1. Jeff Birch, Acting Director www.fai.gov Al Muñoz, CFCM, PMP US Department of Agriculture Meeting the Challenge of Better Outcomes February 5, 2014 1pm – 3pm Vendor Engagement and Negotiation

2. Agenda o Vendor Engagement From Myth-busters to Agency Vendor Communication Plans Most pervasive misconceptions o Negotiation Better vendor engagement for better negotiations Tools & techniques for better negotiations o Q&A 2

3. Vendor Engagement o Office of Federal Procurement Policy (OFPP) February 2, 2011 o “Myth-Busting”: Addressing Misconceptions to Improve Communication with Industry during the Acquisition Process 3

4. Vendor Engagement Access to current market information is critical! 4 Define Requirements Agency Program Managers Develop Acquisition Strategies Seek Opportunities for Small Business Negotiate Contract Terms Contracting Officers

5. Vendor Engagement 5 Best source of information Market Current Technology Trends affecting future procurements Industry Partners Clear, consistent direction to the workforce Criteria for identifying which acquisitions must include vendor input in the pre-award phase Agency Vendor Communication Plans

6. Vendor Engagement o Productive interactions between industry and agency officials o Government clearly understands the marketplace 6

7. Vendor Engagement o Award a contract or order for an effective solution at a reasonable price o Especially important for complex, high-risk procurements 7

8. Vendor Engagement o OFPP Memo, May 7, 2012 “Myth-Busting 2”: Addressing Misconceptions and Further Improving Communication During the Acquisition Process Focused on Industry Misconceptions 8

9. Vendor Engagement Key take-away: Stop buying from strangers! 9

10. Vendor Engagement Use your business background and ask some questions: 10 Are you still buying from strangers?

11. Vendor Engagement Use your business background and ask some questions: 11 Are you still buying from strangers? How well do I know the vendors I buy from? Large or small? Length of time in business? How mature is the industry? How dense or competitive is the industry? How well do I know the products or services I buy? New or mature products or services? Commoditized or highly distinguishable? What’s the market like? Is it highly profitable or lower- margin/high-volume?

12. Vendor Engagement o Asking these types of questions will lead to more questions that are dependent on your type of contracting and level of interest. o Must take the time to analyze your sector commensurate with the level of complexity and risk inherent in the products or services that you buy. 12

13. Vendor Engagement 13 Most pervasive misconceptions “Can’t meet one-on-one with a potential offeror.” “A protest is something to be avoided at all costs – even if it means the Government limits conversations with industry.” 1. 2.

14. Vendor Engagement 14 “Can’t meet one-on-one with a potential offeror.” “A protest is something to be avoided at all costs – even if it means the Government limits conversations with industry.” 1. 2.

15. Vendor Engagement o Generally, there is no such prohibition. o Prior to solicitation, anyone, including program managers and users may meet with potential offerors to exchange general information and conduct market research related to an acquisition. 15 “Can’t meet one-on-one with a potential offeror.” 1.

16. Vendor Engagement o Communication is more restricted during solicitation, during which time the CO is the focal point, and ends with receipt of proposals. o Any information directly affecting proposal preparation must be shared with all potential offerors. 16 “Can’t meet one-on-one with a potential offeror.” 1.

17. Vendor Engagement o Keep it fair and be ethical in your engagement. o There will be some mistakes. o Good judgment comes from experience. o Experience comes from bad judgment. 17 “Can’t meet one-on-one with a potential offeror.” 1.

18. Vendor Engagement 18 “Can’t meet one-on-one with a potential offeror.” “A protest is something to be avoided at all costs – even if it means the Government limits conversations with industry.” 1. 2.

19. Vendor Engagement o Protests are still quite rare and not to be feared. 19 “A protest is something to be avoided at all costs – even if it means the Government limits conversations with industry.” 2.

20. Vendor Engagement o Not communicating won’t prevent a protest. o They want answers, they aren’t getting them, and one of their only options is to file a protest. 20 What is a protest, really, other than a vendor signifying that they’re unhappy with the level of engagement? “A protest is something to be avoided at all costs – even if it means the Government limits conversations with industry.” 2.

