Business Studies Research Paper Sample Negotiating a Contract with the Navy

Negotiating a Contract with the Navy

Negotiating a contract with the Navy can be a daunting task especially when considering that numerous corporations would be in competition in a bid to source for the same contract. As a company that has extensive experience in flooring jobs, the objective has always been to build on a profit margin of 10%. Such an initiative has ensured that the corporation maintains a healthy level of cash flows and sustains its operations in a profitable manner. However, in the case of the contract with Navy, a special scenario presents itself that should be handled adequately to get the business. The proposal that is based on RFP #123456789 that is dated 07/14/2014is threatened by a local competitor who intends on submitting their proposal and a Navy Contract Administration Officer, who is reputed to be smart and tough in negotiations. The firm seeks to determine potential profit objectives for accepting a lower profit margin and engage in negotiation tactics that can be effective in winning the contract.

Profit objectives for accepting a lower profit margin

The profit objective for the corporation should take the form of not only creating a competitive advantage for the local business but also offering a quality service to the Navy that is second to none at a cheaper cost. The first profit objective would then be to accept a lower profit margin if it can only strive to be a lower-cost producer that can act as a powerful competitive approach especially when the Navy is price sensitive. The aim here would be to open up a sustainable cost advantage and use it to underprice the competitor and gain a market advantage for the contract (Garrett, 2005). The opportunity cost for this objective would be foregoing the 10% profit margin or even more that it would have achieved if it provided the service at market rate prices. The corporation would have to engage in aggressive price-cutting to win the contract, but it has to be keen enough to ensure that it breaks even at the very least. Furthermore, the corporation has to guarantee the navy that taking a lower profit margin due to low-cost production will not necessarily mean that the service is of a lower quality as compared to what would be normally provided at the 10% profit margin. Such an initiative ensures they have an edge while negotiating for the contract as they convince the Navy that they will offer superior service.

The second profit objective would be to accept a lower profit margin if it can partner with the Navy to supply its services on a long-term basis and in large scale so as to provide a lower cost by taking advantage of economies of scale (Antonides, 2012). During the negotiation process, the firm should market the quality of its services aggressively and focus on creating a formidable partnership with the Navy in a bid to foster future business opportunities. If the contract can include a clause where the Navy promises to seek the services of the corporation exclusively as regards to flooring jobs, then it would be prudent for the firm to take accept a lower profit margin. Furthermore, there is a need to scrutinize the quantity of the flooring jobs that need to be undertaken since if it were on a large scale then a lower profit margin would be essential. The strategy in the profit objective would be to foster a long-term relationship with the Navy that can create a strategic partnership that is beneficial to both parties.

Negotiation tactics for winning the contract

It would be prudent to have an upper hand in the negotiations with Navy Contract Administrator Officer when engaging in negotiations with him. Since he is smart and tough in negotiations, it is imperative that the firm has an upper hand when engaging in negotiations. The tactic that would work in such a case is ensuring that negotiations begin when a conditional agreement has been made. It is important for the firm to negotiate with the Navy after they agree in principle to the business. If the negotiations are started without the Navy agreeing in principle to the contract, then the firm might concede ground at the onset of the negotiations and the Navy will have an upper hand. It is imperative that the Navy commits and shows interest in the contractual agreement for the firm to have a proper bargaining chip as compared to competitors (Marsh, 2000).

Before going into the negotiation with the Navy officer, it is important to note down all their requirements in the contractual agreement. Every piece of information regarding the officer and all that pertains to the contract can come in handy during negotiations. Understanding the thought process of the officer and common tactics that he often employs during negotiations could come in handy to influence the direction of the negotiations. During negotiations, it is imperative to prepare variables and look for tradable concessions for both groups (Marsh, 2000). In doing so, the firm will be able to come up with bargaining chips and convince the officer to consent to the contract. 

References

Antonides, G. (2012). Psychology in Economics and Business: An Introduction to Economic Psychology. Dordrecht: Springer Netherlands.

Garrett, G. A. (2005). Contract negotiations: Skills, tools, and best practices. Chicago, Ill: CCH. Chicago: CCH.

Marsh, P. D. (2000). Contract negotiation handbook. Aldershot: Gower.