Fee on Negotiated Changes

Since you are using the term "fee," I assume that the contract is cost-reimbursement.

Yes, I've had experience.

In theory, the government is being consistent with government fee negotiation policy, which puts a heavy emphasis on risk. At this point, with the work complete, you are not facing any risk. You can blame the government for dragging their feet, but if I were the CO that would buy you absolutely nothing.

Look, these matters are negotiable, and I doubt very much that your company would pursue the matter before at a board of contract appeals or at the Court of Federal Claims unless the difference between the fee you want and the fee they want to give you is a matter of many thousands of dollars. Is the difference a matter of many thousands of dollars?

Use your best negotiations skills and push for what you want. Settle for a reasonable amount. You are not likely to get more through litigation.

I would argue that  (1) the proposed fee was offered at a time when little or no actual costs could have been known, and in fact, were not known (2) although the work is complete, you do not know the actual cost of the work because you didn't actually collect or record costs that were only incurred against that change (of course this has to be true). Therefore proposed fee on proposed costs are still reasonable.

GAO issued a report (07-599) on undefinitized contract actions in 2007 in part finding DOD wasn't doing this enough (i.e. factoring the lack of risk from completed performance into the profit analysis).

For a negotiation position, you could look at the DOD weighted guidelines described at DFARS 215.404-70 and 215.404-71. Internally run through the analysis to figure out how little the Government thinks your effort is worth  But the main takeaway is just to get a feel for what the Government is looking for in their profit analysis, and what levers they consider that you can spit back at them. I have no clue if your dealing with DOD, but this is good practice for dealing with any agency.

In the end though, like Vern said, this is a negotiation. Come up with your best arguments for why you deserve what you deserve, and help them out with talking points for their negotiation memorandum so that they can show they made a proper effort (they've already started that part by reducing your fee due to decreased risk).

[EDIT--removed commentary on UCAs since they aren't really relevant to the specific topic]

Neil Roberts said:

I would argue that  (1) the proposed fee was offered at a time when little or no actual costs could have been known, and in fact, were not known (2) although the work is complete, you do not know the actual cost of the work because you didn't actually collect or record costs that were only incurred against that change (of course this has to be true). Therefore proposed fee on proposed costs are still reasonable.

If the negotiations have taken “well over a year”, I would question an argument that the contractor didn’t collect or track any costs of a change or identify any impacts to the unchanged work.

Neil Roberts said:

although the work is complete, you do not know the actual cost of the work because you didn't actually collect or record costs that were only incurred against that change (of course this has to be true).

If that's true, then what is the basis for the request for equitable adjustment? Total cost method? That would be another reason for a lower fee.

The best approach might be to just ask for the same rate of fee as was negotiated for the basic contract. If the work of the change was more difficult than the work of the basic contract you could try asking for a higher rate of fee on that basis.

Zag2009 said:

Negotiations have taken well over a year.

Why? The answer to this question will impact my answer to your other question, which is below.

Zag2009 said:

... what counter arguments have you proposed against reduced fee?

In this case, the counter argument is that the contractor has floated the government a loan for the costs of the changed work, since the contract wasn't modified timely to include the additional funds. Therefore the contractor wasn't able to bill its additional costs and had to go borrow the funds, paying unallowable interest on its loan.

This assumes the government is at fault for taking "well over a year" to negotiate the value of the contract mod for the changed work. If the cause for the delay is something the contractor did or did not do, then my counterargument won't work.

here_2_help said:

In this case, the counter argument is that the contractor has floated the government a loan for the costs of the changed work, since the contract wasn't modified timely to include the additional funds. Therefore the contractor wasn't able to bill its additional costs and had to go borrow the funds, paying unallowable interest on its loan.

@here_2_help

This is another case in which an OP did not provide all of the information we need to respond effectively. I said in my first post that since he/she used the word "fee,' I would presume that the contract is cost-reimbursement. We have heard nothing back from Zag2009. If the contract is cost-reimbursement, then the above counterargument won't hold water.

If Zag2009 comes back after a couple of days and says that the contract is fixed-price, then I'm going to put out a contract on him/her. This is the Contract Administration Forum, not the Beginner's Forum. No mercy.

Omar lives!

Vern Edwards said:

@here_2_help

If the contract is cost-reimbursement, then the above counterargument won't hold water.

Omar lives!

Vern,

1. It doesn't matter whether my argument holds water since we are negotiating. Any argument that gets the other side to hesitate, to blink, to lose confidence, is a valid argument.

2. I really really hope your last comment ("Omar lives!) was not a reference to Omar Mir Seddique, the Pulse nightclub shooter. Please tell me you were referring to something else.

here_2_help said:

1. It doesn't matter whether my argument holds water since we are negotiating. Any argument that gets the other side to hesitate, to blink, to lose confidence, is a valid argument.

I disagree - misrepresenting facts is not negotiating in good faith...

Matthew Fleharty said:

I disagree - misrepresenting facts is not negotiating in good faith...

You're hilarious. Government negotiators do it routinely.

here_2_help said:

You're hilarious. Government negotiators do it routinely.

Didn't your mother teach you that two wrongs don't make a right?

I personally hope no one heeds your advice on what constitutes proper behavior at the negotiating table - I think if you took some time to reflect on what you stated, you'd realize its inappropriate.  If you do come to that realization, you should retract that statement.  If you don't, it will just serve as a piece of information about who you are and how you operate.

I recall a case before the Federal Circuit in the 1990's where the Court held that the proper time to assess risk is when a change is made to contract work, not when the amount of the adjustment is negotiated.  With my limited research capabilities, I have not been able to find that case, but I believe it involved Texas Instruments.

here_2_help said:

Vern,

2. I really really hope your last comment ("Omar lives!) was not a reference to Omar Mir Seddique, the Pulse nightclub shooter. Please tell me you were referring to something else.

Omar refers to the character in “The Wire” who robbed drug dealers. Do you really think I’d refer to the other guy? 😠

here_2_help said:

Vern,

1. It doesn't matter whether my argument holds water since we are negotiating. Any argument that gets the other side to hesitate, to blink, to lose confidence, is a valid argument.

Utter nonsense.

Matthew Fleharty said:

Didn't your mother teach you that two wrongs don't make a right?

I personally hope no one heeds your advice on what constitutes proper behavior at the negotiating table - I think if you took some time to reflect on what you stated, you'd realize its inappropriate.  If you do come to that realization, you should retract that statement.  If you don't, it will just serve as a piece of information about who you are and how you operate.

Perhaps I simply don't agree with your characterization that, if I made such an argument, I would be "misrepresenting the facts." Facts and judgments are two different things. In any case, enjoy your moral superiority.

Vern Edwards said:

Utter nonsense.

Okay. Whatever.

here_2_help said:

Perhaps I simply don't agree with your characterization that, if I made such an argument, I would be "misrepresenting the facts." Facts and judgments are two different things. In any case, enjoy your moral superiority.

Well you could have said that, but you didn't (and still haven't by saying "perhaps").  You instead hid behind a fallacious argument by appealing to (what you assert is) common practice by the Government.  Re-read what you argued and explain how your counter argument is equally valid under a cost-reimbursement environment as it is in a fixed price environment.  When Vern pointed out that your argument is not applicable in both of those situations, you posted what I consider an egregious negotiation philosophy.  Now you're pivoting again.  Are you going to defend your original position or admit its flaws?  It's okay to do the latter, I've done it plenty of times on these forums and felt no shame whatsoever.  After all, we're all here to learn (so let's learn the right things).

Vern Edwards said:

@here_2_help

This is another case in which an OP did not provide all of the information we need to respond effectively. I said in my first post that since he/she used the word "fee,' I would presume that the contract is cost-reimbursement. We have heard nothing back from Zag2009. If the contract is cost-reimbursement, then the above counterargument won't hold water.

If Zag2009 comes back after a couple of days and says that the contract is fixed-price, then I'm going to put out a contract on him/her. This is the Contract Administration Forum, not the Beginner's Forum. No mercy.

Omar lives!

I'm here....just stuck in meetings all morning.  The contract is cost-reimbursement (thankfully...now I can sleep at night).  The dollar figure associated with the fee proposed and the fee countered by the government is in the millions.  Therefore, as you can imagine, we don't want to concede without a fight.  We asked for what we believed was a reasonable fee based on risk, in line with previous modifications for similarly scoped work.  The government's argument isn't that the fee is too high for the work being performed, just that since the work is complete, the risk no longer exists.  In other words, had this been negotiated prior to completion of the work, I presume the fee rate proposed and that countered by the government would be much closer.   

I was hoping for past precedence that would support our argument that the fee should be based on the risk of the originally proposed work, but it appears we will just have use our best negotiation skills to justify the higher fee.  As always, thank you for your input.

