Negotiation Strategies in Major Contract Dispute

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February 17, 2016
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March 21, 2016

Negotiation is all about reaching an agreement. Normally, the examples given are less complex and more common. However, the strategies taught in Think Like A Negotiator were derived from many of my experiences as a Government Contracts Official. This post will address a more complex contract situation and how the same Think Like A Negotiator principles were applied.

Sometimes if you can’t reach an agreement, someone has to make a decision of what move to make. That happened when I was in the Air Force as a warranted Contracting Officer. What that means in simpler terms is that I had the unlimited authority on the warrant (another term may be appointment or certification document) to bind the Government on contract actions. There were approvals required at certain dollar amounts from higher-ranking personnel or headquarters. Legal review was also required over a certain dollar amount. Legal was for opinion, the final decision rested with the Contracting Officer.

Image of business contract on background of two employees handshaking

I had a situation once where I had to make a decision about when the Government Program Office should provide a report of services received so payment could be processed. The contract was a $104 million dollar contract. The monthly invoice was hundreds of thousands of dollars. Delay in payment could adversely affect the contractors ability to operate.

They delivered their invoices on the first of the month. The Governments payment policy is Net 30 days after receipt of invoice. The receipt of invoice didn’t start until it was received by the Contracting Office. The Program Office had to sign off on receipt of services by attaching what was known as a “Receiving Report” to the invoices. I as the Contracting Officer would review and sign off on approval of the invoices and send them to the Finance Office to process the payment.

There was another part of the contract that required the Contractor to submit several monthly reports to the Program Office by the 10th of the month following performance.   Those reports took longer to prepare and the Program Office would sit on the invoices until those reports were delivered. That could delay payment by a week or more.

The Contractor came to me to solve this problem. I set up a meeting and did some research on the issue (Prepare In Advance) before the meeting. I thought about what questions I wanted to ask (Ask Powerful Questions), what solution I thought I’d like to reach and the possibility of resolving the issue in one meeting.

I met with representatives from the Program Office and the Project Manager, Contracts and other Managers from the Contractors office. We had a lengthy discussion. The problem was deciding what month of performance the reports were part of. Were they part of the previous months performance since they were reporting on that month’s performance? For example if the invoices were delivered to the program office in July for performance in the month of June and the reports for June were also delivered in July, would those reports be considered as performance during the month of June or July?

The Program Office considered them performance during the month of June, which is why they held up processing the Receiving Report for payment until the reports were received. The Contractor considered them to be performance during the month of July and thought that payment should not be held up for these reports to be received by the Program Office.

There was no resolution during the first meeting. I set up a meeting with the Program Office, the legal office, and myself to get their take on the situation (Consult with Experts). The legal office thought it could go either way. The decision was up to me to decide what was Fair and Reasonable for all concerned. Remember, that is the first thing you have to think about in any negotiation situation. Fair implies a proper balance of conflicting interests, reasonable means not extreme or excessive.

I had to decide what month performance occurred for the submission of the reports. I did some research to see if I could find any precedents in case law (Verify the Facts, Read It) and asked some opinions of my colleagues and commander in the Contracting Office (Consult with Experts/Higher Authority).

Above view of several business partners discussing contract

I knew whatever decision I made was going to be unpopular with one side and popular with the other (Own Your Power). After consideration of the facts, I made the decision that the performance of the submission of the reports occurred in the month they were submitted. In other words, if the June reports were submitted in July, the month of performance for submitting the June reports occurred in July, not June and therefore, the payment should not be held up waiting for the previous months reports to be submitted.

I put it in writing as a “Contracting Officer’s Decision” (Get It In Writing) and sent it to all parties concerned. Of course I had to Leave Emotion Out when the Program Office contacted me and went on a rant about why my decision was wrong and that they were sure the legal office agreed with them. I reminded them that the decision was mine and the legal office was there for advice only and they weren’t the final authority and if they had a problem with it their commander could speak to mine (Use Your Leverage/Influence).

Looking back on it today, I still believe I made the right decision. It could have gone either way but I felt the Contractor’s payment didn’t need to be held up waiting for a report that was suppose to be submitted by the 10th day of the month in the following month.

Think Like A Negotiator strategies are the same whether it’s a multi million dollar contract, a landlord tenant dispute (see previous blog post here – http://thinklikeanegotiator.com/2015/10/anatomy-of-a-negotiation-landlord-tenant-dispute/) or where to meet for dinner. The strategies are the same, how you execute them will be different for each situation. The Power is in The Work!

Eldonna Lewis Fernandezhttp://www.52negotiatortips.com

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Eldonna Lewis Fernandez
Eldonna Lewis Fernandez
Veteran negotiation and contracts expert Eldonna Lewis-Fernandez, author of “Think Like a Negotiator,” has over 30 years of experience crafting killer deals both stateside and internationally, many in excess of $100 million. She’s currently the CEO of Dynamic Vision International — a specialized consulting and training firm that helps individuals hone negotiation skills — as well as a nationally regarded keynote speaker, session leader and panelist on the Art of Negotiation. Eldonna may be reached online at www.EldonnaLewisFernandez.com

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