New Era, New Contract Negotiation Strategy?

Contract negotiation
As we approach the end of the first quarter of 2021 simultaneously with the complete and/or partial vaccination of approximately one-third of the population of the United States against the Covid-19 virus, the business community is looking ahead to financial recovery and a return to business as usual. Although the principal and the most positive result will be negotiations for new and/or renewal of existing contracts, we must realize that things have changed. Things may or may not be back to whatever we once considered to be normal new contract negotiation or contract renewal negotiations.

During this last year of the Covid-19 pandemic crisis, business organizations have been hard-pressed to not only survive, but to develop new management practices to compensate for the lack of personal presence in their dealings with not only their vendor base but their clientele in general. Their business strategies have adapted to a new atmosphere, their business acumen has become increasingly discerning.

We must take this perceptive transformation into consideration when approaching any contract negotiation. A new strategic contractual planning process must be developed and implemented in accordance with this new emerging business atmosphere, allowing measured flexibility in order to adapt to the changes which will evolve as the economy begins to stabilize, just as the evolved changes provoked the economic destabilization during the height of the Pandemic.

In order to develop a new strategic contractual planning process for all contract negotiations while focusing on key information, a contract negotiation strategy is critical for prospective stakeholders involved in the negotiation to ensure all are in agreement with the outcome. At a minimum, one should have the following included in the contractual negotiation strategy:

The most desired contractual outcome
The contract negotiators and all parties to the contract must have an extensive analysis of the key information regarding the potential business, including a summary of details regarding the vendors’ services, cost, and benefits, in order to knowledgeably take the most advantageous steps to reach the ideal contractual outcome for all stakeholders involved.

Best alternative in a negotiated contractual outcome
The second part of a contractual negotiation strategy must include a keyword or situation that would clearly indicate that the most desired contractual outcome could be difficult or impossible to reach. At this point in the negotiation, a slight detour in strategies should be outlined in order to reach the best agreement with which all involved are still comfortable. This potential outcome should be part of the initial analysis and part of the strategy where the vendors’ strengths are recognized, along with their weaknesses to be overcome in order to reach an acceptable agreement.

Least acceptable contractual outcome
The third part of a contractual negotiation strategy must be as thoroughly outlined as the first and second parts detailed above, and must never be approached empirically as a “Hail Mary” solution when faced with a potential contractual loss. This potential outcome should be part of the initial analysis and part of the strategy where the stakeholders identify the minimum acceptable requirements needed in order to reach an agreement.

It is always important to visit and adjust the contractual negotiation strategy to demonstrate flexibility more so recognizing the difficult times that have affected the business and general population, but always focusing on successfully achieving the contractual negotiation strategy outcomes, but more importantly, demonstrating that adapting to constantly changing economic atmospheres is achievable!

Author:

Job Title: Consulting Manager
Organization: Vendor Centric

Laura Melgoza is a Consulting Manager at Vendor Centric, specializing in driving large scale projects with a focus on contract and vendor management. Laura has an exemplary background in designing and implementing operational governance frameworks, change management and 25+ years experience working with organizations of all sizes providing them with the strategic direction in order to deliver the right outcomes.

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