Negotiationskillsforprojectmanagers 100206233654-phpapp01

"In the name of Allah The All Merciful The most Merciful "
Useful Science for the Sake of God
Course:

Negotiation Skills for Project Managers
‫مهارات التفاوض لمديري المشاريع‬
Instructor:
Dr. Attia Hussien Gomaa
Industrial Engineering Consultant
Engineering Service - American University In Cairo
Email: attiagomaa@yahoo.com – Tel: 0122738497
Who Should Attend:
Managers, engineers, and other practitioners concerned with
planning and control in government, industrial and services
sectors.

Objectives:
• To provide the participants with the nature and objectives of
negotiation process in engineering fields.
• To train the participants on negotiation planning and
negotiation tactics.
• To enhance the participants experience by discussing some
real negotiation problems and how to deal with them.

Course Outline:
1. Negotiation overview 2
2. Negotiation management 21
3. Negotiation for selling & buying 39
4. Negotiation for salary 49
5. Conflict management 64
6. Negotiation for project managers 70
7. Negotiation case studies for project managers 104

1

Chapter 1: Negotiation Overview

What is the Negotiation?

Negotiation is
interaction between two or more parties
to achieve certain goals or targets, &
to overcome certain constrains or problems

Negotiation

(1) (3) (5) (7)
Targets Interaction Conference Agreement
(2) (4) (6)
Constraints Communication Conviction

"In business, you don't get what you
deserve, you get what you can
negotiate",
Chester Karrass

"Never cut what you can untie",
Joseph Joubert
2

Negotiation:

 Interaction between two or more parties & Each party
having certain goals to be achieved

 To confer with another or others in order to come to terms
or reach an agreement

 Negotiation is the process of achieving goals through an
agreement.

 Negotiating is the art of reaching an agreement by
resolving differences through creativity

 The process by which at least two people seek to make
something happen. To be successful, both sides must
agree with the resolution. This is just the beginning,
however. Both sides must cooperate in the implementation
of the contract they have accepted

 The definition of negotiation as it relates to employment is:
a series of communications (either oral or writing) that
reach a satisfying conclusion for all concerned parties,
most often between the new employee and the hiring
organization.

 Process of give-and-take exchange among persons aimed
at resolving problems or conflicts

 Chester L. Karrass: ‘In business, you don't get what you
deserve, you get what you negotiate’.

 Joseph Joubert: ‘Never cut what you can untie’.

3

 Robert Estabrook: ‘He who has learned to disagree
without being disagreeable has discovered the most
valuable secret of a diplomat’.

 “Everyone has just his [or her] own negotiating style, and
the worst thing you can do is to adopt a negotiating
technique that does not feel comfortable [because]
credibility, based on an evident sincerity, is the most
important single asset of a good negotiator.” James C.
Freund, Anatomy of A Merger(1975)

PRINCIPLES OF NEGOTIATION:

• The greatest failure in negotiation is failing to negotiate.

• The most important person to know in a negotiation is
yourself.

• Everyone has power in a negotiation.

• Single-issue bargaining leaves both parties unsatisfied.

• Urgency drives decisions.

• Agreement is the end; trading off is the means.

• Even in a collaborative environment, best results are obtained
by keeping the other party on a "need to know" basis.

• The value of something is always in the eye of the beholder.

4

• Success in negotiation is directly related to the amount and
kind of preparation preceding the negotiation.

• The ability to walk away or select another alternative to a
negotiated agreement puts a negotiator in a very strong
position.

• Even when two sides are far apart on major issues, there are
always things they can agree upon.

• Meaningful negotiation involves conflicts. The person who
has a strong need to be liked, or who tends to avoid conflict,
is likely to be at a disadvantage.

A Simple Example:
• Two agents: A and B
• Agent B wants to buy a bicycle from agent A
• Start:
agent A 150
agent B 50
• What next:
agent A ?

What is the basis for your next step?
• Previous bid of yourself and the other agent
(e.g., monotonic concession protocol)
• How bad is it to raise your bid?
(e.g., how much can you afford)
• How bad is it when the transaction does not succeed?
(e.g., are there alternatives)
• Do you have information about a normal price?
(e.g., estimation of the value on the free market)
• How reasonable are you willing to be with respect to the
other agent? (e.g., is it a friend of yours)

5

Strategies for Negotiation:

The Flinch
- Draw back at initial propoal

The Deadline
- Produce results

The Nibble
- Small “something extra” that is sought

The Concession
- Valuable to other, little or no value to you

THE OLD BOOK ON NEGOTIATION:

• “Win -Win” Negotiations: The Good Ones
• “Win-Lose” Negotiations: The Bad Ones
• “Lose-Lose” Negotiations: The Tragedies

THE NEW BOOK ON NEGOTIATION:

• Everyone negotiates for one and only one reason:
to achieve their goals.

• No one ever does anything that is against their interests
(at least as they perceive those interests).

6

? How
Team work: Individuals Team
Lose / Lose
(1) (2)

Individuals Targets

(3) (4)

Team Approach Planning

(5) Win / Win (6)

Target plan Agreement

"In business, you don't get what you deserve....
you get what you negotiate"; Chester Karrass
Dr. Attia H. Gomaa: attiagomaa@yahoo.com 0122738497

7

NEEDS & WANTS:

The wants often distort the
negotiation process, creating a
Emotion
Illogical
desire for something that is not
Powerful critical to the task. Wants are

WANTS
Responsive frequently an emotional response
Costly and are therefore often beyond
Negotiable reason.

Alpha Point
Logical Needs are those things that are seen as
NEEDS

Important critical to the task or outcome. They
Non-negotiable represent a basic or foundational
Critical view, the absence of which would
severely restrict the purpose.

.

Who Negotiates?

Everyone!
 Children when they ‘beg’ for something: sweets or late to bed
 Friend, Wife, etc.
 Owner, Contractor, etc.

• Negotiating is a basic, generic human activity - a process that is often
used in:
• Labor-management relations
• Business deals like mergers and sales
• International affairs
• Everyday activities
• Negotiation is not a process that everyone does, almost daily

8

What is the Aim of Negotiation?

 To arrive at a win-win situation
 Both parties must leave the table feeling satisfied with
results
 Conflict model not helpful in insurance circumstances
although may be applicable to third party (TP) claims
 Power an issue in TP claims

NEGOTIATION CRITERIA:
• Issue must be negotiable
• Negotiators must be interested in both giving and taking
• Parties must trust each other and the negotiation process

When parties disagree they either:
 Accept the status quo
 More powerful side can try to impose solution
 Negotiate

9

Negotiating Orientation (structures):

The structure of the negotiation itself plays an important part in
determining how two negotiating parties should interact.

