Government Contract Negotiation Training Makes Your Pricing Job Easier

Navigating government contract negotiations can require nerves of steel, but with the proper training and approach, you can transform this often daunting process into a cornerstone of your firm's success. 

The key is understanding that a solid technical proposal can lead to smoother and more profitable pricing discussions for you. However, the converse is also true: A weak technical proposal automatically signals to your agency evaluators to negotiate your pricing down. 

By always focusing on innovation and creating value for the government, contracting by negotiation becomes not just manageable but a strategic advantage.

There is also a flexible set of guidelines. The Federal Acquisition Regulation (FAR) outlines acceptable price negotiation methods in section 15.405, which covers the fundamentals of pricing discussions and resultant proposal revisions.

These guidelines aim to balance profitability for your firm and the optimal use of taxpayer funds. A close study of this FAR section can help prepare you for negotiation training. 

Here's a pro tip to get you started: Develop your negotiation strategy with "target" and "floor" positions. Your goal should be to conclude negotiations as close to your target as possible without dipping below your floor. This approach involves submitting initial pricing that falls between these two amounts, giving you room to maneuver during discussions.

Qualifications of a Government Contractor Negotiator

To excel in negotiations, you'll need to wear many hats—and make sure they all fit. You're not just crunching numbers – you're an influencer, a problem-solver, a communicator and more, all rolled into one. Your ability to think on your feet and adapt to changing circumstances can make or break a deal.

Imagine you're in a high-stakes negotiation. The agency representative suddenly throws a curveball, questioning your proposed compliance checks and balances. This is where your analysis skills and contract experience come into play. You quickly recall a similar project you handled last year, and use that knowledge to propose an innovative sprint methodology that includes continuous compliance monitoring and reporting. 

Your emotional intelligence is just as crucial as your technical know-how. When tensions rise over budget constraints, your ability to read the room and steer the conversation toward mutual benefits can turn a potential deadlock into collaborative problem-solving.

Remember, negotiation isn't just about winning – it's about creating value for both parties. The way to do that? Always identify opportunities for innovation that benefit everyone at the table.

A Government Contractor’s Negotiation Skills in Action 

Let's look at a composite, real-world example of these skills in action. Meet Sarah, a Senior Contract Manager who recently faced a challenging software implementation project for a federal agency. The initial Request for Proposal (RFP) contained ambitious delivery timelines that could have compromised quality and increased risk.

Instead of immediately pushing back, Sarah decided to take a step back and analyze the agency's underlying needs and historical procurement patterns. She understood that what's written in an RFP sometimes doesn't fully capture the agency's true objectives.

During the negotiation session, Sarah presented a data-driven alternative schedule. Her approach wasn't just about extending deadlines – it actually enhanced the agency's core objectives of 99% system uptime, while reducing implementation risks. This showcased her deep technical knowledge paired with a genuine concern for the agency's mission.

When stakeholder tensions rose over the proposed timeline adjustments, Sarah maintained her composure. She steered the discussion toward mutual benefits, focusing on how her proposed changes would ultimately lead to a more successful outcome by minimizing potential quality risks in material and labor deliverables. 

The turning point in the negotiation came when Sarah identified an innovative phased delivery approach. This solution satisfied both the agency's urgency and the contractor's quality standards – a win-win scenario that might have been overlooked in a more adversarial negotiation.

Throughout the process, Sarah's careful attention to compliance requirements built credibility with the CO. By focusing on shared goals rather than opposing positions, she transformed what could have been a contentious discussion into a collaborative one.

The final agreement achieved the agency's core objectives while establishing realistic milestones and transparent performance metrics. Sarah's approach exemplified how skilled negotiators can bridge competing priorities through strategic thinking and relationship building.

Contractor Negotiation Education Requirements

While there's no one-size-fits-all path to becoming a successful contract negotiator, a solid educational foundation can give you a significant advantage. Most professionals in this field hold a bachelor's degree in business, law, economics, management or contract management. 

But few stop there – many successful negotiators complement their formal education with specialized certifications in contract management or negotiation skills. These additional credentials can set you apart in a competitive field and demonstrate your commitment to ongoing professional development.

Beyond education, you'll need to develop expertise in areas like understanding legal terminology and interpreting complex material for laypeople. Imagine you're negotiating a complex IT infrastructure contract. Your ability to translate technical requirements into clear contract language while understanding the legal implications of various clauses can be the difference between a successful project and a costly misunderstanding.

While a traditional education has been ideal until now, the field increasingly values practical expertise and demonstrated negotiation skills. If you have strong business acumen and a track record of successful negotiations, you might qualify for positions even without a conventional degree. However, this path typically requires significant relevant experience to compensate for the lack of formal education.

The most successful negotiators commit to lifelong learning, formal or otherwise. 

What You’ll Learn in Contract Negotiation Training

The Ground Rules 

When you embark on contract negotiation training, you'll discover that successful negotiation is built on a support system of tried-and-true principles. 

