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Contract Negotiations “Skills, Tools, and Best Practices”

. Contract Negotiations “Skills, Tools, and Best Practices”. An Interactive Adventure into the Art & Science of the Deal!. By: Gregory A. Garrett, CPCM, PMP. Contract Negotiations – A New Book by CCH INCORPORATED. Key Topics of Discussion:.

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Contract Negotiations “Skills, Tools, and Best Practices”

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  1. . Contract Negotiations“Skills, Tools, and Best Practices” An Interactive Adventureinto the Art & Science of the Deal! By: Gregory A. Garrett, CPCM, PMP

  2. Contract Negotiations – A New Book by CCH INCORPORATED Key Topics of Discussion: • The New Performance-Based Buying and Selling Environment – The World We Live In! * Q&A - Exercise • Contract Negotiation Competencies – The Skills to Win * Self-Assessment Survey • The Contract Negotiation Process * Buyer & Seller – Best Practices

  3. Contract Negotiations – A New Book by CCH INCORPORATED The New Performance-BasedBuying & Selling Environment – The World We Live In!

  4. Cross-Industry Benchmarking Studies * From: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED 2005, pg. 2 (Center for Advanced Purchasing Studies (CAPS) Cross-Industry Benchmarking Report 2003)

  5. The World We Live In Performance-Based SupplyEnvironment SupplyDrivers • Pros • + New products and services • + Wider range of products and services • + More modular products and services • + Reduced prices • + Improved performance • + Faster product introductions • Cons • More complexity • Higher cost of integration • - Less reliability • - Accelerated pace of change • - Rapid Obsolescence • - Less personal contact • Growth of Internet architecture • Continued Growth of Voice/Data/Video wireless communications • Use of e-Marketplaces • Growth of Enterprise Applications for e-procurement, automated sales tools, and Customer Relationship Management (CRM). Technology • U.S. Govt. increased use of commercial buying practices • U.S. Govt. increased use of Past Performance as a major factor in Best Value source selection process • Increased competition • Increased enforcement of procurement ethics Regulation Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 7.

  6. NCMA, CMI, and ISM Studies (2000 – 2003) Show Need for Negotiation Skills • The NCMA, ISM, and CMI Year 2000 surveys showed for every 100 surveyed contract management/purchasing professionals, concerning their roles: • 90 indicate “more time sensitive” • 85 indicate “more responsibility” • 85 indicate “more team-oriented” • 85 indicate “more strategic” • 80 indicate “more use of performance-based metrics” • * Contract Management studies conducted by the National Contract Management Association (NCMA), The Institute for Supply Management (ISM), and the Contract Management Institute (CMI), 2000 – 2003. Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 9.

  7. CMI Year 2001 Study - Results • "Which metrics do you believe your organization will use in the next 3 to 5 years to evaluate personnel performance?" • The respondents Top 10 choices: • Business Judgment 6. Integrity/ethics • Decision making 7. Education • Problem-solving 8. Interpersonal Relations • Negotiation skills 9. Responsiveness • Customer service 10. Communications Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 10.

  8. Contract Negotiation Skills Gap Key Facts • Many of the Master Contract Negotiators in both the public and private business sectors, have retired, or retiring, or are retirement eligible by 2010** • Significant increase in the complexity of contracts and related projects *** ** Survey by Garrett Consulting Services, 2003 *** Center for Business Practices (CBP) study, 2002

  9. Exercise – Q & A • How much money (%) does your organization spend via e-marketplaces, procurement cards, e-auctions, and e-catalogs? • Is your organization using performance-based contracts with your customers and/or suppliers? • How important are contract negotiation skills to ensure business success? Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 12.

  10. Exercise – Q & A 4. How well do you negotiate? 5. Does your organization have the number and level of skilled master contract negotiators needed? Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 12.