Retreadfed said:

I recall a case before the Federal Circuit in the 1990's where the Court held that the proper time to assess risk is when a change is made to contract work, not when the amount of the adjustment is negotiated.  With my limited research capabilities, I have not been able to find that case, but I believe it involved Texas Instruments.

A coworker of mine vaguely recalled the same, but I haven't been able to dig up that case.  I will keep digging and update if I find that case.

Zag2009 said:

I'm here....just stuck in meetings all morning.  The contract is cost-reimbursement (thankfully...now I can sleep at night).  The dollar figure associated with the fee proposed and the fee countered by the government is in the millions.  Therefore, as you can imagine, we don't want to concede without a fight.  We asked for what we believed was a reasonable fee based on risk, in line with previous modifications for similarly scoped work.  The government's argument isn't that the fee is too high for the work being performed, just that since the work is complete, the risk no longer exists.  In other words, had this been negotiated prior to completion of the work, I presume the fee rate proposed and that countered by the government would be much closer.   

I was hoping for past precedence that would support our argument that the fee should be based on the risk of the originally proposed work, but it appears we will just have use our best negotiation skills to justify the higher fee.  As always, thank you for your input.

If you're negotiating with DoD, then the contracting officer probably used the weighted guidelines method to arrive at their negotiation objective. This method considers "contract type risk" (see DFARS 215.404-71-3). The greatest value is given to firm-fixed-price contracts with no financing (4-6% of estimated cost) and the lowest value is given to four different contract types, one of which is cost-plus-fixed-fee (0-1% of estimated cost). This subsection also contains the following instruction to contracting officers:

Quote

The contracting officer shall assess the extent to which costs have been incurred prior to definitization of the contract action (also see 217.7404-6(a) and 243.204-70-6).  The  assessment shall include any reduced contractor risk on both the contract before definitization and the remaining portion of the contract.  When costs have been incurred prior to definitization, generally regard the contract type risk to be in the low end of the designated range.  If a substantial portion of the costs have been incurred prior to definitization, the contracting officer may assign a value as low as 0 percent, regardless of contract type.

Let's assume that the contracting officer would have used the "normal value" for contract type risk for a CPFF contract (0.5% of estimated cost) if negotiations took place before performance. However, because those negotiations took place after performance they are going to use 0% for contract type risk. Doing this should only lower the fee objective by 0.5%.

What was the fee % you originally proposed? What is the fee % the Government countered with?

here_2_help said:

Matthew Fleharty said:

I disagree - misrepresenting facts is not negotiating in good faith...

You're hilarious. Government negotiators do it routinely.

@here_2_help is getting heat for making an accurate observation and holding a realistic, sober viewpoint that reflects reality and human nature (and human evolutionary psychology). Language helps us communicate. Language also helps us deceive. Don't shoot the messenger.

Negotiation almost always involves some deception or "misrepresenting facts." PepeTheFrog thought this was a forum for contracting professionals, not naive Puritans. PepeTheFrog smells some (exclusively) federal employees who have never been subjected to reality. 

If it doesn't, why are some people better at negotiating than others? Think about what makes someone a strong negotiator. Here are some:

*bluffing (lying, misrepresentation) 

*knowing what to say (hiding information)

*knowing what not to say (hiding information)

*appealing to the interests of the other party (deceiving someone to think their interests coincide with yours)

*using emotions, psychological weaknesses, cognitive biases, to persuade (Cialdini's Influence has a solid list of these short-circuits)

*"I don't have the authority" (misrepresentation)

*"That's the best I can do" (misrepresentation if not an outright lie)

*"That's too steep" (misrepresentation if not an outright lie)

Those are just a few. They all involve "misrepresenting the facts" or deception. 

Sure, laws (e.g. fraud, False Claims Act) proscribe going "too far" in misrepresenting the facts, and that's vital to having efficient and transparent markets. But misrepresentation is a fundamental part of negotiation. It's best to minimize misrepresentation and deception through (a) habituation by institutions like juries, common law, rule of law, insurance markets, (b) cultural and therefore genetic reinforcement through making truth-telling a heroic act that is rewarded by material goods (e.g. science and technology), and (c) steep penalties for "crossing the red line" of misrepresentation or deception (e.g. the common law of fraud). But up to that red line... 

Is PepeTheFrog incorrect? (Spare PepeTheFrog nonsense about morality.)

Zag2009 said:

I was hoping for past precedence that would support our argument that the fee should be based on the risk of the originally proposed work, but it appears we will just have use our best negotiation skills to justify the higher fee.  As always, thank you for your input.

There is some Government precedence for thinking about what to do with fee weighted guideline analysis when there may be actuals. See https://www.gpo.gov/fdsys/pkg/FR-2016-10-21/pdf/2016-25332.pdf.

This case is still pending a final report.

Pepe, 

Before I respond further, let me ask you this: do you support the specific “misrepresentation” H2H deemed appropriate on this thread?

Matthew Fleharty said:

Pepe, 

Before I respond further, let me ask you this: do you support the specific “misrepresentation” H2H deemed appropriate on this thread?

PepeTheFrog said:

Is PepeTheFrog incorrect? (Spare PepeTheFrog nonsense about morality.)

PepeTheFrog said:

Negotiation almost always involves some deception or "misrepresenting facts." PepeTheFrog thought this was a forum for contracting professionals, not naive Puritans. PepeTheFrog smells some (exclusively) federal employees who have never been subjected to reality.

@PepeTheFrog

Anyone who tells a deliberate lie during contract negotiations is making a serious mistake. If I were a CO, and if I caught you in a deliberate, substantive lie during price negotiations, you would pay dearly. Dearly. You cannot imagine the price that I would exact from you, and perhaps from your employer, for that transgression. At a minimum, my  program manager would be on the phone to your program manager before the day was out, reading from my script, and my lawyer would be on the phone to yours.

My goal would be to ensure that you did not survive the drama.

I like you, Pepe, but that was bad. The "reality," as you call it, that some people lie during negotiations, does not make it a permissible practice.

Some thoughts for you:

• Bluffing, while not necessarily lying, is a very dangerous tactic and can be self-destructive. If you say or indicate that you'll walk if the other side does not make a concession, you'd better go through with it. If you don't, you're done for.
• As for hiding information, someone might call it defective pricing.
• Don't say you that don't have authority unless you've made sure that you don't. (A smart negotiator does not want authority to settle at other than the approved negotiation objective.) And don't say "That's the best I can do" unless you've made sure that that's the best that you can do.

 

Government contract negotiators are not Soviet SALT negotiators and shouldn't act like they are.

As a contract negotiator, your integrity is your most powerful tool.

Zag2009 said:

The contract is cost-reimbursement (thankfully...now I can sleep at night).  The dollar figure associated with the fee proposed and the fee countered by the government is in the millions.  Therefore, as you can imagine, we don't want to concede without a fight.  We asked for what we believed was a reasonable fee based on risk, in line with previous modifications for similarly scoped work.  The government's argument isn't that the fee is too high for the work being performed, just that since the work is complete, the risk no longer exists.  In other words, had this been negotiated prior to completion of the work, I presume the fee rate proposed and that countered by the government would be much closer.   

I was hoping for past precedence that would support our argument that the fee should be based on the risk of the originally proposed work, but it appears we will just have use our best negotiation skills to justify the higher fee.  As always, thank you for your input.

@Zag2009

Do not negotiate on the basis of risk. Not only has the work been done, but there was never much risk to your company under an undefinitized change to a cost-reimbursement contract, except, perhaps, the risk of a poor past performance rating. And by the way, under an undefinitized change to a cost-reimbursement contract, the delay in settlement has hurt the government, not your company.

The key to the negotiation is the effect of the change on the amount and quality of the effort your company had to make.

Do this:

• Baseline your negotiation strategy on the rate of fee in the contract as originally awarded. Say it was 6 percent. It is unlikely that a board or court would give you a higher rate of fee than that.
• Compare the complexity and difficulty of the work under the original contract with the complexity and difficulty of the contract work as changed. If the work was more complex and difficult after the change, requiring more intensive management, more or more highly skilled supervisors and workers, or more or better facilities or equipment, then aim for a modestly higher rate of fee in the equitable adjustment--say 7 or 8 percent. Be prepared to describe how the work as changed was more complex and difficult and how it affected the effort that your employer was required to make. Provide ample substantive documentation of the effect of the change. Overwhelm them with good, verifiable information. Pour it on. If you can't get any rate increase, then you'll have to decide whether to settle or litigate. Talk to your lawyers.
• If the work was the same in terms of complexity and difficulty after the change, and did not require more and better effort, then argue for a slightly higher rate of fee in the equitable adjustment to compensate you for change integration planning. Say, 6.5 percent. Aim to get no less than the same rate of fee as in the original contract.
• If the work was less complex and difficult, then still argue for the same rate of fee for the equitable adjustment as in the original contract, but be prepared to settle for a modest fee rate reduction, say 5.5 to 5 percent.

