GOVERNMENT CONTRACT NEGOTIATIONPresented by: Stephanie Amend

Agenda• Introduction • The Negotiation Process• Negotiation Strategy & Tactics• Hot Spots• Summary

INTRODUCTION

Introduction to Negotiations• Describing Negotiation• Recognizing Possible Negotiation Outcomes and Styles• Describing Attitudes that Lead to Successful Negotiations• Understanding the uniqueness of the Federal

Government

Fundamentals of Negotiation• Basic concepts• What is a contract?• Good faith in negotiations

Traits of a Negotiator• Knowledge

• Knowledge of the field• Knowledge of the FAR and the law• Trade practices• Knowledge of yourself

• Skilled Communications• Leadership• Confidence• Patience• Physical Condition• Ethics• Compatibility• Timing• Flexibility

The Ground Rules• Government Contract Arena• Statutes

• Competition In Contracting Act• Federal Acquisition Streamlining Act• Clinger-Cohen Act

• Regulations• Federal Acquisition Regulation ("FAR")

• FAR Supplements

Pre-Award ActionsGovernment

• Market survey• Selection of competitive

procedures• Extent of competition• Type of contract• Preparing Request for Proposal

(RFP)• Best value continuum• Evaluation factors• Past Performance

• Issuing RFP's• Oral presentations

Contractor

• Understanding the RFP• Make-or-buy decisions• Data requirements• Past performance• Protecting your interests• Submitting your proposal

Heading Toward Negotiations• Evaluation Of Proposals

• Technical• Management• Price

• Exchanges With Offerors After Receipt Of Proposals• Clarifications• Clarifications and award without discussions• Communications before establishment of the competitive range• Establishment of the competitive range• Exchanges with offerors after establishment of the competitive range

• Negotiations• Discussions

• Proposal revisions• Source selection (if competitive)• Debriefings

FAR Part 15• 15.405 -- Price Negotiation• The purpose of performing cost or price analysis is to develop a

negotiation position that permits the contracting officer and the offeror an opportunity to reach agreement on a fair and reasonable price.

• The contracting officer’s primary concern is the overall price the Government will actually pay.

• The contracting officer’s objective is to negotiate a contract of a type and with a price providing the contractor the greatest incentive for efficient and economical performance. • Therefore, the contracting officer should not become preoccupied with any

single element and should balance the contract type, cost, and profit or fee negotiated to achieve a total result -- a price that is fair and reasonable to both the Government and the contractor.

Risk

Low High

Contract Type T&M Cost FFP

High Low

THE NEGOTIATION PROCESS

The Negotiation ProcessBackground Research

Representation Format

Preparation

Negotiation

Background Research• The opposition• History of similar contracts or claims• Costs• Profit Margin• Price• Statement of work• Terms and conditions• Technical and legal review• Research the opponent's position• Negotiation timing

Negotiation Preparation• Tailoring the Negotiation Team to the Situation• Identifying Negotiation Issues and Objectives• Identifying the Government’s Probable Approach to Negotiation• Assessing Bargaining Strengths and Weaknesses• Identifying Negotiation Priorities and Potential Tradeoffs• Determining an Overall Negotiation Approach• Preparing a Negotiation Plan and Agenda (unless Govt has

agenda)• Practice Negotiation

• Mock Negotiation• Devil's advocate

Representation Format• The sole negotiator• The team

• Contracts• Pricing• Technical• Decision Maker

• Where, when &how to negotiate

Govt Prenegotiation Objective• The prenegotiation objectives establish the Government’s

initial negotiation position and assist in the contracting officer’s determination of fair and reasonable price.

• They should be based on the results of the contracting officer’s analysis of the offeror’s proposal, taking into consideration all pertinent information including field pricing assistance, audit reports and technical analysis, fact-finding results, independent Government cost estimates and price histories.

