Long-term procurement contracts often include “mandatory” terms and conditions, and multiple levels of review and approval, by both legal and business teams. This means the negotiations can drag on, lengthening the sales cycle, burdening internal resources, increasing outside legal costs, and resulting in last-minute concessions to close the deal timely. It can take weeks or months for a new contract to get to the final stage. No matter how simple the contract is, there are many legalities and procedures that have to be followed. With all the delays and roadblocks that can come with securing a new contract, there are numerous ways to expedite contract negotiations and approval.
Do your research well
Contract negotiation is not just a process of reaching to the next level of agreement, it is actually an opportunity to add to the economic value of the vendor relationship, shore up supply chain vulnerabilities, and protect your organisation against risk. The party with more information usually has more leverage. For example, you are on the verge of closing a real estate deal and you know that the other party has no budgetary issues. Here, bumping up the price of the property a bit will result in higher profits without any hurdle. However, in the same case, if the party with whom you are negotiating has no decision power, your efforts will not result in fruits immediately. You have to wait for longer approval processes from the other end.
Having the right information about the other party enhances your ability to create a more collaborative atmosphere and ultimately speeds up contract negotiations.
Possess essential contract negotiation skills
You must possess sound legal knowledge to understand contracting terms and conditions written in legal language. In most cases, less is better than more. Do not jump into verbose arguments if you are unsure about the legal language to be used. The difficulty is that if your words and actions disclose your flaws, they might be exploited against you. The simple tact is to question rather than demand while negotiating contracts. Discussions are sparked by questions; disputes, on the other hand, frequently stifle communication.
Set benchmarks and deadlines
Negotiators frequently worry that when time runs out, they might end up making too many concessions. However, set short-term goals as well as a reasonable yet ambitious final deadline when planning the negotiation process. Deadlines might motivate both parties to make commitments and think outside the box to enter into an agreement. In case the other party fails to meet the deadline, it will either give you a chance to set a new schedule or opt for another vendor.
Take control of your contracts
Always make sure to use facts, not feelings. It's possible that the information provided by the other party is incomplete. Do your homework on the party you're negotiating with, as well as the terms that have been suggested.
For example, if you're a buyer, don't make a hasty counter-offer to the vendor's asking price. Obtaining effective cost splits from competing sellers could provide a buyer leverage to ask for significant discounts with little effort.
Last but not least!
Revamp your NDAs. The NDA can be used by procurement professionals to negotiate before the real negotiations. And, align your procurement and legal department. Often, a company's legal department slows down the procurement process, which in turn slows down contract negotiations as well. If your organization has the capability, start posting your contracts online and having vendors e-sign all paperwork online. Many advanced CLM solutions are available in the market which can make your contract lifecycle management easier than ever.
When you are looking to get a new contract in place, not only do they have to be negotiated and approved, but they have to be signed to go live. CLM solutions like Contractflow built on the ServiceNow platform streamlines your contract negotiation and approval process by bringing everyone and everything together in one place and automating the approvals.
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