Designing and Managing Effective Contracts

The ability to negotiate successfully is one of the most basic of the business person’s skill sets. Significant positive or negative impacts are made to every organization’s bottom line from the results of the negotiations conducted by their employees either with internal or external customers or suppliers. Therefore, it is essential for the continued success of any organization that employees are well trained and experienced in the planning, strategies and conducting of negotiations. This course is designed to provide strong competencies in the methods and strategies that will result in successful negotiations with suppliers and contractors.

Course Objectives

Upon completion of this course, participants will:

• Understand the importance of planning and preparation in successful negotiations
• Be able to identify various approaches and styles in negotiations
• Appreciate how to determine, rate and value the issues in a negotiation
• Enhance their knowledge in the practice of competitive purchasing and link this to the negotiation
• Review and understand the cost drivers in the purchasing cycle
• Understand supplier margins by knowing how suppliers derive prices through the cost recovery method
• Be able to use a model for determining strengths and weakness of both parties
• Be aware of the importance and impact of various contract clauses
• Recognize the need to discuss the issues before negotiation
• Understand common negotiation tactics and countermeasures
• Gain experience through the actual negotiation of sample cases

Who Should Attend?

Managers and professionals involved in projects, contracts, purchasing, operations, maintenance, engineering, quality and other company activities that expose them or their staff to negotiations with contractors and suppliers and who want to improve their competency in this critical area of performance.

Course Outline

Negotiation

• Introductions
• Purpose of the programme and objectives
• Negotiation – a definition
• The four phases of negotiation
• The three types of negotiator – red, blue and purple

Comparing Approaches in Negotiations

• Win/Win Win/Lose or lose/lose approach
• Exercise: defining negotiation skill sets

Preparing for a Negotiations

• Preparation-the critical first step?
• The most important thing to remember in negotiations
• Steps in negotiation preparation

What is negotiable?

• Identifying the ‘tradables’
• Entry and exit points
• Prioritizing

Time – reality or perception?

• Business cycle and market conditions
• Lead-time
• Time limits – time as a tactic

The Purchasing Process

• Supplier/buyer positioning
• Rights and obligations of both buyer and seller
• Raising and managing competitive invitations to tender
• Requirements definition and prioritizing – the prelude to the negotiation
• Tender evaluation criteria – ranking and weighting
• Evaluating the proposal
• Assess strengths  and weaknesses
• Setting the negotiation strategy
• Pricing and payment terms
• Interim payments – stage or milestone
• Through life costs and considerations
• Cost drivers – transportation issues – title and risk transfer
• Cost implications of inventory – JIT
• Volume, specification and quality standards

The Supplier’s View

• Understanding elements of supplier cost to price structure
• Understanding supplier margins
• Reducing supplier prices without attacking their margins

Contracts and Special Clauses

• Types of contract
• Warranties – standard, extended, design defect
• Conditions – the core of the contract
• Acceptance criteria – who, want, how, where and when
• Spares, repairs, documentation and training
• Failure to perform – remedies including liquidated damages

Contract Price Adjustment Criteria

• Fixed price or firm price/
• Contract price adjustment criteria and clauses
• Use of price indices

Preparing the Negotiating Strategy

• The discussion phase
• Team or individual negotiations
• Preparing the team for pre-negotiation discussions
• Confirming assumptions about initial positions
• Negotiation objectives matrix
• Information gathering and recording
• Impact of available competition

Final Preparation

• How to handle the issue of authority
• Determine strategies
• Where and when
• Planning the agenda
• Team negotiations and roles

Common Negotiation Tactics and Countermeasures

• Non-verbal communication
• Undermining
• Delaying action
• Questioning
• Concessions
• The ‘if’ statement
• Comparative options

Course Methodology

A variety of methodologies will be used during the course that includes:

• (30%) Based on Case Studies
• (30%) Techniques
• (30%) Role Play
• (10%) Concepts
• Pre-test and Post-test
• Variety of Learning Methods
• Lectures
• Case Studies and Self Questionaires
• Group Work
• Discussion
• Presentation

Course Fees

This rate includes participant’s manual, Hand-Outs, buffet lunch, coffee/tea on arrival, morning & afternoon of each day.

Course Timings

Daily Course Timings
08:00 - 08:20 Morning Coffee / Tea
08:20 - 10:00 First Session
10:00 - 10:20 Coffee / Tea / Snacks
10:20 - 12:20 Second Session
12:20 - 13:30 Lunch Break & Prayer Break
13:30 - 15:00 Last Session