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Negotiating Government Contracts

Negotiating Government Contracts

The following advice is based of 30 years of experience negotiating contracts with government agencies. The basic rule that many contractors forget is that contractors and their client agencies are on the same side of the table. The agency is not the adversary. The adversary on the other side of the table is the status quo. The agency has a problem to solve and you presumable have the solution. Or what you believe is the solution.

Sure, both the contractor and the agency want to cut a deal that best benefits it. But government contracting is not a zero-sum game. Neither should want to irreparably harm a mutually beneficial relationship. If the agency overpays for the solution the contract could be voided and the agency could go back out to bid. If the negotiations result in a contract that fails to cover your costs and a reasonable profit given what other buyers are paying for the same product or service in the same market, you will probably walk away from the opportunity and welcome a second bite at the apple in a rebid.

So, we recommend that contractors avoid adversarial posturing and accept the fact that both they and their client agency are on the same side of the negotiating table and that the adversary is not the agency but the status quo, which contractor and agency want to vanquish.

One frustrating aspect of government contracting, of which many would-be contractors may not be aware, is the bifurcation between the contracting agency and the purchasing agency. In most state governments the purchasing agency is responsible for procuring the goods and services that the other departments require in order to operate.

So the agency that will use your product or service won’t be the agency with which you will negotiate.

Another fact of which would-be contractors should be aware is that government contracts are of a specified durations such as 1, 3, or 5 years. Short durations protect the agency in the event that technological changes render your solution obsolete during the term of your contract.

So, if the initial term of the contract is up, be ready with Rev. 2 of your offering.