 Win / Win Orientation
 collaborative approach

 assumes that solutions can be reached to satisfy all

parties
 look beyond means and focus on end

5 Steps to Win-Win Negotiating
 identify needs of both parties

 brainstorm list of possible solutions

 evaluate alternative solutions

 implement solution(s)

 follow up

 Win / Lose: Bargaining Orientation
 used by competitive communicators

 victory by one party matched by loss of other

 requires much information gathering

 negotiations are begun by taking positions

 Lose / Lose Orientation
 if one party believes that a negotiating partner is

blocking them, seek revenge
 generally occurs when partners ignore other’s needs

 Compromise Orientation (lose/lose):
 usually done when resources are limited or scarce
 both parties lose some of what they want

10

Negotiating Styles:
 Quick

 Deliberate

 Middle is compromise

Quick Style:
 Negotiate in a hurry
 Use when you won’t negotiate with
these people again
 Get the best deal without regard to the
other side’s “win”

Deliberate Style:
 Use when long term relationship
likely
 Involves cooperation and relationship
building to reach agreement
 Needs much prep, hard work
 May move in fits and starts

Outcomes:
 Realistic
 Both sides satisfied, win/win situation
 Usually results from deliberate style
 Acceptable
 Likely to result from quick style
 Something is better than nothing
 Always ask for a better deal
 Worst
 When you’re too stubborn to be flexible
 Usually from quick style
 Predetermine the outcomes before you start negotiations,
you have a better chance of getting a better result
 “Think carefully, think creatively, and think ahead”

11

Principles:
 There are no rules

 Establish an agenda

 Everything is negotiable

 Ask for a better deal

 Be creative

 Learn to say “NO” yourself

A Good Negotiator Is..
 Creative

 Versatile

 Motivated

 Has the ability to walk away

Are you a Motivated Negotiator?
 Enthusiasm
 Confidence
 Engaged
 Recognition
 Accomplishment
 Pat on the back
 Integrity
 No trickery
 Trustworthiness
 Social Skills
 Enjoy people
 Interest in others
 Teamwork
 Better as a team
 Self-control
 Creativity
 Always looking for ways to complete the deal

12

The Art of Negotiation:
o Identify your power
o Decide what you are willing to concede
o What are the consequences of disagreement
o What can you offer to allay the other party’s fear?
o Is the issue tied to others that you can make offers based
on?
o Can you bring others in on the negotiation?
o Think about tone and body language – remain
courteous!

Do Your Homework:
 Know what you want
 Know the negotiator
 What’s the negotiator’s model?
 What does the negotiator want?

Double Think:
 What do you want? (think)
 What does the negotiator want? (double think)
 What does the negotiator think you want? (triple think)
 Where’s the middle ground?

13

Build Trust:
 Tell the truth
 Respect confidences
 Honor your commitments
 Be clear
 Be open
 Be firm

External Listening:
 Body language – yours and theirs
 Non verbal messages:
 Facial expressions
 Voice inflections
 Eye movement

Move Beyond Positions:
 Ask questions that probe specific needs / interests
 Create a supportive climate
 Find mutual ground

14

LEAVE SOMETHING ON THE TABLE:

Peace treaties are made between enemies, not friends: It usually
takes a war to get them to the bargaining table. Deals are made
between parties who seek mutual advantage, not unilateral victory.
Both sides have to win something, or you don't have a deal, you
have a homicide. One way or another, your counterpart will see to
it that crime doesn't pay.

FIRST NOT FINAL:

Don't create a situation in which your opponent can't justify his
value to his principal by accepting your offer. Give the person on
the other side of the table a chance to knock you down a little.
Remember the previous point: He or she needs to win something,
too.

DON’T NEGOTIATE WITH YOURSELF:

Once you've made an offer, if the other party doesn't accept it,
don't make another offer. Wait for a counteroffer. Don't lower
your own demands without getting them to lower theirs

TAKE A RISK:

Sometimes it's risky not to take a risk. The trial lawyer who says
he or she never lost a case settles too easily. Don't let yourself be
bluffed by artificial deadlines or "final offers." And don't run
bluffs, either. If you are called and you don't follow through, your
credibility is shot.

15

USE EXPERTS:

You don't know everything. Trying to pretend to your opponent,
your client or yourself that you are knowledgeable in some area or
have some vital information when you don't harms your position.
It makes you appear weak and foolish.

ACCURATELY ASSESS OTHER SIDES STRENGTH:

Remember, in any negotiation, both sides are under pressure to
perform. They have bosses, deadlines, pressures, fears and
objectives, the same as you do.

TAKE YOUR TIME:

Don't let the other side force a deal. The more time you give
yourself, the more information you can gather about their true
needs.

REVIEW AND LEARN:

Look back on the negotiation that you have conducted and identify
what worked and what did not. Learn from the experience.

Know Your BATNA:
 BATNA – Best Alternative To A Negotiated Agreement

 Can you afford to walk away?

16

BATNA: Realistic alternatives instead of strict limits.
This method consists of three steps in order to overcome
unrealistic and un-flexible limits:
 Step (1): List everything you could do in case
you do not come to an agreement
 Step (2): Explore your best options and try to improve
them
 Step (3): Choose the best option.

Calculate the value of each concession. Before making the
concessions, ask yourself:
 What is the value of such concession to the other party?
 What will it cost me?
 What do I need in return?

Concessions:
 Leave room for negotiation
 Make the other party struggle for a concession on your part
 Do not make too many concessions, too fast if possible,
make the first most significant concession come from the
other party.

17

Impasses:
 Pause
 Honorable withdrawal
 Change of place, person or proposal
 Mediator
 Respond to aggressions with facts
 Avoid personality conflicts
 Emphasize previous points of agreement
 Move on to non conflicting issues

Negotiating a Raise or Promotion:
 What have you done for them lately?
 How often can you ask for a raise or promotion?
 How much should you ask for?
 How do you ask?
 What if the answer is no?

Setting It Up:
 Agree on a benchmark job
 Agree on proficiency / performance level
 Job value
 Salary range
 Necessary performance
18

What is a Win?
 Settlement range
 What’s your bottom line?

Enjoy Yourself:
 Negotiation is an art
 Logical steps set the parameters
 The art is in the deal
 Have fun!

The Buyer’s Role in Negotiation:
 Acting Alone:
 Recurring purchases of standard, low price items
 Meets in office with supplier reps.

 Buyer as Team Leader:
 Expensive, technically advanced items, or
complex contracts
 Setting up long term relationships
 Negotiating details and specs not included in the
RFP

19

Personality Types:

1-

2-

3-

4-

5-

6-

20

Chapter 2: Negotiation Management

Negotiation Management is a powerful systematic methodology
to achieve certain targets between two or more parties.

Through:
(1) Define the scope of work
(2) Define the targets, bottom lines, and constraints.
(3) Information collection, estimation & analysis.
(4) Brainstorming, planning and target plan.
(5) Consequence estimation and risk analysis.
(6) Face to face discussion
(7) Motivation and direction
(8) Implementation
(9) Control & corrective Actions
(10) Learned lessons
(11) Close out report

21

The Negotiation Process:

Preparation- 1
Establishing- 2
Objectives

Control &- 5
Assessment
Face-to-Face- 3
FACE-TO-FACE
Discussion
DISCUSSIONS

Final- 4
Action

22

Negotiation Process: Preparation

 What do you want?
 What does the other side need?
 Decide on style
 What are the consequences of each choice.

Know the item or service:
 What is being purchased?
 Who is it for?
 How will it be used?
 Are there any substitutes?
 What is the procurement history of this item?
 What is its future with this company?
 Is there any trade lingo to be familiar with?

The Sellers Bargaining Strength
 Seller’s Desperation
 Certainty of getting contract
 Time to reach agreement

The Buyers Bargaining Strength
 Extent of competition
 Adequacy of cost/price analysis
 Knowledge of the Seller
 Thoroughness of preparation

Note: 99% or more of the time involved in a successful negotiation is
invested in preparation for the actual face-to-face discussion

23

Negotiation Process: Establishing
Objectives

 Objectives must be specific!!
 General objectives are inadequate and
too vague to foster good negotiation.
 Planning sheet
 Issues involved
 Realistic, possible, worst

Examples:
 “Lower than previous price”

 “Good on-time delivery performance”

 “Satisfactory technical assistance”

The buyer should develop three specific positions for each term and
condition being negotiated:
 An Objective (target) Position

 A Minimum Position

 A Maximum Position

The buyer should also develop estimates of the sellers positions
Potential Negotiation Issues

Objectives should be developed for all of the following issues:
 Costs and prices

