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Introduction
The negotiation process is a test of wits and will for the involved parties navigating the intense and challenging discussions. As each side tries to develop a contract that will benefit it the most, the stakes and risks are high. While for an average person, the negotiations might revolve around simple contracts such as buying property, joining a company, or selling a prized item, contracts with the federal government demand a more careful approach. A well-designed contract can bring millions in saving or profit for the company. Meanwhile, a poorly planned negotiation can lead to years of unprofitable and unmanageable contractual obligations. Therefore, early preparations help organize the negotiation plan efficiently, thoughtfully, and carefully.
Negotiating within the Industry
When addressing other industry members during negotiations, the process becomes an even more complex matter. Skirting around the well-known issues or concerns would only lead to the other company feeling disrespected and possibly tricked (Geiger, 2017). The negotiating company must approach the discussion by demonstrating respect for the other side. Being clear on what the company wants to achieve and expect from them and showing trust and willingness to negotiate further are critically important during a negotiation process. That is not to say that no tactics could be used to turn the discussion in the company’s favor. Whether a company sells, buys, or offers services, the usual strategies function just as well as when negotiating with other companies. One should be willing to create a win-win situation without agreeing to the first proposals (Dawson, 2021). The difference lies in the acknowledgment that as members of the same industry field, the other company is likely just as informed in the field prices, costs, and issues as the company is. Underestimating the other side can lead to losing negotiating power, signing unbeneficial contracts, or even earning a negative reputation in the industry.
Federal Contracts
When a government signs a contract with a private company to partially or fully carry out a project or deliver goods, it falls into one of three primary categories. It can be Cost Plus Fixed Fee (CPFF), Firm Fixed Price (FFP), or Time and Material (T&M) contract (Nash et al., 2021). The form of a contract decides which side takes the most financial risks and what techniques are used, affecting the project’s negotiation strategies. There must be a thorough preparation: depending on the form, the financial risk for the company may be moderately low or extremely high. When contractors decide the prices, they must present viable data to the federal representative. After the negotiations are done and fixed fees are calculated, the government is feasible for a post-award audit to ensure that the company has provided them with factual information regarding the costs. This falls under the Truth-In-Negotiations Act (TINA), which ensures that the contracting company discloses all the necessary expenses and prices (Nash et al., 2021). Should the governmental team uncover that the contractor did not disclose information that could lower the costs, they may ask for a money return of the sum.
Therefore, there are distinct differences between negotiating contracts with the federal government and personal negotiations. In the case of the former, the contracts can take three fixed terms, and any form of alteration from this format is limited by the regulatory mechanisms. In other words, under T&M and CPFF, all risks are carried by the government, whereas under FFP, the risks are transferred to a contractor. However, personal negotiations are mainly free of these restrictions, which is why risk distribution can be more even. Subsequently, the first major skill of negotiation in regards to the federal contracts is to establish a starting bid by requesting more than one really expected to acquire (Dawson, 2021). For example, when the risks are on a contractor, such as FFP contracts, one should demand more funds than the minimally needed to create a buffer for unexpected occurrences. The second important skill is to create a reasonably large negotiation range, where one can gradually compromise to a good point because it creates a distance to fall back when the opposing party applies pressure on the terms of a contract.
Conclusion
The negotiation process is challenging for any business venue, but it can be made accessible, efficient, and profitable with preparations and a thorough plan. Negotiations are more complicated when writing a contract with an industry insider or the federal government, each carrying unique risks and nuances. Nevertheless, there are ways to handle these challenges to ensure that the negotiated contract fulfills both sides’ demands, leaving everyone satisfied with the result.
References
Dawson, R. (2021). Secrets of power negotiating. Red Wheel/Weiser.
Geiger, I. (2017). A model of negotiation issue-based tactics in business-to-business sales negotiations. Industrial Marketing Management, 64, 91-106.
Nash, R. C., Schooner, S. L., O’Brien-DeBakey, K. R., & Edwards, V. J. (2021). The government contracts reference book: A comprehensive guide to the language of procurement. Wolters Kluwer.
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