Questions & Answers

Negotiation Contract Bidding Process: Defending your Business

contract bidding

Question

I operate a student transportation company with 24 buses and vans. We own the facility and buses and are on a 3 year contract. After 25 years they decided to put us out to bid. I was the lowest legitimate bid, but another contractor tossed in a low-ball impossible to deliver negotiation bid. The school threw out the bids and renegotiate with us. The school restructured issues to there advantage. It's two weeks from the start of school with no contract signed. I need to make this work somehow and avoid this happening again. How do I level the playing field?
Joe from United States

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Answer

Very often we deal with the problem at hand, never noticing that we've completely missed the 'real' issue. So I suggest that you step back from the contract bidding process or tender negotiation and ask yourself a few negotiation questions.

Why after 25 years was your contract put up for tender? If this was due to:

  • A deteriorated relationship, then invest time improving your negotiation relationships first. If trust is at an all time low, then consider apologising for any past perceived injustice, and swapping out your lead negotiator to rebuilt trust. From what you have written it sounds to me like your relationship is a touchy area that needs attention before you talk about their contract bidding process. Although you are short on time, you're unlikely to win a sympathetic ear when you feel rushed and hard done by.
  • New appointee wanting to impress his boss/the board, then create a trusting relationship with this person (and other decision makers and influencers of these decision maker), and brain storm how else you can make her/him look good to superiors.
  • A new district-wide contract bidding process, then learn as much about their contract bidding process as possible - from both your school district and other districts who may have had the process in place for some time now. You'll likely discover ways around the negotiation bidding process, and avenues of creating value within their negotiation process.
  • A perception that you are expensive and that they can achieve a better deal elsewhere, then invest time in understanding all areas of value to your district. Then work on discussing your value before negotiating with the schools so that they can see past bottom line cost figures and don't hurt their value in other areas.
  • A cost saving initiative caused by a budget pinch, then find out if this is a temporary situation and will improve next year. Investigate how you can save costs and reduce service level, and ask them if they would be happy with a reduced service in order to achieve negotiated cost savings. Often companies are happy to explore opportunities within their contract bidding process.

It's likely that more than one of the above reasons is at cause. Negotiating skilfully demands that you examine each in turn.

Examine your legal position to learn what will happen if no contract is signed in 2 weeks time and you are still providing your service. You may find that the law considers your previous contract to extend by a further year, in which case you have time on your side.

Is the person or the people doing most of the school district's contract bidding negotiation the only decision makers? If not, then invest time away from the table influencing and creating awareness amongst the other decision makers. Include those who are not decision makers but who can influence the decision makers (e.g. teachers bodies, parents bodies, mayors office).

You're no doubt acutely aware of what will happen if you were to lose this contract (your BATNA), but how long have you invested in understanding their switching provider pains? Do they need you to transition and train a replacement company; and if so how long would this last? If you were to walk away in 2 weeks, what would the financial and ego costs be to them? How fully do they understand their risk if you were to suddenly stop servicing them? Don't just think in financial terms. In the least threatening way, I suggest exploring this with the school district to raise their awareness and your value.

Bottom line is that unless you are prepared to walk away from this deal, you're likely to give away too much value and lose even if you win the contract. From what you've written it sounds like you are committed to win. Additionally, being prepared to walk away is not only crucial to doing well in the negotiations - you need to think about your long term survival. So have plans in ready should you need to downsize.

If your competitor is trying to win your business, will they be temporarily over extending themselves? If they are stretched in the initial phase, then look at how you can attack their soft underbelly - approach their existing clients. At the very least this can have the effect of distracting your competitor from your client's bid at a critical stage of the negotiations - as they are likely to value the sure thing that is their existing client base far more than they do the uncertainty of winning your client. Is your competitor's offer a cunning calculated move, or do they really lack the negotiation training to make a profit should they win your business?

What do you know about your competitor? What are their weaknesses? What are their strengths? Invest your time discussing both of these with your school district so as to favourably influence their perception of you versus your competitor.

In the interim, be careful about extending your commitment on your debt or loans and keep your staff informed of the contract bidding process. If you have ties in the local community, then carefully consider how you can come out on top whichever way the decision goes, and counter any 'unfair play' accusations that the school district may try brand you with. If you have invested in advertising in the local papers and via the school, then this gives you leverage over your competitor. If you haven't, then learn from this missed opportunity.

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