Towards Building the Gillette Stadium: Negotiations Between the New England Patriots And

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Towards Building the Gillette Stadium: Negotiations between the New England Patriots and the Commonwealth Of Massachusetts

By

TALAL KANOO

Business Negotiations

[12/07/2009]

Introduction

Business negotiations involve dealings among parties intending to reach an agreement or commitment to the course of an action. Essentially, negotiations consist of processes, behavior, and substances that explain how the parties negotiate, and what the parties negotiate over respectively. Other paradigms on negotiations allude to the strategies, process and tools as well as tactics inherent in the process. Strategy refer to top goals of the negotiation process while processes and tools consist of steps followed in the process and the roles of preparing for and negotiating with other parties. On the other hand, tactics refer to detailed statements, actions, and responses to other party’s statements and actions. Opinion and influence also noted as characteristics in this model of looking at negotiations.

In negotiations, preconditions must be met. These will always include knowledge of the existence of and an adequate mutual recognition and respect to the other party, interest of achieving an outcome, interest in entering a negotiation, a basis of communication such as shared language and the ability to meet and the ability to meet the demands or the outcome of the negotiations. In bilateral as well as multilateral negotiations, there may be a principal or an agent for a legal entity such as a corporation or for a human principal. Some negotiations are straightforward and quick should the parties wishes be adequately satisfied by the first proposal but can also drag if proposals and counter proposals are not consensual. Collaborative processes give rise to 'win-win' situation while contentions herald negotiations in which objectives are compromised in the interests of reaching an agreement. In such scenarios, some degree of competition among the parties is inevitable. Other negotiations expose parties to win-lose situations or, in the context of game theory or operational research, a ‘zero-sum game’.

In this paper, an analysis is done of the negotiations that gave rise to the construction of Foxboro Stadium. Principals in this negotiation were the New England Patriots and the Commonwealth of Massachusetts, headed in first part by Robert Kraft and in second part by Thomas Finneran. For it’sextend span before coming into effect, Kraft engaged a number of strategies that have captured the attention of most scholars of business negotiations. The paper describes the life of the negotiations after which an analysis of Best Alternative to a Negotiated Agreement (BANTA), reservation points, and influence factors, style of the negotiators, as well as the norms, and biases in the negotiation are presented.

Building of Foxboro Stadium

For a long time, New England Patriots were suffering in poor facilities of the Foxboro Stadium. The smallest stadium in the NFL was poorly constructed. It continuously fell into disrepair. Its benches were unsuitable for seating during cold weather and the parking lot was disorganized and dirty. It remained unprofitable. The team fell into large debts, and could not recover even after attempts by team executive Chuck Sullivan to bring music acts to the stadium in the hope of earning more profit for the team. Tickets sales failed and the team’s indebtedness it a high of $126 million (Randy, 2005). Even after the stadium and the team were sold to new owners, it was becoming apparent that profitability would return only if a new stadium was built and placed under astute management. It is the only way too that the Patriots would stay on at Foxborough. In sensing this need, other cities in the New England area such as Boston, Hartford and Providence started showing interest in building new stadiums on which to take the Patriots to and away from Foxborough.

The first major proposal for hosting the Patriots came in September of 1993 from Lowell Weicker, the then Governor of Connecticut. He suggested to the Connecticut General Assembly the need to build a stadium at Hartford to attract the Patriots. To that effect, Connecticut General Assembly passed a Bill on 27 September 1993 (Randy, 2005).At the same time in Massachusetts, there was a proposal to develop a “Megaplex” in Boston to cater for the Patriots, a number of baseball fields, and a convention center. Then Boston mayor Tom Menino and Patriots owner Robert Kraft wanted the stadium built in West Roxbury whereas Governor William Weld had wanted it built in South Boston. However, there was overwhelming resistance from neighborhoods at both sites (Boston Business Journal, 1997 Feb).

Menino backed out of the proposals for fear of losing in the reelections. Kraft, however, kept on his plans to finance the building of the stadium in South Boston. In the plan, he was to pay for the stadium’s construction. Resistance from neighborhoods and displeasure from Roxbury and Weld made Kraft to abandon all plans for the stadium. In January 1997 however, Kraft began negotiations with Providence mayor Vincent Cianci in an attempt to build a stadium there and relocate the Patriots to Providence at a cost of $250 million and with a seating capacity of 68,000 people. The construction bill would have been footed through income taxes, surcharges on tickets and public bonds. However, opposition again came from neighborhoods. This proposal again fell through few weeks later.