PepeTheFrog said:

@here_2_help is getting heat for making an accurate observation and holding a realistic, sober viewpoint that reflects reality and human nature (and human evolutionary psychology). Language helps us communicate. Language also helps us deceive. Don't shoot the messenger.

Negotiation almost always involves some deception or "misrepresenting facts." PepeTheFrog thought this was a forum for contracting professionals, not naive Puritans. PepeTheFrog smells some (exclusively) federal employees who have never been subjected to reality. 

If it doesn't, why are some people better at negotiating than others? Think about what makes someone a strong negotiator. Here are some:

*bluffing (lying, misrepresentation) 

*knowing what to say (hiding information)

*knowing what not to say (hiding information)

*appealing to the interests of the other party (deceiving someone to think their interests coincide with yours)

*using emotions, psychological weaknesses, cognitive biases, to persuade (Cialdini's Influence has a solid list of these short-circuits)

*"I don't have the authority" (misrepresentation)

*"That's the best I can do" (misrepresentation if not an outright lie)

*"That's too steep" (misrepresentation if not an outright lie)

Those are just a few. They all involve "misrepresenting the facts" or deception. 

Sure, laws (e.g. fraud, False Claims Act) proscribe going "too far" in misrepresenting the facts, and that's vital to having efficient and transparent markets. But misrepresentation is a fundamental part of negotiation. It's best to minimize misrepresentation and deception through (a) habituation by institutions like juries, common law, rule of law, insurance markets, (b) cultural and therefore genetic reinforcement through making truth-telling a heroic act that is rewarded by material goods (e.g. science and technology), and (c) steep penalties for "crossing the red line" of misrepresentation or deception (e.g. the common law of fraud). But up to that red line... 

Is PepeTheFrog incorrect? (Spare PepeTheFrog nonsense about morality.)

Honestly, I don’t even know what your position is because you’re constantly hedging in your remarks...at one point you advocate for misrepresentation based on some realist view of negotiations, then you pivot to arguing that some forms of misrepresentation are improper by referring to a red line and stating “it’s best to minimize misrepresentation and deception.”  So which is it?  Apparently I don’t even need to write a response because you’re effectively arguing against yourself!

When I tried to inquire about a specific instance of misrepresentation to discuss, you were unwilling to take a position...but you persisted in asking if you are incorrect.  Well, if your position is misrepresentation is an effective and permissible practice in negotiations, then I say yes, you are absolutely incorrect (see next paragraph).  As for your final remark to “spare PepeTheFrog nonsense about morality,” that makes it near impossible to properly have a discussion about the concept of “negotiating in good faith” which is as much a moral/ethical issue as it is a practical one.

But since you only want to address this concept in terms of real world applicability, I’ll bite.  What is actually “naive” is to think that there are no negative real world implications to the strategy or tactics/practices you advocate.  Apparently frogs are only concerned with the short term (which isn’t surprising since your life expectancy is only 10-12 years), but I approach negotiations with the long term in mind (as should others negotiating Government contracts because these are often 5+ year deals).  Unless the negotiation is a one time transaction with no future interaction (aka buying a car could be an example) the resulting deal is only one outcome of the negotiation, another outcome, arguably a more important one, is the relationship between the negotiating parties.  At some point, your “misrepresentation” scheme is going to fail (it’s a matter of basic probabilities that with each subsequent misrepresentation you will inevitably be caught - surely you’ve read NNT’s latest book so you should know this - moreover, with an experienced, well prepared negotiator it’s highly likely misrepresentation will fail sooner rather than later).  So when you do get caught, then what?  You’ve lost all credibility, you’ve damaged the relationship with the other party, and you’ve potentially exposed yourself to penalties or litigatation depending on the severity of the misrepresentation.  Those aren’t risks worth taking, particularly when there are equally (I’d even argue more) effective ways to negotiate.  Ultimately, good contract management requires a good relationship between the parties and your tactics risk poisoning the ultimate outcome (remember, the contract is not the ultimate outcome, it merely embodies the promises of the parties to reach some defined outcome(s)...they still have to work with one another for some period of time to reach that end state).

Vern’s right: any competent party should/would make you pay a heavy price if you’re caught employing these tactics you think are better and stronger.  Do yourself a favor and stop assuming those you disagree with are incompetent, soy milk drinking, non-deadlifting, unprofessional federal employees (after reading NNT’s books I now know where you get most of your jibes from...maybe you should change your moniker to PepeTheParrot).  This pessimism disguised as realism may sound cute when written on these forums, but this isn’t effective or good advice for contracting professionals.

Examples of negotiation tactics where short term goals overcome long term objectives:

1. Government CO says DCAA audit report supports the position that contractor is ineligible for contract award. The DCAA audit report expressly disclaimed an opinion--i.e., stated in writing that the CO could not rely on it. (GAO B-403214; B-403214.2, Oct, 2010) Did the CO misrepresent the DCAA audit report? Yes.

2. Contractor says CDA statute of limitations prevents government from asserting a claim. The facts are cloudy and may not support the contractor's assertion. In litigation, motion for summary judgment denied. (Many cases.) Did the contractor misrepresent the application of the SoL? Perhaps.

3. COFD issued based on "plainly invalid legal theory" originated by an auditor, despite contractor's attempts to negotiate resolution. (LMIS, ASBCA No. 59508) Did the CO misrepresent the validity of the government's position? Perhaps.

4. USAF refuses to accept contractor's information and insists on holding its PNM goals, unilaterally definitizes UCA when negotiations stalemate. (L-3, COFC). Did the USAF misrepresent the reasonableness of the contractor's pricing? Or did the contractor misrepresent the reasonableness of its own pricing? To be determined.

To my knowledge, nobody paid any price for such tactics.

Thesis, antithesis. Synthesis. It's how the world works.

@here_2_help

(I’m going to call it what it is now instead of this “misrepresentation of facts” because you’re using my kindness with language to pivot) Yesterday you advocated for outright misrepresenting facts lying about paying loan interest costs in order to win a negotiation on fee.  This behavior you cite (and probably plenty you don’t cite) has clearly jaded you to the point where you think such behavior is permissible (others think it is strategically valuable).  If that isn’t a case in point I don’t know what is.

As for your examples, maybe #1 fits the bill of this discussion (and if #1 happened without any price paid for such a tactic then maybe these non-government officials aren’t as amazing as you allege); however, you’re stretching quite far on #2-4 (situations where we may not be dealing with facts or the facts are in dispute).  Moreover, you’re not responding to the specific argument at hand. I never said all short term interests are outweighed by long term interests; my argument is specifically in regards to knowingly misrepresenting facts lying__.  You don’t seem inclined to engage in that discussion nor recant your previous recommendation and I won’t persist any further.  I think such behavior by anyone, the Government or the contractor, is unethical, counter productive, and inexcusable.

@here_2_help

All of your examples are ambiguous or vague and prove nothing about misrepresentation.

here_2_help said:

1. Government CO says DCAA audit report supports the position that contractor is ineligible for contract award. The DCAA audit report expressly disclaimed an opinion--i.e., stated in writing that the CO could not rely on it. (GAO B-403214; B-403214.2, Oct, 2010) Did the CO misrepresent the DCAA audit report? Yes.

Do you mean that the CO lied about the content of the DCAA audit report or that he argued that statements actually in the report support an inference that the contractor is ineligible?

here_2_help said:

2. Contractor says CDA statute of limitations prevents government from asserting a claim. The facts are cloudy and may not support the contractor's assertion. In litigation, motion for summary judgment denied. (Many cases.) Did the contractor misrepresent the application of the SoL? Perhaps.

What do you mean when you say that the facts are "cloudy"? A fact is something that is true. (Look it up.) If evidence or the lack thereof supports more than one assertion of what the facts are, then the facts are unknown. Based on its own beliefs about the facts, the contractor might legitimately argue that the statute of limitations bars a government claim, although that conclusion might turn out to be false. Does the contractor know what the facts really are? Does it know that the government's claim is, in fact, timely? Is it withholding that knowledge? Is it knowingly making a false assertion? Is it lying?

here_2_help said:

3. COFD issued based on "plainly invalid legal theory" originated by an auditor, despite contractor's attempts to negotiate resolution. (LMIS, ASBCA No. 59508) Did the CO misrepresent the validity of the government's position? Perhaps.

Did the CO believe that the legal theory was sound, or did he or she know that it was not, and thus that the final decision was not sound?

here_2_help said:

4. USAF refuses to accept contractor's information and insists on holding its PNM goals, unilaterally definitizes UCA when negotiations stalemate. (L-3, COFC). Did the USAF misrepresent the reasonableness of the contractor's pricing? Or did the contractor misrepresent the reasonableness of its own pricing? To be determined.

