Consideration of some key "what" issues around commercial negotiation and the "how" issues from a public sector perspective

1. © 2018 Stephen Boyle
CIPS Republic of Ireland Branch
21 June 2018
Negotiations; What? How? and Why not?
Hosted by EY
Guest Speaker 1: Stephen Boyle, UCD Smurfit Exec’ Development
Guest Speaker 2: Peter Curran, Partner Eversheds-Sutherland
Chair: Eoin Lonergan EY

2. © 2018 Stephen Boyle
Agenda Negotiation; What? How? and Why not?
1800: Registration and Refreshments
1830: Introductions and Acknowledgements
1840: Stephen Boyle – Moving away from Price…
1915: Peter Curran – Negotiation within Public Sector
1945: Facilitated Q&A
2000: End

3. © 2018 Stephen Boyle
Procurement Negotiations:
What, How
and Why Not?
Stephen Boyle
UCD Smurfit Executive Development

4. http://www.medicraftindia.com

5. © 2018 Stephen Boyle
Don’t let price crowd out other issues
• Non-price negotiables also have an economic
impact
• Due to hidden biases, even experienced negotiators
risk focusing disproportionately on price
• Performance metrics can exacerbate the problem
• If price really is the dominant issue, beware of
creating a race to the bottom
Sebenius (2001), “Six Habits of Merely Effective Negotiators”, Harvard Business Review

6. https://architizer.com/

7. © 2018 Stephen Boyle
Don’t put your policies and positions
ahead of your interests
• Positions are inflexible, whereas interests can be
met in numerous ways
• Negotiators need to understand the interests
behind their positions
Thompson (2015), The Mind and Heart of the Negotiator

8. https://www.kartalotomasyon.com.tr

9. © 2018 Stephen Boyle
Don’t dismiss the other side’s perspective
• Negotiators who learn about the perspective of
others are more likely to create (and claim) value
• Understanding their problems helps you to find the
easiest ways to solve your own
Bazerman & Neale (1992), Negotiating Rationally

10. http://www.engineersjournal.ie

11. © 2018 Stephen Boyle
Look for tradeoffs instead of compromises
• Compromise leaves both sides with only half of
what they need – and half of what they don’t
• Successful negotiators look for value-creating
tradeoffs instead of merely meeting half-way
• Don’t negotiate issue-by-issue: keep issues linked
and work with multiple packaged proposals
Thompson (2015), The Mind and Heart of the Negotiator

12. https://www.irishmirror.ie

13. © 2018 Stephen Boyle
Don’t neglect the social contract
• The social contract creates goodwill and shared
expectations
• Costs of a weak social contract can include
– Poor, costly or delayed implementation
– Value-adding opportunities going undiscovered
– Difficulties in handling unforeseen events
– Problems in future negotiations
– Loss of valued vendors
Sebenius (2001), “Six Habits of Merely Effective Negotiators”, Harvard Business Review

14. © 2018 Stephen Boyle
Advice for negotiators
1. Give careful attention to non-price priorities
2. Consider flexible ways to meet your interests
3. Probe and listen to the other side’s perspective
4. Trade across differing priorities to create value
5. Build a strong social contract

15. © 2018 Stephen Boyle
Questions?
stephen.boyle@ucd.ie
Winning Negotiation Strategies
3 day course 2-4 October
at UCD Smurfit Executive Development
See www.smurfitschool.ie for details

16. Negotiations with suppliers:
what, how and why not?
CIPS Procurement Event
12 June 2018
Peter Curran
Partner, Head of Procurement
Eversheds Sutherland

17. Public sector v Private sector
Public sector - what can be negotiated and when?
Competitive procedure with negotiation – Reg. 29
Competitive dialogue – Reg. 30
Negotiation without a competition – Reg. 32
Record keeping – Reg. 84
Post-award negotiation – Reg. 72
Contents

18. Eversheds Sutherland Ireland
|
13/06/2018 |
Public Sector Buying v Private Sector Buying
EU (Award of Public Authority Contracts) Regulations 2016
− Above-financial thresholds
− Works, supplies, services
− Not otherwise excluded
EU (Award of Contracts by Utility Undertakings) Regulations 2016
J&A Developments Ltd v Edina Manufacturing (NI HC 2006)
Public sector v Private sector
Negotiations with suppliers: what, how and why not?

19. Eversheds Sutherland Ireland
|
13/06/2018 |
Only the contract, not the tender documents
Infringement of principles of transparency and equal treatment
“If the contracting authority was authorised to amend at will the very
conditions of the invitation to tender, where there was no express
authorisation to that effect in the relevant provisions, the terms
governing the award of the contract, as originally laid down,
would be distorted”
(Succhi di Frutta)
Public sector - What can be negotiated?
Negotiations with suppliers: what, how and why not?

20. Eversheds Sutherland Ireland
|
13/06/2018 |
Open and restricted procedures - No negotiation permitted under Regs/case-law
Reg 26(3) - greater flexibility than before:
Can use competitive procedure with negotiation or competitive dialogue:
(a) with regard to works, supplies or services fulfilling one/more of following:
i. needs of authority cannot be met without adaptation of readily available solutions
ii. include design or innovative solutions
iii. specific circumstances related to nature, complexity or legal and financial make-
up or because of risks attaching to them
iv. technical specifications cannot be established with sufficient precision by authority
with reference to a standard
b) with regard to works, supplies or services where, in response to open or restricted
procedure, only irregular or unacceptable tenders are submitted
Public sector - When can contract be negotiated?
Negotiations with suppliers: what, how and why not?

