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Chapter 26 - Negotiating IT Contracts

26.0 Introduction

§ 2.2-4302.2(A)(3) of the Code of Virginia states in part: 
3. For goods, nonprofessional services, and insurance, selection shall be made of two or more offerors deemed to be fully qualified and best suited among those submitting proposals, on the basis of the factors involved in the Request for Proposal, including price if so stated in the Request for Proposal. In the case of a proposal for information technology, as defined in § 2.2-2006, a public body shall not require an offeror to state in a proposal any exception to any liability provisions contained in the Request for Proposal. Negotiations shall then be conducted with each of the offerors so selected. The offeror shall state any exception to any liability provisions contained in the Request for Proposal in writing at the beginning of negotiations, and such exceptions shall be considered during negotiation. Price shall be considered, but need not be the sole or primary determining factor. After negotiations have been conducted with each offeror so selected, the public body shall select the offeror which, in its opinion, has made the best proposal and provides the best value, and shall award the contract to that offeror. When the terms and conditions of multiple awards are so provided in the Request for Proposal, awards may be made to more than one offeror. Should the public body determine in writing and in its sole discretion that only one offeror is fully qualified, or that one offeror is clearly more highly qualified than the others under consideration, a contract may be negotiated and awarded to that offeror;

Procurement by negotiation is a process of arriving at a common understanding through bargaining on the elements of a contract, such as delivery, specifications, price, risk mitigation and allocation and terms and conditions. The interrelation of these factors, together with intellectual property ownership rights, existing legacy systems, Commonwealth strategic and/or enterprise objectives, Commonwealth architecture and security requirements, data protection and user access to proprietary software make negotiating a technology contract more complex than non-technology contracts.

An effective negotiator is thoroughly prepared and knows the technical and business requirements, as well as the strengths and weaknesses of his/her position versus the other negotiating party. Only through awareness of relative bargaining strength will a negotiator know where to be firm and/or where permissive concessions in price or terms may be made.

In addition to the insight of the technology experts and subject matter experts (SMEs), negotiation teams benefit from the input of legal, purchasing and/or the business units that will be using the technology. Negotiation experts say that the most common cause of a breakdown in negotiations or in a contract is the failure of one or both sides to define their end of the deal clearly. A well-rounded negotiation team helps to ensure a successful contract by developing a clear and complete negotiation strategy.

Successful negotiation begins with preparation at the outset of the procurement, even before the development of the solicitation. A well-prepared solicitation will outline any negotiation rules or procedures that the agency expects suppliers to follow. This strategy strengthens the Commonwealth’s negotiation position.

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