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Is Your Contract Negotiation Team Lacking the Competencies Needed for High-Stakes Deals?

  • Writer: Arvind Dang
    Arvind Dang
  • Apr 11
  • 5 min read

Updated: Apr 12




Contract negotiation in manufacturing and infrastructure domains—especially high-stakes contracts—involves much more than price discussions. The absence of critical skills in your negotiation team can significantly weaken deal outcomes, impact long-term value, and expose your organization to operational and legal risks.

This article outlines 40 essential competencies, grouped into five core categories, that CEOs, COOs, and procurement heads must consider when forming effective contract negotiation teams. You don’t need every team member to possess all 40 skills, but a strategic distribution of these capabilities based on the contract type can radically improve results.

 

1. Types of Contracts in Manufacturing Industries

Bought-Out Materials:These are contracts for goods needed in the manufacturing process, such as:

  • Raw materials (e.g., steel, pig iron, plastic granules)

  • Semi-finished items (castings, forgings)

  • Assembly-ready components (tyres, lights, pumps)

  • SKD units (engines, axles)

  • Capital equipment and spares

  • Non-production items (IT hardware, office supplies)

SITC (Supply, Installation, Testing & Commissioning) Contracts:

  • Low-value SITC: For systems like solar energy setups or boilers

  • High-value SITC: For factory expansions, new plants, or integrated projects involving multiple disciplines like civil, electrical, and mechanical works

 

2. Manufacturing Complexity Matters

Understanding 66 different manufacturing processes (casting, forging, CNC machining, plating, welding, heat treatment, etc.) is essential, especially for professionals negotiating Bought-out or SITC contracts.


3. The Five Core Competency Groups

To succeed in negotiations, your team needs a balanced mix of:





A. Functional Competencies (12 skills)

  1. Basic knowledge of 66 key most common manufacturing processes

  2. Knowledge of cost elements & cost estimation skills such as below for Bought-out  or  SITC types contracts :

    1.  Raw materials

    2. Tools

    3. Jigs and fixtures

    4. Manufacturing variable costs

    5. Marketing variable costs

    6. Manpower costs

    7. Overheads

    8. Margins

    9. Taxes

  3. Rate analysis, Bid evaluation, and  negotiation  skills

  4. Payment methods/terms (Unique for local /Imports for Bought out  & milestone accomplishment  based on SITC types

  5. INCO terms knowledge from Cost & risk responsibility  sharing perspectives

  6. Knowledge of the  basic prices of raw materials, their  vendors, and availability and knowledge of conversion costs/ processing costs of materials

  7. Vendor and contractor’s  technical evaluation skills

  8. Reputed  Vendors and contractors’ knowledge base

  9. Vendors//Contractors relationship management skills

  10. Logistics costs for  different modes (Road, Rail, Ship, Air, Courier, Multimode) and Marine insurance policies and premiums

  11. Material control, Inventory management skills

  12. Imports licensing /customs clearance -knowledge

 

B. Technical/QC Competencies (4 skills)

Focuses on:

  1. Basic knowledge of the technical features of a variety  of raw materials and substitutes  required for 66 manufacturing processes for  use in Bought-out  or  SITC types of contracts

  2. Quality Standards related to Category Bought-out  or  SITC such as

    1. Applicable Quality  Inspection standards- both local  and International,

    2. inspection methods for materials, WIP, and completed Bought-out  or  SITC types contracts

    3. Sampling plans

    4. Type of  inspection gauges, Tolerance limits

  3. Key Quality aspects  for Bought-out  or  SITC types of contracts  such as :

    1. Physical characteristics

    2. Workmanship

    3. Technical properties,

    4. Functional

    5.  Performance parameters

    6. Endurance tests

  4. Ability to read and understand drawings and specifications –Hard copies or auto CAD/other  software

C. IT/ERP Competencies (5 skills)

Involves:

  1. Knowledge of ERP software for materials management specifically relevant to purchase functions, such as

    1. Bidding software, Purchase, Inventory management, Receipts, and issues,

    2.   Quality management software(familiarity),

    3.  Vendor bill processing software, Vendor payments

  2. Knowledge of Microsoft Office or similar software

  3. Knowledge of IT security aspects  vis a vis vendors such as :

    1.  Access norms to Masters,

    2.  Database of purchase orders, contracts, agreements

    3. Quality reports

    4. Critical business process flows

  4. Knowledge of various masters, like

    1. vendor,

    2. materials/items, employees,

    3. and algorithms-related configuring rates in ERP software for landed costs

  5. Knowledge of audit trails in built-in ERP/buying software and ability to generate essential reports from databases related to the purchase for comparative & landed costs analysis

