IACCM Contract Management Forum

« view all forum posts
2017-08-01 08:25:41

Best re-negotiation Strategy

I am doing one exercise to review existing Application Maintenance Contract.
This exercise is undertaken to identify the areas where Client expects us to put more efforts and provide service.
Some of this expectations are out of contract scope and client being aggressive and dominating pushing many obligation on my account team.
So I am going through each line of contract and understanding the scope of responsibility for anything out of scope I am coming up with additional efforts.

Now, after doing this exercise I would like to form a negotiation strategy to deal with client argument.

@Tim - Your advice is really needed here. This is a good case for all Contract Management Community.
 •  IACCM  •   2017-08-04 05:53:35
It's a very interesting - and of course not uncommon - situation. I'll offer a few immediate thoughts and hope others add to them. I'll also be pleased to have a direct discussion to gather more details.

First, think about your customer's perspective. The situation you outline is unlikely to be unusual (though see what data you can find on whether your situation is typical in their other software relationships). Also explore their past experiences with your company and whether they have had problems or positive experiences in the past. Naturally they want to contain costs and most customers have experienced 'opportunistic' suppliers who try to push up prices post-award. So you need to build their confidence that you are operating with integrity and that any increases are fair and reasonable.

1) in doing your analysis, make sure you look for areas where changes may have occurred that actually benefit the customer. When scope changes, it is rarely all one way. By having a few trades that benefit your customer, you show your objectivity.
2) is the customer's problem that they want no increase, a smaller increase or (perhaps) a short term budget issue? For example, might additional charges be more acceptable if they can be slipped into the next budget year?
3) do you have a record of 'goodwill' examples - past situations where you have given concessions and value-add to the customer?
4) what mechanisms or measures can you offer to show the customer that proposed additional charges are reasonable and in line with market norms?
5) might there be an opportunity to change the way services are defined or delivered? Very often, SoWs and SLAs are created in ways that reduce supplier flexibility in HOW they are delivered, thus pushing up costs. Could you identify cheaper, better ways to deliver the services? Do they actually need current service levels? Are the KPIs the right ones?

As a negotiating strategy, I would be approaching this in a conciliatory fashion, highlighting how the speed of change in markets make it very difficult to establish precise requirements and therefore periodic renegotiation is normal. Hopefully, the ideas above then give you a context for how the customer is felling and some items of value that you can offer, such that they feel you are a fair and reasonable partner.
 •   2017-08-04 06:32:30
Thank you Tim. Your response is helpful. I have taken note of your suggestions. I may further approach for discussion.
 •  Orange  •   2017-09-15 07:15:42
I think I would try to focus on increased value rather that what the price per man day or intervention should be. The customer is asking for extra efforts, but the objective must be to achieve extra benefit for customer, not extra suffering on your side. Steering the discussion towards his benefit and a reasonable price versus the benefit he perceives may unlock a stalemate
Replies: 3
Filter by category
Operations & Capabilities
Organization & People
Strategy & Management Tools