CHAPTER 8

Closing the Deal

A. Ratifying the agreement
The word ‘ratify’ is defined as
‘to give formal consent to [an
agreement], especially by
signature’.
Ratification in our present
context is the process by
which the negotiated
agreement is formally
adopted and endorsed by
relevant authorities.
Negotiators are usually given sufficient
authority to discuss and agree on all
points likely to arise in a planned
negotiation, but with the
proviso(condition) that the final
agreement once concluded must be
ratified by a designated authority.
In a buying
organisation, it might
be that an agreement
must be ratified by the
Head of Purchasing.
This should normally be a
straightforward process. If it often
happens that an agreement is not
ratified it suggests poor planning
on the part of the organisation,
and poor delegation of authority to
the negotiators.
There is a difference between formal and
informal ratification.
A formal ratification is what we have been
discussing so far. Negotiators take the
agreement back to their ‘audience’ and sell
it to them. If they are successful, the
relevant authorities will be prepared to
sign off the deal.
This will only be possible if all
relevant information is
available. If information is
incomplete, it will be impossible
to ratify the deal.
Informal negotiation is more
often found in internal
negotiations and is therefore
less immediately relevant to our
interest in negotiating with
suppliers.
However, it is not completely
irrelevant either: in many cases the
internal negotiation will involve
the parameters within which the
negotiators are to act when the
external negotiation begins.
B. Evaluating the negotiation
Hindsight is a wonderful thing,
and we could all do better if
only we could turn the clock
back and start again.
Of course, that’s impossible
– but we can gain some of
the benefits of hindsight by
evaluating our performance
at each stage of the
negotiation process.
However, it is not necessarily a
failure of preparation if a
negotiation goes wrong.
Circumstances can change, both
during the course of the
negotiation and after it has
finished.
 An outcome that looked
satisfactory at the time may
appear unsatisfactory in the
light of later technological or
market changes.
Evaluating a negotiation need not
wait until the end of the process.
On the contrary, by evaluating
progress continuously we can if
necessary re-shape our approach
to forthcoming stages in the
process.
As an example, if we conclude
during the ‘bidding’ phase that our
approach has been too aggressive
– perhaps indicated by an attitude
of resentment evident in the other
party’s negotiators – we may want
to soften our approach.
Perhaps our target for
certain issues in the
negotiation were too
ambitious or
unreasonable
 If this is the conclusion, we
can modify our behaviour in
the remainder of the bidding
phase, and in the phase of
closing the deal.
The outcome of the final evaluation should be a
written record covering the following points.

1. A comparison of actual
outcomes achieved with
the objectives originally
set.
2.A review of the agreement
achieved, with analysis of
goals achieved and
concessions granted in order
to achieve them.
3. An evaluation of the
performance of both individuals
and the team as a whole,
identifying areas requiring
improvement and/or training
4.A checklist of points
learned for use in
future negotiations
 C. The on going relationship
Once suppliers are on stream, it is
important to manage the relationship
carefully. Buyers have a responsibility
to motivate suppliers so that
maximum value is obtained from the
relationship.
From the buyer’s point of view the
benefits of good supplier relations are
very tangible. The need to identify,
appraise and train new vendors is
avoided if a core group of trusted
suppliers can provide most of the
firm’s materials requirements.
Quality problems are ironed out over a
period of mutual cooperation.
In case of emergency, such as
materials shortages or incorrect usage
forecasts, suppliers will make every
effort to help out if their goodwill has
been secured by a systematic policy of
maintaining good relations.
These benefits are most
apparent when relationships
reflect long-term
agreements based on
partnership between buyer
and supplier.
These give suppliers a
strong motivation to
perform to the best of their
ability, because they know
that the result will be a
reliable stream of work.
They also give needed
encouragement if the buyer
depends on the supplier to invest
in research and development in
order to provide state-of-the-art
solutions to manufacturing
problems.
Many buyers have
introduced systems of
recognition for suppliers
who achieve consistently
high performance.
This may take the form of
private communication with the
supplier concerned,
or may be a more high-profile
exercise involving publishing the
names of selected suppliers.
Another method of smoothing
supplier relations involves the
provision of training.
Many companies train their suppliers
in techniques of statistical process
control, just in time manufacturing
and total quality management.
Another area of cooperation is in
problem solving when suppliers run
into difficulties.
Buyers should be ready to accept that
their own firm’s success depends on
the supplier’s ability to perform.
This should encourage a joint
approach to dealing with the
difficulties that inevitably arise
during complex supply
agreements.
This last issue leads on to
another question: how closely
should buyers monitor the
progress of suppliers to ensure
that all is going according to
plan?
Clearly, it is the supplier’s
responsibility to ensure that
contractual agreements are
fulfilled to the desired
standard.
However, this does not mean that
the buyer can simply sit back and
hope for the best.
Particularly on large-scale one-off
projects buyers should take an
active interest in the supplier’s
operations.
 D.Legal requirements
Most commercial relationships are
formalised with a written contract,
setting out the undertakings and
the rights of both parties, the
buyer and the supplier.
It has been suggested that a
written contract should not
be necessary, and is a sign of
a lack of trust between the
parties.
It is certainly true that where there
is a written contract, and there is a
dispute about performance, the
contract will be used as a point of
reference to establish what the
rights and obligations of the buyer
and the supplier are.
However, written contracts have
other benefits, particularly where:

•the purchase is a one-

off transaction
• the buyer is using a
supplier for the first
time, or
• the supplier is relatively
new, and the
relationship has not yet
had time to develop.
In these circumstances,
written contracts can have a
number of other advantages,
as well as helping with the
resolution of disputes.
Either party can refer to
the contract, in case it is
in doubt about what it
has undertaken to do.
The product specifications
might be included in the
contract, in which case the
contract will be an essential
point of reference.
A written contract can
be a short document,
and need not be long,
complex, legalistic and
adversarial.
For a transactional supply contract,
or a supply arrangement with a
new supplier, a written contract
can be used to identify potential
problems that might arise, and to
determine in advance how these
problems should be dealt with.
It is useful to consider some
of the areas where the buyer
and seller have opposite
interests and therefore use
conflicting clauses.
•Is it a fixed price
contract or has a price
escalation clause been
inserted?
•If the supplier delivers
late, will the buyer be
entitled to terminate
the agreement?
•Who pays the costs of
carriage?
Who bears the risk of
accidental loss or
damage in transit?
When is ownership in
the goods to pass to the
buyer?
Does the contract contain a reservation of
title clause?

(A provision in a contract for the sale of

goods which means that the seller retains
legal ownership of the goods until certain
obligations are fulfilled by the buyer –
usually payment of the purchase price.)