By Steve Kelman

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Behavioral approaches to contract negotiations

the brain

A course title – with the word NEW! emblazoned in capital letters and orange type (everything else in the brochure was blue and black) – appeared in a flyer I recently got in the mail from Federal Publications Seminars.

The flyer was advertising a four-day training conference on government contracting, and the flashy course title caught my eye. Amidst traditional-sounding training sessions, with titles such as "A Practical Guide to the Incurred Cost Submission" and "Rights in Technical Data and Computer Software," the NEW! course was called, "Behavioral Aspects of Government Contract Negotiations."

The instructor is Joe Mason, a technical guy working for a Colorado-based government contractor who also teaches government contract negotiations at a local university and proposed this course to the seminar company last year. After beta testing it last year with only six attendees, this year 29 have already signed up, with the training vendor expecting 40 attendees when the 12-hour, 2-day session is delivered in May.

This new course reflects a positive turn in how participants in government contracting – especially, hopefully, the government – think about the negotiation process, which should be a central factor. (Negotiations are critical to getting taxpayers a good deal, and also important from a job satisfaction perspective for contracting officials, because negotiating, for many, is intrinsically interesting work).

Traditionally, government thought about negotiations in a very formalistic sense. In "negotiating" over proposals that vendors gave the government, government traditionally did not actually even speak with the bidders at all (something considered to be at the heart of negotiating in the normal meaning of the word) – the government sent written communications telling bidders how they were deficient, asking them to revise their proposals, and also requesting a lower price. After the contract was signed, "negotiations" to the government often meant discussion around questions of what rights the contract terms gave the parties.

This is beginning to change, and this new course is one sign of the shift. By "behavioral" features of negotiations, Mason means teaching people to understand and "read" the personalities and agendas of the people with whom you are negotiating, and then how to use that understanding in face-to-face negotiations with others. He means providing hints about how to use one's understanding of the other party to reach a better deal for your own side -- and to develop a solution that is acceptable to all.

The new perspective in this course is, probably, only scratching the surface of a behavioral approach to negotiations. When I first saw the course blurb, I assumed the course was actually including what academics would mean by the term: an approach to negotiations that takes into account the various ways the human mind works (ways that sometimes depart from what most would consider to be rationality.) Thus, academics studying negotiations, for example, apply something called the "anchoring bias" – the fact that people tend to propose solutions around an anchor that gets established in their minds, however arbitrarily, which means that a first offer can influence a negotiation outcome.

In the classic studies of anchoring, two groups of people are asked to estimate the incidence of serious corporate fraud. They ask one group whether the incidence is more or less than 200 firms out of a thousand, and the other whether it is more or less than 20 firms out of a thousand. Although these numbers are chosen totally arbitrary, they serve as anchors in the minds of the test subjects, so that the group asked to consider 200 cases as the benchmark usually estimates a much higher incidence of fraud than the group given the lower number. Mason's course doesn't get into that level of behavioral insight.

I am very happy that courses such as Mason's are being offered now; they are a real step forward. But I also am thinking that a lot of a behavioral approach to negotiations is hardly limited to negotiating over government contracts. Perhaps a better solution, rather than having people take government-contracting unique negotiation training, is for people, including government officials (OK, I am speaking about a world in which training dollars return), to take general courses in negotiations open to the whole world, not just courses designed for the special, closed world of government contracts. Doing that would be to take an even bolder step towards improving the value the government gets from contracting.

Posted on Apr 09, 2013 at 12:09 PM


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