Procurement terms: N

Negotiation is a process through which each party tries to achieve their goals in the context of the relationship with the other party. In procurement, the other party may be a long-term supplier or a one-time supplier, and our approach may be different in each case. However, in every negotiation we need to be clear about our objectives, and decide how we plan to achieve our goals. For example, ‘win:win’ negotiations may be appropriate in some circumstances, and we may plan to share value with the other party, perhaps through the exchange of concessions or trading negotiable variables. In other situations we may have no remit for the relationship with the other party and plan to claim value for us, by using facts and reason, without helping the other party ‘win’. The common elements are clear objectives - the ‘what’ and the ‘how’ - how we plan to persuade the other party, which needs to be consistent with the relationship that we want to create. See also Persuasion and Win:Win. Negotiation Essentials and Advanced Negotiation training is available at Academy of Procurement.

Refer to Planning, Negotiation

Negotiation after the receipt of offers is called post-offer negotiation, or sometimes post-tender negotiation. Some practitioners believe that the routine practice of negotiation after the invitation of written bids leads to bidders including a contingency within their offer which they subsequently ‘yield’ in negotiation, leaving the buyer no better off. In the public sector, governance provisions seek to ensure probity, particularly if there are parallel negotiations with more than one bidder. Avoiding leakage of confidential information and avoidance of a ‘Dutch auction’ are key considerations if the process is to enjoy the confidence of bidders. Advocates of post-offer negotiation point out that the bidders may have ideas and suggestions that emerge only after a dialogue, which may be difficult to undertake prior to bids being issued. See also Auction, Dutch.

Net present value [NPV] is a means of valuing a future sum of money in today’s terms. Because of inflation, $100 in a year’s time is worth less than $100 today, so we need to discount future sums to work out their value in today’s terms. NPV is often used as a means of investment appraisal, comparing current cash outflows and future revenue inflows. If the NPV of a proposed project is positive, the project is viable and is a good use of funds. The approach requires two decisions. What will be the level of future revenue streams and cost outflows? What is the discount rate that will be used to reflect the required return on investment? See also Discounted Cash Flow and Weighted Average Cost of Capital.

Building rapport with stakeholders or fellow procurement practitioners is called networking. For knowledge workers, the ability to solve a problem can sometimes be linked to not just what you know personally, but who you have in your network of contacts and associates who may know the answer. For example, category managers may create a network, external to their organisation, of contacts also managing the same category that can share category-specific information. Internally, power users and key team members may form networks to share insights and understanding. See also Power Users, Stakeholder and Structure, Federal.

Any extraneous or irrelevant information, communication, or distractions that can hinder the efficient and effective management of contracts

Refer to Net Present Value

European Article Number [EAN] is a 13-digit barcode standard. The standard has been renamed International Article Number, but has retained the abbreviation EAN.