Hopefully, we can all agree that purchased services (PS) are different than product contracts. This is especially true on how we specified, measured and negotiated these contracts. Yet, the biggest difference, as I see it, is that we must become “equal” partners with our purchased service contractors to truly impact our PS cost, quality and outcomes. This can only be accomplished by adopting five paradigm shifts in your purchased service contract negotiations:
1. Getting Ready for Negotiations: It is recommended that your first negotiation session be an information and understanding session with your preferred vendor to gauge their willingness for trust, transparency and compatibility. For example, have they been trustworthy in their past transactions? How far is the vendor willing to go to share their profit or losses on your PS contract? Does your vendor have the same values as your organization? All of these preliminary and frank discussions will lead the way to the right formula for success.
2. Agreeing on a Shared Vision: Next, you need to develop a joint shared vision to guide the contracting partners in their negotiations. Naturally, this vision would be molded during the workshop, since both parties could have different visions upon entering these negotiations. This vision then should be incorporated into your contract.
3. Negotiating Guiding Principles: Being “equal” partners demands that the participants to the new PS contract formulate guiding principles or social norms in dealing with each other, such as, honesty, reciprocity, anatomy, loyalty, equity, and integrity. These social norms would be the guiding principles as the parties move forward with the negotiations.
4. Negotiate as Equals: In this step, the parties begin to negotiate the contract. However, the parties agree to negotiate as “equal” partners, instead of having a “them vs. us” mentality. The goal in this step is to negotiate a PS contract that works for both parties.
5. Behave As Equals: After the PS contract has been signed, it is suggested that a value analysis sub-team of customers, stakeholders and vendor representatives convene regularly to review the performance of the contract elements. It is best to have these performance review criteria cited in your new contract to effectively manage it over time.
As you can see, this new PS negotiation process is quite in-depth and, in my opinion, isn’t appropriate for contracts under $100,000 annual value. However, many of the elements of this protocol can be employed in any and all PS contracts to ensure their ultimate success. So, the next time you negotiate a PS contract, don’t make it your goal to “get to yes” as quickly as possible. Now, consider a paradigm shift of “becoming equals” with your vendors in your PS negotiations.
(Source: Getting to We: Negotiating Agreements for Highly Collaborative Relationships by Kate Vitasek and Jeanette Nyden)
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