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Negotiating a Contract

 

STUDENT PAPER

By Raghu Kuppa

SKEMA Business School

Lille, France

 



ABSTRACT

The paper provides a procedural explanation of how a contract is negotiated. It explains the terms negotiation and leverage, and how gaining leverage is the main outcome of negotiating a contract. The paper looks into various negotiation tactics and analyzes them with reference to a survey. The final goal is to determine the best tactic to perform during negotiation. This is concluded upon the analysis which was done on all the tactics recognized by AMA survey. The paper mainly answers the questions – “what are the tactics followed by negotiators” and which is the best in terms of overall efficiency. A Multi Attribute Decision Making (MADM) based on satisfying conditions is used to approach the problem. A tactic by the name highball/lowball is concluded as the best tactic to follow by a negotiator. The paper also provides a post evaluation and performance monitoring for the result obtained. No negotiation tactic is more influential than the other however, under most of the conditions one of them is likely to perform better over the others if followed properly.

Keywords: Negotiation, Business Contract, Finance & Banking, Mergers & Strategic Transaction, Intellectual Property, Litigation & Disputes, Agreement.


INTRODUCTION

Negotiation is a discussion which aims at reaching an agreement by the contractor and the client. It is a process that is found as a part of contract management. Negotiation becomes a necessity as it is vital that the contractor and the client are on the same grounds when making decisions that can affect an organization or a company. The negotiator might encounter a few problems during negotiation which include falling into a dilemma due to the exposure to a large amount of facts and figures or might sacrifice the negotiation stance due to an unarguable offer.  In the process of negotiation, it necessary to take into consideration the views of the client and make deals that wouldn’t drastically effect the contractor as well. Hence it is vital to follow a certain rules and methodologies to negotiate successfully.

The concept of leverage is an influential part of negotiation. Leverage can be considered as the political advantage a contractor has over the counter-part which can help him/her seize the deal. It is directly proportional to the ability to award benefits to the counter-part. Gaining leverage is the final goal of negotiation. It is important to understand why the client may not agree with the contractor’s position to discover the client’s goals. It is also important to analyze the position of the counter-part. Another leverage point would be to align the contractor’s interest with that of the client’s necessities.

The contractor is compelled to understand the position of the counter-part by understanding the needs of the other party. A major problem is the misunderstanding of the position which might stall the negotiation. Not having a wide range of options might also be a problem because it aids in settling onto an agreement at a faster pace. One of the major problems also include ‘authority of negotiation’. It occurs when the contractor makes a deal with the counter-part without knowing if he/she has the authority to make decisions. This is a massive disadvantage to the negotiator as it is a waste of time and effort. Negotiations can be intimidating. Sarcasm and bully tactics are commonly used to make the party feel inferior and uncomfortable to gain one’s demands. In a negotiation, the purpose is to come to a mutual agreement. At times, aggressive behavior might build up a hostile environment and poor relationships. The two parties might not understand each other’s needs due to a rise in emotions which leads to concentrating on the needs of their own rather than coming to a common ground for settling an agreement.

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To read entire paper, click here

 

Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director [email protected].

How to cite this paper: Kuppa, R. (2018). Negotiating a Contract, PM World Journal, Volume VII, Issue X – October.  Available online at https://pmworldjournal.net/wp-content/uploads/2018/10/pmwj75-Oct2018-Kuppa-negotiating-a-contract-student-paper.pdf

 



About the Author


Raghu Kuppa

Paris, France

 

 

 

Raghu Kuppa is a design engineer currently pursuing a Master’s degree in Program and Project management and Business development in Skema Business School, Paris. He has an experience on managing a design project as the design lead for 2 years and two years as a design engineer at Premium Composite Technologies.  He has also designed high performance racing yachts IRC52, MAXI 72, TRANSPAC 52, MELGES 40 and CARKEEK 40 using polymers and composites and is especially experienced with plastics.

He also worked at Johnson Controls for one year and at L&T for 2 years. He is highly experienced in the field of design and has knowledge of 4 professional design software. He has an overall experience in design including Cars and Nuclear submarines. Most of his projects use carbon fiber as the fundamental material. Raghu has a knowledge of the software Catia V5, Rhino, AutoCAD and the Microsoft tools. He is also an RYA qualified Sailor and has participated in offshore races in Dubai and PRO-AM race from Volvo Ocean Race.

Raghu finished his education in Sanketika Vidya Parishad engineering college, Vizag, India, specializing in Mechanical engineering and has a vital experience in solid modelling, Assembly design, Reverse Engineering and output design.