Project Negotiation: A Beginner’s Guide

Introduction

During the course of a project, we might encounter situations where two parties come into conflict and we need to undertake negotiation to achieve an appropriate outcome. The negotiation might be over the price of materials or the best way to achieve the project’s goals, but can extend to any number of different issues. It is important that we have a negotiation process in place, particularly for formal or external negotiations, and that we have effective negotiation skills, so that we have the best chance of achieving the desired outcome.

Formal and informal negotiation

Negotiation can be both formal and informal. Formal negotiation usually takes place between the project manager and an external party or when there is a significant change to the project. It will use a specific framework or process to negotiate with the other party to achieve a positive outcome for the project. Formal negotiation provides a clear process and will clearly record the outcome, providing assurance to both parties.

Informal negotiation happens day-to-day. For example, if you need a piece of work doing, you might negotiate with a colleague for them to take the time to complete that at the expense of another task. Whilst a formal process is unlikely to be required, it is important to understand that this is a negotiation, and you still want to respect the other party and any compromises they make.

The negotiation process

To effectively conduct formal negotiation – and guide informal negotiations – there are five steps that we should follow to achieve the best possible outcome.

Understand the need for negotiation

The first step is to understand the need for negotiation. Why is the negotiation taking place? What circumstances surround the need for project negotiation? Understanding these factors ensures that we know why we are going into a formal negotiation and what the starting point of the other party is.

Prepare

The second step is to prepare for the negotiation. This is where you take the time to really understand the issue and prepare for various outcomes. You want to begin by understanding what you want from the negotiation, and then understand what the other party wants. You might consider the zone of potential agreement (ZOPA) (where your interests might overlap), the best alternative to negotiated agreement (BATNA) (what happens if you can’t agree) and what a win-win outcome looks like.

You will clearly set out what you are trying to achieve so that the team undertaking the negotiation has a clear idea of the outcome they are aiming for.

Discussion, dialogue and debate

This is the core of the negotiation process. There will be discussion of the issue under negotiation between both parties. They will need to maintain a clear and balanced dialogue to understand what both parties want. If one party does not feel listened to, they may not be as accommodating. There will also be aspects of the issue that need to be debated, and there will be some back and forth over exactly what can be done and how the two parties can work together to reach an optimum solution.

Confirm views and document

Once the issue has been debated and an agreement reached, the parties need to confirm their views and document them, providing a clear statement of the outcome of the negotiation. They will state their final position and acknowledge the views of the other party and then document them – this might involve writing an email or preparing a short report stating what has been agreed and the actions that need to be taken. From here, the parties can take the agreed actions and work towards getting the task completed.

Check actions against agreement

When the actions have been completed, they should be checked against the agreement that was made. This is to ensure that the stated actions have been taken and provides assurance to both parties that their agreement has been respected. It can be a simple action such as ticking things off on a checklist or writing a short report about what was done and how this conforms to the original agreement.

The outcomes of negotiation

The outcome of a negotiation will either be positive (an agreement will be reached) or negative (no agreement). We need to consider what the outcome is in both of these situations.

Positive

A positive outcome means that we have been able to reach an agreement that both parties find suitable. From here, we can proceed with our project, having confirmed our agreement and taken action based on it, completing the negotiation process.

Negative

If there is a negative outcome to the negotiation process, i.e., no resolution, further action might be required. As part of our preparation process, we will have considered our BATNA, or what we are going to do if we can’t reach an agreement. If we are unable to resolve the issue, then we will need to consider our next steps.

• Can we return to the negotiating table after taking some time to think? Both sides might need to go away, evaluate their position and decide if they can compromise. Taking this time might allow us to reach an agreement.
• Do we need to consider mediation? If we need to find a resolution, but the two parties cannot work through the issue alone, we might need to consider mediation, where a third party helps the two parties to navigate the discussion to hopefully reach a positive outcome.
• Do we need to terminate the contract due to the differences? If the issues are impossible to overcome, we might need to terminate the contract or cease working with a particular supplier. This is not a decision that should be taken lightly.

If you find yourself in the position of having a negative outcome to a negotiation, you might need to escalate the issue to the sponsor or steering group and seek their advice on the best way to proceed.

Summary

Everyone will have to negotiate at some point in their project management career. It might be informal, such as organising workloads with a colleague, or formal, where you negotiate with an external supplier. It is important that we understand how to carry out a negotiation process and how to deal with a positive or negative outcome. If we can understand this, and know how to approach disagreements, we will be well-prepared to tackle negotiations within our projects.