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The art of contract negotiations

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Tell us what you think about contract negotiations, as featured in this week's Application Developer Management e-newsletter. What negotiation techniques have been successful for you? Which techniques weren't successful? How do you usually prepare for contract negotiations? What contract negotiation advice can you offer to other application development managers?

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Win-win/more win-less win negotiations

by Luis Borges In reply to The art of contract negot ...

I agree that long-term partnerships conditions should be set-up by the market. All negotiations are win-win (but one side wins more than the other). That is the real negotiation process.

Getting the lowest (but fair) price for long-term partnerships is acceptable. Both parties must have a reasonable satisfaction level with the agreement.

But for one-time buys this is not valid. You should get the price as low as possible. And remember, at least on western cultures, no one sells anything to loose.

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by kathy.hall In reply to The art of contract negot ...

I have been working with vendor contracts to
tighten up the sign-off/acceptance criteria.
Bus teams drag the process for every little tweek,
vendors get frustrated and run overbudget, in-hse
resources are tied up beyond the prudent effort etc. So I'd also suggest that the success criteria, performance metrics, and acceptance criteria be clearly spelled out in the contract for both hardware and software performance.
I received a letter from one vendor, post-implementation, thanking me for helping them tighten up their implementation and post implementation processes as a result of contract committments. Just a thought:) kath

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Contract Negotiations

by sheinkin In reply to The art of contract negot ...

Contract negotiations should depend on several aspects of the deal / deliverable:
1. Is it a commodity product?
2. Is it a COTS (Commercial Off The Shelf) product?
3. Is it an Integration Project?
4. Is it a Development Project?
For each, the targets and the methods used should be different:
1. For commodity -- Get the lowest price and earliest delivery, with minimum focus on maintenance and on-going relationship, while not ?burning? the supplier for later deals. Agreeing on a pre-agreed price for future deals also helps bring down price and ease relationships.
2. For COTS -- again the low price and early delivery are the main points, but more focus should be put on maintenance and long term relationships, such as upgrades, capacitychange, etc?
3. For Integration Project -- lowering the cost beyond a certain point will be meaningless, since the supplier would provide less experienced personnel or work on a part-time basis, thereby lengthening the project lifetime. Other points to be ware of are: Changes costs and delays, and purchaser induced delays. Attempting to put penalties on late delivery will usually hurt the purchaser by the following points:
A. Penalties price will be built into the initial quote,
B. Supplier will refuse any changes in scope -- which may cause the project to be delivered on time, but be meaningless and useless.
4. For Development Project ? Assume all the integration project points + add the lower level of understanding the required (as opposed to the ordered) end result.

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