 Delivery schedules

 Quality levels

 All technical aspects of the purchase

 Types of materials and substitutes

 Buyer-furnished material and equipment

 Mode of transportation

 Warranty terms and conditions

 Payment terms

 Discount provisions

 Liability for claims and damage

 F.O.B. point

24

25

Presentation:
 Creative title

 Reduce to “must know” items

 Keywords

 Mini-speeches around keywords

 Visuals

 Don’t give concessions just to keep things going

 Make note of concerns and keep going

Negotiation Process: Face-to-Face Discussion

Fact Narrowing Hard
Finding Recess Differences Bargaining

Fact Finding:
 Initial Meeting

 Focus on inconsistencies between supplier’s proposal

and buyer’s information
 Should gain a better understanding of the supplier’s

interests and abilities (strengths & weaknesses)
 Focus on interests and information, NOT positions

The Recess:
 Buyers reassess relative strengths and weaknesses

 Review and refine

 Organize an agenda

 Prioritize issues to be discussed in the order of their

probable ease of solution
 Goal is to develop a cooperative atmosphere; yet, one

that is going to allow you to effectively negotiate

26

Narrowing the Differences:
 The “back and forth” process

 Define the issue, state the facts, attempt to convince

supplier that your position is reasonable
 If agreement can’t be reached, move on to next issue

 Continue until all things are worked out

 If agreement cannot be reached, there are two choices

 Adjourning

 Hard bargaining

Hard Bargaining:
 Normally, the last resort

 “Take it or leave it”

 Doesn’t work well if the approach to

purchasing is collaborative
 Be careful with bluffing

 Unless a one-time purchase is at stake, be careful that the

seller doesn’t feel abused or unfair treatment

 When in doubt, ask questions!
 Open questions
 Reflective questions
 Tactics

27

Tactics:
 Use

 Walk out

 Don’t use
 Emotional outburst
 Argue special case
 Pretend ignorance
 Play for time
 Nibble and retreat
 “You go first”
 Bad environment
 Defer to higher authority
 Not willing to make any changes
 Silence
 Good guy/bad buy

Negotiation Process: Final Action (Agreement)

 Arrangements should be neutral and comfortable
 Pay attention to what others say
 Screen out all visual distractions
 Ask open ended questions
 Listen to responses
 Proactive vs. reactive behavior

 Win-win
 Individualistic or integrative - (e.g., individual vs. team
vs. group)
 Making a deal or creating a relationship
 Short-term goals or long-term goals
 Creativity - develop different angles (offer recuperator
free for 1st year).

28

Principled Negotiation:
 Separate the people from the problem
 Focus on interests, not positions
 Invent options for mutual gain
 Insist on using objective criteria

Separate People from Problem:
 Understand the other side's position

 Acknowledge emotions, let steam out

 Use active listening

Focus on Interests, not Positions:
 Position is something decided, interests are cause of decision

 Identify underlying interests---some interests will be shared by both

sides

Invent Options for Mutual Gain:
 Brainstorm options
 Evaluate alternatives
 Reconciling differences: look for items that are of low cost to you
and high benefit to them, and vice versa

Insist on Using Objective Criteria:
 Find objective criteria: both parties should be willing to be bound by
standard
 Use and acknowledge reason
 Do not give in to pressure

29

Dealing with problem:
 Avoid a strict mandate
 Moderate the demands of your constituency
 Keep persons whose expectations are too high outside the negotiation
process
 Keep results vague or quite complicated so that criticism has little
basis
 Exaggerate opponent’s concessions

ETHICAL:
 Productive.

 Sets high standards, independent thinking
 Develops proposals in common interest
 Less productive.

 Becomes ‘preachy’. Overly concerned with ideals and
common values
 Tendencies in conflict.

 Sticks to his case because he is ‘right’. Becomes easily
disillusioned
ANALYTICAL:
 Productive.

 Careful analysis. Preference for hard facts and figures.
Predictable, Holds to goals

 Over pre-occupation with details. No ability to improvise.
Not sensitive to climate of meeting
 Tendencies in a conflict.

 Amasses more and more evidence that argument is right.
Becomes stubborn
FLEXIBLE:
 Productive

 Wants to get things done. Takes advantage of opportunities.
Quick to act. Likes to organise

 Bossy. Easily becomes impatient and impulsive
 Tendencies in a conflict

 Does not concede. Tries to win. Becomes angry

30

JOVIAL:
 Productive.

 Socially skilled, diplomatic. Tries to influence climate
positively. Flexible.
 Less productive

 Offers little resistance. Reluctant to take a stand, ambivalent
 Tendencies in conflict

 Over-compromising. Gives in to preserve harmony and good
will
Other Party Doesn't Play:
 Other party is more powerful
 Other party won't use principled negotiation
 Other party uses dirty tricks

Other Party Is More Powerful:
 Don't focus on a "bottom line"
 Know your Best Alternative To a Negotiated Agreement (BATNA)
 Know your opponent's BATNA
 Don't agree to anything less than your BATNA

Won't Use Principled Negotiation:
 Continue to use principled negotiation
 Use "Negotiation Jujitsu": deflect attacks onto problem
 Assertion of position --> ask for reasons
 Attack your ideas --> ask for advice
 Personal attacks --> recast as attacks on problem

Other Party Uses Dirty Tricks:
 Deception: seek verification for claims
 Personal attacks: recognize them

Refusal to negotiate: ask why

31

Cartoon of the Day:

32

Customer-Oriented Development:
§ It is important to develop good relationships with customers (I.e.
clients) -- WHY?

 System development is a partnership effort (it is a ‘two-way
street’)

 It is difficult (if not impossible) to achieve high quality
partnership without good IT-business relationships

 High quality IS-client relationships reduce chances of IS
implementation failures. How?

 High quality IS-client relationships reduce chances of IS
implementation failures. How?
• management of client’s expectations as to project scope,
deliverables, development speed, etc.
• improvement in mutual understanding as to quality and
satisfaction
• building systems clients actually use
• improving efficiency of interrelated tasks

 High-quality relationships also
• enhance professional IS credibility
• improve quality of work life for ISPs and clients

Poor IS-business relationships
 contribute to IS project failures

 detract from IS credibility

 hinder success of subsequent organizational change projects

 plant the seed for the decision to eventually outsource IS

services to a third party contractor

33

Reasons for poor relationships:

o Lack of collaboration among key stakeholders
o “culture gap” between technical specialists and their business-
focused clients
o behaviors of IS specialists during projects:
• failure to understand client’s needs and incentives
• overemphasis on technical issues at the expense of social
issues
• overall, a lack of client-oriented behaviors and service
culture

High quality IT-business relationships:

§ Will discuss conditions under which good relationships evolve at the
end of this presentation

Customer-Oriented Practices:
§ Planning:
• Select appropriate lifecycle model that gives customers
progress visibility, such as?
• Identify real customer (the boss?)
• Create a Win-Win project (Theory-W project management)
• Mitigate the risks

§ Requirements Analysis:
• Gather the real requirements (essential) with customer-oriented
requirements practices
• Clients are more satisfied if they participate in requirements
specifications. Why?
• Use methods such as JAD

§ Design:
• Let customers change their minds occasionally

34

Construction:
• Use readable, modifiable coding practices so you can change
the software
• Use project-monitoring (mini-milestones) so customer knows
you are accomplishing tasks
• Lifecycle model that shows progress

Managing Customer Expectations:
• Prevent customer-determined schedule before requirements &
resources are known
• Manage the size & complexity of features
• Emphasize that the prototype isn’t the product
• Don’t create unrealistic expectations about schedule,
functionality, etc.

Use Project Recovery When...
• Don’t know when project will finish
• Laden with defects
• Developers working burnout hours, low morale
• Nobody can control the schedule
• Customer doesn’t believe project will be done
• The team is defensive, relations are strained…
• Project is about to be canceled

Approaches to Recovery:
• Cut project size to fit time & effort planned
• Increase process productivity by focusing on short-term
improvements
• Slip schedule & proceed w/damage control
• Combination of all 3: Drop features, increase productivity & slip
schedule
• Get project under control & FINISH it!
o Problem NOT catching up BUT finishing project

35

Recovery Plan: First Steps
• Assess situation: how firm is deadline?
• Apply Theory-W analysis -- make winners out of everyone or quit
• Mentally prepare yourself to fix the project
• Ask team what needs to be done
• Be realistic about what you can expect
o Don’t promise unrealistic new delivery dates

THEORY- W --??
** WHAT IS IT AND HOW DOES IT WORK?
** WHAT ARE THE BENEFITS?

