What are the most common procurement negotiation pitfalls and how do you avoid them?

Here's a rare tip: know your counterpart's BATNA. Research their alternatives to tailor your proposals for a strategic edge. For instance, if "Supplier X" lost a big client, they might be more flexible on pricing. Research, analyze, estimate, and strategize to strengthen your negotiation.

In addition to BATNA, know your most desirable and least desirable outcomes in any negotiations. This will help you set the stage to maximize your outcomes but also know when to walk away if things fall below your least desirable outcome.

Don't forget to partner with key stakeholders in your organization. Negotiation is often about communication management, and a good sales person will target decision makers who need to be part of negotiation planning. If you have a strategic sourcing partner, leverage their help. If you are in strategic sourcing, make sure you have all internal players, including technical partners, included in the requirements and negotiation planning. When you go to suppliers, you will be better prepared to drive desired results quickly.

Without thorough preparation the negotiation is unlikely to reach the optimum outcome. Understand your objectives and those of the other party. What are the concessions and best alternative to a negotiated outcome. What are you negotiating for, e.g. Costs - To reduce the cost of procurement by achieving optimum pricing or value for money. Value - To achieve added value such as reduced lead times. Delivery - To improve service performance through Key performance indicators. Disagreement - To resolve disagreement through achieving understanding. Problem - To solve a problem. Quality - To achieve better quality through reducing deficiencies. Agreement - To reach mutual agreement where all parties are satisfied.

Aligning negotiation elements to specific objectives enhances the likelihood of a successful outcome. By focusing on clear communication, understanding mutual interests, and proposing realistic solutions, parties can navigate the negotiation process effectively. A well-documented agreement that reflects the objectives of both parties serves as a foundation for a lasting and productive relationship.

As you prepare for the negotiations, know and learn more about your suppliers. Understand and be able to clearly establish the value you bring to the suppliers with the business. In addition, know where your business fits within the overall business strategy of the supplier. This will help you understand if you want to partner with them or not.

Keeping a broad lens at this point is important. Too many deals focus on the current scope, and end up being win/lose. If you look far enough, enough value can be found to make a deal worthwhile for all of the stakeholders. Public sector procurement has a greater obligation to serve all stakeholders, it can be easier to broaden the lens. But the ESG agenda is making it easier for all organizations to consider more stakeholders and wider sources of value. The certainty and ease of securing benefits are also considerations. Vested deals aim to help buyers achieve ambitious agendas they could not do all by themselves. Experienced partners can and do deliver.

Critical and a much overlooked element - failure to develop the human relationships across both enterprises will lead to malicious compliance and a ‘battle of the forms’. Many times the relationship and trust unlock opportunities and potential for all parties.

Set clear and realistic objectives and target outcomes. Conduct proper preparation. Focus on understanding the other party/ parties. Focus to achieve a win-win; and not only a win for yourself. Listen to the other party. Build rapport and trust. Focus on value

Of course, rapport and trust matter. Try the "mirroring" technique to create a subconscious connection. Observe their body language, tone, and gestures; subtly reflect their behavior. Adjust as needed. This tactic can enhance rapport in negotiations.

The procurement process starts with a crystal clear understanding of two things: the desired outcome and the ripple effect. Stakeholders may only be interested in the outcomes for their department and to the detriment of another department. As a procurement professional, you're more than just a negotiator. You're also a diplomat and the voice of the ultimate beneficiary. A poor purchase can skyrocket client churn and cost millions to remedy. It's essential to ask clarifying questions upfront. You're looking for 20% answers and 80% discrepancies. You're training your ears to catch the disconnect by talking to all stakeholders. Your ability to mitigate a disastrous outcome, time after time, will make you invaluable.

Diagnose your negotiation counterpart's environment and actively listen for their needs and, interests. What are the best possible outcomes, reasonable outcomes, and minimum desired outcomes. Recognise the trading aspects: items the other party may wish to trade and what they may offer or concede.

Objective criteria is no guarantee of a successful purchase. There are countless horror stories of purchases that looked good on paper but ultimately cost the company unbudgeted time and money to fix. It's better to pay more with a vendor that will implement and execute as promised than to make a purchase based on objective criteria only. The key factors to consider are whether they can deliver on time, as promised, and make the process as smooth as possible. It's the difference between going from LA to NY via bus versus private jet. Decide wisely.

In addition to these procedures, it is important to establish a formal process for evaluating and administrating changes. This ensures that every modification is thoroughly assessed for its impact on the scope, timeline, and budget. Regular reviews and audits should also be conducted to monitor compliance with the change control procedures and to identify any areas for improvement. By maintaining clear documentation and communication throughout the process, all stakeholders can stay informed and aligned, ultimately facilitating a smoother and more efficient contract delivery.

I like to use a user acceptance approach to make sure it can be done and your people can make it work. If your people cannot imagine what the new situation will look like and how it would work, you have a steep change management hill to climb, and your solution may not work.

Well, One thing I find helpful is to do a lot of research about what you are going to negotiate for. Knowing the onions of the business also helps you against being blindsided and shows how knowledgeable you are about the product or service. Keeping a good relationship with suppliers is very key to procurement. Walking away can do a lot of good sometimes.