Whether the aim is to conclude a contract at the end of a tender, to resolve a dispute during the execution phase, or to readjust the terms of an agreement, it all goes through negotiation. This discipline cannot be improvised: it requires rigorous preparation and a structured method if the intended objectives are to be reached.
This article sets out a few good practices that can be put in place by the contract manager, or more generally by anyone involved in that often-dreaded moment that is the negotiation.
Defining your method
To organise your thinking before a negotiation, the first essential step is to define and follow a method. There are various methods for framing that preparation. We might cite, for example, the A.T.R.O.C.E. method (yes, its French acronym does live up to its name). This method guides you through preparation in six essential steps:
- Actors: who are the internal and external participants?
- Terrain: what are the key subjects of the negotiation (price, schedule, risks, etc.)?
- Relative power: what is the balance of power between the two parties?
- Objectives: what are your main objectives, and what might the other party’s be?
- Comparing the objectives: where do your objectives and theirs converge, and where do they diverge?
- Events: what are the key phases of the negotiation, and what incidents might arise?
Through this approach, which we set out below, it offers a structured framework that maps out the preparation effectively.
Identifying the actors: who takes part in the negotiation?
Every negotiation involves a range of actors playing distinct roles, which have to be identified in order to prepare the strategy properly:
- Internal actors: these people are directly present during the discussions. They may be project managers, buyers, lawyers, finance staff or technical experts. Their task is to defend the interests of the contract and of their organisation.
- External actors: although absent from the negotiating table, some actors exert a decisive influence and apply pressure. They may be senior management, clients, strategic partners, and so on.
In this first step, it will be important to understand not only who these actors are, but also what their motivations, expectations and possible constraints are.
Anticipating their positions allows you to refine your arguments and to prepare responses suited to their possible objections. Knowing the external influences also helps you foresee any interference or support.
Defining the territories of the negotiation
Discussions are never limited to a single subject. A negotiation covers several issues, or “territories”, which need to be clearly identified:
- Price: what pricing structure will apply? What adjustments are possible if raw material costs or lead times vary?
- Schedule: what are the critical deadlines? Is there any flexibility to minimise liquidated damages?
- Quality and performance: what levels of warranty and performance are required? What standards must be met?
- Risks: who bears responsibility if something goes wrong? Which clauses cover unforeseen events (force majeure, supply disruptions, etc.)?
- Other contractual issues: how long will the agreement run? What are the termination arrangements?
So many questions to be assessed in order to rank your priorities. For example, in a pharmaceutical project, compliance with safety criteria and regulatory standards may take precedence over budget considerations, whereas in construction, the schedule may become the critical issue.
Analysing the balance of power: a necessary equilibrium
Negotiation rests on a relationship of interdependence. Each party needs the other to reach its objectives, but the balance of power can vary from one situation to another:
- Balance: if the two parties have comparable strength, the negotiation can take a more collaborative approach. This is often the case in long-term partnerships.
- Imbalance: if one side largely dominates, the other has to find ways of strengthening its position.
The balance of power is not only an objective reality: it is also a perception. What your counterpart believes about your position matters as much as what you know to be true. If you are seen as “reluctant to negotiate”, your room for manoeuvre will automatically shrink.
To strengthen your position, it can therefore be useful to:
- Prepare solid facts and convincing arguments.
- Be transparent about your strengths, without revealing too much about any “weaknesses”.
- Mobilise internal or external support to back the credibility of the arguments and of the negotiators.
Setting and comparing the objectives
A well-prepared negotiation begins with defining the objectives, which must go hand in hand with an analysis of the other side’s objectives and of the limits you set yourself. This step makes it possible to anticipate the possible zones of agreement and the points of friction.
- Our objectives:
- What are the non-negotiable items, for example a “floor price” or an immovable deadline?
- On which subjects are we prepared to make concessions?
- Rank your priorities: cost, quality, schedule or risk management.
- The other party’s objectives:
- What are their imperatives? For example, a supplier might seek to protect its margins, even at the cost of reduced volumes.
- Anticipate and identify what they might be willing to give up in exchange for a gain on other points.
A considered comparison of the objectives helps define the points where a compromise will be possible and identify the potentially contentious subjects. This can be illustrated, for instance, in the context of remobilising a supplier on site. Your priority might be the schedule and the intervention lead times, whereas your partner will no doubt favour the financial terms of a fresh mobilisation of its teams.
Defining the stages of the negotiation
A negotiation should be approached as a project in its own right, with clear stages, defined communication lines and clearly allocated responsibilities. This structuring is particularly useful in complex settings where several issues intersect.
To that end, the process must involve the right people and the right data, and be understood by the stakeholders:
- build a multidisciplinary team: involve the necessary experts (lawyers, engineers, buyers, finance staff) to cover every critical aspect.
- draw up a schedule: identify the key phases of the negotiation, the pauses required, and the deadlines to be met.
- adopt a structured methodology: a framework such as RACI (Responsible, Accountable, Consulted, Informed) helps clarify roles and responsibilities and mobilise internal resources.
Anticipating the unexpected, such as new demands or unforeseen objections, will strengthen your ability to adapt during the discussions.
Conducting the negotiation and closing effectively
Once the preparation phase is over, the negotiation breaks down into several key moments:
- opening: presenting your objectives clearly and concisely to lay the ground for a constructive exchange.
- discussion: through active listening and exchange, it becomes possible to identify the other party’s priorities.
- confrontation: this means working through the differences while looking for compromises.
- closing: formalising the agreement reached and preparing the transition to execution.
On this point we refer you to our previous article on integrative negotiation.
Conclusion
In demanding sectors, a successful negotiation rests on rigorous preparation and a clear method. By drawing in particular on a contract manager’s negotiation experience, or by developing those skills in-house, any organisation involved in a negotiation and sufficiently prepared can maximise its chances of success while laying the foundations for a fruitful and lasting collaboration.