Negotiation is a common feature of the procurement cycle. There are a variety of negotiating styles that can be used and there is no one right approach. The approach used will depend on the resources available, the skills and experience of the personnel involved, what issues are to be negotiated and the timeframe involved. The approach used should aim to engender mutual understanding and commitment to resolve issues in a cooperative manner that leads to a constructive relationship, and to support the achievement of value for money.

Successful negotiations require the personnel involved to have relevant skills and experience. It is better practice to learn the necessary skills through formal training, and further develop them by experience obtained on the job. Managers and staff who are involved in contract negotiations as an integral part of their responsibilities should identify any skills gaps and address them through professional development activities.

The person or team selected to conduct the negotiations may need to have, for example, communication, problem-solving, technical and financial skills and an understanding of the relevant industry. Professional advisers may also need to be included in the team where the negotiations are likely to be complex, where there may be difficulties in reaching agreement or there is a need for specific expert advice. To ensure effective transitioning to the contract management phase, it is beneficial to involve the manager responsible for the ongoing management of the contract in negotiations.

Negotiations are more likely to be successful when planning for the negotiations include:

•  setting out and agreeing the contract terms and conditions that will be subject to negotiation;

•  committing the necessary resources in terms of time and funding, including obtaining professional advice where required;

•  establishing the roles and responsibilities of the negotiating team;

•  ensuring that those involved have the legal authority to act on behalf of the party they represent;

•  identifying any problems or barriers as well as opportunities, and developing an approach to address these;

•  defining the objectives and constraints of the negotiation; and

•  involving senior management in setting the policy parameters and communicating progress and/ or changes in circumstances to them.

It is important that contract negotiations are conducted in a professional and structured manner. Addressing the following issues will assist in achieving this objective:

•  agreeing on the make-up of the negotiating team of both parties: for example, will professional advisors be on the negotiating team or be available for advice as and when required;

•  agreeing the location and agenda for each negotiating session;

•  where a probity advisor has been appointed, obtaining sign-off on the negotiation arrangements;

•  establishing timeframes in which negotiations of individual issues, as well as negotiations overall, will be conducted;

•  establishing any interrelationships between individual issues/provisions that are subject to negotiation to ensure these are taken into account during negotiations. For example, there will generally be a relationship between service levels and contract price;

•  focusing on achieving the objective sought over the life of the contract, rather than on short-term gains;

•  keeping issues that are not negotiable to a minimum and being prepared to trade-off less important requirements to achieve outcomes that are central to the entity's objectives;

•  keeping unresolved issues to a minimum and agreeing arrangements for their later resolution; and

•  assigning responsibility for taking formal minutes of the negotiations and ensuring the minutes are circulated and agreed within specified timeframes.

There are a variety of negotiating styles that can be used and there is no one right approach.

To ensure effective transitioning to the contract management phase, it is beneficial to involve the manager responsible for the ongoing management of the contract in negotiations.