NASPO recently held the REACH (Regional Education and Connection Hub) Conference in New Orleans, Louisiana. 270 state members representing 47 states and the District of Columbia came together to participate in the first “super regional” conference in NASPO’s history, bringing together the Southern, Eastern, Midwestern, and Western Regions. The event was filled with educational and professional growth opportunities that expanded NASPO members’ support network into all four regions. In this series of blogs, NASPO staff will share key takeaways and highlights from REACH’s expansive programs agenda.
One conference. One session. Many lessons to be learned. Getting the best value out of contracts was a main learning objective during one of the REACH General Sessions. Developing a negotiation strategy to aid in accomplishing that goal was another one. Continue reading to find out what our members learned during this session, and how to become a more successful negotiator!
How do you create a path to success when negotiating? This was the overarching question at one of the NASPO REACH Conference General Sessions with speakers and NASPO Members representing the District of Columbia (DC): George Schutter, CPO; Wil Giles, Chief Contracting Officer; and Jim Pearson, Chief Learning Officer. The ability to negotiate well is a critical skill to have in the field of procurement, and the goal of any negotiation is to get to, in Mr. Schutter’s words, a ‘meeting of the minds,’ as well as getting value for both parties involved. Easier said than done, right?
The fundamental rules of every negotiation are the same. The challenge is being able to ensure that the negotiations result in value for each party so that an agreement can be made. Below are three tips shared by the team from DC to help prepare you and your staff for a successful negotiation:
- Pick a great team – A successful negotiations team requires a mix of skills and defined roles. These roles include:
- Lead negotiator – to conduct primary discussions;
- Internal information specialist – someone who has a thorough understanding of user requirements, technical needs, prices, usage volumes, etc.;
- External information specialist – one who understands the supplier situation, supplier competition, and market factors;
- Strategist – one who understands strategy and provides support in conducting negotiating tactics
- Facilitator/Recorder – someone who provides detailed documentation of all discussions, agreements, and unresolved issues
In addition to roles and responsibilities, the speakers also suggested preparing a carefully scripted response list to anticipated supplier questions so that the entire team is on board and consistent with their responses. Think carefully about which questions are appropriate to answer and to maintain a level playing field of information.
- Develop a Negotiations Strategy – One thing that should be done before developing any negotiations strategy is to execute a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of your department/agency. A SWOT analysis shows your state’s specific position in the market and informs how you should approach it. Understanding your strengths and weaknesses before you go into a negotiation will yield better results. You should also understand how the supplier views your state. A key element in developing a negotiations strategy is to understand the supplier’s objectives and use that information to determine ways to make them see your state as an opportunity. Considering these objectives can allow you to focus the strategy on tactics and goals. Last but not least, a good negotiations strategy always makes developing positive relationships between all parties an objective. These relationships should be established before negotiations begin and should be built on trust, respect, and consistent with a collaborative attitude.
- Establish the boundaries – One of the biggest challenges during negotiations is moving suppliers to the Zone of Possible Agreement (ZOPA), or in other words, the bargaining range. Before doing so, you must establish three things:
- Most Desired Outcome (MDO) – This is the most desired price you will pay for a product/service; if you reach an agreement at that price, then you got exactly what you wanted;
- Least Acceptable Agreement (LAA) – This is the highest price point that you’re willing to go for a product/service;
- Best Alternative to Negotiated Agreement (BATNA) – This is the alternative course of action a party can take if negotiations fail and an agreement cannot be reached. A party should not accept a worse resolution than its BATNA. BATNA can be utilized as a point of leverage in negotiations, however, negotiators also need to be aware of the other party’s BATNA and identify how it compares to what they are offering.
Both parties should contemplate each other’s MDO, LAA, and BATNA before everyone sits down at the proverbial table to discuss solicitations. Understanding the ZOPA is critical for a successful negotiation; within this zone, an agreement is possible. However, if you or the supplier is outside the ZOPA, no amount of negotiation will yield an agreement.
The presenters from DC gave the REACH attendees much to think about when it comes to effective procurement negotiations. We hope these tips can be helpful to you and your team in your next negotiation!
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