Contract negotiation

Zahn Abreu Preferential Procurement Guides, Supplier Development Posts Leave a Comment

Here are the key points from the talk Elmarie Goosen gave at the Smart Procurement Indaba. Contract negotiation is the process of give and take to reach an agreement.

Have a plan

  • Know Your Compromises – What are the things you can give in on?
  • Your Non- Negotiable – What are the things you can absolutely not change?
  • Your Margins – What factors will increase or decrease your price?
  • The value – What value is each party bringing to the table?
  • Your Cost – What is your minimum price?

Be confident, take your time to consider everything before agreeing

Have a Negotiation Strategy. Prepare for what they may say and have a response ready. If they question if this is your best offer, you could ask what why they feel the offer is not good. Listen to their concerns and offer a compromise.

Build rapport

The party with more information usually has more leverage, even personal information about the parties may affect your ability to create a more collaborative.

Ask questions

Understand your customer and what is driving their needs.

Be prepared to offer compromises.

If they say we don’t know you, remind them of your track record and offer payment milestones like 30% deposit, 15% payment on specific milestones.

Break it into parts

Break the negotiation into parts. Reach an agreement on each part separately.

Pick your battles

Prioritise what is most important and don’t try to win every point.

Stay Positive

Find points of agreement and end on a positive note. Find opportunities to say, “You’re right about that,” or “I agree.” Over a series of meetings, always attempt to end each one positively.

NEVER leave anything to be agreed

If you cannot agree it before you sign the contract you lose all leverage and it will not get resolved.

NEVER give an ultimatum

Threats will only damage the relationship.

Do not be afraid to walk away

Do not agree to a deal that will not be profitable. It will damage your business and your reputation if you cannot afford to deliver to your customer’s expectations.

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