Chapter 1

GOVERNMENT NEGOTIATION GOALS

The government can’t even come close to providing all the goods and services it needs to operate using in-house resources, so it has long been policy to meet its requirements for supplies and services from the commercial marketplace. Taxpayers expect the government to do this in a smart manner, at fair and reasonable prices—hence the need for trained government negotiators. The job of a government negotiator is to satisfy the government customer’s needs in terms of cost, timeliness, and quality—while upholding the highest ethical standards at all times. As a government negotiator, you must also comply with all laws and regulations concerning socioeconomic policy, reporting and accounting requirements, transparency, and the like. No government negotiator should start planning for a negotiation without first considering and thoroughly understanding these basic goals.

Hand in hand with the concept of fairness is the requirement to negotiate in good faith. Negotiating in good faith means that you must honestly strive to reach agreement on differences through compromise and not take unfair advantage of the other party. Leading a contractor on in a negotiation by implying that you have funds available to consummate the deal when in fact you know you don’t is an example of negotiating in bad faith. In this case, at the very least, you have caused the contractor to expend time, energy, effort, and money to no good purpose. This is simply not fair to the contractor.

Your ultimate goal—the result of your negotiation—should be to reach an agreement that is fair and reasonable to both parties. But be cautious! Your counterparts in industry do not share the same requirements to comply with laws that you are bound to as a government negotiator. Nor do they share the goal of being fair and reasonable to you.

BEST VALUE

The ultimate goal of every government acquisition is best value. Achieving best value is simply selecting a contractor based on the overall benefit—the best value—to the government considering price and other factors. Although it’s true that sometimes price alone is the best determinant of best value, other factors, such as past performance, are often considered.

We can look at each contractor’s technical approach to solving our problem, as well as many non-price factors such as resumes of key personnel, to help us pick the “right” contractor. We simply have to state those evaluation factors when we go out with our solicitation. When the proposals come in, we can “trade off” technical superiority against price. In other words, we can award to a contractor other than the low-priced contractor on the basis of the technical superiority of that company’s solution—provided we can justify spending the extra bucks to get the extra bang.

That’s great news for our customers, but it complicates your job as a contracting officer and a negotiator. No longer is price the only factor to be negotiated. Rarely will the contractor’s idea of best value—the mix of price and technical factors submitted with the proposal—be your idea of best value. The mix often has to be negotiated, and this can get complicated. You must negotiate not just price, but also factors such as warranty terms, level of effort, delivery dates, level of government involvement and the validity and chance of success of various technical approaches. And you ultimately have to balance all these factors against price.

PERFORMANCE-BASED CONTRACTING

Government negotiators also have the goal of being as performance-based as possible in all aspects of the acquisition. Instead of dictating the specifications—the process for solving our problem—to contractors, we now simply state what we need in terms of outputs and invite them to come up with the process. That’s performance-based contracting. Although this approach often ensures that our needs are better satisfied, it also greatly increases the difficulty you’ll face in proposal analysis and ultimately in negotiations. When the proposals come in, you can no longer do an apples-to-apples comparison, because all the proposed technical solutions can be vastly different—and they come with different price tags.

One company, for instance, may propose to satisfy our need by relying heavily on manual labor, while another contractor proposes to rely heavily on automation and technology. Both proposals can meet our needs; they just reflect different ways of getting to the result. Because the proposals can be substantially different, you have to develop separate negotiation plans for each contractor tailored to the strengths and weaknesses unique to each proposal. When you negotiate with these contractors, you will have to talk about the merits of their particular technical approaches in addition to negotiating price.

To complicate matters, you start off with an immediate negotiation disadvantage. The contractors are the experts in their particular technical approaches, not you. After all, they wrote it; you just reviewed it. They are in a superior knowledge position about the process because they came up with the process—and the process will drive the price. Only through careful planning and good negotiation skills can you overcome this inherent disadvantage and ensure that the government ends up with a fair and reasonable deal.