As I started writing this on Christmas Eve the news websites were proclaiming “Brexit Deal announcement imminent”, or similar. Behind these headlines the commentators all seem to have become experts in fish quotas, arguing that these are fundamental to the deal, or conversely wondering why the whole shebang is being held up for something relatively trivial in scale.
Others have taken glee in each deadline missed, claiming it is evidence of incompetence or intransigence and brinkmanship on the part of one side or the other. All this betrays an ignorance of how deals are made.
I remember a phone conversation I had on Christmas Eve in the highstreet of my local town, re-confirming the final drafting of a major outsourcing contract for a public sector client. I also look back on the frenetic activity that used to take place on the 31st of March when unindexed PFI credits were at stake. There is nothing like a deadline to focus minds and effort.
There is always a tension between holding out to try and squeeze a bit more out for your side, and getting the deal done. This is largely unaffected by artificial deadlines placed on negotiation timetables by one side or the other. People see through them. Each side in a negotiation makes this judgement every day, and if the balance hasn’t tipped towards the deal being done then today may not be the day.
So how to overcome this? For competitive procurements the main weapon in the client side armoury is of course the competition itself. Whether an open procedure with a fixed tender closing date, or a competitive dialogue where least one suitable bid has been matured, the pressure is on bidders not to be lagging behind. But sometimes for whatever reason the competitive pressure doesn’t exist.
I led a large-scale BPO for a government body in which, coincidentally (and for reasons unconnected with this particular procurement), two of the three shortlisted firms withdrew before detailed bids had been developed. This presented a challenge to the client side as, on the face of it, the pressure was off as far as the remaining bidder was concerned, yet for the client, who was undertaking a whole-operating model transformation, completion within overall programme timetables was essential.
Yet we ended up with a good deal that met all the business case criteria and within the desired timetable. The factors that allowed our team to do this were in my view as follows:
1 – sticking to the agreed timetable. This allowed us to maintain momentum on closing the issues that were not controversial, and confirm that the dates allocated for bid submissions actually meant something
2 – strong governance and buy-in from senior stakeholders. This allowed authoritative and clear expression of position by the dialogue team of the parameters that would work for the client.
3 – a plan B. Whilst we didn’t have competition, we did have an alternative route to getting the benefits from the BPO component of the programme. To everyone’s credit it didn’t need to be worked up to great detail, but it was a feasible solution. It would not however have generated an anywhere near comparable deal size for the market hence it was very much in the interest of the remaining bidder to support the delivery of Plan A.
I should add that we had the good fortune of having a bidder that continued to meet the key deadlines. Even so, as with the current big ‘deal’ there were a number of thorny issues that were resolutely stuck as others were resolved until these presented a final set of items to crunch.
We were at this point approaching late November, with governance and contract signature processes to be completed even if a bid/business case evaluation recommended the emerging deal. We really needed supplier boots on the ground from early in the new year to support other parts of the client’s transformation programme. On the face of it, therefore, we were the only ones up against fixed deadlines. However at the same time we suspected that the supplier had two pressures of their own – firstly the general costs of the bid team which would continue to rise so long as the negotiations continued and secondly that their year-end was imminent, with all the consequences for individual performance targets and bonuses being released.
And indeed the mood on both sides became focused on removing sticking points and achieving pragmatic instruction from the respective sponsors on both sides. A path to the deal became clear and over the course of a few key sessions the list of outstanding commercial points was resolved. Both sides traded and gave a little and the solutions were captured in updated drafting. We signed a deal before Christmas as planned.
The simple conclusion must be that that both parties were equally pressured to arrive at a deal at this point. There was simply no case for prolonging to try and get any further benefit. That said, we did not have the politics and glare of the media to deal with. Also we were dealing with one, rather than twenty six other parties.
So it is of no surprise to me that the Brexit deal has not been done sooner (I’ve just refreshed the BBC website and lo and behold it has been confirmed!). It’s clear to me that at this point the benefits of holding out on positions, whether for tangible benefit or to combat the optics of ‘concessions’ are equally unattractive for both sides. The deal was there to be done, so they did it.
Deadlines can be problematic when only one side in a deal is affected by them. When both sides are up against them then they become quite valuable.