I don't understand "refuses to accept the contractor's information." Are you saying that the USAF refused "to accept the contractor's information" are you saying that the USAF knew what the information was, that the information was true and that it supported the contractor's arguments, and yet, despite that knowledge, rejected the information as false or irrelevant?

Look---anyone can come up with examples of people doing the wrong thing. No one is saying that no one ever lies (although your assertion that Government negotiators "routinely" misrepresent the facts is not only vague, but is unprovable no matter what you mean by "routinely").

The point is that doing the wrong thing is wrong. It is not acceptable. Lying to a prospective business partner is wrong, and there should be consequences when a person intentionally lies about substantive matters during a contract negotiation.

Finally:

here_2_help said:

Thesis, antithesis. Synthesis. It's how the world works.

Huh? I hope you're not referring to the Marxist theory of history as expounded in his The Poverty of Philosophy? Man, I'm impressed if you have read that. I'm really impressed if you understood it.

Quote

If we had M. Proudhon's intrepidity in the matter of Hegelianism we should say: it is distinguished in itself from itself. What does this mean? Impersonal reason, having outside itself neither a base on which it can pose itself, nor an object to which it can oppose itself, nor a subject with which it can compose itself, is forced to turn head over heels, in posing itself, opposing itself and composing itself – position, opposition, composition. Or, to speak Greek – we have thesis, antithesis and synthesis. For those who do not know the Hegelian language, we shall give the ritual formula: affirmation, negation and negation of the negation. That is what language means. It is certainly not Hebrew (with due apologies to M. Proudhon); but it is the language of this pure reason, separate from the individual. Instead of the ordinary individual with his ordinary manner of speaking and thinking we have nothing but this ordinary manner purely and simply – without the individual.

Quote

All things being reduced to a logical category, and every movement, every act of production, to method, it follows naturally that every aggregate of products and production, of objects and of movement, can be reduced to a form of applied metaphysics. What Hegel has done for religion, law, etc., M. Proudhon seeks to do for political economy.

So what is this absolute method? The abstraction of movement. What is the abstraction of movement? Movement in abstract condition. What is movement in abstract condition? The purely logical formula of movement or the movement of pure reason. Wherein does the movement of pure reason consist? In posing itself, opposing itself, composing itself; in formulating itself as thesis, antithesis, synthesis; or, yet, in affirming itself, negating itself, and negating its negation.

Do you own your own copy or did you check it out of the library?

Dude! I'm impressed! Did you read Hegel, too? Phenomenology of Mind? (aka, Phenomenology of Spirit) Nearly killed me in my 19th Century Philosophy class at UCLA. I actually broke down and cried when I tried to understand Hegel. Really. At the Powell Library. At 2 a.m. It's a fact.

Give us a break.

Vern Edwards said:

The point is that doing the wrong thing is wrong. It is not acceptable. Lying to a prospective business partner is wrong, and there should be consequences when a person intentionally lies about substantive matters during a contract negotiation.

Vern, PepeTheFrog appreciates your feedback on the costs of using the negotiation tactics that involve misrepresentation. PepeTheFrog agrees. The best cultures, institutions, organizations cultivate a very high price for lying. 

Vern Edwards said:

you would pay dearly. Dearly. You cannot imagine the price that I would exact from you, and perhaps from your employer, for that transgression. At a minimum, my  program manager would be on the phone to your program manager before the day was out, reading from my script, and my lawyer would be on the phone to yours.

PepeTheFrog believes that Vern Edwards has done or would do this. However, PepeTheFrog wants to point out that Vern Edwards is likely very low on the agreeableness personality scale (which is most definitely not an insult), has a very high degree of competitiveness, and an even higher degree of conscientiousness and industriousness which leads him to value truth-telling much, much higher than the average negotiator, or the average government contracts negotiator, on either side of the table. Vern, this is a complement to you. Therefore, Vern creates one the highest prices for lying in the market. Vern raises the stakes and make any form of misrepresentation or lying have an extremely high cost. This is a good thing to have for a negotiator, an arbiter, a judge, a lawyer, a leader, a manager. 

However, that's Vern Edwards, not the rest of the market.  

Vern Edwards said:

Anyone who tells a deliberate lie during contract negotiations is making a serious mistake.

If so, serious mistakes occur thousands, if not millions, of times every day on Earth. Don't ever buy a rug from a bazaar!

Matthew Fleharty said:

misrepresentation is an effective and permissible [PepeTheFrog: widespread] practice in negotiations

Fixed it to reflect PepeTheFrog's position, rather than your various straw men to burn at the stake. 

Matthew Fleharty said:

incompetent, soy milk drinking, non-deadlifting, unprofessional federal employees (after reading NNT’s books I now know where you get most of your jibes from...maybe you should change your moniker to PepeTheParrot).  This pessimism disguised as realism may sound cute when written on these forums, but this isn’t effective or good advice for contracting professionals

PepeTheFrog read the first NNT (Nassim Nicholas Taleb, for the other frogs out there) book very recently, years after being able to spot soy boys and using similar jibs. You should consider that NNT is not the only source for any of the jibes you listed. There's a big, wide world out there.

PepeTheFrog's main criticism of your argument style is that you rally and shame, and are quick to argue the person. You also throw around morality when others might be more interested in the truth or reality. Who are you rallying? Fellow Internet forum members? Who are you shaming? It's kind of silly.

Matthew Fleharty said:

Apparently frogs are only concerned with the short term (which isn’t surprising since your life expectancy is only 10-12 years), but I approach negotiations with the long term in mind

PepeTheFrog agrees with your analysis following this intro. It's all accurate. Let PepeTheFrog translate: Negotiators vary their level of deception, lying, misrepresentation, depending on the circumstances and relations of the parties. Many future negotiations, ongoing relationship between the parties = higher cost of deception. One-time transactions between strangers = low cost of deception. Matthew, you're spot-on.

Matthew, professionals understand their profession, including the beautiful and the ugly parts. PepeTheFrog, like here_2_help, is pointing out the ugly parts.

PepeTheFrog maintains his defense of @here_2_help as getting criticized for speaking frankly about reality, instead of spinning into a moral fervor. 

Wake up, frogs! People lie, misrepresent, bluff, and do all sorts of shady things during negotiations. Worst of all: Lying works sometimes! That doesn't mean it's morally good. Stop clutching pearls. 

This is one of the most interesting Wifcon discussion threads PepeTheFrog has seen in years. PepeTheFrog wonders if some are talking past each other, perhaps staying on different sides of the "is-ought" distinction. 

PepeTheFrog greatly appreciates all the discussion, especially from Matthew and Vern. 

***edited because PepeTheFrog had an incoherent comment about "permissible"

Pepe the Frog:

I've been reading this discussion and I agree.  I think it is interesting and I've been reading it for content.  As the administrator, I try to keep my opinions to myself.  This fascinating and persuasive discussion began as the 4-line question below:

Quote

We are a government contractor in negotiations for a change to our contract.  We originally proposed a set fee at X%.  Negotiations have taken well over a year.  Now the agency wants to reduce the fee to Y% claiming that since the work is complete, the risk is now lower than originally proposed, therefore justifying a lower few percentage.  Has anyone have any experience with a similar situation and if so, what counter arguments have you proposed against reduced fee?

That is why I try to stay out of the Members' way.  You all are what makes this forum work--not me nor my wishes.

PepeTheFrog said:

Fixed it to reflect PepeTheFrog's position, rather than your various straw men to burn at the stake.

Strawman? Please - if anyone is guilty of using strawmen here it's you by (a) re-characterizing @here_2_help's clear statement that one should lie during negotiations and (b) trying to lump in issues like withholding information into my initial objection.  If I mis-characterized your argument, I apologize, but as I stated in my previous post, yours was all over the place to begin with (clearly a slippery frog like yourself doesn't like being pinned down and was able to wiggle out).

PepeTheFrog said:

Matthew, professionals understand their profession, including the beautiful and the ugly parts. PepeTheFrog, like here_2_help, is pointing out the ugly parts.

PepeTheFrog maintains his defense of @here_2_help as getting criticized for speaking frankly about reality, instead of spinning into a moral fervor. 

Wake up, frogs! People lie, misrepresent, bluff, and do all sorts of shady things during negotiations. Worst of all: Lying works sometimes! That doesn't mean it's morally good. Stop clutching pearls.

@here_2_helpdidn't point out that lies happen - he said he would willing do so and advised a member of this forum to make the argument regardless of whether or not it was true.  Take a moment and re-read his post:

here_2_help said:

1. It doesn't matter whether my argument holds water since we are negotiating. Any argument that gets the other side to hesitate, to blink, to lose confidence, is a valid argument.

That's not a case of "this is what happens in the real world so watch out."  That's clearly "this is what I would do."  So yes, this becomes a moral issue when a member of the forum is advising others to engage in outright deception.