NEGOTIATION STRATEGY & TACTICS

Informal vs. Formal Negotiations• Informal

• Email or Phone• Single or minor element• Lower dollar• More commercial

• Formal• In person or phone• Structured• Multi-faceted• Longer term• Higher dollar

Starting the Negotiation• Introductions• Negotiation procedures• Initial probe• Blocking techniques• Tone of the negotiations• Recess

Tactics• Good-faith tactics

• Controlled anger• The bluff• The threat• Controlling the pace of negotiations• Good guy/bad guy• Indirect gimmicks• Silence• Limited Authority• The walk-out

• Negotiation Precedent• Stalemate

• Avoidance• Creativity• Mutually respected authority• Walk-out

Bargaining Tactics• Using Win/Win Tactics• Identifying Win/Lose Tactics • Appropriate Countermeasures

Bargaining Techniques• Rule 1: Be Prepared• Rule 2: Aim High• Rule 3: Give Yourself Room to Compromise• Rule 4: Put Pressure on the Other Side• Rule 5: Do Not Volunteer Weaknesses• Rule 6: Use Concessions Wisely• Rule 7: Say It Right• Rule 8: Satisfy Non-Price Issues• Rule 9: Use the Power of Patience• Rule 10: Be Willing to Walk Away from or Back to Negotiations

Conducting Negotiations• Support every argument

• Statutes and regulations• Authority• Statistics• Precedent• Fairness

• Document• Emails follow phone calls• Memos• Tracked Changes in MS Word• Final memos

Wrapping Up• Oral summaries• Meeting minutes• Final company memorandum• Memorandum of understanding• Educating the team • Lessons-learned analysis

HOT SPOTS

Negotiation Hot Spots• Terms & conditions• Scope• The contract price

Terms and Conditions• Clauses Required by the FAR

• Subpart 52.3 Provisions and Clauses Matrix• Executive Orders and U.S. Code

• Ex) Fair Labor Standards Act and Service Contract Labor Standards• Ex) Minimum Wages Under Executive Order 13658

• Even for Commercial Items• 52.212-5 -- Contract Terms and Conditions Required to Implement

Statutes or Executive Orders -- Commercial Items.• Ex) 52.209-10, Prohibition on Contracting with Inverted Domestic

Corporation

Scope• The contracting officer should request that personnel

having specialized knowledge, skills, experience, or capability in engineering, science, or management perform a technical analysis of the proposal elements

• At a minimum, the technical analysis should examine the types and quantities of material proposed and the need for the types and quantities of labor hours and the labor mix.

Price• Government Budget• Fair and Reasonable Pricing• Profit/Fee Limitations

• 15.404-4 -- Profit.• (i) The contracting officer shall not negotiate a price or fee that exceeds the

following statutory limitations, imposed by 10 U.S.C. 2306(d) and 41 U.S.C. 3905:• (A) For experimental, developmental, or research work performed under a cost-plus-fixed-fee

contract, the fee shall not exceed 15 percent of the contract’s estimated cost, excluding fee.• (B) For architect-engineer services for public works or utilities, the contract price or the estimated

cost and fee for production and delivery of designs, plans, drawings, and specifications shall not exceed 6 percent of the estimated cost of construction of the public work or utility, excluding fees.

• (C) For other cost-plus-fixed-fee contracts, the fee shall not exceed 10 percent of the contract’s estimated cost, excluding fee.

Analyzing Profit• Contractor effort. This factor measures the complexity of the work and the

resources required of the prospective contractor for contract performance.• Contract cost risk.• Federal socioeconomic programs. This factor measures the degree of support

given by the prospective contractor to Federal socioeconomic programs, such as those involving small business concerns

• Capital investments. This factor takes into account the contribution of contractor investments to efficient and economical contract performance.

• Cost-control and other past accomplishments. This factor allows additional profit opportunities to a prospective contractor that has previously demonstrated its ability to perform similar tasks effectively and economically.

• Independent development. Under this factor, the contractor may be provided additional profit opportunities in recognition of independent development efforts relevant to the contract end item without Government assistance.

Mistakes• In a negotiated procurement, you expected the

government would hold discussions and provide you an opportunity to submit a final proposal revision.

• Your proposal contained a material misrepresentation.• You failed to assert a mistake in your proposal.• You think you can walk away from an RFP or IFB.• Not trying to get FOIA info on incumbent contracts.• Not proposing with future negotiation in mind

Keys to Success• Understand the Rules• Be Prepared• Avoid Mistakes• Be Patient

Summary• Negotiations with Government are similar to any

negotiation• Government’s responsibility is to award at a fair and

reasonable price• Terms and conditions are difficult to negotiate• Cost elements are usually the focus

THANK YOU!

QUESTIONS?Stephanie Amend – Founder/Executive Consultant720-515-0527s.m.amend@arrowheadsolutionsllc.comwww.arrowheadsolutionsllc.com