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Week 5: The Award Phase - Discussion
Negotiating Case Study (graded)Read and review the "BBC vs. Info R Us" Case located in Doc Sharing, let's discuss the following questions:
· How should Dan, as the contract manager, prepare for his negotiating session with BBC? How does this relate to the negotiating assignment?
· What if Bennie ignores Dan's recommendations during the negotiation with BBC? How does this relate to what you learned in the negotiating assignment?
· What impact will company politics have on this negotiation?
· What risks exist for Dan at this point? How does this relate to what you learned in our negotiating assignment?
Also, consider if you have been in a similar situation and how you handled the situation. Did you use any of the best practices discussed this week in that negotiation?
Responses
Response / Author / Date/Time
• How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Anthony Mayo / 5/27/2012 1:27:05 PM
I really like Dan’s idea of “trying to accommodate” BBC where possible, given that BBC has underbid the project over the three years that Info R Us has worked with them. It’s a sign of good will to try and accommodate. Additionally, Dan noted that BBC has consistently sought out discounts even after underbidding; I view these circumstances as serious. Perhaps BBC can’t afford a more expensive vendor or is having cash flow issues. The fact that “Info-R-Us” has established them-selves with BBC, over a three year period, their product and service familiarity could provide a leveraging opportunity for the Info-R-Us company. Given that Dan wants to keep the BBC contract, it seems that he should operate fairly and go into negotiations from a value-added standpoint, highlighting past and current performance, seeking an honest discussion of circumstances. Such an approach will still provide the room for a mutual profit discussion and could reveal information that leads Dan down a more creative approach.
For example, competitors with Info-R-Us may be able to match Dan’s price offering but they would not have the history of performance or ongoing performance measures that could be incentivized within a newer business model. The pricing issue may offer some room for negotiations in overhead if a lower price has to be sought in exchange for an extension of the current contract terms, etc. In essence, I think that an established history should carry some unspoken leveraging advantages that perhaps would not be available to newer vendors. During negotiations risk is always involved despite one’s position. I therefore think that Dan’s strategy should include some pricing incentives that are tied into the current existing business model as a potential to extend his current contract. Relying upon business history will provide wiggle room for cost adjustments that could be offset in overhead if needed;I would travel that avenue as the goal should be to retain the current client.
RE: • How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Professor Gordon / 5/29/2012 10:37:14 PM
Anthony,
What about Bennie's view?
All the best,
Robert
RE: • How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Ruchi Galande / 5/30/2012 7:56:14 PM
According to my understanding Bennie is considering BBC will shop around other vendors also before taking any decision about Info R Us. He knows the market prices are lower than the Info R Us and don’t want give any chance to BBC to think about outside vendors.
His plan is less price will attract the BBC and they can agree to have same delivery schedule. Although he understand the risks of less price and considering the no change id delivery schedule will be helpful to Info R Us to make profit.
RE: • How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Teanna Soule / 5/30/2012 9:01:42 PM
It appears that Bernie, although keeping in mind that a profit must be made, is not taking the risk BBC is posing into view. Just because a program comes in on schedule doesn't mean the product is what the customer wants, quality wise. Likewise, bidding a low price with high risk of overrunning not only puts Info R Us at risk of losing profit but also puts the brand at risk of poor press of ideas like bidding low for the business but overruning a budget. Ultimately, the company should try to hold their ground, if they want a lower cost, without having a meaningful estimate to support a lower cost (i.e. lower cost of materials, improved productivity = less hours required...) then negotiations to remove scope should be considered. Bottomline is that if BBC can't afford a product, Info R Us isn't going to give it away.
RE: • How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Latosha Smiley / 5/28/2012 11:13:14 AM
BBC wants delivery of the product earlier then originally expectedand with larger discounts. I agree with you Anthony, the fact that BBC is seeking a cheeper vendor or steeper discount may indicate that the company is in financial trouble. The fact that they have been conducting business with BBC for three years places the company at an advantage. However Dan is a little cocky in my opinion. His overconfidence in accomplishing the desired task at a quicker pacewith limited financial resources may result in project termination. Dan is not willing to consider his companies needs throughout the negotiation process or the fact that BBC lacks proper planning skills which has previously lead to higher costs than planned. In efforts to make a profit Info R Us must consider BBC's previous performance. In efforts to enter into negotiation both Dan and Bennie must be on the same page. After reading the case study they do not agree with what needs to be done throughout the negotiation process. If they can not come to a common understanding the contract may fail to go through or Info R us may not be able to pull through with their end of the negotiation.
RE: • How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Anthony Mayo / 5/28/2012 11:34:12 AM
Excellent synopsis Latosha as I think that you hit the crux of the “disconnect” between both companies. I think that Dan has a sense of what he is seeking within his proposed negotiations with BBC. It’s always easier to renegotiate a bid, contract or terms of a contract after a bidder and contractor have laid the groundwork of what’s required for both entities. The existing contract and relationship has fostered that process.I would advise Dan to believe BBC’s issues of cash flow and pivot his negotiations from that standpoint, coupled with the needs of his firm, and his desire to continue his firm’s business relationship with BBC. Trust has been laid within the foundation from the currently existing contract and should be built upon and described more fully through an honest assessment and fleshing out of corporate needs; the new Pre-award process will permit that process. These are solid tools for the negotiation process for both companies.Knowing the tools that are accessible, reliable and which have been winning strategies can make the difference within a re-negotiation.Info-R-Us has some concrete needs that can be tooled into honest negotiation tactics that can leverage a successful strategy with their current client BBC but I think that trust is foundational to these discussions.