These fundamentals will serve you well throughout your career:

1. Be over-prepared: Knowledge is power in negotiations. You'll learn techniques for researching not just your own pricing positions but also those of the agency you're dealing with.

2. Develop flexible options: Negotiations rarely go exactly as planned. You'll practice creating multiple scenarios and backup plans to adapt to changing circumstances.

3. Stay alert to non-verbal communications: Sometimes, what's not said is just as important as what is. You'll learn to read body language and other subtle cues that can give you an edge.

The Templatized Negotiation Process That All Contractors Use

In federal contracting, each type of contract scenario passes through the following steps, which is the templatized format for agencies, too:

A. Audit. When a Contracting Officer (CO) receives your proposal as a result of your response to an RFP, they will order a Defense Contract Audit Agency (DCAA) audit of your proposal. 

The DCAA may also visit your facility and complete a "Pre-award Survey of Prospective Contractor Accounting System" form. The survey checks compliance with Cost Accounting Standards 401 and 402 to ensure that you have set up your contract on job cost accounting in the same manner it was proposed—in effect identifying direct labor, material and other direct costs that map to the contract. 

How this applies to price negotiations. A DCAA audit doesn’t extend to the negotiation phases of a contract. Still, if you’re astute, you’ll request a copy of the audit and revise your proposal based on any errors the auditor found in preparation for negotiations with your prospective agency client. 

B. Fact-Finding. At this point, your CO might request additional information. They will use this to look for disconnects between your technical approach and the costs and prices you estimate to do the job. 

Your agency might want to examine previous contracts where you’ve done similar work. Remember that most government agencies put together an independent cost estimate of what they feel a product or service should cost—even before distributing an RFP.

At this point, your CO is assessing the cost and the risk associated with the program. The cost will be the first negotiation item, and risk directly influences the government's position on profit. 

How this applies to price negotiations. If your pricing lacks rationale or you’ve written questionable past proposals, the less profit your agency will likely allow you during the negotiation phases. Make sure your justifications and your reputation are buttoned up. 

C. Pre-award Survey. If you’re a contractor brand new to government work, the agency will pay you another visit to determine if your operation is set up to honor the contract, should you receive an award. For example, are your production operations sufficient? Is your manufacturing equipment reliable? What about the qualifications of your staff and sub-contractors you may bring on?

How this applies to price negotiations. The younger you are in the contracting game, the more an agency will scrutinize your business processes and the more rigid they will likely be about your profit.   

D. Cost Negotiations. Here is where the metal meets the road. Once the government makes a counter-offer to your proposal cost (and they will), you’ll need to see how far the counter is away from your “floor” and how close it is to your “target.” 

You’ll likely decide that further negotiations are necessary. The profit issue will move to the sidelines, and talks will commence around reasonable costs. These are the most critical elements of negotiation since fully loaded costs make up most of the contract price. Your firm and the agency will discuss each direct and indirect cost.

The cost elements most open for negotiation? Labor categories and hours, travel, data technology and materials. 

E. Final Profit Negotiations. Once you and your agency agree on costs, your profit rate depends on the risk you can undertake. An agency rarely proposes profit at a rate higher than 25%, and only at that level on firm, fixed-price contracts where the risk to the contractor is highest.

Avoid Short-Term Pricing Tactics in Long-Term Contract Negotiations

As you develop your negotiation skills, think beyond the current contract. Consider how your approach might impact future opportunities with the same agency. For example, aggressively pushing for maximum profit on a minor initial contract might hurt your chances of securing more significant, more lucrative contracts down the line.

Effective negotiation is about more than just following a series of steps. It requires flexibility.  Empathy. Strategic thinking. And above all, adaptability. By understanding the agency's long-term goals and aligning your proposals accordingly, you can position yourself as a valuable partner rather than just another vendor.

Valuable Resources You Can Learn From 

1. In-person training. Federal Publications Seminars are live, onsite 2-day training sessions that are excellent, experiential ways to learn cost and pricing negotiations that benefit both sides of the table. Most importantly, they help you craft a good working relationship with your agency after an award. 

These seminars cover the specifics of negotiating contract and subcontract provisions, prices and claims—and include instruction on creating teaming agreements, subcontract agreements and terms and conditions. 

2. Online training. Udemy offers highly regarded contract negotiation training and instruction on many other topics in building a relationship with the government. Start with this introductory pricing negotiation class, FAR 15 Cost Proposals, Cost Analysis, and Negotiations, then work your way up. Among other topics, this class helps you understand how the federal government calculates profit and fee rates, as well as some of the best ways you can negotiate them.

How Deltek Can Help Smooth Negotiations

As direct and indirect rates change during negotiations, quickly modifying your proposal line items with a tool like  Deltek ProPricer is as easy as making a few clicks, significantly shortening your timelines between phases—and leaving more time for your persuasive narrative. In comparison to Excel, you’ll see why both contracting firms and agencies prefer a synchronous platform that makes file transfers a breeze during negotiations.