What are the most important outcomes to track for negotiation success in contract management?

While savings and value remain the main motivation for negotiations, a contract is not a victory for one party and a loss for the other. Crucial elements to be negotiated and tracked include timely performance, comprehensive coverage of all business aspects, to ensure no omissions or need for changes or amendments, dispute resolution, performance metrics, as well as documentation and record-keeping. Lastly, particularly when anticipating ongoing business with a partner, the central focus should be on trust and relationship-building. Ensuring your partner is satisfied with a fair and mutually beneficial contract is likely to foster a willingness to sign additional agreements and provide discounted rates or other advantages.

In construction industry generally from construction department Asking discounts. To get some discount. Timeline the contract, to increase time without any hassles. Approval of materials and drawing reviews and approval connect to the timeline. If we have not asked earlier material at site now we can ask. Asking for 20% as mobilization advance without bank guarantee with corporate guarantee. Opening of stand by LC, This all construction company requires interest free funds Some free land is required steel bending purpose, like to keep consumables, storage, this is in addition to the site office office for engineering staff and his team

Cost savings may not always translate to value in the long term. Your contract terms should be able to stand the test of time. Operational risk mitigation should be in contract with evaluations for delivery performance and quality. This affects your financial viability and drives true value.

Negotiation success can be measured in many ways. In addition to savings, other important outcome factors are the relationship and win-win proposition for both parties. Successful contract negotiation is not a Zero-Sum game where one party’s gain is other party’s loss. It need not be “I win-You Lose” always. Good negotiations should result in benefit to both the parties. It can be tangible & intangible benefits. For example, advance payment or payment within 7 days can be agreed if the contractor is facing liquidity issues. Similarly, we can agree for reducing PBG amount if contractor performance is good. Similarly, contractor can offer two service engineers instead of one. They can improve delivery performance without any additional cost.

Even before starting a negotiation process one needs to prepare a RACM (risk and control matrix) to understand the potential risk scenarios and how best to mitigate them. This will also be one of the important elements to define your walking away point or BATNA (best alternative to the negotiated agreement). The goal of any negotiation is finding common ground and emerging with a win-win situation for all involved. Since you are potentially building a longer term relationship it is important to balance the interests of both sides. However that should not be done at the detriment of regulatory requirements or certain non-negotiable ethical values.

Historically contract risk has been a point in time assessment of the potential risks in relationship with the third party. We are moving towards monitoring and mitigation through the lifecycle of the relationship. A risk based analysis helps you categorize your relationship and mitigation plans should follow the evaluation at the time of relationship. Periodic assessments, shared services assessment and risk monitoring tools can help monitor vendors. Performance KPIs like quality, SLAs and SLOs can help with what can be measured. The main risks that we see commonly evaluated are: Information security/cyber Financial / Regulatory Reputation Social Compliance Business Continuity Anti Bribery Anti Corruption