[Name of agency]

Negotiation plan

[Name of procurement project]

Contents

Acronyms 1

Approvals 1

Background 1

Business objectives 1

The parameters 2

The negotiation 2

The supplier 2

Supply history 2

Transitioning to new supplier 2

Contract 3

Budget 3

The teams 3

The agency’s team 3

The supplier’s team 3

Logistics 4

Location 4

Timeline 4

Positioning 4

Importance of the goods/services to the agency 4

The agency’s value as a customer 5

Power and dependency 5

Desired supplier relationship 6

Negotiation points 6

Evaluation panel recommendations 6

Opening statements 6

Contract 6

Price 7

Key deliverables 7

Standards and quality 7

Anticipating questions 7

Defining needs 8

The agency’s needs 8

The supplier’s needs 8

What the agency could trade 8

Deal breakers 9

Risks 9

Acronyms

The following acronyms are used in this document.

Approvals

Approval of the negotiation plan

Approval of the budget

Authority to proceed to contract

Business objectives

The business needs that the procurement will address are [insert].

The key benefits of successfully meeting these business needs are [insert].

The procurement will help the agency achieve its [choose: short-term / medium-term / long-term] goals by [insert].

Meeting these business objectives is [choose: critical / urgent / important] to the success of the agency.

If these business objectives are not met the consequences are [insert].

The following elements are out of scope [insert].

The parameters

The proposed contract will deliver the following business needs [insert].

The objectives for the negotiation are: e.g.

to close the deal

get best value-for-money over whole of life

minimise transaction costs and time and drive savings

to build medium to long term relationship with the supplier and seek continuous improvement and innovation

to set clear and realistic expectations.

The negotiation outcomes are [insert].

The negotiation is with the preferred supplier: [insert name and address].

The preferred supplier is [insert information about the supplier e.g. the size of the organisation, annual turnover, number of employees, types of products or services, other government customers etc.]

We have no history of using this supplier. OR Our history of using this supplier is [insert].

There is no existing supplier or arrangement in place to provide these needs. OR

The current supplier is [insert name of current supplier]. The term of the contract is [insert]. The contract is due to expire on [insert]. The whole-of-life costs for the current contract are $[insert].

Aspects of the current delivery that are going well and that we want to retain are [insert details].

Aspects of the current delivery that we are not satisfied with and we want to improve are [insert details].

Improvements presented by this supplier’s proposal include [insert details].

Opportunities to innovate that we would like to explore include [insert details].

Over the term of the contract there are opportunities to provide for continuous improvement and supplier development which include [insert details].

Opportunities to improve how well we manage the contract and the relationships with the supplier and key stakeholders include [insert details].

Please add this section if applicable – modify to suit.

This new contract will result in a transition from the previous supplier. A transition plan will be developed to actively manage the changeover.

The transition will have a [choose: minor / moderate / significant] impact on ongoing service delivery.

Aspects of the transition that need to be addressed in the negotiations are listed below. Negotiating these points will help inform the development of the transition plan.

e.g. who (from the agency and the new supplier) will be responsible for managing the transition

e.g. ensure that the new contract start date aligns / overlaps with the previous contract completion date

e.g. find out what the new supplier needs from the agency and the previous supplier in order to transition effectively

e.g. ascertain the new suppliers requirements for information, access to premises / files / transfer of assets etc. during the transition phase

e.g. customer engagement strategy – how and when the new supplier will be introduced to stakeholders and what will be done to build these new relationships.

The proposed length of the contract is [insert proposed term e.g. three years with the option to extend twice for one year i.e. 3+1+1].

The approved budget (for the whole-of-life) for this contract is $ [insert]. This is based on total capital costs of $ [insert] and total operational costs of $ [insert].

The teams

Negotiating on behalf of the agency

Try to find this out before the negotiations begin. Your agency will need to ensure that it talks to the right people (e.g. you do not want to negotiate implementation details with the sales and marketing rep).

Negotiating on behalf of the supplier

Logistics

Negotiations will be conducted at our offices at [insert location].

Negotiations will commence on [insert date] and aim to be completed by [insert date]. The contract is due to start on [insert date].

It is anticipated that there will be [insert: one/two/three/four] meetings over the course of [insert: one/two/three/four weeks OR one/two/ months].

Positioning

The business impact and risk in the delivery of the goods/services, based on the following supply positioning matrix, is [insert: tactical acquisition / tactical profit / strategic security / strategic critical].

Supply position Value Impact/risk Strategic security Low High Strategic critical High High Tactical acquisition Low Low Tactical profit High Low

Diagram: Supply positioning matrix

Supply positioning matrix explained

The value of the agency’s account and the attractiveness of our business to this supplier have been assessed through the supplier preferencing matrix below. This matrix indicates the level of willingness or reluctance of this supplier to meet our needs.

Based on the matrix we are seen as [choose: nuisance / exploitable / development / core].

This means [insert].

Strategies to address this include [insert].

Supplier’s view Value ($) Attractiveness Nuisance Low Low Development Low High Exploitable High Low Core business High High

Diagram: Supplier preferencing matrix

Supplier preferencing matrix explained

The power and dependency matrix below assesses the levels of power and dependency between us and this supplier. This matrix shows that [choose: the buyer and supplier are independent / the supplier is dominant / the buyer is dominant / the buyer and supplier are interdependent].

This means [insert].

Strategies to address this include [insert].

Diagram: Power and dependency matrix

Given the proposed length of the contract, the level of desired trust and communication with the supplier and the approach to managing risk – the agency will seek a [choose: short term / medium term / long term] relationship with the supplier based on a [choose: strategic collaborative / tactical competitive] relationship. Our objective is to [choose: ensure reliable supply / manage the supplier to achieve optimum results / streamline the supply to minimise transaction cost and time / drive savings].

In the negotiations, this means that we will [insert the strategy and tactics to develop the desired supplier relationship].

Negotiation points

The evaluation panel recommended that the following points are addressed in the contract negotiations: [insert the point/s and described how they will be addressed in the negotiations].

The proposed contract terms and conditions were attached to the tender documentation.

The recommended supplier accepts all of the proposed conditions of the contract. OR

Negotiated conditions of contract

Negotiated pricing

Negotiated key deliverables

Negotiated standards and quality

Anticipating questions

Key questions to open the negotiations with

Possible questions from the supplier

Defining needs

The critical success factors for delivery under this contract are [insert].

Principle needs to be addressed in the negotiation

Anticipated supplier’s needs to be addressed in the negotiation

Areas that may be traded

There are certain critical aspects of the deal that must be delivered. In some instances an alternative may be acceptable. However, if the following critical needs cannot be met we will walk away from the negotiation.

Exit points

Risks

Key risks have been assessed using this risk analysis framework.

Diagram: Risk analysis framework

Overall this procurement is deemed to be [choose: high / medium / low value] with [choose: high / medium / low risk].

Key risks have been assessed on the basis of likelihood (L) and consequence (C).

The key for the following risk tables is:

likelihood (L): R = rare U = unlikely P = possible L = likely A = almost certain

consequence (C): N = negligible L = low M = moderate H = high E = extreme.

Key risks in the delivery of the contract

Key risks in negotiating the contract