Implementation – Negotiation & Contracting
17.1 What is the process of negotiating?
Decisions during the execution of the PPP will be made inevitably
by some form of negotiation between the various stakeholders in
the partnership arrangement. For instance, when the municipality
contracts the private sector to deliver certain services, both
the municipality and the private company must agree to the terms
of the agreement. Neither the municipality nor the private sector
that are parties to the PPP can achieve anything much without the
other. Negotiations do not always end in an agreement. Those making
a decision by negotiation usually have the options of choosing
some or other solution, of saying “no”, of walking
away and of minding their own business. Negotiating is therefore
the process of finding terms of agreement that are satisfactory
to all stakeholders. Negotiating involves five steps:
- 1. preparing for negotiation;
- 2. debating;
- 3. making proposals;
- 4. bargaining; and
- 5. coming to an agreement (the contract).
1. Preparing for negotiation
The activity of preparation reduces on wasted effort and time.
It identifies gaps in the information that will be needed
to make decisions and establishes the criteria for judging
the merits of possible solutions. In preparing for negotiation
the following questions need to be answered:
- What do we need to do first?
- What are we negotiating about?
- How important is each tradable issue?
- What are the negotiable ranges for each tradable issue?
Negotiation requires communication because if the parties
do not communicate in some way, it is going to be
impossible for them to negotiate. Communication need not be oral – it
could be written; it could be via third or fourth parties. Debate is the
act of two-way communication between the parties
to the PPP. Debate shapes the tone of the negotiation and removes or creates
obstacles to the agreement. Debate takes up a greater part of the
face-to-face interaction of negotiators. The debating stage can
be either constructive or destructive.
Examples of destructive negotiation involves:
- irritating the other party;
- assertion and negative assumptions;
- interrupting and blocking;
- attacking and blaming; and
On the other hand, constructive debate could include:
- making neutral statements in order not to provoke the
- assuring the other party;
- asking questions so as not to misunderstand the other party;
- summarising the salient points to demonstrate listening; and
- signalling the desire to move forward with the negotiation.
ometimes there is a need to involve external experts (or
mediators) to help with
the negotiations and debates and to smooth any possible confrontations.
Often public sector representatives will need help from consultants if they
are to conduct constructive debates.
3. Making proposals
A proposal is any form of statement that makes a suggestion
about how to proceed during the negotiation, or which indicates
a possible solution to the issue under discussion. A proposal
is a tentative suggestion that builds on a signal sent
or one received. It is not a final solution (that is the role
of bargaining). Effective proposals consist of two parts: the
condition and the offer. A proposal is specific on the condition,
but vague on the offer.
To make an effective proposal, three main rules should
- the proposal should be conditional;
- the proposal should be presented unadorned and without explanation;
- on completing the proposal, the proposing party should go silent.
An example of an effective proposal is “if you agree to supplying
water to the poor communities, then we will reconsider our policy
on water tariffs”.
A proposal is not a bargain – a proposal is a tentative solution.
A bargain, by contrast, is a specific conclusion; it is also always
a specific condition attached to a specific offer. It takes the
form of “if you do such and such, then I will do so and so”.
A bargain in a negotiation is analogous to what sales people call
a “close”. When a negotiator says “yes” to
a bargain, the negotiation process is more or less over – all
that remains is to write up what has been agreed (draw up the contract).
This stage is perilous for the poor, as the bargaining process
can result in one or other of the negotiating parties stepping
back on importantpoverty reduction issues. Often these
are issues such as questions of price and service coverage,
issues that the private sector will often try to use as bargaining
chips. Thus it is important that the poor have a representative
voice during the bargaining stage and that this voice is heard
5. Coming to an agreement (the contract)
The agreement (contract) is the final part of the negotiation.
Since it is broad in itself, it shall be treated under
separate headings which will consider the whole process of