1. Contract Negotiations “Skills, Tools, and Best Practices”.
An Interactive Adventure into the Art & Science of the Deal!
By: Gregory A. Garrett, CPCM, PMP

2. Contract Negotiations – A New Book by CCH INCORPORATED
Key Topics of Discussion:
The New Performance-Based Buying and Selling Environment – The World We Live In! * Q&A - Exercise
Contract Negotiation Competencies – The Skills to Win * Self-Assessment Survey
The Contract Negotiation Process * Buyer & Seller – Best Practices

3. Contract Negotiations – A New Book by CCH INCORPORATED
The New Performance-Based Buying & Selling Environment – The World We Live In!

4. Findings/Descriptions
Cross-Industry Benchmarking Studies
CAPS Research Cross-Industry Benchmarking Summary (August November 2003 Reports)
Findings/Descriptions
Outsourcing spend as a percent of Sales $
Active Suppliers that Account for 80% of the Purchase $
Active Suppliers that are e-Enabled
Purchase Spend – EDI
Purchase Spend - B2B e-Commerce
Purchase Spend - Strategic Alliances
Purchase Spend - e-Auctions
Purchase Spend - Procurement Cards
Purchase Spend - Minority Owned Business
Purchase Spend - Women Owned Business
Purchase Spend - Other Small Business
Avg.
40.39%
9.47% %
11.60%
5.88%
21.68%
2.21%
1.20%
2.98%
2.25%
12.84%
* From: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED 2005, pg. 2 (Center for Advanced Purchasing Studies (CAPS) Cross-Industry Benchmarking Report 2003)

5. Performance-Based Supply Environment
The World We Live In
Performance-Based Supply Environment
Supply Drivers
Pros
+ New products and services
+ Wider range of products and services
+ More modular products and services
+ Reduced prices
+ Improved performance
+ Faster product introductions
Cons
More complexity
Higher cost of integration
- Less reliability
- Accelerated pace of change
- Rapid Obsolescence
- Less personal contact
Growth of Internet architecture
Continued Growth of Voice/Data/Video wireless communications
Use of e-Marketplaces
Growth of Enterprise Applications for e-procurement, automated sales tools, and Customer Relationship Management (CRM).
Technology
U.S. Govt. increased use of commercial buying practices
U.S. Govt. increased use of Past Performance as a major factor in Best Value source selection process
Increased competition
Increased enforcement of procurement ethics
Regulation
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 7.

6. NCMA, CMI, and ISM Studies (2000 – 2003)
Show Need for Negotiation Skills
The NCMA, ISM, and CMI Year 2000 surveys showed for every 100 surveyed contract management/purchasing professionals, concerning their roles:
90 indicate “more time sensitive”
85 indicate “more responsibility”
85 indicate “more team-oriented”
85 indicate “more strategic”
80 indicate “more use of performance-based metrics”
* Contract Management studies conducted by the National Contract Management Association (NCMA), The Institute for Supply Management (ISM), and the Contract Management Institute (CMI), 2000 – 2003.
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 9.

7. CMI Year 2001 Study - Results
"Which metrics do you believe your organization will use in the next 3 to 5 years to evaluate personnel performance?"
The respondents Top 10 choices:
Business Judgment 6. Integrity/ethics
Decision making 7. Education
Problem-solving Interpersonal Relations
Negotiation skills 9. Responsiveness
Customer service 10. Communications
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 10.

8. Contract Negotiation Skills Gap
Key Facts
Many of the Master Contract Negotiators in both the public and private business sectors, have retired, or retiring, or are retirement eligible by 2010**
Significant increase in the complexity of contracts and related projects ***
** Survey by Garrett Consulting Services, 2003
*** Center for Business Practices (CBP) study, 2002

9. Exercise – Q & A
How much money (%) does your organization spend via e-marketplaces, procurement cards, e-auctions, and e-catalogs?
Is your organization using performance-based contracts with your customers and/or suppliers?
How important are contract negotiation skills to ensure business success?
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 12.

10. Exercise – Q & A 4. How well do you negotiate?
5. Does your organization have the number and level of skilled master contract negotiators needed?
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 12.

11. Contract Negotiation Competencies The Skills to Win!
Contract Negotiations – A New Book by CCH INCORPORATED
Contract Negotiation Competencies The Skills to Win!

