Project Management in the Chemical Industry.

Negotiation/ ( मोल भाव) :

In projects, the project engineer negotiates throughout the project life cycle with all the stake holders of different levels.

Here we will discuss the negotiation basics during the procurement process ie when we are purchasing equipment’s like heat exchanger, pumps, columns, pressure vessels, MOVs, etc for our project.

During the procurement process, following three factors are very vital for the success of the product procuring…
• Price of the product
• Meeting standard specification of the procurred product
• Delivery Schedule of the product

Negotiation take place when there is a deviation on any clause or specification of the bidding document
Healthy and meaningful negotiation can only happen, if you have thorough understanding or technical knowhow about the product you are procuring, price history of the product, delivery schedule and PTR (Proven track record) of the company.

In projects, negotiation generally take place when there is a difference of more than 10%-15% between in-house cost estimate and L1 bidder (Lowest quoted bidder). Most of the time bidder meets the standard specification as it is listed with your organisation, if there is a deviation in delivery schedule this can be expedited post ordering for earlier delivery or break-up ordering can be done ie ordering to two or more bidders based on requirement of material at site.
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Phases of Negotiation:

1. A preparation phase before the negotiation begins with collection of previous and current data or trends:
To negotiate on price a thorough technical know-how about the product and the availability of the past database of the price model of the product should be readly available, these two things provide you the solid basis of negotiation. Some organisation uses the cost estimation software which helps in calculating the cost of the equipment’s up to the accuracy of 90% or more..

2. The actual process of negotiating based on the above data:
During negotiation a detailed work-out of the product cost helps in reaching the win-win situation else sitting for negotiation with the bidder is not meaningful. Negotiation can only become meaningful when a satisfactory solution is achieved by conviction between all parties. The sole purpose of the negotiation is to conclude the meeting with a win-win situation and the main objective of the negotiation shall be achieved else it is a waste of time..

3. The implementation and follow up of the agreement:
After negotiation confirmation regarding the negotiated price wrt no deviation on product technical specification and delivery schedule shall be taken from the bidder though mail before releasing LOA.