Theory W-Stakeholder Conflicting Goals:
• Customers want quick schedule, low budget, lots of features, user-
friendly, robust software
• Bosses want no overruns, no surprises, successful project
• Developers want interesting work, challenge, no grunt work, home
life
• Maintainers want no defects, documentation, modifiability

Theory-W Benefits:
• Project objectives are clearer from beginning because each
stakeholder’s “win” conditions are identified up front.
• Better communication with customers
• Better requirements reduce rework
• Goal-setting produces better schedule expectations
• Minimizes feature creep

36

Theory-W: Everybody a Winner
• Separate people from the problem
• Focus on interests rather than positions
• Invent options for mutual gain
• Insist on objective criteria
• Set project up so everyone can win - if you cannot set it up, then
don’t do the project

Win-Win Steps:

1- Establish Win-Win Preconditions:
o Identify & include all the stakeholders
o Establish reasonable expectations
o Assign tasks so people can achieve their own win conditions
o Provide environment that supports project goals, e.g., training,
appropriate lifecycle model

2- Structure Win-Win Software Process:
o Establish a realistic plan (see Step 1)
o Use the plan to control the project (follow it!)
o Identify & manage win-lose & lose-lose risks
 For each win condition, identify & monitor risks
o Keep people involved

3- Structure Win-Win Product:
o Internal parts that developers & maintainers see
 Documentation
 Modifiability
o External parts that customers/users see
 Easy to learn and to use
 Robust

37

When is Win-Win Appropriate?

o Project recovery or from beginning (best)

o When there is a champion (upper-level support) to bring in all
stakeholders

o Small or large projects

o Downside? -- Manager’s role more demanding:
• Has to manage stakeholder relationships
• Negotiate with stakeholders
• Set & monitor goals

Leverage the People:

• Restore team morale
o Improve working conditions

• Clean up major personnel problems

• Replace problem leadership,
o Give managers assistance
o Change manager’s supervisor

• Add people carefully, if at all

• Instead focus existing team members’ time on project

• Allow team members to respond differently:
o Some work harder
o Some work slowly but surely

• See that developers pace themselves

38

Leverage the Process:
• Find & fix the classic mistakes
o Are you still changing the project definition?
o What about the design adequacy?
o Too few management controls to track status?
o Shortchanged quality to meet the deadline?
o Are people getting burned out?

• Find & fix the classic mistakes
o Is the deadline realistic?
o Are people working too hard & quitting?
o Is new technology a problem?
o Problem developers? Low morale? Accountability?
• Fix broken development processes
o Usually software development fundamentals, e.g.,
version control, defect tracking
• Use miniature milestones
o Schedule realistically with miniature milestones
o Track scheduling progress carefully
o Record reasons for missed milestones
o Recalibrate schedules from what you learn after 2-3
weeks have passed
o Don’t commit to schedule until you have one you can
believe
• Manage risks carefully

Leverage the Product:
• Stabilize the requirements
o First determine WHAT the requirements are
• Trim the feature set - prioritize what’s left
• Assess your political position?
• Reduce number of defects & keep them low
• Get to a state you can test & keep it working

39

Chapter 3: Negotiation for
Selling & Buying

Objectives of Negotiations:
 To obtain the quality specified
 To obtain a fair and reasonable price
 To get the supplier to perform the contract on time
 To exert some control over manor in which the contract is carried out
 To achieve maximum cooperation
 To maintain relationships
 To create a long-term relationship

When to Negotiate?
 Sole source situation
 Sellers market
 Specification not complete
 Competitive bidding not appropriate
 New products
 When Competitive Bidding is Impractical or
Inappropriate
 When Risks and Costs cannot be accurately
predetermined
 When the buyer is contracting for a portion of the
seller’s production capacity
 When tooling and set-up costs represent a large
percentage of the supplier’s total costs
 When a long period of time is required to produce the
item
 When products of a specific supplier are desired to the
exclusion of others

40

NEGOTIATIONS WITH VENDORS:

Can you negotiate?
• Yes, negotiation is natural! (Would you be here today if you could
not negotiate?)
• Negotiation is the means by which we gain what we need or want
or desire want or desire when somebody else controls what we
need or want or desire.
• But there are skills to be learned.
• And we should be prepared for negotiation to expose our
weaknesses (e.g. losing our temper) as well as our strengths.
• And if after learning the skills and getting some experience we do
not feel comfortable with negotiation, we should leave it to others
to negotiate on our behalf.

Why negotiate?
• Negotiation is inevitable if librarians wish to provide a good
service to their users.
• Our political masters will not provide us with resources unless we
present a good case : that involves negotiation.
• The content our users need mainly comes from commercial
providers : they wish to make as high a profit as possible and
unless we are willing to pay the highest price we need to
negotiate.
• Even if we leave the face-to-face negotiation to other people, we
need to know enough to assess whether the best deal has been
achieved.

41

Before negotiation starts ……
• Know what you want. The lowest price? The most content? Added
benefits like training? How important is the content to your users?
At what point will you walk away from the negotiation?
• Know who you will be negotiating with. Is this a new market for
the company? Do they have any existing sales they may wish to
protect? Is the company looking for good publicity from your
purchase? Are the sales staff familiar with your situation?
• Choose the venue and the participants carefully. Use the “home
advantage” if at all possible. Do not allow a commercial supplier
the advantage of being your host. Always have a colleague with
you. You decide when to take meal-breaks.

When the negotiation starts …
• Stay calm and strong! This helps to keep you in control of the
negotiation. Ask the vendor to justify their position.
• Stay in control of the agenda. Prepare a list of issues to be
covered. Use short, simple words and sentences to describe the
points of greatest importance to you. Know what you expect to be
included as part of the basic price and what you are prepared to
consider as “extras”.
• Know when to compromise. Compromise is almost inevitable but
the art is in knowing what to concede, when and how. Make notes
on concessions won and given.
• Know when to say “no” and walk away. Librarians have not done
this enough because of the need to supply content their users need.
Make clear the issues on which negotiations have broken down so
that they can be resumed if conditions change.

42

After negotiations end …
• Send a letter or e-mail as quickly as possible summarising your
understanding of the agreement reached. It keeps you in control of
the situation if you are the first to write down what was agreed.
Solve any problems of misunderstanding before the lawyers start
drawing up a contract.
• Sign a legal contract as soon as possible. Do not give the vendor
time to back out of any favourable terms you have agreed. (N.B. If
the terms are not favourable, you should not be agreeing to them!)
Read the contract carefully.

Define the issues!

 Interests
 Success
 Performance or function
 Details
 Terms - conditions
 Price
 Liabilities
 Delivery - dates

43

Negotiation For Selling & Buying:

Selling:

• Recognise ‘buying roles’ – particularly within organisations /
families
• Need identifier
• Budget holder
• Purchaser
• Gatekeeper
• User

Sell benefits:
• Aim to ‘solve customer’s problems’ (not sell your product)
• Recognise the whole product offering not just the core benefits
(packaging; brand; image; colour; distribution)
• Recognise importance of relationships and relating to people (one of
your skills?)

