Contract negotiation. It’s pretty important in procurement, especially public sector procurement where contracting authorities have to use taxpayers’ money judiciously. They are accountable for every penny spent, so their contract negotiating skills and business negotiation strategies have to be razor sharp.
It’s also preferable to get contract negotiations done as quickly as possible, to take the next step in the contract lifecycle.
This is possible in today’s digital age with Artificial Intelligence (AI) and sophisticated eTendering software systems, including cloud-based systems, that automate most of the mind-numbing negotiation tasks so you can nail the human side of the process.
The more quickly you fully embrace AI and automation the better because a Gartner survey has revealed that by 2027, 50% of organisations will use AI to manage much of the contract negotiation process.
Contracting authorities who don’t get on board with developing procurement technologies now might find themselves at a permanent disadvantage.
Can AI Be Trusted?
In a word: Yes.
Artificial Intelligence has been around long enough and evolved enough to trust it with many critical tasks, particularly the number-crunching tasks. AI takes this data and turns it into something useful, like performance predictions and market-related risk analysis.
In fact, AI is one of the best tools you can have in the modern digital procurement process.
How AI Benefits eProcurement
Practice makes perfect and one of the biggest benefits AI delivers is scenario simulation.
AI tools can simulate various negotiation scenarios so your contract negotiation specialists can develop effective negotiation strategies to ensure outcomes always swing in your favour. Simulations also present opportunities to work on alternative solutions, like Plan B or C.
Additional Benefits Include
The list of benefits AI tech provides to negotiators is long. We’ve included some of the most significant here.
Data-Driven Decision-Making
As mentioned above, AI tools analyse enormous amounts of data and turn it into valuable information. It identifies patterns, trends, opportunities, and business relationships, all of which are beyond the reach of traditional software.
Data is also crunched, analysed, and updated in real-time for up-to-the-minute insights that negotiators might need to make critical decisions that change the nature of the contract.
Customisation & Standardisation
Each contract is different but there are similarities in contract negotiation strategies that you can incorporate into convenient, time-saving templates.
For example, cleaning services. You could have a standardised, customisable negotiation strategy for suppliers who provide the full range of services.
You could also have a standardised, customisable strategy for specific services only, like window cleaning.
The approach is similar but with subtle changes and that’s where tweakable negotiation strategies can be useful.
Standardised templates are also a great way to stay on track because they go through the negotiation process step-by-step. This improves efficiency, accelerates turnaround times, and ensures every box is ticked – no missed terms or clauses.
Increased Transparency
Registering on an eProcurement platform is another way to improve contract negotiation in a digital world. Platforms provide an array of services and tools in one centralised account. They are structured to be transparent, which is not only essential for the procurement process but can also be invaluable in negotiations.
Learning and Improvement
AI, particularly Gen AI and Machine Learning (ML) software learn every time they process data, generate reports, or help develop negotiation strategies. The more AI is used, the better it becomes at its job, which enables it to take on even more advanced, sophisticated services in contract management, including negotiating contracts.
While ongoing negotiation skills training can help negotiators improve their face-to-face interactions, ongoing learning enables AI to identify and take advantage of opportunities humans alone would miss.
Negotiation Strategies for the Digital Age
Here’s how you can ensure your business negotiation tactics are ready for the new public sector procurement market.
Embrace technology
Early digital platforms were far more limited than the options available today. It’s shifted from a digital contract repository to platforms that support the entire procurement process and help negotiate contracts effectively. Contract Lifecycle Management (CLM) systems are your best friend in this instance, with AI or ML that continuously improves contract negotiation strategies.
It’s important to include all vested departments or sectors when developing negotiation strategies, for example, sales and legal teams. Input from your legal team is essential to clarify roles and responsibilities, clauses, terms, and regulations. Incorporating these into AI parameters helps to ensure you are always covered should any disputes arise.
Deepen Supplier Relationships
Transparency has a lot going for it. For instance, seeing the same data and getting real-time updates ensures everyone is on the same page.
The single, centralised platform facilitates communication between negotiators and suppliers. Communication facilitates collaboration. Collaboration facilitates understanding. Understanding the priorities of the other party facilitates contract negotiation with win-win outcomes. Win-win outcomes facilitate deeper relationships with key suppliers.
And that is exactly what you want in a procurement process.
Value Trumps Price
The new Procurement Act places a lot of emphasis on value, overall value, that is. This levels the playing field and enables SMEs to compete in the public sector. But it also works wonders for relationship building and – very importantly for both parties – looks at long-term value.
Price is immediate, value lasts.
Contract lifecycle management software uses all available data to take a very good look at suppliers (from all angles) and their offerings, or in technical terms, their total cost of ownership. This is important for contracting authorities because they can create a negotiation window which contains the best outcomes for both parties.
Too much to one side and the purchasing side comes out tops. Too much to the other side and suppliers come out tops.
Negotiations should aim for the window. The best negotiators hit the middle. The result is a win-win situation where all parties are happy with the outcome.
Ongoing Training & Education
Experts aren’t born. Even if you have the gift of the gab, you need to learn how to use it in different negotiation scenarios. Ongoing training keeps your negotiation skills sharp and you up-to-date with evolving negotiation tactics.
Often the best lessons are from your peers. It’s in your best interests to attend conferences and other events and watch webinars or newsletters that could contain gold nuggets of information that will help you develop successful strategies for negotiation.
Leverage eProcurement Technology And Master Contract Management
Contracting authorities who want to stay relevant in an evolving procurement landscape must constantly hone their skills to keep up with technological developments that make their jobs easier, not harder. To further enhance efficiency, it is crucial to track contract negotiations, providing real-time visibility into negotiation statuses and task ownership across the business.
With contracts hinging on value, it’s more important than ever to nurture professional relationships and learn collaborative skills that give your negotiation strategies the edge in the competitive public procurement market.
Are you ready to take your contract negotiation skills to the next level? Explore additional resources on digital procurement and contract negotiation strategies to stay ahead of the curve in the ever-evolving world of procurement.
Delta eSourcing is a valuable resource with more than enough experience in the public sector to provide the guidance you need to successfully adapt to the fluid procurement environment.
