Before Christmas, we started this series looking at the need for negotiation skills amongst many people in public sector organisations. We explained why negotiation is often critically important during the delivery or contract management phase of contracts, where it may not be the procurement professionals who lead – or are even involved at all – in those supplier negotiations.
We are focusing here on the issue of principled negotiation versus bargaining, as the vast majority of important negotiations in the public sector fall into the first category. We have also explained that “Getting to Yes”, the book from Fisher and Ury of the Harvard Negotiation Project, is still the best introductory book on negotiation that we know. That book describes five basic elements of principled bargaining:
– Separate the people from the problem.
– Focus on interests, not positions.
– Invent options for mutual gain.
– Insist on using objective criteria.
– Know your BATNA (Best Alternative To Negotiated Agreement)”
Too often negotiation becomes a struggle of wills; I say your price is too high, you say it is very fair and in fact rather low. We take positions, as we discussed in our previous article. Rather than making this sort of assertion, Fischer and Ury tell us that we should always look for objective evidence to back up the statements we make during negotiations, and to support reaching a final fair agreement.
The first step is to search for appropriate objective criteria, and then gain the agreement of both parties to using them. That means they need to be as tangible, relevant, practical and realistic as possible so both parties are likely to agree to their use.
This is highly applicable to many public sector negotiations during the contract management phase. The typical case might be talking to a supplier about poor performance. But simply saying “your service levels are not good enough” does not help the negotiation move forward. If you can produce objective evidence – real measures of performance – that will put you in a stronger position and help the negotiation be based on fact. If you can use benchmarks to validate that statement, even better.
“You are only achieving 97% availability for your systems, and here is the published industry benchmark that says that the average is 99%. Now, what can you do to improve matters?”
That gives a factual basis for a meaningful negotiation. When it comes to price, many longer-term contracts in our experience contain some sort of benchmarking or price adjustment clause, although too often the are not used or well understood by the buying organisation. Or there may be a clause saying that the supplier must offer the customer their “best price” (i.e. no other customer will get a better price without it applying also to this buyer). Whilst that final approach in our experience is hard to implement in reality, the idea of using objective benchmarks is a good one and supports the Getting to Yes principle.
So if we have a three-year contract for supply of equipment, and we can show that the market price has fallen, that should objectively support the re-negotiation. Indeed, this might take us further into a discussion of “open-book” arrangements, where the cost structure for the supplier is shared with the buyer and is reviewed through the contract term. Whilst that is another whole discussion (and there are positives and negatives to open-book), there is again a link to this idea of using objective criteria. At the moment of writing this, for instance, it would be interesting to know how many public sector contracts are delivering higher than expected returns for the suppliers because of the dramatic fall in the oil price!
Using objective criteria supports a sensible, rational negotiation, but we should not forget that power does come into negotiations as well as logic. In the final part of this series, we will look at the fifth principle – developing your BATNA. In our opinion, it is probably THE most important point for any negotiator to understand.