If you truly believe those that deceive others should pay a high price, so should those that encourage others to do it.  So Pepe, show us you actually believe what you say and condemn what @here_2_help actually said...not what you mistranslated it into.

I am with Vern on this and am abhorred at the idea that other than honesty and good faith is necessary or acceptable for successful negotiations.

That doesn’t mean that one can’t open with other than your bottom line position, offer or counteroffer. 

I was a very successful contract, claims and modifications negotiator during my career and didn’t have to lie.  

And I did not tolerate anyone working for me lying either

Matthew Fleharty said:

That's not a case of "this is what happens in the real world so watch out."  That's clearly "this is what I would do."  So yes, this becomes a moral issue when a member of the forum is advising others to engage in outright deception.

PepeTheFrog thinks you have identified the crux of our disagreement and discussion. 

PepeTheFrog sees it as the former "this is what happens in the real world." Matthew sees it as the latter: "this is what I would do" and "this becomes a moral issue." 

PepeTheFrog can't help but complement everyone in this thread for recreating a bastardized version of the ancient discussion between Thrasymachus and Socrates based on the contracting profession and negotiation!

Or maybe Thucycides! Maybe "justice" and "morality" are merely constructs created by the strong (dominant elites) who form a militia, a band, a tribe, a society, a civilization that has certain rules, morals, and justice systems as a means to minimize conflict and maximize cooperation, and these constructs of "justice" and "morality" are a gift from the superior nation-builders and conquerors to the inferior free-riders. Or maybe it's all just hot air!

"right, as the world goes, is only in question between equals in power, while the strong do what they can and the weak suffer what they must" 

joel hoffman said:

abhorred at the idea that other than honesty and good faith is necessary or acceptable for successful negotiations.

That doesn’t mean that one can’t open with other than your bottom line position, offer or counteroffer

Hmm...honesty includes opening with other than your bottom line position. Yes, joel hoffman, yes...come to the Dark Side! Let it consume you!

Pepe, If you don’t know what I meant then you appear not to understand how to develop pre-negotiation objectives; that there can be a range of reasonable objectives for various items or issues that can affect the bottom-line; that there is room for negotiations; how to expect the other party to justify the reasonableness of soft or questionable areas in its proposal or position;   or how to effectively negotiate without making up something or lying. 

Or you might offer an alternative approach for the other party to consider that would be less expensive and/or faster.

Etc.., etc. 

bruther... or sister...

By the way, only a fool would open a negotiation at their bottom line...unlessYou are not willing to negotiate.

Matthew Fleharty said:

I approach negotiations with the long term in mind (as should others negotiating Government contracts because these are often 5+ year deals).  Unless the negotiation is a one time transaction with no future interaction (aka buying a car could be an example) the resulting deal is only one outcome of the negotiation, another outcome, arguably a more important one, is the relationship between the negotiating parties.  At some point, your “misrepresentation” scheme is going to fail (it’s a matter of basic probabilities that with each subsequent misrepresentation you will inevitably be caught - surely you’ve read NNT’s latest book so you should know this - moreover, with an experienced, well prepared negotiator it’s highly likely misrepresentation will fail sooner rather than later).  So when you do get caught, then what?  You’ve lost all credibility, you’ve damaged the relationship with the other party, and you’ve potentially exposed yourself to penalties or litigatation depending on the severity of the misrepresentation.  Those aren’t risks worth taking, particularly when there are equally (I’d even argue more) effective ways to negotiate.  Ultimately, good contract management requires a good relationship between the parties and your tactics risk poisoning the ultimate outcome (remember, the contract is not the ultimate outcome, it merely embodies the promises of the parties to reach some defined outcome(s)...they still have to work with one another for some period of time to reach that end state).

I think that what Matthew said is the key to this thing. Of course human beings lie and misrepresent during negotiations. But that is not a justification for following suit. We're talking government contracting here. We're not rug merchants in the Istanbul Grand Bazaar. Let's set morals aside for the moment. You simply cannot lie during contract negotiations to people that you will have to work with on a regular basis on important projects and expect to earn and keep their respect and cooperation.

It's perfectly okay to be tough and argumentative, to make them work for it, especially when there is no "correct" settlement and things have gotten down to hard bargaining. And I don't mind the other negotiator using whatever leverage she legitimately has to her advantage. But as for shady tactics, well, people you negotiate with regularly will figure you out after a while, and it will cost you.

H2H wrote:

Quote

Any argument that gets the other side to hesitate, to blink, to lose confidence, is a valid argument.

According to the principles of deductive logic, that is not true. But if you are arguing a point, I don't mind if you choose your premises in order to construct an argument that supports the conclusion you want me to accept. That's an acceptable tactic. I do mind if you knowingly use false premises and assert that they're true. That's lying.

That's a big leap, joel hoffman. 

joel hoffman said:

justify the reasonableness

Justifying, huh? That sounds much better than misrepresenting. It sounds way better than lying.

joel hoffman said:

soft or questionable areas

What makes these areas soft or questionable? When you examine them, PepeTheFrog wonders if you can find something that resembles a (gasp) lie or misrepresentation...

PepeTheFrog isn't calling anyone a habitual liar or attacking anyone's morality.

PepeTheFrog is saying that deception and misrepresentation is a part of negotiation, and anyone who says otherwise is engaging in a form of deception and misrepresentation. 

If there is 100% transparency, there is no need for deception or misrepresentation. At that level, you only need fully reciprocal exchanges of information and fully reciprocal agreements to cooperate. But asymmetry of information is the fact of life in almost all cases, which breeds the need for "negotiation."

joel hoffman said:

only a fool would open a negotiation at their bottom line...unlessYou are not willing to negotiate.

You got it. "Negotiate" unless you are willing to be 100% transparent...

If you're not 100% transparent, then you have an incentive to negotiate, to deceive, to lie, to misrepresent, to get a better deal than you would otherwise get with 100% transparency and fully symmetric information exchange.

PepeTheFrog said:

Hmm...honesty includes opening with other than your bottom line position. Yes, joel hoffman, yes...come to the Dark Side! Let it consume you!

Pepe: That reflects a fundamental lack of understanding of the art of negotiation. Fundamental. Slow down, Pepe. Think about what you're saying.

Opening at other than your bottom line is not dishonesty.

And apparently I'm the one who lives in Lala Land...

PepeTheFrog said:

PepeTheFrog is saying that deception and misrepresentation is a part of negotiation, and anyone who says otherwise is engaging in a form of deception and misrepresentation.

I think you're going too far, Pepe, my friend.

Morality aside, the distinction between principled negotiation and positional bargaining should be noted. I see arguments here that seem to treat them interchangeably. 

Both forms of negotiating have their place. The former is more appropriate for a government contract negotiation setting.

@FrankJon

Why don't you explain the difference?

Principled Negotiation: Not about negotiating “hard” or “soft.” It’s about deciding issues on the merits by seeking mutual gains and resolving conflicts by applying objectively fair standards. Better for sustaining long-term relationships.

Positional Bargaining: How negotiating is traditionally thought of. Entering a negotiation with your idea of a "win" and fighting for it. Because it can often lead to conflict and a win-lose outcome, it's better left for one-off transactions.

FrankJon said:

Positional Bargaining: How negotiating is traditionally thought of. Entering a negotiation with your idea of a "win" and fighting for it. Because it can often lead to conflict, and the objective is a win-lose outcome, it's better left for one-off transactions.

Emphasis added: what is this "win-lose outcome" you speak of?  Why would a party willingly enter into an exchange in which they lose (absent something coercing or compelling them to do so)?

Win - lose means you must win and they must lose.  

Rather, the objective should be for “win-win or no deal”  (Stephen Covey).

And morals should NOT be put aside...

Matthew Fleharty said:

Why would a party willingly enter into an exchange in which they lose (absent something coercing or compelling them to do so)?

I mean...nobody wants to be the loser.

Matthew Fleharty said:

Why would a party willingly enter into an exchange in which they lose

Great question! It happens all the time. It could be sheer foolishness, or it could be asymmetry of information. The other side hid information! 

The other party "won" by deception or misrepresentation due to asymmetry of information. The other party "won" by negotiation!

How and why did the "losing" party sign the deal? 

They were persuaded, deceived, to enter into an exchange which they thought was more beneficial than it actually was...they were out-negotiated. Deceived.

If the "winning" party was 100% transparent, and eliminated the asymmetry of information (was completely honest, told the truth, the whole truth, and nothing but the truth), the "losing" party would get a better deal! But that wouldn't be good negotiating, would it? 

What kind of poker player plays with the cards face up on the table? What kind of a negotiator willingly provides 100% transparency and gives away asymmetric information advantages? (Well, the Truth in Negotiation Act was Congress' attempt...)

Deception and misrepresentation is a part of negotiation.

If there is 100% transparency, full symmetry of information, there is no need for deception because it would be useless. The info is there. It's available. Can't hide it. Can't spin it. 

