Negotiating contracts, the First Fleet and 'doing the Placido Domingo'

In the last 2 weeks I enjoyed presenting to nearly 100 public sector legal professionals on negotiating contracts.

Here are 5 key points:

1. I have noticed that face to face negotiation is becoming less frequent. Picking up non-verbal cues is really important, as is building trust and rapport. Setting up a face to face meeting can also send a powerful statement of intent and commitment to a project.

2. Preparing, developing and continuing to refine your BATNA is crucial. It can be tempting to see this work as a luxury. There is also a stereotypical view of entrepreneurs that says they work at great speed all the time. Some of the most successful deal makers I have worked with are extremely self-disciplined and have an innate ability to assess risk but they supplement this by building real options and alternatives. This takes time, creativity and intellectual effort. These options and alternatives are very powerful tools in negotiating with third parties.

3. Terminating contracts is risky and difficult. It is also an admission of failure somewhere in the process. Developing real alternative remedies should be a key requirement for deal teams and especially the lawyers.

4. Deciding to anchor the other side and knowing when you are being anchored is a key skill for the negotiator. You are at a great and potentially dangerous disadvantage if you have not carefully studied the other side and its circumstances. This is about being able to tell the difference between positional bargaining (eg, we never give indemnities, that is our policy) versus interests-based bargaining (ok, if we don’t have a lawful right to use our IP and you suffer loss, we can cover you for that).

5. "Doing the Placido Domingo". Even when your BATNA is shot, you have spent all your negotiating capital and you feel your leverage is at rock bottom, maintaining composure and self-discipline is incredibly important so you don’t let the other side see you squirm. Perception is reality. Sometimes you must steel yourself to present a strong and professional image even when you don’t feel it.

In preparing for the seminar, I was interested to learn that the First and Second Fleets were outsourced. The First Fleet had a mortality rate under 6% but the Second Fleet's mortality rate was 40%. The contractor was paid based on head count loaded, not head count delivered. An early lesson on getting the incentives right.