Negotiation skills from the PM's perspective

Abstract

The procurement process of a project or program typically involves in its initial steps the performance of bidder conferences, in which potential sellers are gathered in order to understand the main proposal and future contract requirements. The outcome of such meetings for the contractor is a clearer overview of the most proficient sellers, which are therefore given priority during the contract bidding process. In this regard, not only understanding the procurement process from the buyer’s perspective, but also developing appropriate negotiation skills is essential for a Project Manager to optimise their chances of obtaining contracts as a seller or service provider. For instance, being able to ask relevant questions about the concerned project or program may indicate experience and professionalism. Likewise, building up traditional relationships with contractors shall be prospective operationally wise in the long term. Establishing a proper negotiation strategy is, therefore, perceived to be significant for a project manager to increase their opportunities of acquiring contracts as a service provider.

Introduction

It is fundamental for a Project Manager to hold fair negotiation skills, not only to adequately cope with issues during the project lifetime, being those related either to the internal or external stakeholders, but also to build trust in business’ relationships. The long term success of certain enterprises is understood to be based in well-established connections between groups and individuals that constantly will to support its development, following the favourable conditions which outcome from such bonds. This cooperative mindset has led most of the biggest ventures to set a new approach for making business, on which the competition was replaced by an idea of creating greater values together. This innovative strategy is justified by three main factors:

• Future considerations: focusing excessively on short term results might compromise opportunities with higher potential of outcome in the long term.
• Win-Win framework: by providing benefits to the counterpart in a negotiation, eventual rewards with greater value may come in return.
• Trust: Developing trust-based relationships reduces the necessity of spending resources on monitoring the partner’s behaviour towards following the contract terms and conditions.

Based in these concepts, a project manager at the seller’s position (or the one bidding for a contract) shall design their negotiation strategy to adequately approach a contract bidding process.

Negotiation Strategy

A well-structured approach towards a contract bidding process is fundamental for increasing the odds on succeeding. A general negotiation structure that likewise applies for the current context comprises the following stages:

Preparation

The same way a contractor goes through a preparation stage before the bidding in order to define the place and time to carry on with the process, as well as the arguments to be presented regarding the contract conditions, the project manager as a bidder shall also prepare in advance a series of information to be remarked when necessary. This includes, for instance, policies and standards from their organisation, thresholds for possible benefits to be provided, feasibility of scope fulfilment, etc.

Discussion

This stage involves questioning, listening and clarifying possible misunderstandings that might arise from the contractor’s side when introducing the project proposal. A recommended practice is to take notes of doubtful points during that stage, so as to further discuss and clarify them when needed. The acts of listening and questioning when appropriate are also essential, not only to avoid redundancies, but also to demonstrate interest and technical competence.

Clarification of Goals

Following the discussion phase, the interests and perspectives from both sides need to be understood, in order to reach a common agreement. As a contract bidder, the project manager shall be fully aware of the contractor’s expectations and requirements, but also have made their points clear for the final accordance.

Negotiation of Win-win outcome

Negotiating conditions from which both sides can take significant profits is the ideal situation for maintaining a positive connection, which can further lead to a partnership also for future projects. At this stage, the project manager shall be enough open and flexible to give and receive suggestions regarding possible alternatives to reach often better outcomes. Holding a conservative or rigid position at this point might even lead to a failure on obtaining the contract.

Agreement

Once both sides have come to an understanding in all aspects, the final agreement can be achieved. It is fundamental once again to assure that all the contract conditions have been made clear to all the involved parts.

Implementation of Course of Action

After the agreement, a course of action is set up by the project manager and his team, in order to plan the strategies for tackling the obtained project. This stage takes place just before the project initiation, and shall be thoroughly structured so as to avoid critical flaws during the project lifetime. Whether the project manager structure their negotiation strategy taking the previously mentioned steps into consideration, potential disagreements or misconceptions can be avoided during the process, and it can therefore progress through an uneventful way.

Negotiation Skills

An often assumed misconception in the corporative world is that the best negotiators are born with their skills, and therefore do not need much effort or training to accomplish positive results when negotiating. In fact, project managers seen as successful negotiators develop several skills from distinct fields, and shall be able to employ them in diverse contexts, such as products and resources acquisition, services, stakeholders’ management, contract biddings, etc. There are three key factors which tend to have a significant effect on the outcomes of negotiation processes and shall be given extra importance by project managers when seeking for means of developing their skills. These are the following:

Attitudes

Negotiations are strongly influenced by the attitude of the involved parts towards the concerned topic. For instance, an aggressive approach from one of the sides can lead the counterpart to adopt a defensive position. Likewise, demonstrating needs of personal recognition can be perceived as an extremely negative posture, most likely hindering the continuation of the process. A project manager in the negotiator position, for instance, during a contract bidding process, shall adopt a plain behaviour, avoiding to demonstrate strong emotions and absolutely dismissing any sort of attitude that indicate interests apart from the ones of the company or group they represent in the process. Likewise, as the possible contractor may also apply an aggressive strategy towards the bidders in order to take high advantage of the final agreement, it is important for the PM to be able to manage their behaviour and avoid manifesting a defensive position. While seeking for a longer relation with the potential client is important, achieving favourable terms and conditions on the agreed contract is also a basic concept.

Discussion

The way to visualize a negotiation process is decisive on defining the characteristic of the accord. Whether one of the involved parts does not approach the deal from a visionary and long-term perspective, attributing little importance to the relation with the counterpart, it becomes prone to be limited to a single occasion already from the beginning. A negotiator that does not target the relationship with the client tries to obtain as much as possible from the immediate resources available, whereas the one seeking for a long-term relation tries to add benefits for both sides involved. It is therefore essential for the Project Manager as a bidder to distinctively assess the conditions presented and manage their approach towards the process as either a single-case situation to take the best profit as possible, or as a mean of creating a permanent bond with the potential client, or partner in that case.