Strategic Response to a Price Increase Demand
The Negotiating Challenge
The client received a demand for a cost increase of over 20%
- Our client had agreed to a fee of $16.4M with a contractor for its part of a $250M construction project
- Subsequently, the contractor said it ‘needed $20M’ because it had ‘underestimated costs in order to buy the business’
- The challenge was to respond to the demand and avoid a cost increase while protecting the project’s viability.
How ENSI Helped
Our role was to help develop the negotiation strategy and prepare the negotiating team
- We looked beyond the requested price increase to focus on the other party’s need to manage project risk
- We focused the negotiation strategy on identifying and discussing risks via structured questioning
- And we encouraged the team to challenge resource estimates to provoke a more thorough identification and analysis of issues
- We facilitated intensive ‘dress rehearsals’ to help team members test assumptions and prepare for the unexpected
- Rehearsals revealed true individual negotiation skills as a basis for team selection - in some cases eliminating those who ‘talked tough but give way easily face to face’
- We provided an independent view on the other party’s perspective to assist the team during planning and rehearsals.
Costs were reduced by more than 20% and the business relationship was enhanced
- There was no price increase
- The final negotiated fee of $13M was a $3.4M saving on the original agreed price
- Overall, there was a paradigm shift from ‘negotiating at the margin’ to ‘renegotiating the contract’.
- The other party’s paradigm also shifted. It spoke of ‘the value of a structured negotiation approach’.
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ENS International (ENSI) provides negotiation consulting and training services helping people and organizations think and act differently to achieve more.
Negotiators gain the edge using proven ENSI influencing processes incorporating commercial psychology with a deep understanding of human behaviour. ENSI delivers through Consulting Services and In-House or Open Course training.
With over 60 Practitioners working within 75 countries we have a depth of experience across a diverse range of sectors.