If there is anything less than 100% transparency, full symmetry of information, there is a demand for deception. Deception pays off. Negotiation, including deception, pays off!

It depends on what you define as "lose," but even with asymmetrical information or deception, absent coercion (or something similar), people do not generally enter into transactions that make them worse off.  @PepeTheFrog and @FrankJon seem to define "lose" as getting even a marginally smaller portion of the pie or not as much of the pie as they should have under an environment with 100% transparency.  I don't think that is a proper definition of "losing" in a negotiation.

What does a hostage negotiation look like without any deception (full transparency, full symmetry of information)?

Isn't it just a stand-down order? "You have 10 seconds to do X or our snipers will ventilate you." It's an exchange of information, a communication. 

(a) What does a contract negotiation look like without any deception (full transparency, full symmetry of information)?

(b) What does a contract negotiation look like with some deception (less than full transparency, asymmetry of information)?

What's the difference between (a) and (b)?

PepeTheFrog said:

How and why did the "losing" party sign the deal? 

They were persuaded, deceived, to enter into an exchange which they thought was more beneficial than it actually was...they were out-negotiated. Deceived.

Matthew Fleharty said:

@PepeTheFrog and @FrankJon seem to define "lose" as getting even a marginally smaller portion of the pie or not as much of the pie as they should have under an environment with 100% transparency.  I don't think that is a proper definition of "losing" in a negotiation.

In November 2015, I impulsively bought a turkey frier for about $120. The turkey was pretty good, but the oil was expensive and the hulking unit took up a lot of space in my closet when it wasn't being used 10 months out of the year. (Plus, my girlfriend has this thing about saving my arteries.) After a failed and expensive attempt with it in November 2016, the girlfriend ordered it out of the apartment. I posted it to Craigslist for $80. I knew this probably was higher than FMV (there were pools of grease that I simply could not sop up entirely), but I wanted to see if anyone would bite. I had no interest in the well being of a faceless, prospective buyer who I would never see again. I simply wanted to maximize my gain and minimize my remorse.

Having received little interest in the frier several days before Thanksgiving 2017, a woman offered me $40 for it. This was significantly less than I wanted, and I felt slightly below FMV. I was disappointed with the offer. But, knowing that my window of opportunity to evict the monstrosity and recoup some costs before another year passed (over which time the value could have dropped more) was rapidly closing, I reluctantly agreed.  

I was not deceived, but I did feel like I had "lost" the transaction. These sorts of transactions in which one party has leverage over another - from bazaars to car dealerships to homes - happen all the time. One can simultaneously agree to a deal for one reason and be disappointed with the terms for another.

I define a negotiating loss as a feeling that the other side got the better deal at your expense. That might be a result of deception, leverage, error, lack of fortitude, or I'm sure many other reasons.

If losing is defined by a feeling, I'd posit that the losing feeling is likely the result of not properly understanding one's BATNA (if one did, they wouldn't feel like a loser after reaching a negotiated agreement).  I stand by my point that absent coercion (or something similar) people do not generally enter into transactions that make them worse off.

Matthew Fleharty said:

If losing is defined by a feeling, I'd posit that the losing feeling is likely the result of not properly understanding one's BATNA (if one did, they wouldn't feel like a loser after reaching a negotiated agreement).  I stand by my point that absent coercion (or something similar) people do not generally enter into transactions that make them worse off.

You're taking a very narrow view of negotiation outcomes, interests, and emotions. To feel like a loser doesn't necessarily mean being "worse off" financially. If you're a company doing business with the Government, and you're in desperate need of liquidity, and the Government CO, knowing this fact upon reviewing D&B, counters with an offer just above cost, how do you feel? On the one hand, you're alive. On the other hand, you're working for peanuts because the government (unjustly?) exploited its leverage.

Coming full circle, the point of my first post in this thread is that you would generally want to avoid this sort of win-at-all-costs "positional bargaining" when seeking to establish a long-term relationship. In a short-term relationship, there is much less risk to doing it. (Again, this does not consider the moral aspect.)

@FrankJon I saw you edited your initial post about having an objective to reach a win-lose outcome - that was the language I took exception to (hence why I bolded it).  I’m not going to chase a moving or non-existent target here.

Yes. It is probably more accurate to state that with Positional Bargaining the objective is to win at all costs. The other side losing can be a natural consequence, since the parties are not concerned with each others' interests.

Matthew Fleharty said:

I'd posit that the losing feeling is likely the result of not properly understanding one's BATNA

By the way, a BATNA is a feature of Principled Negotiation, not Positional Bargaining, where you'll traditionally see a bottom line instead.

Vern Edwards said:

According to the principles of deductive logic, [what H2Help wrote] is not true. But if you are arguing a point, I don't mind if you choose your premises in order to construct an argument that supports the conclusion you want me to accept. That's an acceptable tactic. I do mind if you knowingly use false premises and assert that they're true. That's lying.

I don't condone lying. I do condone attempting to undermine the confidence of the other side of the table by making arguments that may not be entirely valid if somebody examines my premises carefully. In my experience, very few negotiators do that.

Matthew Fleharty said:

@here_2_help

(I’m going to call it what it is now instead of this “misrepresentation of facts” because you’re using my kindness with language to pivot) Yesterday you advocated for outright misrepresenting facts lying about paying loan interest costs in order to win a negotiation on fee.  This behavior you cite (and probably plenty you don’t cite) has clearly jaded you to the point where you think such behavior is permissible (others think it is strategically valuable).  If that isn’t a case in point I don’t know what is.

As for your examples, maybe #1 fits the bill of this discussion (and if #1 happened without any price paid for such a tactic then maybe these non-government officials aren’t as amazing as you allege); however, you’re stretching quite far on #2-4 (situations where we may not be dealing with facts or the facts are in dispute).  Moreover, you’re not responding to the specific argument at hand. I never said all short term interests are outweighed by long term interests; my argument is specifically in regards to knowingly misrepresenting facts lying__.  You don’t seem inclined to engage in that discussion nor recant your previous recommendation and I won’t persist any further.  I think such behavior by anyone, the Government or the contractor, is unethical, counter productive, and inexcusable.

I feel your contempt burning me through the screen. I'm sorry I disappointed you.

This discussion reminds me of Robert Axelrod's game theory experiments.

Matthew Fleharty said:

what is this "win-lose outcome" you speak of?

@Matthew Fleharty 

Here's a win-lose outcome scenario. First, read the Differing Site Conditions clause, FAR 52.236-2 (APR 1984).

Here are the facts:

A subcontractor working at a remote site under a firm-fixed-price government construction contract discovers a Type I differing site condition. However, the sub is behind schedule, and since there is no government inspector on site, it takes some photos and makes some notes and keeps working in order to save time, thereby disturbing the condition without first giving written notice as required by clause paragraph (a).

Two days later the sub gives the COR written notification of the differing site condition. The sub then submits a $250,000 request for equitable adjustment (REA) to the prime, who forwards it to the COR. The COR, concerned because REAs are threatening to take the project over budget, forwards it to the CO with the recommendation to deny the claim pursuant to clause paragraph (c). He sees the contractor's failure to comply with the notification requirement as an opportunity to save money.

The contractor asks the CO to extend the written notification time prescribed in paragraph (c). FAR provides no guidance on granting or denying the discretionary extension. The nature and extent of the differing site condition are clear from the contractor's photos, notes, and other evidence. The parties go back and forth on the issue of an extension. The CO ultimately denies the contractor's request. The CO says: "The clause is clear. Your sub knew the rules and ignored them. I won't extend the time for notification. I'm gonna play by the rules of the game." The CO is taking advantage of the clause to save money.

The CO sees his position as a "win" for the government. If the CO grated the extension the COR would see it as an instance of the CO failing to "back him up" and thus a "lose." The contractor sees it as a lose for itself that's based on a "mere technicality."

I'm not taking a position on who is right. I'm merely using the scenario as an example of one in which the parties see the outcome as win-lose.

Thanks Vern.  I understand that win-lose outcomes can and do occur - I made that comment to take exception to the characterization of positional bargaining as a situation where someone has the objective to pursue a win-lose outcome because I don’t think that generally people intentionally try to pursue such an outcome.  @FrankJon clearly didn’t intend to say that and edited his post to remove that statement.

EDIT: Maybe that scenario would make for a good topic in the new debate forums Bob created.

Matthew, I think that many people quite often practice a win-lose approach for various reasons in their daily lives. This includes personal and business relations, and in any type of negotiations.

Such behavior may be a reaction or even a habit, as a defense due to something else going on in their lives. 

Attending Stephen Covey’s “The 7 Habits of Highly Effective People” in 1989 was a huge eye opener and life changing for me.

While each habit builds upon and works together with the other, the ideas of “win-win” and “win-win or no deal” stand out to me. They are highly successful life habits - when I don’t forget to apply them in daily life, including my personal and contractual relationships.

