor's technical solution, including unique technology,
innovative and unique uses of commercial items, or any information
that would compromise a contractor's intellectual property to another
contractor;
o Reveals a contractor's price without that contractor's permission;
o Reveals the names of individuals providing reference information
about a contractor's past performance; or
o Knowingly furnishes source selection information to anyone other than
Government personnel who have a need to know.
3.8 Presenting A Negotiation Plan To Management Need for Management Support. To be successful in a contract negotiation, you
must have management support. If management does not support you, other
members of the Government negotiation team and the contractor will soon know.
When this happens, team members and the contractor will no longer come to you
for guidance and answers. Instead, they will go to management.
You should have continuing communications with management, just as you do with the contractor and members of the negotiation team. , For contracts that attract a relatively low level of management interest
(e.g., small dollar contracts with no major issues), communications will
likely center on available funding, workload, and other general management
concerns.
, For contracts that attract higher-level management interest,
communications should center on the key issues involved. Typically, these
communications will involve a briefing on key elements of the negotiation
plan, especially the team's negotiation objectives.
Management Briefing. A management briefing gives you an opportunity to obtain
policy guidance and management observations on the strengths and weaknesses
of the negotiation plan. In fact, multiple briefings may be required to involve
different levels of management in the negotiation process.
, An informal oral presentation; The prenegotiation briefing can take many forms, including:
, A formal oral presentation; or
, A written document (e.g., a prenegotiation or business clearance
memorandum).
The actual briefing format will depend on many factors including agency
policy, contracting activity policy, and the personalities involved. For example,
some managers may feel that they can better evaluate an oral presentation, while others may want the detail that a written business clearance provides.
Management Feedback. Whatever the form of the prenegotiation briefing, there
must be provision for management feedback. In particular management should
have the opportunity to:
, Approve or reject the negotiation plan.
, Identify any management limits on negotiation flexibility. The negotiation
team must know what happens if the team changes its evaluation of one or
more key issues during negotiation (e.g., a price higher than the original
objective now appears reasonable). The team might be:
o Empowered to negotiate any position as long as the contracting officer
considers the position fair and reasonable;
o Empowered to negotiate a position within specific limits approved by
management; or
o Limited to the prenegotiation positions specifically approved by
management.
, Approve or reject changes to the plan that will permit the team to exceed
any previously-established management limit.
3.9 Preparing A Negotiation Agenda
Need for an Agenda. One of the most difficult tasks during a negotiation is to
confine the discussion to what is important while avoiding irrelevant subjects.
One of the best ways to promote productive and efficient discussion is to
establish an agenda for both sides to follow.
Timing. Whenever practical, you should prepare a draft agenda for contractor
review prior to the start of contract negotiations. This gives the contractor an
overview of what the Government feels is important and provides the contractor an opportunity to recommend changes.
Some negotiators prefer to wait until the start of negotiations to present the
agenda. Though often appropriate, this may delay the start of meaningful
negotiations while the agenda is being addressed. Negotiations may be further
affected if the contractor is not prepared to discuss key issues identified in the
agenda.
Prepare Negotiation Agenda. The negotiation agenda should include the following
items: , Topics to be addressed and the order in which they will be considered;
, A general time schedule for the negotiation sessions;
, Location(s) of the negotiation session(s).
, Names and titles of Government and contractor team members. Include
office symbols and phone numbers when appropriate.
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