 

D. Legal Competencies (10 skills)

Country Specific  Statutory Acts/regulations related to :

  1. Goods & Service tax –Rates & basic requirements for availing input tax credit

  2. Import-export-Policy framework

  3. Customs (Vendor invoice Valuation, Packing lists, examination by customs, anti-dumping etc)

  4. Custom tariff –Knowledge of HSN classification and effective import duty rates

  5. Contracts –Terms and conditions

  6. Income Tax deduction on contractual services received for SITC contracts

  7. Standards of Weights and Measures

  8. Packaging –Pricing and quality markings requirements

  9. Foreign Exchange Management, including RBI- norms for  payment terms & FC remittances

  10. Other relevant aspects applicable to the  Industry for purchase and contracts of Type 1,Bought out or SITC Contracts

E. Leadership Competencies (9 skills)

Requires knowledge of:

  1. Ethical frame of mind

  2. Team management ( For productivity enhancement)

  3. Team development and training ( for delegating  low value-added works to lower hierarchy)

  4. Alignment with organization objectives for Targets related to Revenue, Costs & Profitability

  5. Quality of work

  6. Effectiveness & speed

  7. Analytical mind

  8. Change management skills

  9. Risk management skills

 

 

4. Who Should Negotiate Contracts?



Effective contract negotiation isn’t a one-person job. Here’s a role-wise breakdown:

  • Core Team: Procurement or contract engineers lead negotiations, especially for medium-value items.

  • Senior Management: Heads of manufacturing and COOs participate in high-value negotiations where budget and technology align.

  • Subject Matter Experts: Technical, legal, or financial experts should be involved based on the type and complexity of the contract.

 

5. Role Hierarchies and Skill Levels

Negotiation teams are often organized into three broad levels:

  • L (Lower level): Staff, junior managers

  • M (Middle level): Managers, senior managers

  • H (Higher level): GMs, VPs, Presidents, CXOs

Each level contributes differently depending on the contract’s value, complexity, and associated risks. Segregation of duties (SOD) and financial authority guidelines dictate their involvement.

 

6. Illustrations: Matching Skills to Contract Scenarios

Here are four real-world examples that show how the 40 competencies apply in different contexts:

Illustration #1: Bought-Out Parts for a Vehicle Plant (High-Value)

  • Lower Level: Vital technical skills and desirable functional/legal knowledge

  • Middle Level: Essential in almost all areas

  • Higher Level: Strategic decision-making and legal oversight is vital

SMEs (Subject Matter Experts): Technical experts are recommended; legal/financial are optional based on complexity.

Illustration #2: High-Value SITC Project (e.g., Vehicle Manufacturing Plant)

  • Middle & Higher Levels: Require a strong mix of all five competencies

  • SMEs: Essential – include legal, technical (MEP/Civil), and financial experts

Illustration #3: ERP/IT Procurement

  • IT/ERP skills are vital at middle levels

  • Technical and legal input is important at all levels

  • SMEs: Strong involvement of IT experts is essential

Illustration #4: Non-Technical Admin Materials (Stationery, Office Equipment)

  • Lower-level staff can handle these with essential functional and technical knowledge

  • Higher-level input is need-based only

7. Key Takeaways for CEOs and Procurement Leaders

Before your next contract negotiation:

  • ✅ Ensure your team collectively covers all five competency areas

  • ✅ Assign roles based on contract complexity and value

  • ✅ Utilize legal and IT/ERP insights to strengthen your negotiation posture

  • ✅ Engage subject matter experts where required

 

Want to Deepen Your Negotiation Skills?

If you’re looking to transform your negotiation outcomes, check out my detailed Udemy course titled:

"Contract Negotiation: Enhance Your Skills—Unlock 9 Key Gains"

Course Highlights:

  • Real case studies across 5 major scenarios

    • Bought-Out: Grey Iron Castings, Hot Forgings, Machined Parts

    • SITC: Jacuzzi Systems, Passenger Lifts

  • 4.8-star rating from 58 students

  • 4800+ enrolled learners since launch (Dec 2024)

  • Over 1.24 million YouTube views across 82 videos on business ethics and contract negotiation


 

Final Thoughts

In today’s competitive environment, high-value contract negotiations require much more than intuition and price haggling. They demand a strategic blend of technical, commercial, legal, and leadership competencies—supported by process awareness and digital tools.

Don’t let weak negotiation frameworks cost your organization valuable time, money, or reputation. Build your team with foresight—and skill.

 




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