Guide: Contract Negotiation - Procurement Planning PMBOK Guide Seventh Edition
Contract Negotiation in procurement planning is a crucial aspect of Project Management as defined in the PMBOK Guide's Seventh Edition.
Why it is important:
Contract negotiation is a dialogue between the purchaser and potential suppliers that aims to reach agreements that satisfy both parties. It is important because it determines the terms and conditions of the contract, ensuring that project risks associated with contractual agreements are well managed and that project objectives are achievable. Through negotiation, project managers can ensure that contracts are fair, balanced, and provide best value for money.
What it is:
Contract negotiation is a process where the project manager and vendor arrive at a mutual agreement on the terms and conditions of a contract. This may include discussions on the scope of work, price, timelines, and other key contract components.
How it works:
The process starts with the preparation where the project manager should understand and outline the needs, objectives, and constraints of the contract. Following this, discussions regarding terms and conditions take place. The conclusion of negotiation is a signed agreement. It is crucial that the terms of the contract are monitored throughout the project lifespan.
How to answer questions regarding Contract Negotiation in an exam:
When answering exam questions, it is essential to understand the different stages of contract negotiation - from preparation to discussion to agreement and monitoring. Emphasize the importance of communication, fairness, and balance in achieving a mutually beneficial agreement.
Exam Tips for answering questions on Contract Negotiation:
1. Understand the full process from preparation to monitoring.
2. Highlight the roles of both, the project manager and vendor in the process.
3. Acknowledge the need for balance and fairness in the negotiation.
4. Understand how efficiency and effectiveness can be achieved through negotiations.
5. Reviews and scenarios based questions may often come up, so be prepared for those. Interaction with real contract negotiation scenarios can be very beneficial.