21. Eversheds Sutherland Ireland
|
13/06/2018 |
“Negotiations should aim at improving the tenders so as to allow
contracting authorities to buy works, supplies and services perfectly
adapted to their specific needs. Negotiations may concern all
characteristics of the purchased works, supplies and services including,
for instance, quality, quantities, commercial clauses as well as social,
environmental and innovative aspects, in so far as they do not
constitute minimum requirements.”
(Directive 2014/24, Recital 45)
Public sector - When can contract be negotiated?

22. Eversheds Sutherland Ireland
|
13/06/2018 |
How can contract be negotiated?
− Contract notice
− Selection stage (PQQ)
− Procurement documents should identify:
− subject matter of procurement
− award criteria
− min requirements
− sufficiently precise to allow for decision to participate
− not subject to negotiation
− ITT/ITN sent to qualified candidates
− min. 3 – ‘sufficient to ensure genuine competition’
− ‘Initial tenders.. shall be the basis for subsequent negotiations’
Competitive procedure with negotiation - Reg 29

23. Eversheds Sutherland Ireland
|
13/06/2018 |
Reg 29(8) “.. authority shall negotiate with a tenderer the
initial and all subsequent tenders submitted by that
tenderer, except for the final tenders within the meaning of
paragraph (16), to improve the content of the tenders.”
Reg 29(10) “.. authority may award contracts on the basis
of the initial tenders without negotiation where the
authority has indicated, in the contract notice.. that it
reserves the possibility of doing so.”
(Somague (IR HC (2015) No. 21 JR)
Competitive procedure with negotiation - Reg 29

24. Eversheds Sutherland Ireland
|
13/06/2018 |
− Reg 29(11): During negotiations authority must:
− treat all tenderers equally
− not provide information in discriminatory manner which may
give some tenderers an advantage over others
− inform bidders of changes to technical specifications or other
procurement documents, other than those setting out the
minimum requirements
− not reveal to other participants confidential information
communicated by bidder participating in the negotiations
without their agreement
Competitive procedure with negotiation - Reg 29

25. Eversheds Sutherland Ireland
|
13/06/2018 |
− Reg 29(14): Negotiation in successive stages:
− successive stages of procedure may reduce number of tenders to be
negotiated by applying award criteria specified in contract notice or
another procurement document.
− contact notice must indicate whether it will use this option
− Reg 29(16): Where authority intends to conclude negotiations:
− inform remaining tenderers and set common deadline to submit new or
revised tenders
− verify final tenders confirm with minimum requirements and comply
with Regulation 56(1) & (2)
− assess final tenders on the basis of award criteria
− award contract
NOTE: no negotiations of final tender!
Competitive procedure with negotiation - Reg 29

26. Eversheds Sutherland Ireland
|
13/06/2018 |
− Authority defines its needs/requirements in contract notice/descriptive document
− Aim of dialogue is to identify / define means best suited to satisfying authority’s needs
− Can discuss all aspects of procurement with the chosen participants
− Ensure equality of treatment
− Do not reveal to other participants solutions/confidential information communicated
− Successive stages (if flagged in contract notice)
− Continue until authority can identify the solution(s) capable of meeting its needs
− Bidders submit final tenders on basis of solution(s) specified during dialogue
− Post final tender – ‘clarify, specify, optimise’
− Negotiations with best price-quality ratio tenderer to
confirm financial commitments or other terms in tender by
finalising terms of contract
− Negotiations must not —
− have effect of materially modifying essential aspects
of tender/procurement risk distorting competition
or causing discrimination
Competitive dialogue - Reg 30

27. Eversheds Sutherland Ireland
|
13/06/2018 |
Similar grounds as before 2014 Directive:
Negotiation without a competition – Reg 32
No suitable PQQs/tenders received
Extreme urgency not foreseeable by/attributable to authority
Competition absent for technical questions
Procurement of artistic works or performances
To protect exclusive rights (eg IPR)
Additional supplies (to avoid incompatibility/disproportionate difficulty)
Additional works (where flagged in original tender)

28. Eversheds Sutherland Ireland
|
13/06/2018 |
Authorities must keep sufficient information to record progress & justify
decisions at all stages:
− Communications with operators
− Internal deliberations
− Preparation of documents
− Dialogue or negotiation
For every contract established, draw up a report to include:
− Justification for use of dialogue/negotiated procedures
− Justification for use of negotiation without a competition
Report given to Commission / competent authorities on request
Also – FOI & Discovery!
Reg 55(2) - Upon request, advise tenderer who submitted admissible
tender of ‘conduct and progress of negotiations and dialogue with
tenderers’
Record keeping - Reg 84

29. Eversheds Sutherland Ireland
|
13/06/2018 |
Post-contract changes may not be ‘substantial’:
− Contract materially different in character from one
initially concluded
− Modification would have attracted/allowed admission of
other candidates or acceptance of another offer
− Economic balance changed in favour of contractor
− Scope ‘considerably’ extended
− New contractor (except as permitted)
Pressetext case
Post-award negotiation - Reg 72

30. Eversheds Sutherland Ireland
|
13/06/2018 |
Safe Harbours:
− Low value modifications
− Additional requirements from existing contractor*
− Unforeseeable circumstances*
− Change of contracting party
− Precise review clauses
*Transparency obligation + price increase cannot exceed 50%
Post-award negotiation - Reg 72

31. eversheds-sutherland.ie
© Eversheds Sutherland 2018
Peter Curran
Partner,
Head of Procurement
Eversheds Sutherland
T: +353 1 6644 990
E: petercurran
@eversheds-sutherland.ie

32. Agenda
1800: Registration and Refreshments
1830: Introductions and Acknowledgements
1840: Stephen Boyle – Moving away from Price…
1915: Peter Curran – Negotiation within Public Sector
1945: Facilitated Q&A
2000: End