Relationship Marketing:
• Use database / IT to personalise communication with customer
• Track usage, interest, and complaints
• Capture and build upon communication with prospective customer
• Tailor offerings to customer profile

Buying:
• Don’t accept the first offer
• Determine a ‘package’ which recosts the product (i.e. support
services included)
• Know your requirements and what will solve your problem – draw
up a specification
• Use knowledge of competition’s offering to secure a lower price

44

Closure:
• Ensure agreement / next meeting is secured
• Secure in writing / shake hands if appropriate
• Build a relationship for future supply / purchase

Spend 15 mins..
 reducing a price by £500, you have effectively earned your

business £2000 an hour

1- Preparation:
• Know the item or service
• Know the seller’s bargaining strength
• Know the buyer’s bargaining strength
• cost or price analysis
• Know the seller

2- Aspects to Negotiate:
• Price
• Quality
• Support
• Supply
• Transportation
• Duration

3- Negotiation:
 Negotiation is a back and forth communication designed to reach

an agreement.
 Soft

 Hard

 Principled

• decide issues on their merits rather than through haggling
4- Criteria:
 Produce a wise agreement

 Efficient

 Don’t damage the relationship

5- Problems with Positions:
 Ego

45

 Stalling
 Endanger relationship
 Hard game always dominates a soft one

Three Stages of Negotiation:
 Analysis

 Planning

 Discussion

New Focus:
 People
 Interests
 Options
 Criteria

1- Focus on People:
 Separate the people from the problem

 Don’t degenerate into blaming, anger etc.

 People problems are:

 Perceptions
 Emotion
 Communication

Perception:
o Put yourself in their shoes
o Don’t blame them for your problem
o Face saving
Emotion:
 People often feel threatened
 Allow the other side to let off steam
 Don’t react to emotional outbursts

46

Communication:
 Negotiators often not talking to each other
 Listen actively
 Build a working relationship
 You are on the same team
 face the problem - not the people

2- Focus on Interests:
 Not positions
 There are usually several ways to satisfy an interest
 Behind opposing positions lie shared and compatible
interests as well as conflicting ones.

Interest Identification:
 Ask “why”?
 Ask “why not”?
 Multiple interests
 You must communicate your own interests
 Look forward, not back

47

Invent Options for Mutual Gain:
 Watch out for:
 premature judgement
 searching for a single answer
 The assumption of a fixed pie
 thinking that solving their problem is their problem

Prescription:
 Brainstorming
 Broaden your options
 Look for mutual gain
 Make their decision easy
 Give them an answer, not a problem

Objective Criteria:
 Horse trading may miss the point entirely
 Market value
 Precedent
 What a court would decide
 Reciprocity

Review Session:
 7:00 Sunday
 Room 118
 Bring your questions
48

Negotiator Behavior:
 Willing to compromise
 View issues independently
 Explore twice as many options per issue
 Make comments about common ground
 Make less irritating comments
 Give fewer reasons for arguments advanced
 Congratulate counterpart on job well done

Tactics:
 Low Ball
 Honesty/Openness
 Price Increase
 High Ball
 Best and Final Offer
 Silence
 Use of Power

49

Chapter 4: Negotiation for Salary

The definition of negotiation as it relates to employment is: a
series of communications (either oral or writing) that reach a
satisfying conclusion for all concerned parties, most often
between the new employee and the hiring organization.

It takes the Right Attitude:
• Employers don’t give salary increases, employees earn them.
• You have no right to an increase, you earn it.
• You have the right to a salary adjustment due to inflation or an
increase in the cost of living, but you have no right to an
increase based on merit.

Timing is Everything

How much time should pass before you should think
about your next salary increase?

• When you have been praised for work you have just
completed.
• When major changes occur in your job responsibilities or
tasks.

The Art of Negotiation
Principles of Negotiation

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1. Postpone the negotiation
• Bounce back the question to the interviewer.
• Stall elegantly.
• Use your sense of humor.
• Disarm your interviewer

2. Avoid mentioning your last salary
Employers use this to:

• Gauge where you fit in the salary range;
• You may be screened out quickly if the number of candidates
is large, as salary is an ideal and obvious way to compare
candidates and screen them out.

3. Make them talk first:
Wait for the interviewer to expose himself. Effectively
postponing the negotiation and making the interviewer
talk first has several advantages. Most importantly you:
• Get a better offer than you originally planned;
• Refrain from “shooting yourself in the foot” by asking for
too high of a figure;

• Take the necessary time to obtain specific information
about the level of the job and its corresponding
responsibilities;
• Gauge how the interviewer is evaluating you before you
have to negotiate with him;
• Discover the starting point of the negotiation process.
51

Sometimes the interviewer will try to
open negotiation by coming right out and
asking how much money you want to make.
Example:
I: How much do you want to earn?
Y: Oh, thank you for raising this issue. Before
answering you, I’d like to ask a question.
I: Please do.
Y: Do you have salary curves or indexes in your organization?
I: Yes, of course we do.
Y: Could you tell me, then, what sort of salary range you have in
mind for this job? This will make things easier and save us
time.

Stand Your Ground : Agree with Gentle Humor
I: You certainly are tough when it comes to negotiating!
Y: Why, thank you!

Turn Negatives to Positives
I: You seem so sure of yourself! It appears that
nothing will make you budge.
Y: Yes, this is a compliment given to me by many of
my past employers.
Common Sense
I: You appear to be a person who is always watching
out for himself.

52

Y: Do you think so?
I: Yes, you seem to be very interested in the money
aspect of this job.
Y: The job to be filled requires excellent negotiation
skills. I am demonstrating that I have those skills.
Later, when I work for you, I will fight and
negotiate just as firmly on your behalf.

Continued Principles:
• Avoid bluffing.
• You will be more efficient if you stick to the truth for several
reasons:
• The very fact that you use only true information makes you
feel more comfortable and secure, which make the interview
easier.
• Bluffing, lies, or exaggeration can hamper the
otherwise good negotiation tactics at your disposal.
• When checking is done after the interview, your integrity and
good faith are proven and you benefit.
Get It In Writing
Accepting a firm job offer together with a salary proposal can be
done either verbally or in writing. However, a confirmation in
writing is a must in the following four cases:
• If you have some sort of negative intuition or feeling about
your interviewer and have doubts about the value of his word;
• If the promises made to you seem too numerous or generous to
be given without something more being demanded of you
some time down the road;

53

• If the salary formula is complex (due to adjustment,
commissions, etc..), or if you think the salary has not been
stated clearly or not negotiated thoroughly;
• If the risk to you is great. Ex. If you must resign from a present
job to take a new job the risk is too large without having a firm
written proposal in your hand, signed by the person for whom
you will be working for.

Money Isn’t Everything
• Communicate salaries after the offer has been made.
• Analyze other options/
child care, elder care, disability/ life insurance, other perks…
• Ensure you like your job.
• Don’t accept a job based on salary.
• Accept a job that you will enjoy.
Negotiation is a Gamble we all Play…

Good Luck!!!!!!!!
Interdependence:
• Both parties need each other. A buyer cannot buy unless
someone else sells and vice versa; each is dependent
upon the other.

• When we are dependent on another, we have to accept
and accommodate the demands of another.

• Interdependent relationships are characterized by
interlocking goals-both parties need each other to
accomplish their goals.
54

Standards for Evaluating Relationship Outcomes:

• Anticipated Outcome (0): What we expect to receive
from this relationship.

• Comparison Level (CL): The standard against which a
person evaluates a relationship---what we could receive
from other relationships.

• Comparison Level for Alternatives (CLalt): The lowest
level of outcome that would be accepted from this
relationship before changing to another relationship.

55

Standards for Evaluating Relationship Outcomes (SERO):

• The Thibaut and Kelly mode of analysis permits us to draw a
distinction between attractiveness and satisfaction on one
hand and dependency on the other.

• A person can dislike a relationship and stay, or like a
relationship and leave.

• In negotiation, the other party may dislike dealing with us,
but since we have "the best deal in town;' he or she will
continue to negotiate with us.

• Alternately, the other party may like us, but nonetheless
break off negotiations because of more attractive possibilities
elsewhere.

