John Clements, Management Consultant at The Gap Partnership, details the importance of preparation and planning in the negotiation process for successful tender bids.
The evening of Tuesday 3rd July 2018 will be etched on the minds of every England football fan. England had never won a World Cup penalty shoot-out with the last penalty shoot out in any competition won in 1996. After extra time, England found themselves in a penalty shoot-out once again. Despair all round for England fans who feared the worst. And yet, England managed to win, scoring four penalties to Columbia’s three. Euphoria all round (at the time of writing, England had not actually won the World Cup). So, what was different this time?
England relentlessly practised, they engaged sports psychologists, they plotted where the Columbians were going to hit their penalties and knew who was going to take their own penalties and where they were going to hit them.
Contrast this euphoria with the experience of many services organisations (suppliers) in the BSA who are well versed in responding to a Request for Quotation (RFQ) or Invitation to Tender (ITT) processes in the public and private sectors. The process can be costly, complex and ultimately may result in disappointment. I have been involved in many tenders (not necessarily in the public sector) where this disappointment is often rapidly followed by an internal announcement around how everyone can take great pride in the effort that has been put in, how new Intellectual Property (IP) has been built and solutions developed that can be used in the next tender process. Few suppliers would agree with the quote, “Success consists of going from failure to failure without loss of enthusiasm.”
Public Sector Procurement Challenge
The cost and complexity can be particularly evident in public sector procurement processes where the tight constraints of the process means the supplier is seemingly not able to pull the levers that it might do in a private sector procurement. For example, building strong executive relationships and running more creative value building sessions. Moreover, some of the other “tactics” that might be deployed such as challenging the timescales or evaluation criteria, setting up “out of process” meetings or indeed persuading the buying organisation that it doesn’t need to go out to tender in the first place and engage on a sole source basis are met with a simple refusal to engage. I would add to this list that where negotiation is a possibility in public sector procurement processes, the negotiation process may be somewhat frustrating and not always result in a creative solution. The inclusion of MEAT (Most Economically Advantageous Tender) criteria can result in a race to the bottom amongst suppliers with the winning bidder paradoxically putting itself in a losing position in the long term.
UK public sector expenditure on business services is huge and many suppliers cannot afford to pull out of the market. They need to be competitive (in order to win) while maintaining a profitable business. The public contract regulations 2015 state that, “Contracting authorities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner.” Therefore, suppliers should be able to rely on the integrity of the contracting authority. On the flip side, contracting authorities have a sharp focus on adhering to these regulations for fear of challenge from any supplier.
So where do suppliers go from here? If the process is fair and transparent and suppliers cannot afford to not have a public-sector business, what can suppliers do to increase their win percentage? What can they do to emulate the preparation and planning mindset of the England football team?
Preparation and Planning
Where the process does not involve any negotiation, the outcome can be binary and highly dependent on factors outside of negotiation e.g. quality of solution and competitiveness of price. Where negotiation does take place in public sector procurement, matters can become more complicated. It feels like the contracting authority is completely in control of the process and there is nothing that the supplier can do to influence the outcome. Some suppliers respond to an ITT at face value and don’t think more broadly about what will increase their win percentage through negotiation. Or put another way, they don’t think through every aspect of the negotiation process and plan accordingly. So what things do suppliers need to think about:
- Scoping: Define internal objectives for the negotiation and “red lines” and ensure these are understood and agreed.
- Stakeholder Management: Build actions to ensure internal stakeholder alignment and to plan and manage interactions with the contracting authority.
- Communications Management: Create an internal and external communication plan with a focus on pre-conditioning the other party and create focused positioning around variables.
- Balance of Power*: Create a set of actions to work out where the balance of power lies and what can be done to shift the balance – it is the perception of power that matters, and this can be influenced.
- Negotiation Strategy: Identify a preferred negotiation strategy approach and triggers that might change that strategy.
- Risk Management: Explore all the problems that could occur during the ITT and negotiation process and define preventative and contingency actions.
- Tactical Planning: Plan negotiation tactics and moves starting with “the end in mind” i.e. how will the agreement work in practice and mitigate risk.
- Execution: Agree how opening positions will be communicated and revealing of “red lines” will be avoided – investment in the “how” versus the “what.”
*Negotiation takes place in the other party’s head and it is therefore important to understand the other party (contracting authority), their motivations, interests and pressures as well as the competition and market forces.
Addressing these issues up-front and early in the tender process will put suppliers in a more advantageous position to conclude the negotiation successfully. Planning and preparation is 90% of negotiation and should take place before a supplier gets into the negotiation room i.e. not making it up as you go along. If you only focus on the 10% that takes place in the room, the likely outcome is a lost or sub-optimal deal. Negotiations can be pressurised situations, by planning and preparing and knowing what you are going to do beforehand, the pressure can be mitigated and confidence increased. England couldn’t dictate the structure, format or timing of a penalty shootout. However, there was an opportunity for them – in the words of the England manager, Gareth Southgate- to “own the process.” By thinking differently about negotiations, suppliers may also be able to do likewise.
For further information, contact john.clements@thegappartnership.com.