Covey taught that “Win-Lose” behavior will ultimately lead to Lose-Lose results, not only in business but also in personal relationships. 

I reccomend that everyone read the book and attend the Course, if at all possible.

By the way, such behavior is based upon  moral, ethical and honest dealings with others.

joel hoffman said:

Matthew, I think that many people quite often practice a win-lose approach for various reasons in their daily lives. This includes personal and business relations, and in any type of negotiations.

There is a difference between deliberately pursuing a win-lose approach as one's objective end state and ending up in a win-lose situation because of naivety.  I suppose that is the distinction I was trying to get at.  I don't think that on average people behave in an exploitative manner - there are people and markets that do, but I think they are the exception, not the rule.

Matthew, Win-Lose behavior can be mutual in relationships and/or negotiations. “It takes two to have an argument”, as they say. I’ve seen some marriages with such behavior dissolve with a lot of de-programming necessary afterwards.

I think win-lose thinking and behavior is perfectly natural in market situations in which exchanges are entirely transactional: there is no past, there is no future, there is only the present. The classic case is a sale in which the parties haggle over nothing but the purchase price and do not expect to ever see each other again. The more money the buyer pays, the less money the buyer will have and the more the seller will have. It's a zero sum game every. But such thinking and behavior becomes problematic when the exchange is relational, and there will the exchange will take the form of an ongoing relationship between the parties.

The classic discussion of this can be found in "The Many Futures of Contracts" by Ian R. Macneil, which appeared in Southern California Law Review, 1974 (47 S.Cal. L. Rev. 691, 1973 - 74). The article was the foundation of the relational theory of contract.

Many things have been said here, but much of the debate has been prompted by careless expression, such as "misrepresentation of fact" and saying that government negotiators do it "routinely." When Matthew said it was a euphemism for lying, some people back-peddled off a tough stance, because that's not what they meant by the term. They were referring to deceptive behavior, like saying that they could not pay more because they did not have enough money, a more sophisticated version of the old market game of reacting to a seller's price by saying, "What do you think I am, a rich man?" or "But I have a poor, sick mother at home to take care of" or pretending to walk away. Something like the legendary care salesman's tactic of saying, "Let me go talk to my boss," only to come back and say that the boss wouldn't go for it, but how about....? And see the "haggling" episode in "Monty Python's Life of Brian."

I know here_2_help personally, and I do not believe that he advocated lying. Reading some of his posts of late and having discussed some cases with him, I think that he has become somewhat embittered by some of his experiences with the government. On the basis of my knowledge of him, I say he is a very upright and trustworthy person.

if only there were some sort of statute about truth in negotiation...

kevlar51 said:

if only there were some sort of statute about truth in negotiation...

Granted, but it doesn't apply to many types of negotiations. For example, it is not applicable to the negotiation of final indirect cost rates subsequent to a DCAA audit report that questions certain contractor costs, even if the aggregate total of the questioned costs is in excess of $2 million.

Hypothetical:

You're in a firm-fixed-price contract negotiation. You've been going back and forth with the other side: offer-counteroffer. Then the other side submits a counteroffer that you believe to be based on a false assumption that works in your favor. They don't say that they made the assumption, and they don't ask you a single question about the matter, but you can tell based on the content of the counteroffer.

Do you tell them that you think they made a false assumption?

On 4/19/2018 at 12:36 PM, PepeTheFrog said:

What does a hostage negotiation look like without any deception (full transparency, full symmetry of information)?

Not analogous to a contract negotiation. Irrelevant to the discussion.

Vern Edwards said:

Hypothetical:

You're in a firm-fixed-price contract negotiation. You've been going back and forth with the other side: offer-counteroffer. Then the other side submits a counteroffer that you believe to be based on a false assumption that works in your favor. They don't say that they made the assumption, and they don't ask you a single question about the matter, but you can tell based on the content of the counteroffer.

Do you tell them that you think they made a false assumption?

On the Government side, I certainly would for a few reasons:

Philosophically, I think Contracting Officers should be objective arbiters of the process.  Sure they must safeguard the interests of the United States and be good stewards of the taxpayers' dollars, but I often say that I've never read anywhere in the FAR a directive to "save as much money as possible" (particularly at another party's expense).  Instead, the FAR says a CO's responsibility is to award contracts at fair and reasonable prices (which with lingering false assumptions can one accurately determine that amount?) and to conduct business with integrity, fairness, and openness.  I think addressing the false assumption is behavior consistent with both of those charges.

Negotiation wise, by raising that issue (assuming it isn't the only lingering one since the scenario does say "you've been going back and forth") I think you'll likely gain a considerable amount of credibility with the other party that could help propel what might be an intractable negotiation towards closure.

Lastly, if not acted on, unexpressed assumptions inevitably rear their ugly heads during contract performance and that could have two implications: (1) the differing expectations during contract performance could jeopardize successful and smooth performance & (2) if it's apparent or becomes apparent that you knew about it and said nothing, that's going to damage the relationship (the implications of which have already been discussed enough on this thread).

On the Contractor side, I'd like to say I would as well - hopefully, I'd be able to sell the positive long term benefits to my boss so that I could keep my job 

Speaking of contract negotiations and hostage negotiations, here is a book from a man who has done both and discusses the similarities:

Never Split the Difference

Regarding making a deal involving false assumptions: if you value a relationship, and/or want to actively manage the risk you should clarify the situation. Did the assumption involve an ambiguity in our offer? If yes, what type?

A lot of what we do is clearing up ambiguities. I'd rather have a meeting of the minds than strike a deal that involves a false assumption. Accepting their assumption (counteroffer) involves an assumption on our part and may lead to the disputes process and a third party's version of principles for contract interpretation.

It would be interesting to know if the counter-offeror's false assumption was reasonable and what that changes, if anything. For example, could it be argued that no contract exists?

On 4/18/2018 at 3:34 PM, Zag2009 said:

...since the work is complete, the risk no longer exists.

There is a certain perverse logic in play here - Government delays the negotiation, and in so doing achieves a lower fee !  I'm assuming at this point you are asking for actual costs plus fee/profit?  As suggested, if I were you, I would focus the negotiation on the portion of fee that is supposed to compensate for that risk component.

On 4/18/2018 at 4:23 PM, PepeTheFrog said:

Is PepeTheFrog incorrect?

Yes, 'pepe' is incorrect. Good negotiators don't have to lie, and good negotiators don't let their emotions sway their judgement (think of LCDR Data. He was incapable of lying, because lying is an emotion-based response to avoid embrrassment,  consequence, etc.).

As a practical matter, I simply don't know how you could even have a strategy based on misrepresentation.  How would that work in the PNM?  Would you actually add a 'misrepresentation' cost element, which detailed the upper and lower bounds of what you are going to misrepresent?

The negotiator's job isn't to get the Best Price in The History Of The World; it's to achieve  a fair and reasonable price.  Ralph Nash sums it up nicely in his writings on Good Faith and Fair Dealing on the part of the Government.  Those F-35s ain't going to build themselves after all.

On 4/20/2018 at 3:45 PM, Vern Edwards said:

Do you tell them that you think they made a false assumption?

I would say 'yes', as doing otherwise would not result in a fair and reasonable outcome.  A false assumption may also indicate an ambiguity in the requirements.

REA'n Maker said:

There is a certain perverse logic in play here - Government delays the negotiation, and in so doing achieves a lower fee !  I'm assuming at this point you are asking for actual costs plus fee/profit?  As suggested, if I were you, I would focus the negotiation on the portion of fee that is supposed to compensate for that risk component.

Emphasis added - that's an assumption, not a fact of the OP's scenario.

Matthew Fleharty said:

Emphasis added - that's an assumption, not a fact of the OP's scenario.

Fair point. But a contractor has no incentive to delay receiving  revenue, whereas the Government does have an incentive to delay expending revenue. Plus, this is the Government we're talking about here...😀

In all honesty, when I used to do this stuff for the Navy, there was oftentimes a little devil sitting on my shoulder, whispering in my ear that if I just dragged my feet for a month or two, the negotiation would be much easier because it would simply be  a matter of reviewing actuals at that point.

On 4/20/2018 at 2:45 PM, Vern Edwards said:

Hypothetical:

You're in a firm-fixed-price contract negotiation. You've been going back and forth with the other side: offer-counteroffer. Then the other side submits a counteroffer that you believe to be based on a false assumption that works in your favor. They don't say that they made the assumption, and they don't ask you a single question about the matter, but you can tell based on the content of the counteroffer.

Do you tell them that you think they made a false assumption?

Yes. Not only is it the right thing to do, I have seen where it fostered trust in me by a contractor. Negotiations of subsequent modifications were easier and day to day relations improved.

Negotiation does not involve any deception is on par with diversity is our greatest strength.

Some of you sound like church ladies and it makes PepeTheFrog yawn. 