  11. Contract Negotiations – A New Book by CCH INCORPORATED Contract Negotiation CompetenciesThe Skills to Win!

  12. The Contract Negotiator’s Competencies Model Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 14.

  13. Skills to Win: Self-Assessment Survey • Complete the 20 question – Skills to Win: Self-Assessment Survey (1 = Low Skills to 5 = High Skills) • Summarize and add-up your score on the survey worksheet (pg. 3) • Compare your result to the Self-Assessment Survey Scoring table Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pgs. 15-16.

  14. The Skills to Win: Self-Assessment Survey • I am a person of high integrity. • 1 2 3 4 5 • I always act as a true business professional, especially in contract negotiations. • 1 2 3 4 5 • I ensure all of my business partners and team members act honestly, ethically, and legally, especially when involved in contract negotiations and contract formation. • 1 2 3 4 5  • I verbally communicate clearly and concisely. • 1 2 3 4 5 • I am an effective and persuasive contract negotiator. • 1 2 3 4 5 Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 16.

  15. The Skills to Win: Self-Assessment Survey cont. 6. My written communications are professional, timely, and appropriate. 1 2 3 4 5 7. I am an excellent team leader. 1 2 3 4 5 8. I consistently build high performance teams, which meet or exceed contract requirements. 1 2 3 4 5 9. I am willing to compromise when necessary to solve problems. 1 2 3 4 5 10.  I confront the issues, not the person, in a problem-solving environment. 1 2 3 4 5 Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 16.

  16. The Skills to Win: Self-Assessment Survey cont. 11. I recognize the power of strategies, tactics, and countertactics and use them frequently in contract negotiations. 1 2 3 4 5 12. I am able to achieve my desired financial results in contract negotiations. 1 2 3 4 5  13. I understand various cost estimating techniques, numerous pricing models, and how to apply each when negotiating financial arrangements. 1 2 3 4 5 14. I understand generally accepted accounting practices and how to apply them when negotiating deals. 1 2 3 4 5 15. I am highly computer literate, especially with electronic sales tools, and/or electronic procurement tools. 1 2 3 4 5 Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pgs. 16-17.

  17. The Skills to Win: Self-Assessment Survey cont. 16. I am knowledgeable of e-marketplaces, vertical and horizontal trade exchanges, e-auctions, and how to use them to buy or sell products/services. 1 2 3 4 5 17. I understand the contract management process and have extensive education, experience, and professional training in contract management. 1 2 3 4 5 18. I have extensive education, experience, and training in contract law.   1 2 3 4 5 19. I have extensive education, experience, and training in our organization's products and services. 1 2 3 4 5  20. I am considered a technical expert in one or more areas. 1 2 3 4 5  Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 17.

  18. Skills to Win - Self-Assessment Survey Worksheet Questions # Self-Assessment Score (1-5) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Grand Total Score: _______________________________ The Skills to Win: Self-Assessment Survey cont. Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 17.

  19. Skills to WinSelf-Assessment SurveyScoring 90+: You have the knowledge and skills of a master contract negotiator. 80 - 90: You have the potential to become a master contract negotiator, after reviewing the specialized skill areas and determining in which areas you need to improve your skills. You are an intermediate contract negotiator. 65 - 79: You have basic understanding of successful contract negotiation skills. You need to improve numerous skills to reach a higher level of mastery of contract negotiations. You are an apprentice contract negotiator. 0 - 64: You have taken the first step to becoming a master contract negotiator. You have a lot of specialized skills areas you need to improve. With time, dedication, and support (education, experience, and training) you can become a master contract negotiator. The Skills to Win: Self-Assessment Survey cont. Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 18.

  20. Contract Negotiations – A New Book by CCH INCORPORATED The Contract Negotiation Process

  21. Contract Negotiations – A Complex Human Activity Successful contract negotiator must: • Master the art and science, or soft and hard skills, required to become a master negotiator • Possess the intellectual ability to comprehend factors shaping and characterizing the negotiation. • Be able to adapt strategies, tactics, and countertactics in a dynamic environment • Understand their own personalities and personal ethics and values • Know their products and services, desired terms and conditions, and pricing strategy • Be able to lead a diverse multi-functional team to achieve a successful outcome Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pgs. 53-54.