• Whether you should or should not agree on something in a
negotiation depends entirely upon the attractiveness to you of
the best available alternatives

• This concept is called BATNA (an acronym for Best
Alternative To a Negotiated Agreement) and suggest that
negotiators need to understand both parties' BATNAs when
they negotiate.

56

Example : SERO
• Gomaa has been employed by an organization for six
months and is making $31,000 per year.
• The average salary of Gomaa's college classmates who
were accepting new jobs was $30,000.
• Recently, the organization where Gomaa works was
downsized and Gomaa's job was eliminated.
• His boss offered him another job in the organization at
$28,000.
• Gomaa realizes that most other companies are not
currently hiring because it is not the end of the school year,
and he believes that it would be difficult to find a new job
for more than $25,000.
• Anticipated Outcome: The salary for the new job in the
organization is $28,000.
• Comparison Level (CL): The average starting salary of
Gomaa's classmates is $30,000.
• Comparison Level for Alternatives (CLalt): The perceived
salary of a readily available alternative job is $25,000.
Principles of Negotiation?

57

• The greater the distance between 0 and CL, the greater the
attractiveness or unattractiveness of the relationship.

• When a relationship is unattractive, we may think of leaving,
but whether we do depends upon our options.

• We may not like our current job, but if we are relatively
unskilled, we may find it difficult to get another job.

• If we have many skills, however, we may know of several
jobs to which we can easily move.

• People leave relationships when outcomes fall below this
CLalt.

• It is assumed that the more a person's actual outcome exceeds
the CLalt, the more dependent upon the relationship he is.

58

The Dilemma of Honest:

• Concerns how much of the truth to tell the other party

• Telling the other party everything about your situation may
give that person the opportunity to take advantage of you.

• However, not telling the other person anything about your
needs, wants, and desires may lead to a stalemate.

• Just how much of the truth should you tell the other

Example: The Dilemma of Honest

• If X told Y that he would work for as little as $35,000 but
would like to start at $40,000,

• It is quite possible that Y would hire him for $35,000 and
allocate the extra money, that he might have paid to him
elsewhere in the budget.

• If Y does this, he might hurt their long term relationship.

• Y should insure that both parties’ needs are met.

• If X does not tell Y any information about his salary
aspirations, then Y would have a difficult time knowing how
to satisfying those needs.

59

The Dilemma of Trust:

• Concerns how much to believe what the other party tells
you.
• If you believe everything the other party says, then he or
she could take advantage of you.
• If you believe nothing the other party says, then you will
have a great deal of difficulty in reaching an agreement.
• Exactly how much to believe of what the other party tells
you depends on many factors:
• The reputation of the other party
• How he treated you in the past
• The present circumstances, and so on.

Example: The Dilemma of Trust

If Y told X that $38,000 was the maximum has was
allowed to pay him for the job, without seeking approval
“from above”, should X believe him or not?

60

Search For An Optimal Solution:
• The search for an optimal solution through the processes of
giving information and making concessions is greatly
aided by trust and a belief that you're being treated
honestly and fairly.

• Two efforts in negotiation help to create this trust and
belief:
• Perceptions of outcomes
• Perceptions of the process
• The former attempts to change a party's estimation of the
perceived importance or value of something

Perceptions Of Outcomes:
• Attempts to change a party's estimation of the perceived
importance or value of something

• If Y convinces X that a lower salary for the job is
relatively unimportant given the high promotion potential
associated with the new job, the X can feel more
comfortable making a concession on this point.

Perceptions Of The Process:
• Efforts based on the negotiating process help convey
images of equity, fairness, and reciprocity in proposals and
concessions

• Satisfaction with a negotiation is as much determined by
the process through which an agreement is reached as with
the actual outcome obtained
61

Understand the Nature of the Interdependence:
• Understanding the nature of the interdependence between
parties in a negotiation is a critical negotiation skill.

• Unfortunately, negotiation situations do not present
themselves with neat labels, typically, describing the
nature of the interdependence between parties.

• Negotiators make judgments about the nature of the
interdependence in their negotiation situations, and
negotiator perceptions about interdependence become as
important as the actual structure of the interdependence

Understanding History:

• The point here is that people bring much baggage with
them to a negotiation, including:
• Past history
• Personality characteristics
• Moods
• Habits
• Beliefs about how to negotiate

• These factors will influence how people perceive an
interdependent situation, and this perception will in turn
have a strong effect on the subsequent negotiation.

62

Cooperators and Competitors:

• There are two general types of negotiators:
• Cooperators
• Competitors

• Competitors enter negotiations expecting the other party to
compete, and to compete with everyone.

• Cooperators will cooperate with other cooperators and
compete with competitors

Competitors:
• Competitors believe that all negotiations are competitive
and that the world contains only competitors because all
the people they negotiate with compete (either they were
natural competitiors, or they were cooperators who have
adapted and compete rather than being taken advantage
of).

Cooperators:
• Cooperators understand that negotiations may be
cooperative or competitive and recognize that there are
both cooperators and competitors in the world.

63

Mythical Fixed Pie:

• Most negotiators in a situation containing both cooperative
and competitive elements (mixed-motive) will assume that
there is a fixed pie – the more I get the less you have

• 68% of negotiators assume that negotiations will be win-
lose and only 32% assume a win-win situation

• Those negotiators that adjust to a situation quickly
generally achieve better results

64

Chapter 5: Conflict Management
 The objective is not to eliminate conflict but to learn how
to manage it so the destructive elements are controlled
while the more productive aspects are enjoyed.

 Negotiation is a strategy for productively managing
conflict.

Conflict more generally

 When a person or group frustrates the goal attainment
of another.

 Types of conflict
 Relationship
 Task
 Process

Levels of Conflict:
• Intrapersonal or Intrapsychic – conflict occurs within the
individual. Souces of conflict can include ideas, thoughts,
emotions, values, predispositions, or drives that are in
conflict with each other.

• Interpersonal – conflict between individual people

• Intragroup – conflict within a small group – among team
members, committee members, familes, etc…

• Intergroup – conflict between groups, unions and
management, warring nations, feuding families, etc…
65

66

Elements That Contribute to Conflict’s Destructive Image:
1. Competitive Processes – parties compete against each
other because they think their goals are in competition and
that the two of them cannot both achieve their objectives.

2. Misperception and Bias – as conflict intensifies,
perceptions become distorted. People tend to view things
consistently with their own perspective on the conflict.
Thinking tends to become stereotypical and biased

3. Emotionality – conflcits tend to become emotionally
charged as the parties become anxious, irratated, annoyed,
angry, or frustrated. Emotions tend to dominate thinking
and the parties may become more emotional and irrational
as the conflict escalates.

4. Decreased Communication – Communications declines.
Parties stop communicating with those who disagree with
them and communicate more with those that agree.

5. Blurred Issues – Central issues in the dispute become
blurred and less defined. New, unrelated issues are drawn
in as the conflict becomes a vortex that attracts both related
and innocent bystanders.

6. Rigid Commitments – parties become locked into
positions. As they are challenged by the other side, parties
become more committed to their points of view and less
willing to back down from them for fear of losing face and
looking foolish. Thinking processes become rigid, and the
parties tend to see issues as very simple and either or rather
than as complex.

67

7. Magnified Differences; Minimized Similarities

8. Escalation of the Conflict

Functions and Benefits of Conflict:

• Discussing conflict makes organizational members more
aware and able to cope with problems. Knowing that
others are frustrated and want change creates incentives to
try to solve the underlying problem.

• Conflict promises organizational change and adaptation.
Procedures, assignments, budget allocations, and other
organizational practices are challenged. Conflict draws
attention to those issues that may interfere with and
frustrate employees.

• Conflict strengthens relationships and heightens morale.
Employees realize that their relationships are strong
enough to withstand the test of conflict; they need not
avoid frustrations and problems. They can release their
tensions through discussion and problem solving.

