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Negotiating a contract

What are the pros and cons of negotiating a contract over the traditional tendering procedure?

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If I understand the question correctly, you are asking for the pros and cons of acquisition in the retail model versus the business-to-business model.

Truthfully, unless you are an individual consumer and are only purchasing a single item, you will always see more value from a negotiated agreement. The single item purchase does not provide you with the leverage necessary to entice a business into treating you with any amount of visible respect, metaphorically similar to the individual gambler versus the "high roller" who is "comp'ed" as a result of their play.

Negotations for any acquisition usually result in better pricing, better sale terms, (for example, what happens if there's a problem with the item purchased?) and a more mutually beneficial long-term relationship. These negotiated agreements do come at a price themselves, though, as they are time-intensive to create and require an investment in resources to setup and manage.

By way of example of what I mean, assume that you are buying a car - the one personal tangible item that most people feel comfortable "negotiating on" with the vendor. That car has a sticker price and a sales contract. But in any vehicle purchase, how many people actually read the contract? Even as a professional negotiator, I realize that my leverage to negotiate the terms of the template agreement is minimal - so I focus my energy on the price. I feel that for a purchase of that size, I am entitled to some price flexibility, and this is borne out by the vast majority of people who negotiate price with their car dealer.

But what if I was buying 10 cars? Or a 100 car fleet for a rental car company? Should I: 1) Deal with the dealer or with the manufacturer? 2)Pay full price (or even a dealer price) for each vehicle? and 3)Only live with the standard automobile contract terms?

The answer(s) are that I will probably try to contact the manufacturer directly, (thus eliminating a source of price increases in the middleman dealer,) and I will significantly negotiate the price of each vehicle, treating the entire purchase as a single sale which, because of the increased value, has more negotiation room. Lastly, I will seek special status as a buyer of an entire fleet and will probably look for maintenance and service terms more favorable than would be received by the average 1-car-buying individual. And the manufacturer is obviously going to want to work with me more readily because of the exponential increase in revenue.

Lastly, I would like to take just a moment to say that the so-called traditional model of buying and selling is, in fact, negotiation. As a consumer-based society, we have simply grown comfortable with the "just pay the sticker price" model of commerce. If you visit any non-first-world society, what you find is a world where bargaining, trading, bartering and negotiating are the norm, not the exception. Negotiation, while more intensive at times, will almost always yield more favorable results.

This was first published in December 2005

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