  22. Buyer’s Contract Negotiation Objectives • Acquire necessary supplies, services, and/or solutions of the desired quality, on-time, and at the lowest reasonable price • Establish and administer a pricing arrangement that results in payment of a fair and reasonable price • Satisfy needs of the end-user (customer) Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 55.

  23. Seller’s Contract Negotiation Objectives • Grow profitable revenue (long-term vs. short-term) • Increase market share within their respective industry • Deliver quality supplies, services, and/or solutions – achieve customer loyalty Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 55.

  24. Key Inputs Tools & Techniques Desired Outputs • Solicitation (RFP,RFQ, etc.) • Bid or Proposal • Buyer’s sourceselection process • Seller's past performance • ·Previous contracts • ·Competitor Profile Business Ethics/ Standards of Conduct Guidelines • ·Market and Industry practices Contract Negotiations – Essential Elements • Oral presentations • Highly skilled contract negotiators • Legal Review • ·  Business Case Approval • ·  Contract Negotiation Formation Process • Plan negotiations • Conduct negotiations • Document the negotiation and Form the Contract • Contract or Walk away Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 56.

  25. Contract Negotiation Process Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 61.

  26. Checklist of Buyer – Contract Negotiation Best Practices • (The Buyer Should: ) • Know what you want – lowest price or best value • State your requirements in performance terms and evaluate accordingly • Conduct market research about potential sources before selection • Evaluate potential sources promptly and dispassionately • Follow the evaluation criteria stated in the solicitation: management, technical, and price • Use absolute, minimum, or relative evaluation standards to measure performance as stated in your solicitation • Develop organizational policies to guide and facilitate the source selection process • Use a weighting system to determine which evaluation criteria are most important • Use a screening system to prequalify sources • Obtain independent estimates from consultants or outside experts to assist in source selection • Use past performance as a key aspect of source selection, and verify data accuracy • Conduct price realism analysis • Create a competitive analysis report • Use oral presentations or proposals by sellers to improve and expedite the source selection process Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 85.

  27. Checklist of Contract Negotiation Best Practices • (The Buyer and Seller Should: ) • Understand that contract negotiation is a process, usually involving a team effort • Select and train highly skilled negotiators to lead the contract negotiation process • Know market and industry practices • Prepare yourself and your team • Know the other party • Know the big picture • Identify and prioritize objectives • Create options – be flexible in your planning • Examine alternatives • Select your negotiation strategy, tactics, and countertactics • Develop a solid and approved team negotiation plan • Determine who has the authority to negotiate • Prepare the negotiation facility at your location or at a neutral site • Use an agenda during contract negotiation Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 86.

  28. Checklist of Contract Negotiation Best Practices cont’d. • (The Buyer and Seller Should: ) • Set the right tone at the start of the negotiation • Maintain your focus on your objectives • Use interim summaries to keep on track • Do not be too predictable in your tactics • Document your agreement throughout the process • Know when to walk away • Offer to write the contract • Prepare a negotiation results summary • Obtain required reviews and approvals • Provide copies of the contract to all affected parties • Document negotiation lessons learned and best practices • Prepare a transition plan for contract administration • Understand that everything affects price • Understand the Ts and Cs have cost, risk, and value • Tailor Ts and Cs to the deal, but understand the financial effects on price and profitability • Know what is negotiable and what is not Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 86.

  29. Contract Negotiations – Skills, Tools, & Best Practices • This presentation is a brief highlight of the 350+ page book, which contains: • 200+ Best Practices in Contract Negotiations • 50+ Tactics & Countertactics used in Contract Negotiations • 25+ Forms/Templates for planning, conducting, and documenting contract negotiations • 10 Successful Strategies for planning contract negotiations • Much, Much, More!!!

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