Contract Negotiation in Procurement Process: Successfully Land the Contract You Want

Being unprepared for contract negotiation in the procurement process is asking for trouble down the road. However, with some strategic planning and relationship building, you can set up your procurement contracts for success. Here are some key considerations to keep in mind before you start the negotiation.          

Understand What Success Looks Like

Before negotiating, define what success means for this contract. Ask yourself:

• Will both parties understand rights and obligations and adhere to them?
• Will expected financial and operational benefits be realized?
• Will stakeholders be satisfied?
• Is there an efficient performance monitoring process?
• Is the supplier responsive and committed to resolving issues?

Good contract management in procurement facilitates an effective working relationship between buyer and supplier. Keep this bigger picture of success in mind as you negotiate the details.

Research the Situation

Do your homework before sitting down at the negotiation table. Take a data-driven approach by analyzing:

• Historic spend and suppliers in the category.
• Forecasted purchasing volumes.
• Existing pricing and market rate benchmarks.
• Terms in similar contracts with other suppliers.
• Past performance data if you have contracted with this supplier before.

With spend analytics, you can easily access the insights needed to negotiate from a position of strength. Define fallback positions in case you do not reach your ideal agreement.

E&I Cooperative Services® can help you prepare. You can compare pricing, terms, and conditions with E&I’s 150+ ready-to-use contracts. Because E&I negotiates contracts on behalf of its 6,000 members, there is bulk buying power to negotiate best-in-class pricing and terms.

You can also take advantage of E&I’s strategic spend assessments (SSAs). E&I provides a no-cost evaluation of your spend data to find opportunities to reduce costs, bring more spend under contract, and maximize efficiencies. An SSA can uncover areas to save and consolidate, providing a strategic roadmap for future procurement.

Understand the Supplier’s Motivations

Look beyond the supplier’s obvious commercial goals. Research helps uncover their wider business objectives, challenges, and biases. For example:

• What non-financial incentives could you offer, like a reference or introduction?
• Who will attend the negotiation for them, and what are their priorities?
• What risks or opportunities do their financials suggest?

Gaining this context facilitates creative problem-solving to meet both parties’ core needs as part of negotiation and contract management in procurement. Building a solid relationship with suppliers can help make future interactions more productive.

Manage Your Team’s Dynamics

Your internal team can unintentionally derail negotiations despite good preparation. Financial, time, or professional pressures may boil over into unhelpful emotional reactions. It is best to:

• Eliminate any conflicts of interest.
• Understand individual motivations and loyalties.
• Watch for personality conflicts and misunderstandings.
• Diffuse any rising tensions by pausing.

With patience and empathy, you can get discussions back on track.

Remain Open and Listen

Do not rush to assumptions or hardened positions. Listen closely to understand the other side’s perspective. Acknowledge their ideas positively and look for mutual ground. Some tips include:

• Do not let impatience take over when opinions differ.
• Allow others to speak, and listen carefully.
• Consider if parts of their solution could work for both parties.

Creativity and compromise require open-mindedness. Multiple effective solutions likely exist.

Learn from the Experience

After signing, debrief with your team on lessons learned while the experience is fresh. What worked well that should be repeated? What can be improved for next time? Which data and insights proved most valuable?

Experience with one supplier can help in negotiations with the next.

The Only Member-Owned, Non-Profit Cooperative for the Education Community

E&I Cooperative Services is the only member-owned, non-profit, sourcing cooperative that exclusively focuses on serving the education community. As their sole focus, E&I’s team of procurement experts is uniquely equipped with the experience and expertise to meet the specialized needs of educational procurement.

There is no cost to become a member and no minimum purchasing requirement.

Not only do E&I members get access to competitively sourced contracts and certified diverse suppliers, but they also can benefit from exclusive rebates and incentives from select suppliers. As a cooperative, E&I also shares proceeds with its members in the form  of patronage refunds based on yearly volume.

Contact the experts at E&I Cooperative Services today to learn more about contract negotiation in the procurement process.