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Critical Aspects of Contract Negotiations

ISM's 93rd Annual International Supply Management Conference

St. Louis, MO
May 2008


Ernest G. Gabbard, J.D., C.P.M., CPCM, Director, Corporate Strategic Sourcing, Allegheny Technologies, Inc.

A successful negotiation starts with an understanding of how to make the most of two sets of skills: strategic and people skills, said Ernest G. Gabbard, J.D., C.P.M., CPCM at this well-attended Tuesday morning session."Some of the best negotiators I have seen in my experience are excellent at persuasion, so both parties reach an agreement they are pleased with," he said.

Gabbard spoke about how to assure success in negotiation, which can be tricky to accomplish for new procurement hires and experienced veterans of the profession alike. Gabbard reminded attendees that the sellers are more concerned about the perspective of you, the buyer, and he suggested that rather than thinking in terms of what your internal customer or boss' objectives might be in the negotiation outcome, to consider the common denominators shared by both the buyer and seller in order to achieve the best results. "The supplier does a lot of research and prep prior to negotiating with you, and we might want to do the same. Ask them what do they absolutely need, and what do they want?" At the same time, said Gabbard, it's important to remind your boss and/or internal customers that we often need to make concessions and it can be impossible to get everything you want...but it is entirely possible to get everything you need in a strong negotiation.

The major components that assure negotiation success can be rated in the following order: knowledge/information; people/communication skills; negotiator aspirations; planning/preparation; appropriate strategy; negotiator "power"/leverage; tactics and countermeasures; and time and timing. Discussion also covered power issues when dealing with single/sole source suppliers, dealing with a power shift during the course of the negotiation process, a breakdown of the steps entailed in a negotiation, and finally, what to do in the event of a deadlock.

"The highest qualified people shuld be selected for the negotiating team," said Gabbard at the close of the session. "And everyday life is full of opportunities to practice negotiations, so look for those opportunities as well to hone your skills."

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