What Does it Mean to Negotiate a Contract?

This series began discussing fostering relationships through contracting. This idea underpins all discussions about contracting because if you keep the relationship in mind while conducting contract negotiations, where both sides are heard and concerns are addressed, then there is a greater likelihood that the outcome will be beneficial to both parties.

In the previous post, when I talked about contract specifications, I focused on delving into a thought process about the needs of the agency. I talked about thinking through the process of receiving the contracted service and of working with the contracted vendor. The side of thinking about and writing contract specifications is the thought exercise that goes into defining your agency’s need for the service. The contracted vendor should be doing the same on his or her part.

The next step is to meld those two definitions of the service into a single description of the service and to come up with a contract specification that meets the needs of both parties. The format for bringing the needs of both parties together is a contract negotiation. There are four key steps to successful contract negotiation.

1. Prepare. A solid negation starts with preparation, knowing what your agency wants and needs from the contracted vendor. Knowing what extras would be nice to achieve. Knowing where the agency can give something to the vendor and where the agency can ask for something in return. To be successful, it is imperative that the person entering the negotiation knows the needs of the agency and has authority to act on behalf of the agency.

2. Involve other agency staff. Clear backup for the negotiator from other agency staff is also crucial. Legal counsel, risk managers, accounting professionals and others can be used to bring their expertise to the negotiation. They can also be used to take on different roles in the negotiation to help move through sticking points in the discussions.

3. Listen to the vendor’s needs.  Good negotiations also involve listening to the needs of the vendor. Forcing the agency’s agenda, giving too little, failing to understand the market conditions can put vendors in a situation where they feel forced to agree to or choose to acquiesce to contractual terms that they know they will not be able to meet or to meet with a high level of performance. This sets up problems in the relationship.

4. Find the win-win. As government agencies we are contracting out a service because we cannot or choose not to perform it in house and it is important to remember that fact. We as contract managers are never provisioners of the service. We rely on the vendor for that. Our reliance on the vendor means that a balanced relationship is crucial for our agency’s success. Well thought out contract negotiations will help to foster a positive relationship with the vendor and to produce the best outcome for the agency.

Successful contract negotiations end in a win-win, not in simply a win for the agency. Vendors will perform best when the proper incentives and profit motives are available to them and they are able to operate in accordance with the standards and traditions of their industry. Look for opportunities to equalize the relationship and to build in positive outcomes for both sides.

Carolyn Ninedorf is part of the GovLoop Featured Blogger program, where we feature blog posts by government voices from all across the country (and world!). To see more Featured Blogger posts, click here.