104 - Introduction to Negotiations

Question 1

Best and Final Offer (BAFO)

Answer 1

The final proposal submitted after negotiations are completed that contains the proposer’s most favorable terms for price

Question 2

Best Alternative to Negotiated Agreement (BATNA)

Answer 2

Refers to an alternative action to be taken if negotiations are unsuccessful and do not result in an example

Ex: If negotiations were unsuccessful, the a BATNA may extend current contract and stipulate time for rebids at a later time

Question 3

Clarification

Answer 3

A clear understanding of the product/service/system/project to be deliver when negotiations are complete; can help parties fine tune a project deliverables

Question 4

Lose-Lose Negotiation

Answer 4

Where neither side is able to come to a mutual agreement and, as a result, neither side reaches their goals

Question 5

Scope

Answer 5

AKA Scope of Work

Area in an agreement where the work to be performed is described, including deliverables, milestones, reports, and timelines

Question 6

Market Analysis

Answer 6

Process of analyzing prices and trends in the competitive marketplace to compare product availability and offer prices with market alternatives and establish the reasonableness of offered prices

Question 7

Negotiation

Answer 7

A process between buyers and sellers seeking to reach mutual agreement on a matter of common concern through fact-finding, bargaining, and persuasion

Question 8

Price

Answer 8

Total amount, in money or other compensation, to be paid or charged for a commodity of service

Question 9

Principled Negotiation

Answer 9

A method of negotiations that focuses on reaching an agreement that serves the interests of both parties

Question 10

Terms and Conditions

Answer 10

Standard boilerplate language used to apply to clauses and rules specific to bids and offers formally solicited that may become incorporated into the final contract

Question 11

Win-Lose Negotiation

Answer 11

When what is gained by one party is lost by the other, with parties effectively competing with each other in order to walk away with the most

Question 12

Win-Win Negotiation

Answer 12

An outcome that satisfies the interest of both parties- it is the ideal negotiation and is obtained through successful communicating and agreeing on objectives

Question 13

Importance of Negotiation

Answer 13

Negotiations ensure the state is getting the most values out of the final proposal selected.

-allow the state and the supplier the opportunity to clarify finite details and expectations prior to the contract formation process

Question 14

The Four Primary Reasons for Negotiation

Answer 14

1. Clarification
2. Scope
3. Price
4. Terms and Conditions

Question 15

Who negotiates?

Answer 15

The authority to negotiate typically rests with the Chief Procurement Official; however, the best practice for negotiation is to use a team.

These typically include:

Legal
Procurement
Subject Matter Expert
Finance
User Agency Representative

Question 16

When to negotiate?

Answer 16

There are typically three opportunities during the procurement cycle when negotiations may be needed.

Development of Contract as a Result of a Solicitation - During contract development you can negotiate for deliverables, timeframes, performance measures, liquidated damages, pricing, etc.

Contract Renewal - At this point, there is a mutual opportunity to discuss services, deliverables, responsibilities, and pricing.

Contract Review - A contract review could also be precipitated by budget, supplier performance, program needs, or other circumstances that have an impact on existing terms and conditions.

Question 17

Where do negotiations take place?

Answer 17

Your Office - This gives leverage to the purchasing entity. Here, the purchasing entity is comfortable and has resources readily available.

Neutral Site - When entities don’t want to give one side or the other a homefield advantage, the best alternative is a neutral location. A neutral location can set the tone for a win/win outcome by demonstrating goodwill and fairness.

Supplier’s Office - Negotiating on the supplier’s home turf is the least preferable option unless there is a need to see the supplier’s site. Here, the purchasing entity is least comfortable and elements such as diminished confidence and travel fatigue can be leveraged to the supplier’s advantage.