21. Vendor Engagement o A much better option is a debriefing, which should be encouraged, even with the winning proposer. o Debriefs allow vendors to understand the award decision and to submit better proposals next time. Thorough debriefs = better future proposals 21 “A protest is something to be avoided at all costs – even if it means the Government limits conversations with industry.” 2.

22. Vendor Engagement o Government contracting of the future will be about interacting with industry more meaningfully, and about designing effective solutions together… …not about buying from strangers. 22

23. Vendor Engagement and Negotiation 23 Effective vendor engagement will improve the productivity of your negotiations

24. Vendor Engagement and Negotiation 24 Effective vendor engagement will improve the productivity of your negotiations Know the vendor

25. Vendor Engagement and Negotiation 25 Effective vendor engagement will improve the productivity of your negotiations Know the vendor Know the product/service

26. Vendor Engagement and Negotiation 26 Effective vendor engagement will improve the productivity of your negotiations Know the vendor Know the product/service Know the environment which you are engaged

27. Vendor Engagement and Negotiation Without these, your negotiations will be much more difficult! 27 Effective vendor engagement will improve the productivity of your negotiations Know the vendor Know the product/service Know the environment which you are engaged

28. Negotiation o As a process, negotiation is communication through which two parties attempt to reach a mutually satisfactory result on a matter of common concern. 28 Negotiation is a discussion aimed at reaching an agreement

29. Negotiation o There are no “players” and no “sides” and no one “wins” a negotiation. o A successful negotiation is one in which the parties achieved a mutually satisfactory result. 29 …not a game or contest

30. Negotiation o Thinking of negotiations as a contest is detrimental to the goal of achieving better outcomes. o Causes reluctance to enter into negotiations. o Allows for bad outcomes. If you think you won, you didn’t. 30

31. Negotiation o What does a vendor do when it “loses” a negotiation? o It doesn’t. We end up paying for it one way or another. o Quality suffers, employees suffer or the vendor simply doesn’t perform. 31

32. Negotiation o Government has a superior bargaining position. o Leveraging that position to the detriment of the vendor will result in poor outcomes. o Because in contrast, the vendor has superior knowledge. 32

33. Negotiation o The cost of poor vendor engagement and negotiations. o The 30p “gourmet” burger. o Cost of damage repair far exceeded any profit that could have been made. 33

34. Negotiation o You’re going to negotiate at some point with your vendors. o Be prepared to negotiate on every acquisition. o You’ve probably negotiated at some point today. 34 Planning for Negotiations

35. Negotiation o Get the right price for the level of quality and delivery that the Government requires. o Not to get the lowest price. 35 Objective of Negotiations

36. Negotiation o Negotiating a position versus negotiating based on interests. o FAR discusses development of a pre-negotiation position and pre-negotiation objectives somewhat interchangeably. 36

37. Negotiation o A position has a static connotation, suggesting that the Government should only move from its position based on evidence provided by the vendor. o This is adversarial and distracts the negotiation team from focusing on paying the right price for the Government’s requirements. 37

38. Negotiation o In contrast, by identifying those mutual interests around which the Government and its industry partners can bargain, the parties can achieve a mutually satisfactory outcome. 38

39. Negotiation o Remember, the point of negotiations is to achieve a mutually satisfactory result. o Don’t become overly focused on achieving the lowest price. o The lowest price could cost you. 39

40. Negotiation 40 Preparation Focus on Objectives Flexibility Tools of an Effective Negotiator

41. Negotiation o Effective vendor engagement to understand industry partners and the environment. o Thoroughly documented with your customer the Government’s requirement and its fair price. 41

42. Negotiation o Understand the objectives of the negotiation and can distinguish those objectives that must be met from those that can be reduced if needed. o Not be tied to a position. 42

43. Negotiation o Understand the limit of your own infallibility. o Be prepared, but be prepared for change. o There’s more than one way to make a burger. 43

44. Vendor Engagement and Negotiation o Remember that you and your team will make mistakes along the way. We could use more small mistakes to build upon our experience so that we’ll make fewer large mistakes in the future! 44

45. Vendor Engagement and Negotiation o Questions 45