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Contract Negotiations Skills, Tools, and Best Practices. Gregory A. Garrett, CPCM, C.P.M., PMP Chief Compliance Officer U.S. Federal Government Programs Lucent Technologies – Bell Labs Innovations. An Interactive Adventure into the Art & Science of the Deal!.

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Contract NegotiationsSkills, Tools, and Best Practices

Gregory A. Garrett, CPCM, C.P.M., PMP

Chief Compliance Officer

U.S. Federal Government Programs

Lucent Technologies – Bell Labs Innovations

An Interactive Adventureinto the Art & Science of the Deal!

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

slide3

Contract Negotiations – An NCMA National Education Seminar (NES) & CD-ROM

Key Topics of Discussion:

  • The Need for Contract Negotiation Skills * Q&A - Exercise
  • Contract Negotiation Competencies – The Skills to Win * Self-Assessment Survey
  • The Contract Negotiation Process * Buyer & Seller – Checklist of Best Practices

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

slide4

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, Inc. (2005), pg. 10.

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

slide5

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

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

slide6

Exercise – Q & A

  • How important are contract negotiation skills to ensure business success?
  • How well do you negotiate?
  • Does your organization have the number and level of skilled master contract negotiators needed?

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 12.

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

slide7

Contract Negotiations – An NCMA NES & CD-ROM

Contract Negotiation CompetenciesThe Skills to Win!

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

slide8

The Contract Negotiator’s Competencies Model

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 14.

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

slide9

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

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pgs. 15-16.

slide10

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

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 16.

slide11

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

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 16.

slide12

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

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pgs. 16-17.

slide13

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 

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 17.

slide14

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.

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 17.

slide15

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.

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 18.

slide16

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, Inc. (2005), pgs. 53-54.

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

slide17

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, Inc. (2005), pg. 56.

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

slide18

Contract Negotiation Process

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 61.

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

slide19

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
  • 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
  • Use oral presentations or proposals by sellers to improve and expedite the source selection process

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 85.

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

slide20

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, Inc. (2005), pg. 86.

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

slide21

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
  • 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
  • Know what is negotiable and what is not

Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH, Inc. (2005), pg. 86.

NCMA 5th Annual Commercial Contract Management Conference

Make the Connection: Your Customers, Suppliers, and Partners

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