March 2017 Newsletter: Doing Business With Uncle Sam Part II: Negotiations

Last month we discussed some basics of government contracts, including contract types. This month we will explore the topic further looking specifically at negotiating contracts with the government (federal and state). Like large commercial entities, the government definitely appears to have the upper hand. For many small businesses that translates into a reluctance to fully negotiate. But keep in mind, the fact that you have a good or service that the government needs to buy gives you a seat at the table and some leverage.

When Can You Negotiate Your Contract with the Government?

Contracts awarded using sealed bidding do not permit negotiation. A standard provision may state that the, “government intends to evaluate proposals and award without discussions.” When that provision is used, actual negotiations are not permitted unless the contracting officer determines they are necessary.

Contracts awarded via a request for proposal or request for quotation are negotiation contracts and your proposal represents an initial offer. Language in the proposal may provide that the, “government intends to evaluate proposals and award a contract after conducting discussions with offerors whose proposals have been determined to be within the competitive range.”

Here negotiations are required with any offeror(s) in the competitive range. Negotiations, in either a competitive or sole source environment, are exchanges with the government that are undertaken with the intent of allowing the offeror to revise the proposal. Negotiations may apply to price, schedule, technical requirements, type of contract, or other terms of a proposed contract.

How Do You Approach Your Negotiations with the Government?

Five tips to keep in mind when negotiating with the government:

  • Develop a negotiation with a “target” position and a “floor” position. Your objective is to conclude the negotiation achieving a price as close to the target position as possible while never going beneath the floor.
  • Do not reveal your strategy in front of the other party except to objectively explain your position in terms of an incremental offer or a counter offer.
  • Look for insights into the other party’s negotiation position from the questions being asked, the data being requested, or the responses being obtained.
  • Defend your cost and performance position as conveyed in your proposal with documented facts.
  • It goes without saying that courtesy and professionalism are always in order.

Be sure to catch next month’s article where we will be discussing what to do if you have a dispute with the government after the contract has been awarded.

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