That’s another piece of my private project series. A tricky one. Price negotiations and their consequences.
Being a customer you try to receive several offers to be able to compare them. That’s obvious. Then you dig for some recommendations or opinions about vendors. Talking about building a house it would be other houses built by the company and opinions from their current owners. Then you choose one or two and start negotiations.
After my “RFP process” I had a price in my mind I wanted to pay for the first stage of building. Then I grouped companies into those which should be willing to reach my price goal and the rest. Among the former group I had a favorite, which price-wise was close, but there were other points to be discussed. I left price negotiations to the very end since the gap wasn’t very significant. When we reached compromise in other areas price negotiations went very smoothly.
I showed a price I was willing to pay. I didn’t add anything as my negotiating position since that isn’t on the list of my rules of negotiations. My point was clear: “If my price suits you fine, that’s good. But if you are going to agree on it just to take the deal and then try to force me to pay some hidden costs it will be better for both parties if you stay with your pricing.” My offer was accepted.
We got to the work. However, when it came to accept costs of specific tasks the vendor started talking about additional works (change requests in software world) which he was forced to do while he didn’t plan them. I was able to convince him: “You told me you were able to deliver within the price we’d agreed. I don’t tell you how to build the product even when I see you save some time/money on specific tasks but I expect the final effect will look like we’ve agreed. If you made wrong assumptions at the beginning that’s your risk. If the price wasn’t the best I could get on the market the risk is mine.” Of course it wasn’t so easy but after all we got to the point and shook our hands.
How it maps on our everyday project management? I’m yet to see this kind of open and honest negotiations on a customer side. To be honest I don’t expect to see that in my professional life. Somehow most of people expect price negotiations to be long and tough even when they know what price they’re ready to pay/sell for. Most of the time the customer is willing to squeeze the vendor as much as possible, even when they’ve already met their price goal. On the other hand vendors try to fortify themselves and defend their position with formal agreements forcing the customer to pay for additional works.
Both sides end up trying to find a hook to exploit it against the other side. There’s a lot of effort invested only to keep cooperation going. But somehow almost everyone feels better that way.
Agile is some kind of answer here, since this is a model where change is accepted and welcome. The key point is one side – the customer – should accept that model of cooperation with all consequences. Unfortunately customers who are willing to work that way don’t grow on trees or something.