Negotiation Case Studies

Approaches to Negotiation and Relationship Building

This set of case studies contains three real examples of third sector organisations entering into negotiations,
about the development of products and services. Together they illustrate the key points that someone
needs to consider when preparing for and entering into negotiations.

Case study 1: Preparation and Planning

Learning Point
This case study shows how a third sector organisation can make progress even in a complex and bureaucratic
negotiation. It shows the importance of getting all the right people on side before focusing on the specifics, and of
sheer determination!

We were negotiating with our County Council for the transfer of a former primary school which was surplus to the
County’s requirements. It was a large building that needed considerable investment. It was an ideal opportunity for us to I
integrate our activities into one base with room for growth.There was no other obvious alternative use.
The negotiations went through various stages. First we encountered real incomprehension, as we were dealing with
property people trained to do commercial deals. ‘Not-for-profit’ or ‘collaborative negotiation’ were not concepts they
were used to dealing with. There was a phase of complete confusion with growing numbers of Council departments
becoming involved as the building had to be declared ‘surplus to requirements’ and opened up for competitive offers. At
this point we organised an emergency meeting with all 22 Council staff involved.
This was a crucial step which secured agreement in principle to go ahead. It also resulted in the appointment of a lead
person from County to coordinate the transfer process.
Finally we worked through a period of bureaucracy to comply with the Council’s approval and scrutiny requirements.The
deal that we eventually struck was for 5 years rent free against market rent of 25,000 pa. Our preference was always to
own the building – so watch this space!
Over the two and a half years that this took, we learned the following:
1. Recruit champions and advocates early in the process to help prepare your case and assist in understanding the
County’s broader aspirations.
2. Be prepared to make the business case from day one and have a comprehensive business plan drafted. This will
improve your credibility.
3. Discuss things with both junior and senior staff to ensure that all decision makers and influencers are fully onside.
4. Deal with one effective spokesperson.
5. Don’t negotiate specific terms until the later stages - trying to drive a bargain too soon will tend to scupper the
deal.
By John Every, Blacon Community Trust
Source: Finance Hub

A joint initiative to strengthen support services for the third sector

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 Case study 2: Long term relationships

Learning Point
The key essence of this case study shows that you need to develop long term relationships, understand the
Commissioners perspective and ensure that your profile is known at the right levels.

The Avenues Trust is a medium sized Social Care Provider working across London and the South East, employing 850 staff
to support 900 people. It manages approximately 50 registered homes for people with complex learning difficulties and
mental health problems and an increasing range of support for people in their own homes.
“The example that I’d like to use is about our negotiation with a PCT for services provided in registered homes. We had a
five year contract with the PCT to provide services for 90 people with learning disabilities following the closure of a long
stay hospital.The initial five year period expired a few years back and the contact is now renewed annually. It is worth £4.6
million per year.
Over the last ten years, we have developed a good relationship with the commissioning PCT. There are regular twice
yearly contract meetings which are professionally managed and focus on the needs of users but are clearly conducted in
the context of very tight financial parameters.
From our perspective, the negotiations are led by the local Operational Managers with support from the central
Corporate Directorate. Avenues, therefore, has a team which will vary but will always have a Senior Operational Manager,
a Finance Manager and a representative from Human Resources.The PCT will always have their contract/commissioning
Manager normally someone from the Finance Department and a representative of Quality Assurance/Contracting Unit.
Our experience of review meetings is that they never come to a conclusion in one sitting as there are always a series of
issues raised which need further work and resolution at subsequent meetings.There is, therefore, always a rolling agenda
of issues that need to be resolved.
Our objective in the negotiation was to achieve full cost recovery. This has a number of elements including a reasonable
inflationary uplift, the effective sharing of risk in relation for instance to void management; i.e. spaces in registered homes
which are unfilled and the increasing needs of service users often leading to service redesign and increased costs. We also
had an overall objective in these meetings to further develop its services to make them better meet the needs of its
service users.
We are firmly of the view that the vast majority of commissioners of public services wish to provide the best possible
service within the resources available to them. I do not believe that they are antagonistic towards providers, but they have
a role to ensure the best use of public money. The last of the commissioners’ objectives was “to keep Avenues on their
toes”. I think it is important that we are challenged regularly to ensure that we are providing a good as service as is
possible.
The negotiations are always tough with this PCT. Any request for additional resources will need to be based upon evidence
and will be robustly challenged. However, they do understand the regulatory regime within which we operate and
requirements laid down by the Commission for Social Care Inspection are normally funded.
Meetings are undertaken in an atmosphere where both sets of negotiators understand their role and this does not
descend into hostility. Avenues’ preparation for the negotiation includes providing detailed activity and financial
information. We operate an open book approach to financial negotiations.
We were only able to achieve a 1.5% inflationary uplift on the contract which is clearly not sustainable in the long-term.
One of the biggest issues for us is sub-inflation uplifts, particularly compounded with settlements between NHS bodies.
However in this negotiation, there was an agreement to review all service user needs which produced an increase in
resources based upon increased need which led to an increase in the contract price. It also led to an agreement that in the
current year we would reconfigure some services that are losing money in order to approach full cost recovery for this
contract.
Avenues’ experience is that it is hard to achieve full cost recovery on contracts that it has managed for a number of years,
as it is difficult for commissioners to uplift historically under funded services. Our response to this is to reassess each
service one by one and establish a new and more realistic cost base.
Full cost recovery is easier to achieve in newer negotiations.

