Eskom Procurement Book 2015

NEGOTIATION

7.13 APPENDIX

APPENDIX 7.1

A7.1.1 CASE STUDY: A TENDER FOR THE DESIGN, FABRICATION, SUPPLY AND ERECTION OF A STEEL STRUCTURAL BUILDING The following is a case study based on the author’s personal experience, and is an example of how a complicated negotiation, through careful planning on both sides, resulted in a win-win where it could so easily have resulted in deadlock or a lose-lose negotiation. Company A, a major conglomerate, had requested tenders for the design, fabrication, supply and erection of a steel structural building. The steel structure was to form an integral part of a R200 million project. Company A had already received several quotes from various construction companies, including Supplier X. The negotiation took place at Company A’s head office in Johannesburg. The team consisted of the project manager, the project procurement manager and the project construction engineer. The team was responsible for the management of the overall project, which was very intricate, and Company A had already experienced problems in maintaining time and cost deadlines. Company A had already received several quotes for the steel structure, ranging from R3 200 000 to R2 630 000. Supplier X had come in at R2 782 200. Supplier X had worked successfully with Company Aon similar projects in the past. They had always been difficult negotiators concerning the terms of the contract, but Company Awas fairly certain Supplier X had a fairly thin order book at that time. The major issues of concern were: • The total price was R2 782 200 and this was approximately 6% higher than A had budgeted. If Company A were to stay within the overall project requirement, it needed to negotiate at least R265 000 off the price. • Supplier X had employed a particular construction manager on the previous successful project they had completed for Company A. Company A wanted this individual to be involved again. • In order to ensure that Supplier X completed the job on time, Company A required a 10% performance bond. • Company A suspected that sub-contractors were being used by Supplier X and realised that, if this were the case, a handling charge could be added to the quotation and thus many of the quoted aspects might be more economically handled by Company A, albeit at great inconvenience. • Company A required a delivery period of four months. A7.1.3 COMPANY A’s INITIAL STANDPOINT A7.1.2 BACKGROUND

169 CHAPTER 7