The team revealed its new plans of building a new stadium in Foxboroin September 1998. This would keep the team at Massachusetts. In the proposal, Kraft would fund the construction of the state alongside the state of Massachusetts. More competition came from Connecticut towards the same venture and so Kraft again signed an agreement intending to move the team to Hartford on 18 November1998. The proposal would cost in excess of $375 million and would construct a 68,000 seats stadium complete with 60 luxury boxes. The residents again challenged the project. Coupled with site problems, this caused a flop in agreements about details between Kraft and Connecticut. Problems with the site were discovered, and an agreement could not be reached regarding the details of the stadium. This failure to agree enraged then Connecticut governor John G. Rowland, who lobbied Kraft so hard but to no benefit.

After exhausting all possible avenues of relocation in 1999, Kraftofficially declared that the team would remain in Foxborough after all. This was the start of negotiations and eventual construction of Gillette Stadium. The latest proposal would provide $72 million in state capital for land, infrastructure, and roads for Kraft’s privately built facility. Additionally, the area around Foxboro Stadium would be turned into a family entertainment destination which could offer an NFL pavilion, a NASCAR speedway, outlet shops, waterslide parks and horse racing. There were doubts however, of where money would come from to pay close to $2 million plus in debt service that would result. Additionally, athletes would be taxed on their income earned during away games in their state in the new plan and the money channeled to the new Patriots stadium.

Kraft needed the state to buy land around the stadium for him to develop (Sports Business Daily, 2009). In his negotiations, he wanted to secure improvements to the roads and area by the state as well as favorable tax treatment. The Commonwealth was divided between several proposals, and the House, Senate and Governor all had differing opinions on the value of keeping professional football in Massachusetts.In a Bill that proposed a $50M in state bonds, $30M to improve infrastructure and $20M for the purchase of 316 acres around Foxboro Stadium to enable Kraft to develop the stadium. In a way, the legislators had Kraft’s work cut out for him. However, chief among those who were opposed to Kraft’s building of a new stadium at Foxborough was the House Speaker, Massachusetts Tom Finneran. Finneran has proposed that a new Foxborough site be built adjacent to the old CMGI Field to retain the Patriots in Massachusetts. In his incessant opposition, he vetoed a $70 million measure intended to keep the Patriots in town. He is in history referring to Kraft as a whiney millionaire. His opposition to a private football stadium being financed by public dollars was not his alone. He was more supportive of a lease upon which a comprehensive legislation restricting the authorization of the Massachusetts Port Authority in an attempt to muzzle its environmental powers of granting leave to such a project as Krafts. In a way, Kraft backed down on his earlier demands and decided to build the $200 million stadium with own money. All he asked for a lease on public land. This may have been the most modest transaction and attracted the speaker's inflexibility.

In all sites that Kraft attempted to secure for the Patriots including Foxborough, residents too displayed what was historically referred to as anti-Kraftism or anti-footballism. Political and negotiations persisted that tested every party’s strategies was at display. On his part, Kraft could not agree to a pact where the state was not able to provide enough developable land that would make the stadium economically possible (Sports Business Daily, 2009). What negotiation strategies and factors that drove either party into this final agreement are analyzed below.

Analysis of the Negotiations

Parties to the negotiation

Principal parties to this negotiation were New England Patriots, being party of first part and the Commonwealth of Massachusetts being party of the second part. Agencies to these parties were in the persons of Bob Kraft for party of the first part and Tom Finneran for party of the second part. The negotiations also had third parties or beneficiaries with interests. In the first part were Kraft Sports Group, a subsidiary of the Kraft Group whose CEO was Bob Kraft, the New Patriotic Teamwhich badly needed an operational stadium and a section of legislators and citizens of Massachusetts. In the second part was the Legislative Assembly with citizens interests at heart and theneighborhoods worried about the effects of the stadium on their lives. Other interest parties in the engagement included the Governor of Massachusetts, the Mayor of Boston, and other elected officials of the state.

Best Alternative to a Negotiated Agreement (BANTA)

In business negotiations theory, the Best Alternative to a Negotiated Agreement (BANTA) refers to the course of action that a party in a negotiation takes if a negotiation in which he engages fails without a probable agreement in the offing. This is the primary focus in every successful negotiation. As a strategy to attaining a greater or advantage in a negotiation, a party must never accept a worse resolution than its BATNA. These requires an acute valuation of deals and all its considerations such as relationship value, the likelihood of the other party living up to a different side of the bargain and the time value of money, etcetera. For negotiators therefore, this is the point of leverage in their negotiations. Although alternative options should evaluated easily, the understanding of which alternative corresponds to a party's BATNA is often not invested. BANTA options should nevertheless be real and actionable in order to be of value (Sports Business Daily, 2009). For lack of time, many options taken as BANTAs usually fall short of meeting these criteria.

