During the sales process, the buyer usually has the most negotiating power because they hold two of the critical keys to a deal: the actual need (which they can choose not to fulfill) and the money to make the purchase. While there are other elements that go into a sale, these two factors are critical for a sale to happen. And the buyer controls both.
This is true in the government market too. Unless the contract is for a sole source item that the government MUST have, the power to control the buying process lies with the government, and “officially” with the contracting officer.
However, the CO rarely awards a contract in a vacuum. Even though he/she may be the source selection authority, the decision is rarely made solo. Still, the government team has the bulk of the “power” over who gets the contract – and whether or not a contract actually gets awarded.
But what about after award?
What about after the buyer has chosen what to purchase, has paid for it, and now awaits delivery (for an item) or performance (for a service)? Does some part of the negotiation power transfer or does it all remain with the buyer?
Depending on the contract terms, much of the negotiation power may shift to the seller. An example would be a cell phone contract or a car lease. Once you’re buy, you’re locked in. In the other extreme, the buyer retains all negotiation power by virtue of deciding to simply agreeing to continue paying (Software as a service sometimes fits this model).
However, for many contracts, especially in complex sales like government contracts, the balance is somewhere in between these two extremes. On a service contract for example, the seller (contractor) has agreed to deliver a service to the government in exchange for a payment for a specific period, say one year. Likewise, the buyer (government) has committed to pay the contractor for that same service for that one year.
In other words, they now both have skin in the game. Both sides want the contract to succeed. Compare this to the pre-award process when the government was interested in successfully awarding a contract. After award, however, the government has a vested interest in the success of the contractor they awarded to. They do not want you to fail either.
This shift in negotiation power is not about power however. It’s about communication. The lesson is not to take advantage of the government being stuck with you after award. The point of this balance of power is to motivate contractors to openly communicate good news and bad. To let the government know what is going on EARLY so that they can help fix it.
Likewise, the message for the government is to embrace the contractor maintaining this balance. Too often the contractors came to me after there was a problem because they were concerned that I, as the CO, would unleash my power as a buyer and cut them loose. What is more likely, however, is that I am as interested in your success as you are since (1) my customer needs whatever you are delivering so contract success is important to us too and (2) I don’t want to start over again with a whole new contract.
Remember that the ‘balance’ of negotiating power shifts after award. The art of negotiation in government contracting is to know how much it’s shifted.
That’s a topic for another article though.