# Presentation: 502683

## Contractor Business Strategies

**Contractor Business Strategies**

**October 2007**

## Bid/No Bid Considerations

-  Adequate Capability
-  Personnel/Equipment/Finances/Capacity
-  Level of Competition – Core Competency?
-  Technical/Schedule Capability
-  Demonstrated Past Performance
-  Opportunity Costs/Return on Investment

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## PRICE = COST + PROFIT

- For Commercial Items, the U.S determines best value at price and other factors
- Evaluators don’t know what costs and profits are on any tender

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## Standard Elements of Costs

-  Direct Labor
-  Direct Manufacturing
-  Direct Engineering
-  Other Direct Costs (ODC’s)
-  Overheads
-  Transportation
-  Security
-  Company Administrative Costs (G & A)

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## NEGOTIATION OPTIMAL OUTCOMES

**NEGOTIATION OPTIMAL OUTCOMES**

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## NEGOTIATION OPTIMAL OUTCOMES

- Win-Win
- Recognize risk factors
- Necessary skills
- Bargaining techniques
- Management support
- Tolerate conflict

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## PREPARE  FOR CONDUCTING NEGOTIATIONS

- Identify all activities
- Make checklist
- Document information received/requested
- Written exchanges
- Face to face exchanges
- Exchanges prior to negotiations

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## Fact-finding

**Oral or written communication **_**prior**_**  to negotiation: **

- Obtain information for position
- Identify assumptions
- Clarify matters affecting cost
- Resolve inconsistencies

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## Fact-finding

**Telephone conversation**
**Face -to-face meetings **
**Written request for proposal clarification**

**Relatively simple requirement and low dollar value**
**Moderate to complex requirements; moderate to high dollar values**
**Relatively complex requirements and high dollar values**

**Methods of Fact-finding**

**Typical Contracting Situation**

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## Potential questions

- How was estimate developed?
- Why are levels of the proposed efforts needed?
- How do proposed efforts relate to contract requirements?

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## Do’s of Fact-finding

- Use questions
- Avoid complex questions
- Be thorough and systematic
- Obtain rationale for estimated amounts
- Caucus with team members
- Document

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## PLANNING FOR NEGOTIATIONS

**PLANNING FOR NEGOTIATIONS**

## PLANNING FOR NEGOTIATIONS

- Flow chart
- Potential team members
- Identify issues and objectives
- Determine pre-negotiation objectives
- Identify counterpart’s probable approach
- Identify principal negotiators
- Preparation

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## Steps in Negotiation

**Steps in Negotiation**

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## NEGOTIATION TEAM SELECTION

| Team Role

Team leader

Technical analyst

Pricing analyst

Business terms analyst | Potential Team Member

Contract specialist

Engineer

Technical specialist
End user
Commodity specialist
Inventory manager
Transportation manager
Property manager
Logistics Manager

Auditor
Cost/Price analyst

Legal Counsel

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| --- | --- |

**NEGOTIATION TEAM SELECTION**

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## PLANNING FOR NEGOTIATIONS  continued

- Identify issues and objectives
- Determine pre-negotiation objectives
- Identify counterpart’s probable approach
- Identify principal negotiators
- Preparation

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## Importance of Preparation

- Cannot be overstated
- Must be prepared to be effective
- Contractors are generally better prepared

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## Organize Negotiation Team

- Typical Team members
- Price analyst
- Technical representative
- Auditor or attorney
- Chief Negotiator
- Does most of bargaining
- Serves as chairperson

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## Identify Issues and Objectives

- Issues: Likely areas of disagreement
- Target price
- Sum of cost element estimates
- Fair and reasonable AND flexible
- Other negotiation objectives

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## Research Probable Approach

- Goals and priorities
- Price issues
- Non-price issues/needs
- Past styles and tactics
- Pressures and constraints

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## Assess Bargaining Power

- Assess both sides
- Elements:
- Competition
- Knowledge
- Time constraints
- Bargaining skills
- Importance of the contract
- Degree of risk aversion

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## Establish Priorities and Positions

- Classify issues
- Must points
- Give points
- Avoid points
- Bargaining points
-      (range of possible positions)
- Rank issues

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## Establish Price Range

- Minimum
- Lowest fair & reasonable price consistent with a Win/Win outcome
- Avoid arbitrary amount
- “Opening Position”
- Maximum
- Highest fair & reasonable price
- Available funding or ceiling price

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## Develop Negotiation Approach

- Determine order of discussion
- Rehearse potential concessions
- Plan tactics(Generally avoid application of Win/Lose tactics)

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## Develop Overall Plan

- Draft a negotiation plan
- Brief management
- Prepare agenda
- Rehearse Plan
- Kickoff briefing

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## STEPS IN NEGOTIATION

- Review agenda
- Review facts
- Bargaining and consideration
- Offer and counteroffer
- Reach agreement/impasse

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## Final Thoughts

- Each solicitation must be read thoroughly
- Focus on evaluation factors in section M
- Consider security costs
- Be timely
- Remember process is competitive and non-political

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