For the case in point, the Patriots through Kraft and the Commonwealth through Finneran had various options as their BANTAs. In this, the Patriots opted to accept lease for the extra land for development, develop the infrastructure, and ask the state to charge taxes for the team’s use and for maintenance of the stadium. In this way, he would be able to recover the costs of construction while still maintaining ownership of the stadium. The Commonwealth, in an attempt to secure Kraft’s intention to retain the Patriots at Boston, as it eventually did, opposed funding a private stadium through public funds and insisted that rather than buying the land for such development, Kraft would do the same and expect maintenance of infrastructure by him. It also insisted that rather than asking for favorable tax treatment during construction or thereafter, the Kraft would recover his construction costs from charging for the usage of the stadium.

Reservation points

In business negotiations, a reservation point is that beyond which a party cannot accept a deal and so returns to transfix in the BANTA. Essentially, it is the qualification of a party’s BATNA and on which the next best alternative aside from negotiation is opted for. This is commonly referred to as the bottom line.Failing to have a reservation point essentially means one is engaging in a negotiation unwisely. A reservation point justifies the act of walking away to a better alternative.

Kraft had the intention of attaining the state’s approval to buy him land and develop the roads and infrastructure of the area as well as granting him favorable taxes to develop and maintain the stadium. On the contrary, Finneran felt that there was no need for the State to engage in a private enterprise and instead would build a new stadium adjacent to the old CMGI Field to retain the Patriots. Additionally, he opposed the use of public funds to develop private football stadium and supported the lease of land instead of buying it out for private development. The Commonwealth also insisted that environmental requirement for why neighborhoods wanted to hear none of such stadia development had to be addressed by Kraft.

The influence factors used by parties

Several factors influence the course of negotiations in many businesses. These include but are not limited to cultural background of the parties, the mindset and other psychological factors, negotiation styles, inherent and additional bargaining power of the parties, advocacy, and persuasiveness of the parties, as well as previous experiences in such negotiations. In the current case, both the primary and third parties employed a number of factors to influence the outcome of the negotiations.

As a party of the first part, Kraft used his capitalist mindset to pass a developmental agenda which he supposed would benefit the state while in actual fact, he was targeting the returns of such assistance. He was also strategic in using his economic leverage to convince the Commonwealth that he was the only and ready investor and with the best offer of all. In that way, he was able to sustain negotiations not only with the Commonwealth of Massachusetts but also with other authorities. Yet by finally giving way to the reservation point of the Commonwealth, he demonstrated an experience. He knew for sure that the neighborhood of other sites wanted none of his developments and so he willingly accepted the next best option his BANTA. As a party of the second part, the commonwealth (read Finneran) was astute and bully. He once proposed building a new stadium adjacent to Foxborough very sneakily to push Kraft into accepting to choose out of the public funding proposal. He was psychologically and physically aggressive about the option passing through the general Assembly and even had the courage to refuse the passage of a bill allowing funds to finance Kraft’s developments. In the course of the negotiations, he was able to secure additional bargaining power from the backing of other legislators who felt the agreements were out of place.

The third parties had their factors into the argument too. The neighborhoods steadily employed advocacy to voice their concerns over development of a stadium whose environmental consequences they were not adequately cushioned against. They employed the legislators and senators as their influential persons in this process and incorporated associations. The Patriots on the other hand employed threats of moving out of Boston, which they apparently knew was not welcome to Bostonians, to push for the renovation and development of Gillette Stadium.

Critique of the Style of the Primary Negotiators

The Speaker of the House, Mr. Tom Finneran was a fierce negotiator in this case. He was very objective and persistent in what he felt the neighborhoods wanted, too much to the point of annulling a legally passed bill. He was objective and seemed to have grabbed the details of the process. He was true to his principles and the Commonwealth’s wishes. He understood the wishes of Kraft. He must have wanted to prevent them at all costs to prove that the entrepreneur was being exploitative of taxpayers. However, Finneran was easily excited and emotional. These were visible biases to his approach in the negotiations.

On his part, Kraft was also strategic. He responded perfectly to the other party’s communications, detected, and interpreted the course of every negotiation. He must have gained a lot of experience from earlier negotiations so much as to suppress disadvantageous cues from the other party. He coped well with the conflicts and emotions from Finneran and was always in time to secure adequate backing from legislators over his course. He was also self confident and assertive and showed no aggression. Having known the potentiality of continuing in his initial proposals, he was able to assess the counter proposals and variations in interests of the other party and tactically retreat to an agreement. He was however uncompromising. This badly hurt his relationship with other political leaders of the state including Finneran. An example of his abrasiveness was when he joked that if the $30M legislation for infrastructural improvements got “micromanaged to death, then we won't be able to do it” and that he would revisit the Providence proposal if that became the case.