Procurement Policies and Procedures

Negotiating successfully takes skill and practice and should result in a win-win situation for both the buyer and the seller.

Good Negotiators:

  • Do their homework 
  • Clearly understand their requirements and objectives
  • Develop strategies             
  • Never lose sight of their goals
  • Know where they can afford to compromise and where they cannot
  • Make sure their negotiating teams have whatever expertise (technical, financial, legal) is needed to increase the chances for a successful settlement 
  • Make an effort to anticipate the vendor’s strategy and to determine what the vendor hopes to gain from the negotiation process.

Buyers should negotiate when:

  • The Purchase involves a significant amount of money or represents and on-going effort.
  • The number of vendors available are too few to competitively bid the purchase (the buyer can’t be sure of getting a fair price)
  • New technologies or processes are involved for which selling prices haven’t been determined yet
  • The vendor must make a substantial financial investment in equipment, technology or other resources
  • Not enough time is available to competitively bid the purchase.

Negotiation Strategies

Whenever possible, the buyers should:

  • Negotiate on their own “turf” The physical environment should be pleasant, well ventilated and lighted
  • Prepare an agenda and brief the members of the negotiating team beforehand so that their strategy isn’t compromised
  • Never lose sight of the target what should be gained form the negotiation
  • Have confidence in their facts and figures. Never use information that could be questioned or proven inaccurate
  • Negotiate only with vendor representatives who are empowered to make concessions
  • Leave plenty of room to manoeuvre. The greater the initial demands the greater the probability for success.
  • Not be afraid to be silent. Silence can be an effective negotiating tool. If the vendor fears he is losing the business, he may talk himself/ herself into offering more and better concessions than expected
  • Call a recess or coffee break if negotiations break down.
  • Always withhold something for concession in return for a point the vendor is willing to concede.
  • Always be fair. The vendor is entitled to a reasonable profit. One that allows him to stay in business for the long run

Negotiation Strategies to Avoid

Buyers

  • Shouldn’t reveal their strategies to early into the negotiation process
  • Should avoid getting so bogged down in details that the overall objectives are lost
  • Should never try to prove the vendor wrong.  Leave the vendor room to retreat gracefully form a stated position.
  • Should avoid displays of temper, frustration and anger that can handicap the negotiation process and logical thinking
  • Should not communicate anything to the vendor that reduces bargaining power for example. “Your our only source” We have €20k budgeted for this purchase, “I have to have it now” Etc, Be intelligent and cautious
Close X