The Negotiating Challenge
The client received a demand for a cost increase of over 20%
- Our client had agreed to a fee of $16.4M with a contractor for its part of a $250M construction project
- Subsequently, the contractor said it ‘needed $20M’ because it
had ‘underestimated costs in order to buy the business’
- The challenge was to respond to the demand and avoid a cost increase while protecting the project’s viability.
How ENS Helped
Our role was to help develop the negotiation strategy and prepare the negotiating team
- ENS looked beyond the requested price increase to focus on the other party’s need to manage project risk
- We focused the negotiation strategy on identifying and discussing risks via structured questioning
- And we encouraged the team to challenge resource estimates to provoke a more thorough identification and analysis of issues
- ENS facilitated intensive ‘dress rehearsals’ to help team members test assumptions and prepare for the unexpected
- Rehearsals revealed true individual negotiation skills as a basis for team selection - in some cases eliminating those who ‘talked tough but give way easily face to face’
- ENS provided an independent view on the other party’s perspective to assist the team during planning and rehearsals.
Costs were reduced by more than 20% and the business relationship was enhanced
- There was no price increase
- The final negotiated fee of $13M was a $3.4M saving on the original agreed price
- Overall, there was a paradigm shift from ‘negotiating at the margin’ to ‘renegotiating the contract’.
- The other party’s paradigm also shifted. It spoke of ‘the value of a structured negotiation approach’.