project management

Tips for negotiating successful contracts

Negotiating successful contracts requires a professional a professional structured process along with good negotiating skills, the ability to remain above the emotions that me be at play and instincts that often only come with experience. Here are some simple tips to follow when negotiating contracts.

Keep things as simple as possible

Be careful of intricately creative, complicated and structured agreements or deals. They can become overly complex and result in problems and issues. Complicated agreement structures often require significantly more extensive legal advice and drafting expertise than parties realise at the beginning. Straightforward contract agreements and documents that are easy to understand usually have fewer issues when it comes to implementation and management of the contract.

Instinct is important so don’t get caught up in the emotions of the deal

Instinct is not a replacement for careful research and investigation but it is highly important in contract negotiations. If it smells fishy then be careful and step back in need.  When people seek things that don’t make sense, or if they carry on about unrelated matters when asked for information then there is likely to be a hidden agenda.  Be aware when you or a colleague may be overly keen to clinch the deal. In such situations it is easy to get caught up in emotion and sometimes difficult to realise that something is not quite right, or in fact may be very wrong.

Develop in principle agreement of the key contract terms and objectives before moving to the detail

You should agree the key terms of a contract (such as work to be performed, price, terms, etc.) in principle before starting on the detail of the contract. Focus on the high level expectations, contract deliverables and terms of engagement and don’t get caught up in in the micro details. If your counter party is presenting lengthy sheets containing all the detailed terms and conditions then you should press for a simpler initial approach. Getting the principle contract terms and objectives agreed up front makes completing the detail much easier later on. They provide a reference point for the detailed contract.

Take legal advice but take care to manage your lawyers and instruct them effectively

Having the right team is essential for negotiating successful contracts. Expertise is necessary in a range of fields and the contract leader usually does not have all the skills necessary. Legal advice is usually essential so get your lawyers involved at the right time.  Legal advice will be needed to make sure that there are no gaps in the commercial negotiations and to identify potential legal issues. Make sure you give your legal advisers clear guidance and instructions.  Don’t let the legal advisers take over the negotiations as that would likely be counter-productive and also probably result in unnecessary costs.

Think strategically and plan ahead

Negotiations are like chess. You need to consider all the moves you could make as well as counter moves that your counterpart may make. Ask yourself – what does the other party want or need from the negotiation. Also, planning is a critical skill. There are many steps in negotiating contracts so a carefully structured plan is necessary to ensure that nothing is over looked and that you are prepared for each key milestone, meeting or decision point. Before meetings make sure that the key people are available and that they are briefed appropriately.

Manage the other people on your team and departments in your organisation

At stages it is likely that you will need input from colleagues, possibly in other departments such as accounting, service or sales.  These people and departments may have differing agendas and a range of expectations from the contract. Whilst all the needs have to be considered and factored into the negotiation, at some point concessions will need to be made. So, internal negotiation of the terms may be as important as negotiating terms with the external contracting party.  Be aware of the other party endeavouring to divide you, your team and your colleagues by initiating direct discussions with other people in your organisation.  The leader of the negotiation should carefully manage the various relationships and needs across departments and their oprganisation.

Don’t get pressured into agreement or decisions without proper consideration

Often, someone on your team (or maybe even you) is overly eager to get the deal done and they let their emotions over rule logic. In these situations unwise decisions can be made and concessions can be made that should not be given away. The other party may also apply pressure by referring to deadlines that may or may not be realistic. So, be careful not to make hasty decisions without proper consideration or in the heat of discussions. Review everything carefully, take the necessary time you need and make sure that you get the right professional advice at every stage.

Follow through to finalise the contract

When the negotiation has been completed there can be a tendency to relax. This can be dangerous. Make sure that there is a carefully agreed plan to finalise the contract and to ensure all the detail is attended to in the time agreed. Don’t rest until the contract is right, the documents are signed and everything is sealed.

Do you need help with a contract?

ENC Consulting specialises in contract management and negotiations. So contact us for a free consultation.