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 Learning points
1. I think the major learning point from this particular negotiating experience is that these are long-term
relationships, not one off episodes.
2. The Avenues Trust needs to have a long-term perspective on each negotiation and bear in mind a number of
factors which would include whether or not the particular contract was strategically important to us.
3. There seems to us little point in attempting to demand significant increases in contract sums in a year when extra
finances are simply not available. This does not mean that we take this view in the long-term. We will need to
achieve better financial settlements in the successive years, and to campaign to raise the profile of services we
and others provide.
4. Finally, this set of contract negotiations has led The Avenues Trust to focus even closer on what we do best,
based on the values of the organisation and services which match commissioning priorities.”
By Steve James, The Avenues Trust
Source: ACEVO: A Guide to Negotiation Strategy and Tactics for Third Sector Leaders

Case study 3: Be bolder

Learning Point
This case study shows how third sector organisations are often in a stronger negotiating position than they think. Do not
assume there is no room for negotiation, just because the other side is very assertive.

We had a deal with a card provider to issue a Macmillan credit card. With 12 months left on the contract they suddenly told
us that they had sold our contract to another provider, and we had only two weeks to sign a new five-year contract.
We normally take three months to agree a contract like this. Before we spoke to them we made a list of our needs, and a list
of their needs, and then thought about how we could trade these. For example, if we have something of low value to us that
they want, we won't give it up easily. This is what I learnt in the private sector, and it needn't be any different in the third
sector.
From the start, we were clear that the two week deadline was their deadline, not ours. Our main lever in the negotiation
was the threat not to sign the new contract.That would have meant staying with them for another year and not making any
money, but we had to be willing to carry through on our threat, otherwise they might call our bluff. On the whole we were
reasonably well prepared and knew our options. By being assertive, we got what we wanted.
Coming from the commercial sector, I was surprised by the other side's attitude, who thought that we would roll over
because we are a charity. Apparently all other charities that were offered the same deal as us accepted without question.
Most charities are actually in a stronger position than they think they are.
By Jason Suckley, Head of Corporate Partnerships at Macmillan Cancer Support
Source: Finance Hub

ACEVO Commissioning Support Helpline

Contact us for advice and support on procurement and commissioning issues:
E: commissioning.support@acevo.org.uk
T: 0207 280 4937
W: www.acevo.org.uk/commissioning

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