Contracts & Legal


Negotiation is a process of two or more people trying to come to an agreement that satisfies the interests of all parties.  According to Ware (2007), “To negotiate is to communicate or confer with another to arrive at the settlement of some matter” (page 6). The process is carried out to contract development, requirements development, resolve differences, bargain for collective rights, and to satisfy any breaches in a contract with the overall intent to create a compromise. Through the process of negotiating, an agreement is established and a course of actions is developed that each party must follow. [1]

Website: FAR Part 15 – Contracting by Negotiation

In Government Contracting: (FAR 15.306(d)).

Negotiations are exchanges, in either a competitive or sole source environment, between the Government and offeror’s, that are undertaken with the intent of allowing the offeror to revise its proposal. These negotiations may include bargaining. Bargaining includes persuasion, alteration of assumptions and positions, give-and-take, and may apply to price, schedule, technical requirements, type of contract, or other terms of a proposed contract. When negotiations are conducted in a competitive acquisition, they take place after the establishment of the competitive range and are called discussions. [2]

Negotiated Contracts vs. Sealed Bidding (FAR 14.101(d), FAR 15).

The Federal Acquisition Regulation (FAR) states that any contract awarded using other than sealed bidding procedures is considered a negotiated contract. [2]

  • Procedures for contracting by sealed bidding require the Government to evaluate bids without discussions and award to the responsible bidder whose bid, conforming to the invitation for bids, will be most advantageous to the Government considering only price and price-related factors. Negotiations are not permitted prior to contract award.
  • Procedures for contracting by negotiation permit negotiations prior to contract award. However, a solicitation under procedures for contracting by negotiation may or may not actually require negotiations. For example, the Instructions to Offeror’s — Competitive Acquisition:
    • The standard provision states that the “Government intends to evaluate proposals and award without discussions.” When that provision is used, actual negotiations are not permitted unless the contracting officer determines in writing that they are necessary.
    • Alternate I, states that the “Government intends to evaluate proposals and award a contract after conducting discussions with offeror’s whose proposals have been determined to be within the competitive range.” Here negotiations are required with any offeror(s) in the competitive range.

Satisfactory Negotiation Results (FAR 15.101, FAR 15.402(a), FAR 43.103(a), and FAR 49.201(a)).

What is a satisfactory result in a Government contract negotiation? That depends on whether the negotiation is competitive or non-competitive and when it takes place in the contracting process. [2]

  • Competitive discussions may take place either before contract award or before award of a task/delivery order under an indefinite-delivery indefinite-quantity contract. The discussions with each offeror in the competitive range should be directed to facilitating the preparation of a final proposal revision that will provide the best value for the Government, given the award criteria, the offeror’s proposal, and existing constraints within the offeror’s organization. Then the Government can evaluate the available proposals to determine which proposal offers the overall best value.
  • Noncompetitive negotiations can take place either before or after the award. In non-competitive negotiations for:
    • Award of a new contract or a task/delivery order under an existing indefinite-delivery indefinite-quantity contract, the satisfactory result is a contract or order that provides for the purchase of the required supplies or services from a responsible source at a fair and reasonable price.
    • A bilateral contract modification, the satisfactory result is a contract modification that reflects the agreement of the parties about any modification of contract terms, including any necessary equitable adjustment related to the modification.
    •  A fixed-price termination for convenience settlement, the satisfactory result is a settlement that fairly compensates the contractor for the work done and the preparations made for the terminated portions of the contract, including a reasonable allowance for profit.

Overriding Negotiation Themes

Government negotiators should always keep in mind the following basic attitudes when negotiating Government contracts:

  • Think win/win;
  • Sell your position;
  • Win results not arguments;
  • Everything is negotiable; and
  • Make it happen.


AcqLinks and References:

Updated: 7/20/2021

Rank: G

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