sample negotiation plan

5/20/2018 Sample Negotiation Plan

1/3

1

Team Code:G

NLU DELHI - HSF INTERNATIONAL NEGOTIATIONCOMPETITION 2014

National Law University, Delhi

NEGOTIATION PLAN FOR BRILLIANTINDUSTRIES

In the matter of

American Phones2Go

&

BrilliantIndustries


2/3

2

STRONG POINTS

BrilliantIndustries (hereinafter referred to as B) are currently far ahead of the schedule

with regards to completion of the project as sub-contracted to them by American

Phones2Go (hereinafter referred to as A). This is supported by the fact that 60% of the

required construction has been completed by B, while only half (50%) of the allocated

time to complete the project has elapsed. Completion of the project ahead of schedulewould make B eligible for the bonus amount stipulated in the sub-contract (5

million).

There is reason enough to believe that the Force Majeure clause, as defined in the sub-contract would be applicable to the current situation, especially in light of the fact that

the newly-formed Freedonian navy is incapable of providing any protection

whatsoever to the ships involved in the transportation of material and equipment.

Another relevant factor in determining the applicability of Force Majeure is the fact

that the only feasible method of transportation of material and equipment is via sea.

The road and rail infrastructure remains in a dismal state of affairs and will not be

operational for another five years at the very least. Further, transportation by air isagain not an option due to the cost of air freight being prohibitively high.

Bs reputation and stature as an experienced infrastructure-development company in

developing countries has led to them being offered a similar project in a different

continent, by another major telecommunications company, MobilesRUs.

In light of the recent allegations of fraud made against As CFO, A have given

reassurances to their business partners (including B), that a complete and transparent

investigation into the matter would be launched by them. This measure may help to

prevent B incurring any reputational damage that might be suffered by them as a

result of being associated with a company accused of fraudulent practices.

WEAK POINTS The allegations of fraud made against As CFO have marginally affected the prestige

gained by B of working with A, in a negative manner. If these allegations are proved,

this could be heavily damaging for Bs reputation, solely by being associated with A.

Although the project appears to be proceeding ahead of schedule, concerns have beenraised regarding the quality of some of the work done by B (25% of the completed

masts). Furthermore, a few of the masts do not seem to meet the correct specifications

as prescribed by A.

The cost of shipping new materials has spiked sharply and unexpectedly, on account

of rampant piracy in and around the Freedonian waters, along with the dismal state of

other forms of freight transportation in Freedonia. The increase in shipping costs has

led to a 15% increase in the overall cost of completing the project, translating into anadditional cost of 54 million. These additional costs have led to the project turning

into a loss-making operation for B, to the tune of 14 million.

There is enough reason to believe that the current situation regarding transport shows

no sign of abating in the near future. This has been substantiated by a U.N report

predicting an escalation of piracy in the foreseeable future, as well as the widely

accepted fact that transportation by road and rail would not be viable for another five

years at least.

There is ambiguity regarding the interpretation of the Force Majeure clause by the

Tradedonian courts, and thus it is possible that the courts could hold the Force

Majeure clause to be inapplicable. Such a decision would lead to serious financialramifications for B.


3/3

3

The increase in interest rates on the loan taken by B to upgrade its equipment (before

the signing of the sub-contract) has caused constraints on Bs cash flow. B could thus

face major financial problems if the value of the sub-contract is not substantially

revised.

B is further apprehensive about backing out of the contract, due to the fact that such a

move would damage its reputation as a company specializing in operations indeveloping countries. This damage in reputation could also jeopardize the current

offer made to them by MobilesRUs.

INTERESTS AND NEEDS

B are dependent on the revenue streams generated by the sub-contract between them

and A. Thus, it would be ideal for them to reach an agreement wherein such a

relationship continues to exist.

It is also of crucial importance to B that the existing value of the sub-contract is

revised and the financial consideration received by B is further increased, owing to

the sharp and unexpected increases in expenses.

Another crucial interest for B is to ensure that their reputation remains untarnished,

especially with regard to their integrity in financial operations as well as those of their

business partners. Thus, B would seek the insertion of an indemnification clause (in

the range of 5- 8 million), in case the allegations of fraud are substantiated. If this is

not possible, B would at the very least seek a guarantee of a public statement

absolving them of any role in the fraud.

B are also heavily committed to quality control and thus they are not appreciative ofAs recent inspection of the masts, as they feel this has been disruptive and

unwarranted. They would like to maintain the degree of autonomy in quality control

that was previously enjoyed by them.

BEST ALTERNATIVE TO NEGOTIATED AGREEMENT (BATNA)

In case the parties fail to reach a suitable agreement at the negotiation settlement, the best

alternative for B would be to attempt to secure the prospective deal with MobilesRUs as soon

as possible, so as to diversify operations and increase the available revenue streams which

would help in mitigating the losses incurred by B in the Freedonia operations.

GOALS AND OBJECTIVES

The value of the sub-contract has been stated as being 400 million. Due to the

additional costs incurred, this figure has increased to 454 million. Thus, the initial

estimate of a 40 million profit has been overturned, and B would in fact end up

making a loss of 14 million. Thus, B would be looking for a revised deal for a totalvalue of 454 million, so as to maintain parity with the deal originally agreed to.

The loan taken by B prior to the signing of the sub-contract has seen the applicable

interest rates rise, and has caused a tightening of cash-flow. This has made it difficult

for B to meet the increased costs of the sub-contract that have arisen due to piracy.

Thus, B would be expecting remuneration for the difference in the rates of interest

from A.

Contingent to A receiving a clean chit with regards to the allegations of fraud, Bwould want to maintain their partnership with A, so as to benefit from other such

projects that A would undertake in the future.

B would want to ensure that they are not restrained from entering into agreements

with any other third-party either at present or in the future, unless there are significantfinancial incentives to do so.

sample negotiation plan

Documents