4.1 Initiate Negotiations

Once it has been decided which bidder will be chosen to commence negotiations with, the process of post bid negotiation (PBN) can begin. This should not be confused with ‘bid clarification’ as was described previously. Bid clarification is contact between the purchaser and bidder(s) purely for the purpose of clarifying aspects of the bid which are perhaps ambiguous or anomalous. PBN is contact between the purchaser and leading bidder with a view to improving or enhancing value for money. It is conducted after receipt of formal bids, and before the award of any contract.

Potential areas for negotiation will differ depending on the bid received, but typical topics might be the terms of payment, scope of work, quality of certain goods or services, supply and cost of spare parts, earlier delivery or completion dates, warranties and guarantees, documentation requirements, expediting and inspection procedures, maintenance and support, repair or after-sales service, compensation for failure to meet specified requirements (e.g. of delivery, quality, etc.), commitments surrounding secondary procurement objectives, and procedures for remedial action for unsatisfactory performance. The list is not meant to be exhaustive.

Competition must not be distorted by allowing a tenderer, not clearly in the lead, a chance to improve its offer. Nor should any changes be made which would result in a contract being awarded on terms more favourable to the bidder. At all stages the competing bidders must be treated in an honest, fair and ethical manner, whilst retaining bid confidentiality.

Some good practices for the negotiation phase include:

• Have the key individuals who will run the project involved in the negotiations. This will eliminate confusion, questions, misunderstandings and ultimately reduce the amount of change orders post contract award.
• Have the contractor teams submit a list of their exceptions to the terms and conditions in a specific format provided by the owner. This allows for comparisons between teams by the owner and to address their concerns one at a time. Once completed they were taken off the list. Items that impacted the “show stoppers” should be discussed first.
• The negotiation team should not discuss any technical issues. A separate team that should deal with these issues and report back to the main negotiators. In cases where detailed concerns were raised with respect to a finance or supply chain issues a member of the main negotiator team can lead the discussions off line and report back to the main negotiating team.
• Line by line reviews of the scope and all contract documents should be done to ensure there would be no opportunity for the contractor to claim they did not understand or were unaware of the contract requirements.
• All alternatives and value add options should be reviewed and finalized at this stage so they could be included in the final contract.
• Once the negotiations were finalized the contractor and purchasing organizations should confirm that their respective organizations would accept the final negotiated terms and conditions.