On several negotiations, when I brought up the idea of doing package deals while brainstorming with my negotiation team, I mostly got resistance: too early; the other party will take and not give; showing too much into our cards; etc. We are talking  here about big infrastructure and power plant deals with negotiations that could last weeks or months. However, the principles analysed below are certainly transposable to most types of negotiations, except maybe to pure price negotiations. Let’s dig a bit deeper into this subject.

1) Why use package deals?

Package deals are a powerful approach to resolve, in one go, a substantial number of issues during a contract negotiation. It can help unblock situations. Both parties can get what is important for them while conceding on what they can live without.

2) Better to be the first mover or wait for the other party to act?

Even though many people are afraid to propose package deals, it is an advantage to be the first mover. The fear to take the initiative is based on an assumption that the other party will see the points that you are willing to concede and will disregard the concessions that are expected from their side in return.

3) Advantages and risks of being the first mover?

The first mover advantage comes from the fact that you can establish the reference framework for (that part of) the deal. Your package proposal, if credible, will inevitably be the starting point of further discussions. The inherent risk is that you propose something unrealistically favorable for your side. Then, this proposal cannot become the reference. There will be no value in your proposal and you will only have created distrust.

4) What are the criteria to establish the package deal?

The party receiving the proposal should be able to acknowledge it as a step in their direction, at least on some important points. It is still necessary to keep a bit of negotiation margin in your package deal. Not too much, just enough to let the other party adjust your proposal. Otherwise it will be seen as a too one-sided proposal where the other party feels they have accepted something exclusively coming from your side. This regardless of whether it was a balanced proposal from the start, or not. In their mind, you will be owing them one, which is a situation you have to avoid.

5) What is the right timing to propose package deals?

Many people will have the tendency to think it is still too early to propose a package deal, no matter how much time you have already spent on the negotiation. This is linked to one’s personality. If you are of that type, you need to force yourself to start thinking about a package deal early in the process. Of course, you have to first conclude the round of explorations, where each party explains its arguments, where observation is key and concessions are not yet required. Delaying the package deal to the very end of the negotiations is a pity as explained below.

package deals in negotiation

6) What is the impact on the dynamics of the negotiation?

In complex negotiations, it can be necessary to have various, consecutive phases. These will include some package deals and some direct exchanges on a point-by-point basis. The advantage of an early package deal is that it can create a positive dynamic in the negotiations. Once the negotiators from both sides have jointly resolved a substantial amount of subjects, you can feel the relief in the negotiation room. Suddenly, reaching an overall deal does not seem so far away any more. That’s why it can be a brilliant move to propose an early package of easy subjects.

7) How to present package deals?

This time I have to make some advocacy for a bit of disorder. It is not a good idea to make the deal explicit by grouping the points showing the concessions for either side. Be smart, include as the first point a clear concession to the other party but then randomly present the other concessions. Let the other party do the counting and do not make it too easy. My recommendation is not to label the subjects too much as your points or theirs. You should present them as overall solutions for the good of the project. A win-win outcome for all at the table. On the other hand, you should do your best efforts to clearly spell-out the resolutions leaving no ambiguity. And always state that the deal is valid for the package as a whole but remain flexible to adjust a bit the package. If, in the end, you cannot agree on the package, you are back to square one without agreements on any of the points included in the package.

Best of Blog – Contract Negotiation

Conclusion

Package deals are a “must have” in the toolbox of an efficient negotiator. Here above, we have analysed some important aspects around initiative, timing and presentation of such deals.

Click here for other articles on negotiation.

AfiTAC.com is the blog on commercial and contractual subjects for the Project Businesses (Construction, Infrastructure, Oil & Gas, Power & Renewable, Water Supply & Sanitation, etc). Its objective is to stimulate reflection, learning, convergence to balanced contracts and positive dispute resolution. You can subscribe to our newsletter by writing to “newsletter@afitac.com”. You can also connect to our LinkedIn page. Engagement with the readers is what keeps us going. So, don’t hesitate to exchange with us by commenting here below, liking our publication on LinkedIn and writing to us “info@afitac.com”. 


Jan Bouckaert

Jan Bouckaert is a FIDIC Certified Adjudicator (President's list) with 25 years of worldwide experience in negotiation of complex construction, renewable energy, power and infrastructure projects. He is also specialized in contract management, project controls and alternative dispute resolution. During Jan’s career path, he lived in France, Belgium, Egypt, India and Portugal and worked for GE Renewable Energy, Alstom Hydro, Besix/Six Construct. He is a Civil Engineer from the University of Leuven (Belgium) and has an MBA from ISEG (Portugal). He speaks fluently English, French, Portuguese and Dutch. Jan is the founder of AfiTaC, a company giving advice on international tenders and contracts. Be welcome to connect on LinkedIn: https://www.linkedin.com/in/afitac/

0 Comments

Leave a Reply

Avatar placeholder

Your email address will not be published. Required fields are marked *