Post Tender Negotiations business analysis

29 May 2020

Well done! You’ve worked hard, the tendering process is almost over and you can relax. But can you? What you might not be expecting is the call that invites you for post-tender negotiations. This means further discussions and potential adaptations to your ‘finalised’ offer. This will always take place prior to a contract being awarded and usually happens when the buyer has not been overwhelmed by the proposals on their short-list.

Usually if you are called back at this stage for renegotiation, then you can assume the buyer likes your overall proposal but feels it needs some tweaking to meet their objectives. They may also want to ensure you are fully aware of all contractual obligations and requirements where this has not come through clearly in your tender.

Scope of Post Tender Negotiations

  • It can be wide ranging from additions to alterations in your proposal.
  • You can also be asked to re-price. This is the most common reason for initiating negotiations, especially during these economically tough times. Buyers are more eager than ever to gain additional value for money through provision of extra products or services for a reduced price than given in your tender.
  • Try to think of a request to re-price as another opportunity to win. The buyer could easily have chosen one of your competitors but instead kept the process open for improved offers.
  • If you do not have any pricing wriggle room or submit a bid where margins are close to the bone this is going to put you at a disadvantage at this stage as there will be little more you can offer in terms of value or price. Know your lower limits and stick with them.

Tips for Successful Negotiation

  • Before you start always establish your fallback position: how far you will go to win the contract and when to walk away.
  • If the buyer asks you for a concession, don’t immediately give it away because you want to win the contract. A skillful negotiator concedes from time to time, the key is to give a small concession for a large one.
  • Ask if there’s anything else holding them back from committing to you, try to find out everything that is on their ‘want’ list. If you start conceding things on an individual basis, a skilled buyer will take what you’ve given and ask for more.
  • Make sure you listen. On the face of it, this seems a ridiculous tip. We all listen, don’t we? Listening is difficult to do well, but it certainly pays dividends.
  • Once you know the buyer’s wants prioritise them in order of importance. You can then start to trade them against your wants. For example, if they want rebates on late deliveries, you might ask for a premium on late orders or urgent deliveries.
  • Never give anything away without getting something in return.
  • Try and trade things that have a big value to your buyer but a low value or cost to you.
  • Keep calm. Anger breeds anger and insult leads to further insult. Even in the face of provocation, especially in the face of provocation, always keep a cool head. Any displays of emotion should be calculated rather than an uncontrolled outburst.

The buyer must have a good reason for initiating further negotiations. It must be both fair and competitive and cannot be a ‘Dutch Auction’ where the buyer seeks to drive down your price against your competitors. The whole process must be open, fair, and auditable, and any changes you subsequently agree to must be submitted again in writing.

Negotiation Outcomes

Lose-Lose

If negotiations breakdown or if you’ve reached a deal that is so poor that neither party finds it workable, something somewhere has broken down in the negotiation process. Fortunately, at this stage of the tendering process, a lose-lose situation is almost impossible because the process is designed to stop this happening.

Win-Lose

This is where one party achieves a much better outcome or deal than the other. Whilst this position might be acceptable in the short-term, on a long-term basis it is not usually sustainable and results in an inharmonious business relationship.

Win-Win

This is the classic description of a good negotiated outcome with both parties feeling they have gained from the negotiation and are committed to delivering the outcome to their mutual advantage.

It is achieving this win-win scenario that you should aspire to in all your negotiations.

So, you’ve successfully managed all aspects of
the tendering process, its been hard work and you’ve been awarded the contract.

Congratulations!

Now the real hard work begins…