Facilitated Contract Renegotiation (FCR) can be a very useful way of resolving an issue between contract parties without triggering a formal dispute mechanism, thereby enabling the parties to continue their contractual relationship. Here are some tips about how you should approach FCR:
1. To begin with, like all negotiation, you are likely to get the best outcome from FCR if you prepare properly. This includes analysing your position, and the pros and cons of each possible option. It also includes identifying what your “walk-away” position is (your Best Alternative to a Negotiated Agreement, or “BATNA”).
2. You need to be clear with the other party about what you want, and also about the consequences if the FCR is unsuccessful – without being threatening. But you need to be flexible about your demands. The negotiation will involve give-and-take. In order to achieve an outcome that you want, you will probably have to give something up.
3. You need to both listen and communicate. This is all the more important in an FCR, where there has already been a contractual relationship, perhaps for some time. Both sides have to understand how the current situation has arisen, and why a renegotiation is needed. That understanding can only come through listening and communication.
4. You should use the facilitator. They are there to help the parties deal with difficulties in the renegotiation. If there is an issue with communication, for example, the facilitator can help to deal with this – perhaps by speaking to the parties privately, or making suggestions about who would be the appropriate person on each side to hold a meeting.
5. You should always keep the relationship in mind. The parties come into the FCR with a history – an experience of dealing with each other. The good and the bad points from that history are likely to come into the discussion. You should see the FCR as an opportunity to strengthen the relationship. In order to do this, you will need to appreciate how the relationship has changed over time, and what is required for the parties to move forward.
6. You need to treat each other with respect. This should not be seen as an opportunity for one party to take advantage of the other, and one party should not be put in the position where they feel they are begging the other for help. Both parties need to recognise that they are on an equal footing because there is a benefit to both of them to continue the relationship.
7. It is important to show you are being reasonable. The party that has requested the renegotiation needs to explain the situation clearly. The other party should be ready to ask open questions about this, so that they get the information that they need. Both parties then need to explain clearly the reasons for what they are asking for.
8. Don’t ascribe blame. Criticism creates obstacles for the negotiation. The FCR looks to the future and is not stuck in the past, and this is not a battle, with each party scoring points off the other, but a collaboration.
9. Assess objectively the options that are presented. Don’t let emotion or criticism get in the way. Weigh up the options against your BATNA, and also how they will affect the relationship going forward. Don’t be afraid of rejecting an option if it is unworkable for you, but do so positively with suggestions of how the option might be reworked in order for it to be acceptable. This shows the other party that you have taken on board what they have said.
10. Be humble. Both parties need to acknowledge any mistakes, and accept the position that they are in. And be positive, accepting that there is value in continuing the relationship. Humility and positivity lead to creativity: it will help the parties see more clearly the options that are available to them, and encourage them to work together to think up more options.
Ben Giaretta, Partner, Fox Williams