RE: • How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Latosha Smiley / 5/29/2012 9:09:27 PM
A Mayo,
You are RIGHT!! The companies have already established a level of trust among them building a contract based off the existing relationship would be easy, BBC must not feel like their needs are not being met while at the same time Info R Us need not make promises they may not be able to keep in efforts to land the contract. The bottom line is financial gain!
RE: • How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Dennis Granlund / 5/29/2012 7:49:24 PM
I agree and have seen overconfidence and the feeling that they can do no wrong lead to failure too many times. You have to focus on the task , scope and value of the contract.
How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Levonde Jones / 5/28/2012 4:44:43 PM
How should Dan, as the contract manager, prepare for his negotiating session with BBC?
Dan needs to focus and stick to an approved business plan. Dan should NOT lower the price. Dan needs to communicate with Bennie before the meeting with BBC, to come to an agreement to resolve negotiation disagreements.
RE: How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Cynthia Mcgowan / 5/30/2012 5:20:23 AM
I agree with you Levonde, I think that it would benefit Dan and Bennie to consider this contract modification as critically as it was considered the first time that the contract was negotiated. And, the same amount of analysis should go into it. They should be using the best practices, one of which is that they should develop a solid and approved team negotiation plan; which means that they need to negotiate with each other and determine were each of their standings measure up with the goals of the organization. As a part of this, they will have to determine if the risk of lowering the price will put them in a position to have to undercut on quality just to continue to make a profit later, which could hurt them more in the long run.
RE: How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Martial Yao / 5/30/2012 5:59:59 PM
Dan knows very well the other party and he thinks that Info R us will have more and more difficulties to perform the contract if they don’t pay attention to details. Since three years, BBC is pushing them to offer larger discount; reduce the profit again is not a good idea for Dan.
But Bennie, the new sales manager, has his own idea and does not want to listen too much Dan; I disagree with his attitude; he needs to understand very well the whole image and takes into account Dan’s view.
RE: How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Cynthia Mcgowan / 6/1/2012 6:47:34 PM
I agree with you martial, I also think that Bennie may have done his analysis based on data that does not include the "actuals" from past experiences that Dan has had. Bennie also seems to be focused on only the short term goal of retaining the contract, and not looking out for the long term missions and goals of the organization.
RE: How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Lorenzo Welch / 5/30/2012 11:19:45 PM
I think Dan has done his research he has worked the contract for 3 years is well knowledgeable on financial status of contract. He clearly knows the other party and wanted to give Bennie somebackgroundinformation before they started negotiations. If Beenie, ignores Dan the company could lose financially offering a a low bid. Politically Dan and Beenie sounds like they need to meet to discuss strategy fornegotiations they are not on the same page.
RE: How should Dan, as the contract manager, prepare for his negotiating session with BBC? / Jennifer Weaver / 6/1/2012 9:14:57 AM
I agree that it is critical that these two get on the same page with their strategy and approach with this negotiation. There is a potential that money could be lost if both individuals do not understand the other approach and I think this might also lead back to the importance of best practices and strategy definition.
RE: Negotiating Case Study / Anthony Collins / 5/28/2012 9:25:06 PM
Modified:5/28/2012 9:27 PM
Dan should take a closer look at Bennie’s suggestion (lower price but control over the schedule) and compare to his plan (not budging on the price) and see if there is any room for compromise. However, since Dan has greater experience working with BBC, he probably knows what he is talking about but since he has already used that argument, he will have to show Bennie on paper why he is right or where there is room for compromise.
Do this and he will have gained Bennie’s respect and will find that future negotiations with Bennie will come more from a position of strength.
I don’t think that Bennie ignoring Dan’s recommendations will do either he, Dan, or the company any good. He is staking the company’s viability of retaining such a valuable account on emotion. He is new to the situation and knows too little about the account to just discount Dan’s opinion on the matter. After all, it is predicated on a wider experience base.
Dan may could have considered a wiser approach in which he utilized the win-lose negotiation strategy in which he concealed his own position/interest, revealed Bennie’s position/interest, and somehow weakened his resolve to the point that Bennie willingly either accepted his position on the key issues or at least modified some of his positions.
This strategy to be used of course if there is no way to implement a win-win negotiation strategy. Winning or losing a negotiation can just be a matter of one’s perspective. In order to find out, one has to compare the situation outcome to whether you got all that you wanted or how close you got to your best or worst case scenario.
(World Class Contracting, 5th Edition. CCH p. 153).
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RE: Negotiating Case Study / Renee Gordon / 5/30/2012 2:16:06 PM