​​Negotiating with your preferred supplier

From the agency’s perspective, the primary objective of the negotiations should be to:

• test the understandings and assumptions that have influenced a supplier or provider in preparing their offer
• get the best value for money by working together to refine or enhance the proposal – this might include price negotiation.

Negotiation should not focus solely on reducing bottom line costs - too much time and energy can be expended in negotiating price at the expense of achieving value.

Planning negotiation

Negotiations should always be a planned activity. The scope and size of the negotiation will influence the level of planning required.

For smaller projects or simple negotiations

For smaller negotiations, you should:

• consider who should be involved
• identify your own objectives and priorities as well as those of the supplier
• consider what you know and what you don't yet
• identify the variables, eg service delivery methods, client volumes, reporting, pricing
• decide your strategy and approach to the negotiations. The approach you take should mirror the intended relationship for the engagement — eg if the relationship is to be highly collaborative then the negotiation approach should reflect this.

For large projects or complex negotiations

It might be worth getting help from your procurement specialist to plan and/or conduct the negotiations. For larger or more complex procurements this might involve developing detailed negotiation plans.

A negotiation plan:

• details the desired outcomes for the negotiation
• considers price versus budget
• lists key deliverables, performance indicators, milestones and timeline for delivery
• identifies payment options
• records the proposed contract terms and conditions and acceptable variances
• may address transitional measures from current supply arrangements if required
• may include an exit strategy to be applied at the end of the contract term.