Weekly value-added in 5 minutes
Good day deal closers!
In today’s 4th edition of our negotiation series we will have a look what actions are needed - after negotiation - to close a deal. We speak about offer comparison, contracting & deal closing.
Developing these skills covered today & using them, you will never buy at unfair prices again and you will secure your interests and security in your newly acquired property/ownership. Let’s dive into Deal Closing toghether!
In today’s email
After negotiation - next steps to offer comparison.
Working with data - Nomination of your partner.
Close the deal - Contracting.
Book recommendations.
C2B takeaway.
OFFER COMPARISON
Offer comparison is crucial in procurement as it allows us to make informed decisions based on various factors such as cost, quality, and service level agreements (SLAs). Let's consider an example case: tendering for a framework agreement for mobile phone contracts with three different providers: Provider A, Provider B, and Provider C.
This is where a weighted evaluation matrix comes into play. By assigning weights to different criteria based on their importance to our organization, we ensure that our evaluation process is objective and comprehensive. The matrix forces us to consider all relevant factors systematically, from cost-effectiveness to service reliability, and make decisions based on evidence rather than intuition.
Here's why relying solely on gut feelings is not advisable:
Subjectivity: Gut feelings are inherently subjective and influenced by personal biases, experiences, and emotions. What may seem like the best option intuitively may not necessarily align with the organization's strategic objectives or requirements.
Risk of Oversight: Gut feelings may overlook important factors or nuances in the supplier proposals, leading to missed opportunities or costly mistakes. Without a structured comparison process, it's challenging to ensure all relevant aspects are thoroughly evaluated.
Inconsistency: Gut feelings can vary from person to person, leading to inconsistent decision-making within the procurement team. A weighted evaluation matrix provides a standardized framework for evaluation, promoting consistency and transparency in decision-making.
Here's a breakdown of the criteria we might include in our matrix:
Cost: The overall pricing structure, including monthly fees, call rates, and any additional charges.
Quality of Service: Assessments of network coverage, reliability, and customer support.
SLAs: The terms and conditions outlined in the service level agreements, such as response times for issue resolution and uptime guarantees.
Assign weights to each criterion based on their importance to our organization. For instance, if cost is a primary concern, it might be assigned a higher weight than other factors. Conversely, if we prioritize quality of service, that criterion would carry more weight in our evaluation.
Here's an example of a weighted evaluation matrix:
Criteria | Provider A | Provider B | Provider C |
|---|---|---|---|
Cost (40%) | $XXXX | $XXXX | $XXXX |
Quality of Service (30%) | 4/5 | 3/5 | 5/5 |
SLAs (30%) | 3/5 | 4/5 | 4/5 |
Total Score | XX | XX | XX |
Utilize this matrix to objectively compare the offers from each provider and make an informed decision based on the overall scores.
Please keep in mind that you can choose criteria individually. Connection stability and payment terms could also be important. Simply ask your internal customer which criteria are most important and compare these with the (global) company goals. If you are unsure about this, seek advice from various stakeholders (e.g. Finance, Sales, R&D, Operations, others).
PARTNER NOMINATION
Now that we've completed the offer comparison using our weighted evaluation matrix, let's determine which partner to nominate for the framework agreement.
In our example case, let's say Provider C scored the highest total score in our evaluation matrix. This indicates that Provider C offers the best combination of cost-effectiveness, quality of service, and SLAs for our organization's needs.
We should communicate our decision to nominate Provider C clearly and professionally to all stakeholders involved in the procurement process. This ensures alignment and transparency throughout the supplier selection process.
CONTRACTING
With Provider C selected as our preferred supplier for the framework agreement, it's time to finalize the deal through contract negotiation and drafting.
In our contract with Provider C, we'll outline key details such as:
The scope of services covered under the framework agreement, including the types of mobile phone plans offered and any additional services provided.
Pricing terms, including the agreed-upon rates for various services and any discounts or incentives.
SLAs, specifying the performance expectations and responsibilities of both parties.
Terms of termination and dispute resolution procedures to address any potential issues that may arise during the contract period.
By clearly defining these terms and incorporating them into a well-structured contract, we mitigate the risk of misunderstandings and ensure a smooth working relationship with our chosen supplier.
Important for any type of contract: the more precise and detailed the requirements / service description is, the higher the probability that YOU will get the favor of the judge in the event of a legal dispute. Remember, sometimes decisions are made based on readily available information as the time factor is very limited (e.g. more court cases than staff available).
Through this example case, we've demonstrated the importance of offer comparison, supplier nomination, and deal closing in the procurement process, specifically in the context of tendering for a framework agreement for mobile phone contracts. These principles can be applied to various procurement scenarios, enabling us to make informed decisions and achieve successful outcomes.
BOOK RECOMMENDATIONS
"Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond" by Deepak Malhotra and Max Bazerman - Offers practical strategies for achieving successful negotiation outcomes.
"Contract Negotiation Handbook: Getting the Most Out of Commercial Deals" by Damian Ward - A comprehensive guide to mastering the art of contract negotiation.
"The Art of Negotiation: How to Improvise Agreement in a Chaotic World" by Michael Wheeler - This book explores negotiation as a dynamic process influenced by uncertainty and complexity. Wheeler provides practical advice on adapting negotiation strategies to diverse situations, making it a valuable resource for mastering the art of negotiation in today's unpredictable world.
C2B Takeaway
Comparison Shopping: Similar to evaluating bids from different providers in procurement, you can compare offers from various mobile phone carriers. Look beyond just the monthly cost and consider factors like network coverage, data allowances, and customer service quality.
Weighted Decision-making: Create your own version of a weighted evaluation matrix. Assign weights to different factors based on their importance to you. For example, if network coverage is crucial because you travel frequently, it might carry more weight in your decision-making process.
Negotiation Tactics: Negotiate with your chosen provider to get the best deal possible. Use the information you've gathered from your comparison shopping and evaluation matrix to leverage better terms, such as discounted rates or additional perks like free device upgrades.
We learned in our negotiation series
Throughout this four episodes of negotiation excellence, we've explored various aspects of negotiation, from getting comfortable with the process to closing the deal effectively. Today, we focused on the critical steps of offer comparison, supplier nomination, and deal closing, using a practical example of tendering for a framework agreement for mobile phone contracts.
In our example case, we learned the importance of:
Offer Comparison: Understanding why it's crucial to compare offers from different suppliers using a weighted evaluation matrix, considering factors such as cost, quality of service, and SLAs.
Supplier Nomination: Nominating the supplier that best aligns with our organization's needs based on the results of the offer comparison, and effectively communicating our decision to stakeholders.
Deal Closing: Finalizing the agreement through contract negotiation and drafting, ensuring all key terms and conditions are clearly defined to mitigate risks and ensure a successful working relationship.
These principles can be applied not only in procurement but also in various other negotiation scenarios, both in professional and personal contexts. By mastering these techniques, you'll be well-equipped to navigate negotiations with confidence and achieve favorable outcomes. Remember, negotiation is a skill that can be honed over time, so keep practicing and refining your approach. Thank you for your participation, and best of luck in your future negotiations!
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