PSP60616 Advanced Diploma of Procurement & Contracting – Block 2 – Activity 9 – Final negotiation on a large contract

Case Study: Final negotiations on a large contract
An entity was nearing the end of the evaluation of tenders for a five-year services contract. Of the tenders being evaluated, one was well ahead of the others in terms of overall value for money (including such factors as price, service, and risk factors). However, it was higher priced, with higher service levels.
The tender evaluation team briefed the procurement steering committee and sought approval to obtain a best and final offer from the most highly ranked tenderer. (The possibility of seeking best and final offers had been explicitly mentioned as an option in the request for tender documentation). An indication was provided to this tenderer of the preferred service level.
To encourage the provision of a genuine best and final offer, the tenderer was not advised of their current ranking in the process.
Following final analysis of the offers the tender evaluation team recommended to the steering committee the preferred tenderer, and a list of issues for negotiation. The types of issues being explored in the negotiations included some costs in later years of the contract (which the entity considered should reduce as experience was gained) and a number of partial compliance issues on contract clauses (for example, the RFT had specified that the Commonwealth wished to be able to sub-licence some intellectual property of the contractor, but the contractor did not want to permit sub-licensing).
A list of issues was sent to the contractor so that as many issues as possible could be resolved by correspondence. The remaining substantive issues were then addressed in a one-day negotiation session. The result of this was a negotiated form of the offer that could be formally considered for acceptance by the entity.
(Extract from the ANAO’s publication – Developing and Managing Contracts, February 2007, p. 55)
Scroll to Top