• Conflict promotes awareness of self and others. Through
conflict, people learn what makes them angry, frustrated,
and frightened and also what is important to them.
Knowing what we are willing to fight for tells us a lot
about ourselves. Knowing what makes our colleagues
unhappy helps us to understand them.

• Conflict enhances personal development. Managers find
out how their style affects their subordinates through
conflict. Workers learn what technical and interpersonal
skills they need to upgrade themselves.
68

• Conflict encourages psychological development. Persons
become more accurate and realistic in their self-appraisals.
Through conflict, persons take others' perspectives and
become less egocentric. Conflict helps persons to believe
that they are powerful and capable of controlling their own
lives. They do not simply need to endure hostility and
frustration but can act to improve their lives.

• Conflict can be stimulating and fun. Persons feel aroused,
involved, and alive in conflict, and it can be a welcome
break from an easygoing pace. It invites employees to take
another look and to appreciate the intricacies of their
relationships.

69

Conflict Management:
C
o
n
c
e
r
n

A
b
o
u
t

O
t
h
e
r
’
s

O
Yielding Problem Solving

Compromising

Inaction Contending

Concern About Own Outcomes

• Contending (competing or dominating) – Parties who
employ this strategy maintain their own aspirations and try
to persuade the other party to yield

• Yielding (accommodating or obliging) – Show little or
no concern in whether they attain their own outcomes, but
are quite interested in the other party attains their outcome

• Inaction (avoiding) – show little interest or concern in
whether they attain their own outcomes, nor do they show
70

much concern about whether the other party obtains his
outcomes. Inaction is often synonymous with withdrawal
or passivity, the party prefers to retreat, be silent, or do
nothing

• Problem Solving (Collaborating and integrating) –
actors pursue a problem solving strategy showing high
concern for attaining their own outcomes and high concern
for whether the other party attains their outcome. Both
parties pursue approaches to maximize their own joint
outcome so both sides win.

Managing conflict: Assertiveness vs. Cooperation

 Avoidance (low, low)
 Accommodation (low, high)
 Competing (high, low)
 Compromise (med, med)
 Collaboration (high, high)

71

Chapter 6:
Negotiation Skills for Project
Engineers

Golden Rules for project engineers:
• In business, you don't get what you deserve, you get what
you negotiate.
• If you fail to plan, then you plan to fail.
• Negotiation is an art and The art is in the deal
• When you see a problem, you say welcome
• In practice, there is no optimal solution.
• The best solution must be customizing according to the
working conditions.
• There is always room for negotiation.
• Ensure that the negotiation team members have a consistent
message, roles, and approach for the negotiation.
• Determine your “drop dead” conditions and fallback
positions before beginning the negotiation.
• Negotiate to a complete contract, taking into consideration
potential changes to your organization and to the vendor’s.
• Hope for the best and plan for the worst.

72

Timeline for Project Engineer Negotiation:

What are the bases of negotiation in the following?

Timeline Owner Contractor
1. Initial Contact
2. Initial Interview
3. Tender /Offer
Interview
4. Follow-up
Interview
5. Offer detailed
negotiation
6. Contract review
negotiation
7. Progress
negotiation
8. Closed-out
negotiation

Contract negotiation:

The contract negotiation process should be a period to clarify
and resolve issues identified during each phase of the selection
process.

1. Define requirements
73

2. Evaluate responses

3. Evaluate product demonstration

4. Site visit

5. Contract and cost analysis

6. Contract negotiation

7. Agreement

• In summary, we often need to balance the desire for
technical excellence and cost
• It can be a point where management and engineering
collide.

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Evaluating and resolving conflicting objectives:

1. Technical Proposal
– if OK then move onto
2. Budget (or Financial)

Technical Proposal:

– knowledge and experience in relevant fields – 50%
– Managerial and financial capabilities – 20%
– General capabilities – 30%

Knowledge and Experience in Relevant fields:
• The design document should detail how the proposed design
will meet the design requirements
• The document should detail a timeline as to how the project
will be executed
Managerial and Financial Capabilities:
• Does the tenderer have appropriate personnel (CV)?
• Is the tenderer able to substitute a similarly qualified person
should the primary person become unavailable?
• Is the tenderer able to complete the work within the budget
allocated?

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General Capabilities:

• Is the tenderer or good reputation?
• Does the tenderer have a good understanding of your
business and the environment in which it works?
• Does the tenderer have good contacts within the industry?

Lastly,…

• Once the tenders have satisfactorily satisfied the technical
requirements then tenders should be compared on the basis of
cost

Four foci of evaluation (Cotterall and Hughes1995)

1. Strategic Assessment
2. Technical Assessment
3. Cost-benefit assessment
4. Risk Analysis

• Where do each of these forms of evaluation relate to when
considering the Tender?

76

Contract evaluation matrix

Technical Proposal
Level Budget
K M G
Strategic x
Assessment
Technical x
Assessment
Cost-benefit x
assessment
Risk Analysis x
K - knowledge and experience in relevant fields – 50%
M - Managerial and financial capabilities – 20%
G - General capabilities – 30%

1- Strategic Assessment

• Objectives: support for corporate vision
• Information System (IS) Plan: legacy systems
• Organisation Structure: enhance of destroy?
• Management Information System (MIS)
• Personnel: manning levels and skill base
• Corporate Image: will it affect customer perceptions

77

2- Technical Assessment

• Functionality: will the end product work?

Applications
Security
Metrics –design requirements

• Scalability: is the network able to grow without major
problems
• Adaptability: will the project be able to incorporate new
technologies in the future?
• Manageability: can we monitor network operations and make
necessary changes easily?

3- Cost-benefit Analysis:
• Costs
– Development cost
– Setup cost
– Operational costs
• Benefits
– Direct benefits (reduction in salary bills)
– Indirect benefits (increased accuracy, increased
timeliness, more user friendly)
– Intangible benefits (Better customer and supplier
relationships, better information flows/problem solving)

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• Cost-benefit Analysis
– If benefits > cost, that is good
– If benefits < cost – that is bad
• How do you measure intangible benefits?

4- Risk Analysis
• What is the likelihood that an event will result in the project
not meeting its objectives?
• A cost-benefit style of analysis can also be used to quantify
possible losses. “What if” analysis
• The difficulty is determining the likelihood of an event
occurring or accounting for an unpredictable set of
circumstances

Typical Risks:
• Lack of commitment on pricing.
• Implementation services bid are inadequate to accomplish the
implementation.
• All components (pieces of the system required to make the
software work as discussed) are not included in the bill of
materials.
• Little ability to escalate problems so that they have
appropriate attention.
• Inability to cleanly exit the contract if the solution does not
work appropriately or circumstances change.
• Payments do not incentivize the vendor to complete the
implementation in a thorough and timely manner.
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Service level:
• Ask the question whether specific technologies are suitable
for the kind of service you wish to deliver.
• Best effort
• Deterministic service
• Guaranteed Service

Criteria used in your last milestone exercise

Milestone Service
Best Effort Deterministic Guaranteed
Response Time
Accuracy
Availability
Network Utilisation
Throughput
Efficiency
Latency

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Negotiation Timeline for real project:

Activity Dur. Month
1 2 3
Type Week
Select Preferred Vendor 4 X
Review Contract 1 X
Select Negotiation Team Members 1 X
Orient Team to Issues 1 X
Hold Negotiation Kickoff Meeting 1 X
Validate/Negotiate Sizing and Pricing 1 X
Draft Milestones 1 X
Agree on Acceptance Criteria 1 X
Draft and Finalize Work Plan 2 X
Complete Terms/Conditions 4 X X
Conduct Legal Review 1 X
Sign Contract 1 X

81

The Role of Contract Negotiation:

• System Planning
• System Selection
• Implementation

• Establish the foundation and structure for a solid working
relationship.
• Clarify and/or resolve any issues identified during the
selection process.
• Further understand the vendor’s goals, objectives, priorities,
and culture.
• Provide detailed understanding regarding the mechanics of
the relationship to your executive team and project sponsors.
• Assess lingering risk and mitigate with specific strategies.
• Enable your organization to take advantage of best-case
scenarios.
• Protect your organization against potential worst-case
scenarios.

