How can you create value when you've been invited to negotiate through a tender process? - Part 2

If you haven't read Part 1 of this Newsletter, go back and read that first.

Having analysed the deal set up and design you are in much stronger position to influence the process and outcomes of a tender.

Rather than passively accepting the rules of a competitive tender, it is almost always possible for you as sellers (suppliers) to find opportunities to respectfully challenge and shape the process to your advantage. Power dynamics in negotiations are multifaceted, and you can leverage various sources of power throughout the tender process.

Begin by challenging and shaping the process

1. Find Opportunities for Leverage: Recognise that power dynamics are not fixed throughout the negotiation process.

As a seller (supplier), you can often find leverage when you enter a tender process, especially if you are a desirable candidate (e.g., incumbent supplier or have previously worked with the decision maker). Don't be afraid to respectfully challenge, disrupt, and change the rules of a competitive tender. Sellers who provide unique value can often secure concessions from buyers, even in the face of onerous terms and conditions.

Begin by evaluating power dynamics and exploring where you can find leverage, consider the following as start point before entering the tender process:

• Each party's Next Best Options (NBO's)
• The dependence of each party on each other - both current and future
• Precedents that have been set through deals with them in the past or with other buyers in the market
• Influence on the other party's future reputation or brand strength
• The uniqueness of your product or service solution

Remember, that having competition in the market place doesn't take away all of your power. Your job is to be clear on where your power lies and learn how to influence the perception of your power in your favour with the business you are negotiating with - not your competition.

During the early stages, sellers (suppliers) often possess leverage, particularly when their inclusion in the tender is desirable to the buyer. Don't be pressured into accepting unreasonable contract clauses (e.g. standard T&C's on payment terms) without leveraging your power dynamics to negotiate concessions in your favour. Don't miss out on opportunities to secure better terms by understanding and utilising the power dynamics effectively.

2. Respectfully Disrupt the Process: During the tender process, it's likely that buyers will impose restrictive templates and communication limitations. To overcome these obstacles, consider three respectfully disruptive moves:

• Re-imagine the business problem: Fill out the required template while challenging the buyer's premise of the problem stated in the RFP and provide a supplemental response addressing the problem you believe the client truly cares about. This requires that you've done some adequate information gathering, remember don't assume that the businesses requirements are adequately reflected in the RFP.

• Offer multiple packages: Provide responses that vary in scope, resourcing, price points, and incentive models. Multiple equivalent simultaneous offers demonstrate creativity, provide context for the relationship between price and value, and uncover buyer preferences. Don't miss the opportunity to get more of what you want by giving them more of what they want.

• Bypass communication restrictions: With careful consideration, bypass unreasonable communication restrictions by engaging directly with the buyer or decision owner or by cc'ing them in a summary of your understanding, or what has been proposed and why. This can help clarify what is most important to them, build/strengthen relationships, uncover new insights, and influence decisions.

Remember, rules in negotiation are there to serve the party that's written them. Don't fall prey to the rules of a game that you don't want to play.

During the final stages of the tender, buyers may employ aggressive tactics to maintain leverage, such as isolating price from other variables or setting time deadlines for a pricing submission. It's at this time sellers are most vulnerable - the sunk cost of investing both time and energy into the process, internal leadership pressures and the possibility of 'winning' can lead sellers (suppliers) to making unilateral concessions.

Stay disciplined right through to the end and remain confident in your ability to create value for the buyer. Align your stakeholders on what to expect during the process in advance and remember at this late stage it's highly likely buyers have identified their winning supplier and are most likely using their competition against them as leverage to improve on price and terms.

Don't follow passively, instead proactively shape the outcome by considering:

1. Proposing a period of exclusive negotiation where both parties can go deeper in understanding interests and repackage the deal as appropriate.
2. Setting a deadline for decision by the buyer after which you will withdraw your tender.

After the award of the tender, don't get complacent, be sure to ensure all agreed key contract terms are in writing before delivery of products or services commences.

In summary of Part 2:

1. Challenge and Shape the Process: As a seller (supplier), don't passively accept the rules of a competitive tender. Find opportunities to respectfully challenge and shape the process to your advantage. Recognise that power dynamics in negotiations are not fixed, and you can leverage various sources of power throughout the tender process.
2. Evaluate Power Dynamics: Before entering the tender process, evaluate power dynamics by considering each party's next best options, dependence on each other, precedents, influence on reputation, and the uniqueness of your solution. Understand where your power lies and learn to influence the perception of your power in your favour.
3. Utilise Leverage: During the early stages of the tender process, sellers often possess leverage, especially when their inclusion is desirable to the buyer. Don't accept unreasonable contract clauses without leveraging your power dynamics to negotiate concessions in your favour.
4. Respectfully Disrupt the Process: Overcome restrictive templates and communication limitations by re-imagining the business problem, offering multiple packages, and bypassing communication restrictions. These moves help you provide creative solutions, understand buyer preferences, and build relationships.
5. Stay Disciplined in the Final Stages: Buyers may use aggressive tactics to maintain leverage. Avoid making unilateral concessions by staying disciplined and proactively shaping the endgame. Propose exclusive negotiations, set deadlines for decisions, and hold back delivery until key contract terms are agreed upon.
6. Maintain a Value Creation Mindset - We know tenders are inherently structured in a way to destroy value. Don't get sucked into a finite game that you will only lose playing - play the infinite game of value creation instead, focus on promoting mutual gains and optimise the value exchange.

There is infinitely more skill involved in being The Value Negotiator - Happy Negotiating!