12. The Contract Negotiator’s Competencies Model
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 14.

13. Skills to Win: Self-Assessment Survey
Complete the 20 question – Skills to Win: Self-Assessment Survey (1 = Low Skills to 5 = High Skills)
Summarize and add-up your score on the survey worksheet (pg. 3)
Compare your result to the Self-Assessment Survey Scoring table
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pgs

14. The Skills to Win: Self-Assessment Survey
I am a person of high integrity.
I always act as a true business professional, especially in contract negotiations.
I ensure all of my business partners and team members act honestly, ethically, and legally, especially when involved in contract negotiations and contract formation.   
I verbally communicate clearly and concisely.
I am an effective and persuasive contract negotiator.
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 16.

15. The Skills to Win: Self-Assessment Survey cont.
6. My written communications are professional, timely, and appropriate.
7. I am an excellent team leader.
8. I consistently build high performance teams, which meet or exceed contract requirements.
9. I am willing to compromise when necessary to solve problems.
10.  I confront the issues, not the person, in a problem-solving environment.
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 16.

16. The Skills to Win: Self-Assessment Survey cont.
11. I recognize the power of strategies, tactics, and countertactics and use them frequently in contract negotiations.
12. I am able to achieve my desired financial results in contract negotiations.   
13. I understand various cost estimating techniques, numerous pricing models, and how to apply each when negotiating financial arrangements. 
14. I understand generally accepted accounting practices and how to apply them when negotiating deals
15. I am highly computer literate, especially with electronic sales tools, and/or electronic procurement tools.
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pgs

17. The Skills to Win: Self-Assessment Survey cont.
16. I am knowledgeable of e-marketplaces, vertical and horizontal trade exchanges, e-auctions, and how to use them to buy or sell products/services  
17. I understand the contract management process and have extensive education, experience, and professional training in contract management  
18. I have extensive education, experience, and training in contract law.  
19. I have extensive education, experience, and training in our organization's products and services.   
20. I am considered a technical expert in one or more areas. 
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 17.

18. Skills to Win - Self-Assessment Survey Worksheet
The Skills to Win: Self-Assessment Survey cont.
 Skills to Win - Self-Assessment Survey Worksheet
Questions #
Self-Assessment Score (1-5) 1. 2. 3. 4. 5. 6. 7. 8. 9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Grand Total Score: _______________________________
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 17.

19. Skills to Win Self-Assessment Survey Scoring
The Skills to Win: Self-Assessment Survey cont.
Skills to Win Self-Assessment Survey Scoring
90+: You have the knowledge and skills of a master contract negotiator.
: You have the potential to become a master contract negotiator, after reviewing the specialized skill areas and determining in which areas you need to improve your skills. You are an intermediate contract negotiator.
: You have basic understanding of successful contract negotiation skills. You need to improve numerous skills to reach a higher level of mastery of contract negotiations. You are an apprentice contract negotiator.
0 - 64: You have taken the first step to becoming a master contract negotiator. You have a lot of specialized skills areas you need to improve. With time, dedication, and support (education, experience, and training) you can become a master contract negotiator.
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 18.

20. The Contract Negotiation Process
Contract Negotiations – A New Book by CCH INCORPORATED
The Contract Negotiation Process

21. Contract Negotiations – A Complex Human Activity
Successful contract negotiator must:
Master the art and science, or soft and hard skills, required to become a master negotiator
Possess the intellectual ability to comprehend factors shaping and characterizing the negotiation.
Be able to adapt strategies, tactics, and countertactics in a dynamic environment
Understand their own personalities and personal ethics and values
Know their products and services, desired terms and conditions, and pricing strategy
Be able to lead a diverse multi-functional team to achieve a successful outcome
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pgs

22. Buyer’s Contract Negotiation Objectives
Acquire necessary supplies, services, and/or solutions of the desired quality, on-time, and at the lowest reasonable price
Establish and administer a pricing arrangement that results in payment of a fair and reasonable price
Satisfy needs of the end-user (customer)
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 55.

23. Seller’s Contract Negotiation Objectives
Grow profitable revenue (long-term vs. short-term)
Increase market share within their respective industry
Deliver quality supplies, services, and/or solutions – achieve customer loyalty
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 55.