82

Developing a Negotiation Strategy:
• Identify negotiation team members (3–4).
• Determine the timing for inclusion of legal counsel.
• Review the contract and develop an issues list.
• Determine the priority of issues and areas for leverage.
• Develop a party line.
• Identify team member roles/responsibilities.

Contract Negotiation Strategies:

Vendor contracts are, to varying extents, one-sided and in
favor of the vendor. The trick to negotiation is to identify the
tactics and approaches that are most effective in obtaining
concessions.

• Hardball Tactic – protracted negotiation typically
accomplished via attorneys.

• Pushover (non-tactic) – negotiation on price with
acceptance of terms and conditions.

• Balanced Approach – open discussion of issues and
implications on both sides with a desire to develop a
workable solution for each party.
83

84

Contract Negotiation Process:

Step Main items
1. Determine Goals/ • Uses.
Objectives • Growth.
• Timing.
2. Obtain the “Complete” • Bill of materials.
Contract From the Vendor • Terms and conditions.
• Appendices.
3. Review and Identify Major • Balance of responsibilities.
Issues • Inclusion/expansion.
• Payment.
4. Identify Negotiation Team • Executive sponsors.
• System owner(s).
• Legal counsel.
5. Develop Strategy • Goal.
• Leverage.
• Concessions.
• Go/no-go.
6. Negotiate Contract • Location.
• Frequency.

• Format.

85

Relationship between Owner and Contractor:

• It is important to develop a good relationship between Owner
and Contractor.

• Discuss the major contract terms and conditions that can and
should be negotiated.

• Identify various strategies and approaches for negotiation.

• Provide suggestions to improve leverage.

• Provide a framework for contract negotiation.

Relationship Status
Owner Contractor

Win Win
Good & Long term

Lose Win
Bad & Short term Win Lose
Lose Lose

86

How to establish Good & Long term Relationship?

1- Information Analysis:

 Scope and requirements analysis
 Budget and payment analysis
 Technical conditions analysis
 Time analysis
 HSE analysis
 Resource analysis
 Risk analysis
 Others conditions
2- Double / Triple Think:

 What do you want? (D)
 What does the negotiator want? (T)
 What does the negotiator think you want? (T)
 Where’s the middle ground? (D)
 What’s your bottom line? (T)
3- Build Trust:

 Tell the truth
 Respect confidences
 Honor your commitments
 Be clear
 Be open
 Be firm

87

4- Move Beyond Positions:

 Ask questions that probe specific needs / interests
 Create a supportive climate
 Find mutual ground

5- External Listening

 Body language – yours and theirs
 Nonverbal messages
o Facial expressions
o Voice inflections
o Eye movement

6- Know Your BATNA

 BATNA – Best Alternative To A Negotiated Agreement
 Don't focus on a "bottom line"
 Don't agree to anything less than your BATNA
 Separate the people from the problem
 Focus on interests, not positions
 Invent options for mutual gain
 Insist on using objective criteria
 Can you afford to walk away?

88

7- Negotiating a Raise or Promotion

 What have you done for them lately?
 How often can you ask for a raise or promotion?
 How much should you ask for?
 How do you ask?
 What if the answer is no?

8- Setting It Up

 Agree on a benchmark job
 Agree on proficiency / performance level
 Job value
 Price / Salary range
 Necessary performance

89

Negotiation Issues:
Negotiation may be developed for all of the following issues
1- Budget and payment conditions:

 Costs and prices
 Discount provisions
 Payment terms
2- Technical conditions:

 All technical aspects
 Quality levels
3- Time conditions:

 Schedules
 Crushing
4- Safety conditions:

 HSE levels
 Safety tools
5- Resource conditions:

 Types of materials
 Material levels
 Manpower limits and skills
 Tools types and level
 Equipment types and level
 Subcontractors
6- Others conditions:

 Mode of transportation
90

 Warranty terms and conditions
 Cooperation and relationships

Note: 99% or more of the time involved in a successful
negotiation is invested in preparation for the actual face-to-face
discussion

Objectives of Negotiations:

 To obtain the quality specified
 To obtain a fair and reasonable price
 To get the supplier to perform the contract on time
 To exert some control over manor in which the contract is
carried out
 To achieve maximum cooperation
 To maintain relationships
 To create a long-term relationship

91

PMIS - Negotiation Issues
# ID Form/report Responsibility
1 PSR Project scope & requirements
Project
2 WBS Work breakdown structure
Manager
3 PBP Project base price

4 SEC Standards & Engineering calculations
5 DDS Detailed drawing and specs
Design
6 BOQ Bill of quantity
Manager
7 WPA Work package activities
8 RAL Resource allocation (Mat., HR, Eq., SubCont.)

9 RPR Resource performance rates
10 BOM Bill of materials and program
11 BOE Bill of equipment and program Resource
12 BOH Bill of human resources and program Manager
13 IER Internal and external resources and program
14 PPR Procurement program reports

15 RCR Resource cost rates
16 TMC Total material cost
17 TEC Total equipment cost
18 TLC Total labor cost
19 TSC Total subcontractor cost Cost
20 TDC Total direct cost Manager
21 TOH Total overhead cost
22 TPC Total project cost
23 NVA Net value added and Margin factor
24 NPR Net profit (or Saving) ±X %

25 MAP Target Master plan for WBS
Planning
26 APS Action plans for each WP
Manager
27 DPS Detailed plans for each work type

28 WOS Work orders for each crew (weekly or monthly) Site
29 WFU Work order follow-up (weekly or monthly) Manager

30 PER Performance evaluation report All

31 KPI Key performance indicators (for Top mang.) Project
32 RAS Risk ass. Report for critical (for Top mang.) Manager

92

Project Cost Parameters
• Total direct cost
 Total Materials cost
 Total Labor cost
 Total Equipment cost
 Total Sub-contract
• Total indirect cost (overhead)
 Project (job or site) overhead (10 to 20 %)
 Office (management) overhead (5 to 10 %)
 Sales tax (3 to 6 %)
• Risk estimation (for critical activities and resources)
(up to 25%)
• Total cost = Direct cost + Indirect cost + Risk estimation
• Profit (10 to 20 %) For normal projects
• Price = Total cost + Profit
• Markup = Office overhead + Profit = (15 to 30 %)
• Value Added = Price – External resources
= (I + E + O + P) – E
=I+O+P
• Margin factor = Total project value / Total direct cost

For construction projects:
Lower Price limit = (1.3 to 1.7) * ERC
Margin Factor = 1.3 to 1.5

Loading Full Normal Unused capacity
capacity Capacity <60%
>85 % 60-85%
Parameter Profit Markup Value added
Target 1) Profit 1) Overhead 1) Internal Resources
2) Profit 2) Profit
Resource External Mixed Internal
View
93

Project Price Parameters:
Price = Total Cost * Weight Factor

1- Project information:
- Scope and requirements
- Location and Utilities
- HSE requirements
- Quality requirements
- Duration, etc.
2- Contractor information:
- Company strategy or policy
- Resource availability
- Available and unused capacity (work load)
- Overhead ratio
- Value added ratio
- Mob and De-Mob
- Contractor history (CV & Quality manual), etc.
3- Owner information:
- Owner strategy or policy
- Contract type
- Price measurement (LE or $)
- Payment condition (Cash flow)
- Bonus/ penalty
- Future projects
- Owner history, etc.
4- Market information:
- Competition level
- Relationships
- Environment conditions
- Limitations and constraints, etc.

94

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