EP 9 - Post Tender Negotiations

Post-tender negotiations can be a challenging phase of securing work for inexperienced negotiators, and clients can be very bullish and leverage your desire to establish new business with arbitrary demands to reduce your price.

Let’s take a look at some bargaining tips to help you be more effective in your next post-tender negotiation.

The objective of Post Tender Negotiations should be to obtain the most desirable outcomes for both parties.

So, what is a desirable outcome?

A desirable outcome is a result that the person or company sets out to achieve. In post-tender negotiations with a new client, the desired outcome will look something like this:

• The Client: To place the order on or below budget with a competent contractor who will deliver on time, to the required quality, and establish a good working relationship for future projects
• The Contractor: To secure work with a new client, make a profit, and establish repeat business

Negotiations should be a reciprocal trade-off between both parties, however, often is the case where the contractor is asked to drop their price to secure the work, and this concession is made with no bargaining back for a better commercial deal.

So now we understand what both parties are trying to achieve; how do we get to a position where the contractor receives the best possible deal for themselves? Let's take a look at what you can bargain with:

• Payment terms: can you negotiate better payment terms? If you can reduce payment terms with the client, you will mitigate the commercial risk, so if you’re being asked to provide a discount, flip it back to them and offer your discount strictly on the basis of 7 or 14-day payment terms – if the payments are late, the discount will be void.

• Valuations: Similar to payment terms, where you can significantly reduce your risk, bargain with weekly or bi-weekly valuations.

  You can frame this as helping project deliverability as your cash flow will be significantly enhanced, and this will help both you and the client - with minimal risk as they’re paying for works done on site, but it will be a bit more admin for them.

• Retention: This one can be tricky, as most contracts are fairly rigid and Main Contractors can be reluctant to budge on retention if they’re working with a new subcontractor for the first time.

  However, if you’re going to offer a discount, and you’re struggling to negotiate any other commercial terms, why not ask for retention to be removed from the contract? This will reduce your commercial exposure and you wont be chasing that last bit of profit 12 or 24 months later down the line.

Now we’ve looked at what you can bargain with, lets take a look what other positions you need carefully consider.

• Programme – this one is a big no no from me, and too often I see contractors chop weeks off their programme without fully understanding the clients scheduling and master programme. This should never be done without a detailed consultation with client. So please, if the client is looking to reduce your programme, get a meeting with the client and flesh out the programme together.
• The walk of no shame – be prepared to walk away if you don’t feel comfortable. If you get to this position, but the client is pushing too much and you can’t make it work, be polite and amicable and let the client know that you’ll have to regretfully decline as you cannot make the scheme work commercially, but you would like to take a look at the next scheme.

The Takeaway:

When you’re negotiating with a new client, remember that negotiations should work both ways, so before you offer that discount, make sure your business is getting something in return. And remember, if you don’t feel comfortable, be prepared to walk away from the table.