Look, PepeTheFrog does not want to deny you the opportunity to feel warm and fuzzy inside and get a hit of dopamine. Nor does PepeTheFrog want to deny you the opportunity to signal to Internet forum peers that you're morally virtuous and display none of the defects of human nature. 

But when you're being honest with yourselves and not trying to preen or spin into a moral fervor...

...maybe after you've had a stiff drink...

...you'll admit...

Deception is a fundamental part of negotiation. You can judge a society, economy, legal system, culture, civilization, etc. by how much deception is legal or socially acceptable in negotiation. PepeTheFrog agrees it must be kept to the bare minimum.

But seriously, frogs. Name the society, economy, legal system, culture, civilization, etc. that has zero deception in negotiation. Do it without bringing up how you're an angel and never deceived anyone nor would deceive anyone, ever, in any situation.

@PepeTheFrog I don't recall anyone here saying that deception doesn't happen, but there are plenty saying it shouldn't.

PepeTheFrog said:

Deception is a fundamental part of negotiation.

de·cep·tion

dəˈsepSH(ə)n/

noun

synonyms:

deceit, deceitfulness, duplicity, double-dealing, fraud, cheating, trickery, chicanery, deviousness, slyness, wiliness, guile, bluff, lying, pretense, treachery

The downside of course being that  you only get to employ that tactic once, because your credibility and integrity is totally shot thereafter.

REA'n Maker said:

The downside of course being that  you only get to employ that tactic once, because your credibility and integrity is totally shot thereafter.

You can employ deception more than once. Your credibility and integrity is harmed only if (a) you get caught and (b) it's a form or instance of deception that, for whatever reason, is "bad" enough to destroy your credibility and integrity. Nobody cares if you're caught with an inflated "bottom line" in many types of negotiation. "OK, fine, you're really killing me, but I'll do $12,500 instead of my limit, which was $13,000...but only because I really like you!"

You're implying that all tactics that involve deception will destroy your credibility and integrity (and that you will get caught every time). Putting aside getting caught, not all forms of deception rise to the level of the synonyms you listed like fraud or treachery. Fraud or treachery will likely destroy your credibility and integrity. Successful bluffing will not have any effect. Unsuccessful bluffing might reduce it. Guile will not likely destroy it; your opponent might respect you more for it. Lying may or may not reduce or destroy it. It depends on the lie and whether you get caught. 

PepeTheFrog thinks many of you have an emotional reaction to the word and concept of deception. Deal with it. Face reality. 

PepeTheFrog would say that some of you are living in a world that doesn't exist, or that you are playing by rules that nobody else follows. But PepeTheFrog doesn't believe some of you are being honest and fully transparent....instead, you're being deceptive about your potential for and comfort in using deception. Or maybe you're just deceiving yourself.

Matthew Fleharty said:

I don't recall anyone here saying that deception doesn't happen, but there are plenty saying it shouldn't.

That's like saying competition and violence shouldn't happen. Or that hierarchy should be abolished. 

Good luck! You might say I'm a dreamer, but I'm not the only one...

The reality is that a frog has to practice deception and guile to avoid being eaten by predators, such as the 14 foot alligator in my back yard lagoon. Unfortunately, she believes that it is also necessary at her work.

PepeTheFrog said:

That's like saying competition and violence shouldn't happen. Or that hierarchy should be abolished.

No it’s literally not - stop drawing false equivalences, it’s bad form.

PepeTheFrog said:

You're implying that all tactics that involve deception will destroy your credibility and integrity (and that you will get caught every time). Putting aside getting caught, not all forms of deception rise to the level of the synonyms you listed like fraud or treachery. Fraud or treachery will likely destroy your credibility and integrity. Successful bluffing will not have any effect. Unsuccessful bluffing might reduce it. Guile will not likely destroy it; your opponent might respect you more for it. Lying may or may not reduce or destroy it. It depends on the lie and whether you get caught. 

PepeTheFrog thinks many of you have an emotional reaction to the word and concept of deception. Deal with it. Face reality. 

PepeTheFrog would say that some of you are living in a world that doesn't exist, or that you are playing by rules that nobody else follows. But PepeTheFrog doesn't believe some of you are being honest and fully transparent....instead, you're being deceptive about your potential for and comfort in using deception. Or maybe you're just deceiving yourself.

“Putting aside getting caught...”?!?!?! Who is living in their own world now Pepe?! You cannot just wish away a strong argument against your position because it’s convenient for your point. You’ve ignored the fact that (a) inevitably deceptive practices will be caught if repeated over time and, further (b) trained and prepared negotators know how to identify deception.

There are other, effective ways to negotiate beyond relying on or using deception - period.

PepeTheFrog said:

PepeTheFrog thinks many of you have an emotional reaction to the word and concept of deception.

My response is devoid of any emotional or moral precepts.  It's simply a fact that deception is not a sound business strategy.  There is no recovery after  your deception is exposed.  Your effectiveness as a negotiator after that point is zero.  Simple as that.

REA'n Maker said:

It's simply a fact that deception is not a sound business strategy.

Deception is a fundamental part of negotiation. 

You switched to business strategy, which opens to the door to even more deception.

What is marketing? Is there any deception in marketing? Marketing is a fundamental business strategy (or tactic, or practice). 

What is advertising? Is there any deception in advertising? Advertising is a fundamental business strategy (or tactic, or practice).

REA'n Maker said:

There is no recovery after  your deception is exposed.  Your effectiveness as a negotiator after that point is zero.

You overstate the cost of being caught for deception by assuming the absolutely worst form of deception. Fraud might reduce you to zero, sure. Concealing critical facts or information about your strategic position so that the other side has a mistaken (incorrect, inaccurate, untrue) belief about your position will not reduce you to zero. It's expected because deception is a fundamental part of negotiation.

Matthew Fleharty said:

You’ve ignored the fact that (a) inevitably deceptive practices will be caught if repeated over time and, further (b) trained and prepared negotators know how to identify deception.

Some deceptive practices will not be caught and can be repeated over time.

There is some deception that negotiators cannot or will not identify, no matter their level of training or preparation. You overstate the ability of trained and prepared negotiators. How can a negotiator know what they don't know? CIA and DOD research into remote viewing and psychic phenomena has not progressed as far as you might think and those that demonstrate abilities are not widely available as negotiators. They're usually used for other projects. 

Matthew Fleharty said:

There are other, effective ways to negotiate beyond relying on or using deception - period.

True, but that doesn't falsify that deception is a fundamental part of negotiation.

When you negotiate, the other side sees your position as an iceberg above the water. The other side only sees what you present about yourself, or what the other side can find out about you.

The iceberg below the water is what the other side doesn't know, which is the totality of your incentives, finances, strategy, timelines, etc. Part of your job as a negotiator is to conceal a certain amount of the iceberg below the water so that you can maintain a stronger negotiation position and get a better deal. If the other side knew everything about the iceberg below the water, your position would be weaker. As a negotiator, you lead the other side to believe that your negotiation position is stronger than it is in reality by keeping certain facts or information to yourself. You lead the other side to believe something that is not true (deception).

Deceive: cause (someone) to believe something that is not true, typically in order to gain some personal advantage

joel hoffman said:

The reality is that a frog has to practice deception and guile to avoid being eaten by predators, such as the 14 foot alligator in my back yard lagoon. Unfortunately, she believes that it is also necessary at her work.

"Tho' Nature, red in tooth and claw"

PepeTheFrog said:

True, but that doesn't falsify that deception is a fundamental part of negotiation.

Yes it does.  See definition of "fundamental"

Quote

forming or serving as an essential component of a system or structure; central

If one does not need to use or rely on deception to be an effective negotiator (which you just agreed was "true"), it follows that deception is not essential and therefore, not a "fundamental part of negotiation."

Somebody call Professors Dunning and Kruger.

Matthew Fleharty said:

If one does not need to use or rely on deception to be an effective negotiator (which you just agreed was "true"), it follows that deception is not essential and therefore, not a "fundamental part of negotiation."

Sloppy, sloppy, sloppy. Or maybe it's deceptive?

PepeTheFrog said that it is true that... 

Matthew Fleharty said:

There are other, effective ways to negotiate beyond relying on or using deception

@PepeTheFrog 

This: "There are other, effective ways to negotiate beyond relying on or using deception."

&

This: "...deception is a fundamental part of negotiation."

are mutually exclusive statements.

If you can explain how they are not mutually exclusive, please do so, but "sloppy, sloppy, sloppy" is not an argument.

@PepeTheFrog

Are you advocating deception in negotiation, or are you just saying that it's common and that you should be prepared for it?

I think I finally understand the context of the negotiation Pepe The Frog is describing, where deception plays a major, positive role in the outcome:

In this context, Pepe is 100% on the mark. I stand corrected.  😄

I hope that's the last word in this thread. 😊