FUNDAMENTALS OF CONTRACT NEGOTIATION AND MANAGEMENT LEROY D. BANDA HEAD, COOPERATIVES DEVELOPMENT AND PROJECTS MUSCCO

This session will address the basic issues affecting contract negotiation: types of agreements, terms and conditions, and negotiation strategies.

DEFINITIONS GRANT Purpose is to transfer money, property, services, or anything of value to recipient in order to accomplish a public purpose No substantial involvement is anticipated between sponsor and recipient during performance of activity Often called an “assistance mechanism”

COOPERATIVE AGREEMENT DEFINITIONS COOPERATIVE AGREEMENT Principal purpose is to transfer funds to recipient to accomplish a public purpose Substantial involvement is anticipated between sponsor and recipient during performance of activity

DEFINITIONS CONTRACT Principal purpose is to acquire property or services for direct benefit or use of the sponsor Sponsor determines that procurement contract is appropriate Often called a “procurement mechanism”

SO . . . WHAT IS A CONTRACT? A document that describes a relationship between two parties, such as a buyer and seller, that is defined by an agreement about their respective rights and responsibilities BEWARE, contracts are: More difficult to negotiate More difficult to administer Have more rules and are less flexible

TYPES OF CONTRACTS The Contract Masquerade Memorandum of Understanding Teaming Agreement Agreements of funds: e.g. grants with terms and conditions, contracts, purchase orders, Intergovernmental Agreements Other agreements: e.g. Material Transfer Agreement, non-disclosure agreements, data transfer agreements, BOT etc.

CONTRACTS: PROCESS Solicitation and Amendments Pre-Bid Conference Prime Proposal Subcontract Proposal Exceptions Letter Proposal Review (Technical and Cost Proposals) Verification/Negotiation Best and Final Offer More Negotiation??? Acceptance

PROPOSAL PREPARATION Dissect the Solicitation Document Attend to Amendments Assign Responsibilities: Technical, Cost, Management Coordinate with Subcontractors Write to the Evaluation Criteria Meet Regularly During Proposal Development Arrange for a Pre-submission Review Do Not Lose Your Focus Prepare the Terms and Conditions Letter

TERMINATION Why is Termination a potential issue? How is a Termination problem identified in a contract? Compromises? Alternative language? Is it ever OK to agree to a Termination clause? Your experience . . .

TERMINATION Mutual Termination Termination for Convenience Termination for Default/Cause (cure notice) Non-Cancelable Obligations

TERMINATION Ensure that: The notification period for termination is adequate; The institution's costs are adequately covered in the event of termination; The parties agree how disputes are to be handled, particularly in the case of termination for cause.

STATE STATUTES Why are State Statutes potential problems? How are State Statutes identified in a contract? Compromises? Alternative language? Is it ever OK to agree to another state’s statutes? Your experience . . .

KEY PERSONNEL Why is Key Personnel a potential issue? How is a Key Personnel problem identified in a contract? Compromises? Alternative language? Is it ever OK to allow the sponsor to choose the project personnel? Your experience . . .

TECHNICAL DIRECTION Why are Technical Direction and Changes potential issues? How are Technical Direction and Changes problems identified in a contract? Compromises? Alternative language? Is it ever OK to agree to Technical Directions or Changes? Your experience . . .

The Changes Clause Why is inclusion of the Changes clause a potential issue? How is the Changes clause identified in a contract? Compromises? Alternative language? Is it ever OK to agree to the Changes clause? Your experience . . .

Changes Be careful of the Changes clause in contracts.

CONFIDENTIALITY/ DISCLOSURE Why are Confidentiality and Non-Disclosure potential problems? How are Confidentiality and Non-Disclosure clauses identified in a contract? Compromises? Alternative language? Is it ever OK to agree to Confidentiality or Non-Disclosure statutes? Your experience . . .

RIGHTS IN DATA Why is ownership of data a potential problem? How are Rights in Data problems identified in a contract? Compromises? Alternative language? Is it ever OK to agree to a limitation on the rights to data? Your experience . . .

RIGHTS IN DATA Clearly define ownership of data. Clearly identify proprietary or confidential data. Know what restrictions are acceptable to the institution. Identify the risk/liability for the disclosure of proprietary or confidential information? Beware of the Rights in Data clause in contracts.

Rights in Data – Release and use restrictions. Except as otherwise specifically provided for in this contract, the Contractor shall not use for purposes other than the performance of this contract, nor shall the Contractor release, reproduce, distribute, or publish any data first produced in the performance of this contract, nor authorize others to do so, without written permission of the Contracting Officer.

NEGOTIATION OBJECTIVES To achieve a framework that facilitates the work/business – ‘’win – win’’. To arrive at a mutually-acceptable agreement. To set a positive tone for the on-going relationship. To negotiate a contract that is consistent with the national policies and procedures.

“binding” agreement and you have a legal obligation to perform. Remember A contract is a “binding” agreement and you have a legal obligation to perform.

AN INTEGRATED MODEL OF PRINCIPLED NEGOTIATION 1. IDENTIFY THE NEGOTIATION ISSUES COMMUNICATION PRE – NEGOTIATION PLANNING 2. OBTAIN INFORMATION OF THE OTHER PARTY 3. ESTABLISH OBJECTIVE CRITERIA & CREATE OPTIONS 4. DETERMINE THE POSITIONS AND OPTIONS 5. ESTABLISH THE DEAL PARAMETERS 6. DETERMINE OBJECTIVES OF THE NEGOTIATION 7. DEVELOP NEGOTIATION PLAN, STRATEGY & TACTICS PPLANNING 8. EMPLOY PERSUATION 9. DETERMINE COMMON GROUND, POWER BASES & FRAME THE NEGOTIATION NEGOTIATION 10. ESTABLISH THE NEGOTIATION CLIMATE 11. IMPLEMENT THE DEAL

THE THREE PILLARS OF PRINCIPLED NEGOTIATION Principled negotiation rests on three pillars; Trust Flexibility Visibility TRUST 1.Speak the language of the other party 2. Manage your reputation 3. Make dependence a factor 4. Make unilateral concessions 5. Label your concessions 6. Explain your demands 7. Maximize joint gain

FLEXIBILITY Principled negotiators are divergent thinkers that see every negotiation as an opportunity to work together with the other party in ways that unlock optimal value for all and establish a sound basis for a mutually beneficial future relationship. Whereas positional negotiators are past/present oriented, merely focusing on the problem, trying to remove the problem from the negotiation table by ‘’fixing’’ it. Principled negotiators are future oriented, seeing the problem as an opportunity to explore better future ways of working together for the benefit of both parties. Negotiation is not primarily about the past or present, but is concerned with where the parties will be living tomorrow

VISIBILITY When parties do not trust each other, the natural tendency is to reveal as little as possible to each other and play their cards as close to chest as possible. This approach exacerbates the distrust, creates a climate of secrecy and unpredictability. Unless one party is willing to run the risk of revealing its interests and visibly showing its good intentions, the negotiation is likely to fail or to deliver a sub-optimal outcome that in all probability will rapidly unravel. Good negotiators understand that the only way of encouraging the other party to open itself to the possibility of jointly creating a mutually beneficial solution requires a willingness on their part to take the first step to towards visibility.

Negotiations and Contracts

GROUP WORK 1. Why do contracts not work for farm produce in developing countries? 2. In your group discuss challenges in sustainable agribusiness and way forward.