Risk management as it relates to government contracts can often be a complex and convoluted process. This is particularly true as government contracts often have certain stipulations and provisions that are unlike their private sector counterparts. When approaching a high-level negotiation is therefore important to have a strategy that emphasizes risk management and its implications for downside protection.
To begin, as with any negotiation, it is important to identify each party’s key interest. By identifying what each party is attempting to achieve, it is much easier to formulate a negotiating strategy. Here, I would first identify the counterparties primary constituencies and formulate a strategy centered around them. In the case of a government contract, the immediate constituency is the community at large. Depending on the contract, a key counterpart stakeholder is the supply chain itself. For example, in a bid to construct military housing on an off-base premise, key counterparty stakeholders would be the building industry supply...
As a result, to negotiate a building contract, it would not be enough to simply bid based on price. Here, an understanding of the dynamics of a military family are important. As many militaries personnel leave for extending periods of time it is important that the community have a proximity to vital shopping and convenience store outlets. As many families have
children it is important to have quality amenities so a spouse can feel comfortable having their children around others. The negotiation would also need to account for the builders and contractors working on the project. Here the overall negotiation process shouldn’t simply focus on cost but how it will impact the government stakeholders and constituencies.
The same would apply to a high stakes defense contract negotiation. The negotiation plan here would focus exclusively on the how the proposal can protect the…
