First Contact

Initial contacts regarding re-negotiation should be between the most senior executives in the buyer and provider organizations. In these exchanges, the client should focus on setting a very positive tone, positioning the re-negotiation process as an opportunity for both parties to realign the contract, extend it, and continue a refreshed and mutually beneficial relationship.

Most clients expect the service provider to be hostile to the idea of re-negotiation. It is the client’s approach that determines the provider’s response; expecting hostility may very well guarantee it. If the client instead seeks to enlist the provider in solving a joint problem to the benefit of both, service providers will see the opportunity and adopt a much more positive attitude.

One common re-negotiation challenge is the perception gap between the two parties. The client may sense dissatisfaction in the user community, or with the responsiveness, or flexibility of the service provider, or may feel the relationship has become adversory.

The service provider, on the other hand, may have a completely different view, believing that it has outperformed the requirements despite the client’s unreasonable demands and lack of appreciation for the provider’s increasing costs. When either side brings too much emotion to the table, they tend to make unreasonable requests, which are never helpful to the re-negotiation process.

Successful re-negotiations call for both client and service provider to approach discussions by initially agreeing on a set of facts. If they collect and agree on the data needed for rational dialogue, they move beyond beliefs and perceptions.

Failures of Traditional Negotiations

Traditional negotiating models involve taking positions and coercing the other party into accepting at least a modified version of those positions through a compromise. This approach is unhealthy. It is rooted in a battle for control, and leaves both parties dissatisfied. Negotiations based on compromise often seem initially successful, but ultimately they contain the seeds of their own destruction.

Modern negotiations and re-negotiations are based on bringing parties together through the use of accepted facts, agreed analyses and unambiguous dialogue. The objective is a common understanding of possible solutions and converging toward an outcome that is mutually acceptable. Neither party should feel it gave up anything to satisfy the other.

Modern re-negotiated agreements are different from their legacy ancestors in some very important ways. First among them is that contemporary agreements contain the tools used to manage and respond to changing conditions, while maintaining alignment between the parties. These change-management tools support a far more effective and formalized governance function. They make it possible for the client and the provider to appropriately respond to each small change trigger as it arises by re-positioning the relationship and the contractual documents.

A key objective of any re-negotiation is to create the contract with these tools and implement the governance reforms necessary to make them effective. This guarantees that full-blown re-negotiation will not be needed in the future.

Re-negotiation offers a great opportunity for the client and service provider to build a solid future together. By giving the needed attention to the process and its key elements, it can be done correctly. The reward will be in the long-term results, with a refreshed relationship where governance processes maintain alignment between the parties on the scope, performance and price/value of the services delivered.