Duncan MacLaren; adapted from The Tendley ContractTwo-party potentially integrative contract negotiation between representatives of a large corporation and a consulting firm over very different expectations of the cost of services
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Several years ago, GE International purchased a networked computer system to serve all of its operating departments. Unfortunately, the computer system has become utterly ineffective. GE International’s Senior Manager of Information Management Operations has been charged with finding an expert to divide and reprogram the computer system, rewrite the manuals, and maximize the value of the existing high-quality hardware and software.
The Senior Manager has located a computer consulting company that seems to be far better equipped than any of the alternative companies to handle this project. The consulting company, in turn, is eager for the publicity of working with a world-renowned company like GE International. At the last minute, the Senior Manager and the computer consultant realize that they have been exploring this contract without knowing that the other party had an enormously different idea regarding the appropriate price for the project. The parties are meeting one last time to see if there is a way to salvage the deal.
This case is similar to The Tendley Contract but takes place in a more corporate setting.
- This case is an excellent vehicle for comparing principled negotiation to positional bargaining.
- What are the advantages and disadvantages of revealing one’s BATNA in this situation? How do the parties’ BATNAs — and their disclosure or nondisclosure of them — affect the negotiation?
- The fact that there is such a huge discrepancy in what the two parties want GE International to pay for the job makes it very difficult to come up with a contract without generating creative options. What can the parties do to facilitate option generation?
- This case often generates discussion around “fair” pricing for the contract. What are some criteria for determining a fair price? Are the parties’ initial expectations regarding the price relevant to what the price should be? Do the parties’ BATNAs have any bearing on what the price should be?
- Confidential Instructions for:
- Computer Systems Consultant
- GEII Team
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- All of the above
- Teaching Note
GE International Contract Attributes
- Time required:
- 30 minutes – 1 hour
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