In some instances, the client may arrive at a point where they have narrowed down the bidders being evaluated to one or two, and wish to enter a negotiation phase. This will likely involve a meeting or series of meetings where the bidder(s) will be invited to private meetings to discuss and consider various scenarios in order to improve their offer in some way, more often than not involving their commercial offer. It should be expected that any such meetings are minuted, and should be reviewed and agreed by both client and bidder before being considered approved.
It is likely that this phase was already built into the client's tender strategy, as part of a several-step process. For example, they may have a strategy to gather and then squeeze down the pricing as much as possible. Typical elements that a client will include in their strategy might include:
Tender an attractive workscope to get an attractive price
After submission, clarify prices and perhaps question any that seem uncompetitive
Indicate bidder to be close but not competitive enough
In negotiation introduce new scenarios concerning scope to get further reductions
Bidder’s negotiation plan
Where a bidder anticipates that a negotiation phase is likely or at least possible, this should have been included in their tender response strategy, but will need to be adapted according to the direction and pace of the negotiation. Hopefully, there is provision to address the client's demands, and the negotiation outcome is more likely to be satisfactory from the bidder's perspective.
A lot of the pressure from the client comes in the form of limiting the amount of time the bidder has to think and respond, so any work invested ahead of the negotiation will help reduce the pressure felt by the bidder and should reduce the risk of being pushed into something that was not planned.
Document what's negotiated
Attention should be paid to ensuring that all details of the negotiating are documented, as it is likely that some aspects may be relevant to be incorporated into the contract that will be awarded for the work. It will be much easier to review the eventual draft contract if detailed minutes have captured what has been agreed to in these meetings.
Alan has worked in the oil and gas industry since 1974 in various administrative, operational and managerial roles in the UK, Netherlands and Norway. In 1993 he joined Halliburton in Norway as country manager of their new Drilling Systems division. Following a merger with Dresser industries in 1998, he moved to Business Development where he established a BD support team providing centralised expertise for tendering, contract management, market intelligence and various BD software systems. After managing up to 200 tenders and proposals annually for over 20 years, Alan retired at the beginning of 2020 with plans to explore Norway, and spend time with family overseas, He enjoys downhill skiing in the winter, golfing in the summer and following the Formula 1 racing season throughout the year.
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