Eskom Procurement Book 2015

NEGOTIATION

SYNOPSIS This chapter places negotiation within the context of procurement and describes it as a process by which parties attempt to resolve a conflict or reach an agreement. In all negotiations the parties involved have varying degrees of power, but no absolute power over each other. This means that there is always room to manoeuvre. Negotiations are only possible where the parties involved are willing to move from their stated positions and when that willingness is expressed at some point; they are therefore about the movement of opposing parties towards each other and towards a mutually acceptable position. This chapter is a practical guide to negotiating within the procurement context. It explains how to prepare for the negotiation by, among other things, itemising all potential issues that may be discussed in the negotiation. The actual negotiation strategy is important and should be written down and agreed upon by the negotiation team. Although there can be no substitute for experience, this chapter presents a number of topics that will be critical throughout the negotiating process. 7.1 INTRODUCTION The negotiation process is a much-neglected but vital part of successful procurement, and typically will take place once initial bids have been received and a short list of bidders has been drawn up. The intensity and degree to which parties negotiate can differ across purchase requirements. However, negotiation will also feature in on going supplier relationships to establish performance targets, correct non-conformance, perform contract reviews and widen the scope of services or products delivered by individual suppliers.

The goals of procurement should be to:

• Reduce fixed and recurrent costs. • Allow the organisation to focus on its core business. • Gain access to supplier skills and technologies. • Provide flexibility. • Reduce cycle times.

These goals will be made easier with a network of suppliers that enjoys working with an organisation and are aligned with its goals, not just their own. Negotiation can make or break this network.

7.2 NEGOTIATION OVERVIEW Negotiation is a process by which parties attempt to reach agreement about a set of issues. All negotiations have one thing in common: the parties involved have varying degrees of power, but not absolute power over each other. And,

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