24. Contract Negotiations – Essential Elements
Contract Negotiations – Essential Elements
Key Inputs
Tools & Techniques
Desired Outputs
Solicitation (RFP, RFQ, etc.)
Bid or Proposal
Buyer’s source selection process
Seller's past performance
·    Previous contracts
·    Competitor Profile Business Ethics/ Standards of Conduct Guidelines
·    Market and Industry practices
Oral presentations
Highly skilled contract negotiators
Legal Review
·  Business Case Approval
·  Contract Negotiation Formation Process
Plan negotiations
Conduct negotiations
Document the negotiation and Form the Contract
Contract or Walk away
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 56.

25. Contract Negotiation Process
Plan the Negotiation
Conduct the Negotiation
Document the Negotiation and Form the Contract
Prepare yourself and your team
Know the other party
Know the big picture
Identify objectives
Prioritize objectives
Create options
Select fair standards
Examine alternatives
Select your strategy, tactics, and countertactics
Develop a solid and approved team negotiation plan
Determine who has authority
Prepare the facility
Use an agenda
Introduce the team
Set the right tone
Exchange information
Focus on objectives
Use strategy, tactics, and countertactics
Make counteroffers
Document the agreement or know when to walk away
Prepare the negotiation memorandum
Send the memorandum to the other party
Offer to write the contract
Prepare the contract
Prepare negotiation results summary
Obtain required reviews and approvals
Send the contracts to the other party for signature
Provide copies of the contract to affected organizations
Document lessons learned
Prepare the contract administration plan
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 61.

26. Checklist of Buyer – Contract Negotiation Best Practices
(The Buyer Should: )
Know what you want – lowest price or best value
State your requirements in performance terms and evaluate accordingly
Conduct market research about potential sources before selection
Evaluate potential sources promptly and dispassionately
Follow the evaluation criteria stated in the solicitation: management, technical, and price
Use absolute, minimum, or relative evaluation standards to measure performance as stated in your solicitation
Develop organizational policies to guide and facilitate the source selection process
Use a weighting system to determine which evaluation criteria are most important
Use a screening system to prequalify sources
Obtain independent estimates from consultants or outside experts to assist in source selection
Use past performance as a key aspect of source selection, and verify data accuracy
Conduct price realism analysis
Create a competitive analysis report
Use oral presentations or proposals by sellers to improve and expedite the source selection process
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 85.

27. Checklist of Contract Negotiation Best Practices
(The Buyer and Seller Should: )
Understand that contract negotiation is a process, usually involving a team effort
Select and train highly skilled negotiators to lead the contract negotiation process
Know market and industry practices
Prepare yourself and your team
Know the other party
Know the big picture
Identify and prioritize objectives
Create options – be flexible in your planning
Examine alternatives
Select your negotiation strategy, tactics, and countertactics
Develop a solid and approved team negotiation plan
Determine who has the authority to negotiate
Prepare the negotiation facility at your location or at a neutral site
Use an agenda during contract negotiation
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 86.

28. Checklist of Contract Negotiation Best Practices cont’d.
(The Buyer and Seller Should: )
Set the right tone at the start of the negotiation
Maintain your focus on your objectives
Use interim summaries to keep on track
Do not be too predictable in your tactics
Document your agreement throughout the process
Know when to walk away
Offer to write the contract
Prepare a negotiation results summary
Obtain required reviews and approvals
Provide copies of the contract to all affected parties
Document negotiation lessons learned and best practices
Prepare a transition plan for contract administration
Understand that everything affects price
Understand the Ts and Cs have cost, risk, and value
Tailor Ts and Cs to the deal, but understand the financial effects on price and profitability
Know what is negotiable and what is not
Reference Text: Contract Negotiations, by Gregory A. Garrett, CCH INCORPORATED (2005), pg. 86.

29. Contract Negotiations – Skills, Tools, & Best Practices
This presentation is a brief highlight of the 350+ page book, which contains:
200+ Best Practices in Contract Negotiations
50+ Tactics & Countertactics used in Contract Negotiations
25+ Forms/Templates for planning, conducting, and documenting contract negotiations
10 Successful Strategies for planning contract negotiations
Much, Much, More!!!