Procurement and Contracting Support Branch
Contracting and Legal Division
Commercial Group
Defence Materiel Organisation
Department of Defence
Commonwealth of Australia
Contract Negotiation
Report V1.2
Released 1 July 2012
Defence Scope
This publication should be considered best practice guidance for Defence and DMO staff undertaking
procurement activities.
Note to External Agencies
External agencies intending to use this template will need to tailor it in order to meet their specific
procurement requirements (including relevant internal guidance) and should seek appropriate
professional guidance as required.
Disclaimer
The information in this publication is provided by Defence and DMO for the purpose of disseminating
procurement guidance to its staff. While every effort has been made to ensure the guidance in this
publication is accurate and up-to-date, any user should exercise independent skill and judgment
before relying on it. Further, this publication is not a substitute for independent professional advice
and users external to Defence and DMO should obtain appropriate advice relevant to their particular
circumstances.
Defence and DMO does not make any representation or warranty about the accuracy, reliability,
currency or completeness of any material contained in this publication and nothing in this publication
should be considered a representation by the Commonwealth. In publishing this information, Defence
and DMO does not warrant that the information will be used in any particular procurement process.
Defence and DMO is not liable for any loss resulting from any action taken or reliance made on any
information or material in this publication (including, without limitation, third party information).
Copyright
Commonwealth of Australia 2011
With the exception of the Commonwealth Coat of Arms, this publication is provided under a Creative
Commons Attribution 3.0 Australia licence.
The details of the relevant licence conditions are available on the Creative Commons website
(accessible using the links provided) as is the full legal code for the CC BY 3.0 AU licence.
This publication should be attributed as Department of Defence Contract Negotiation Report V1.1.
Use of the Coat of Arms
The terms under which the Coat of Arms can be used are detailed on the It’s an Honour website.
Feedback
All feedback on this publication and suggestions for improvement should be sent to:
Procurement.instructions@defence.gov.au
Amendment Record
Version
Release Date
Closure Date
Description of
Amendments
106729826
PROCESS TEMPLATE
Contract Negotiation Report
General Information For Users
Use Of The Contract Negotiation Report Process Template
1.
This Contract Negotiation Report (CNR) process template has been developed for Complex
Procurements. The template will require tailoring to suite the complexity of the acquisition.
This template may not be suitable for Strategic Acquisitions which may require more
comprehensive documentation.
2.
At the conclusion of negotiations a Contract Negotiation Report must be completed for all
Complex Procurements. Drafters should refer to the Defence Procurement Policy Manual
(DPPM), and DMO users must also refer to relevant Defence Materiel Instructions (DMIs)
including DMI(PROC) 13-0-001.
3.
The CNR process template has not been designed for situations where the Commonwealth
enters into parallel negotiations with more than one tenderer and a comprehensive report is
required. In such instances, a summary of negotiation outcomes with all tenderers should be
provided to the delegate in the same CNR.
4.
All paragraphs can be tailored to suit the requirements of the acquisition, CORE and
OPTIONAL paragraphs have not been used in this template.
5.
Text utilising examples has been included where appropriate to further guide the types of
information that should be contained in various sections of the template. The example text
uses a different formatting style; the text is shaded grey and bordered to differentiate it from
the rest of the process template and bullet points are used to ensure that the automatic
numbering of paragraphs is not adversely affected. The examples are merely suggestions
and not definitive prescriptions of what might be contained in each of the sections.
6.
All ‘Notes to drafters’ and ‘Examples’ must be removed before the completed document is
provided to the delegate for signature. The section entitled ‘General Information for Users’
should also be deleted.
Formatting in the Template
7.
Within the template sections of text may be contained in table boxes. When modifying the
template, if drafters wish to retain the text they should first cut the text out of the box (using
Ctrl x), paste it into the document (Ctrl v) and then delete the box. If the text formatting is
lost, simply highlight the text and then select the relevant formatting style from the ‘Styles
and Formatting’ drop down menu on the Microsoft Word tool bar.
Contracting Services
8.
Where assistance with drafting a Contract Negotiation Report is required, contact your
relevant contracting specialist. For DMO personnel please refer to DMI(PROC) 13-0-001.
COMMERCIAL-IN-CONFIDENCE
106729826
[…INSERT GROUP OR DIVISION…]
[…INSERT UNIT…]
[INSERT...Correspondence Reference Number]
[INSERT...File Reference Number]
Note to drafters: Position descriptions should be used for all addressees. Insert relevant
delegate and addresses as appropriate.
[…INSERT AS REQUIRED…]
(Location)
[…INSERT SECTION 44 DELEGATE...] (Location)
(for endorsement etc…)
(for signature)
CONTRACT NEGOTIATION REPORT FOR […INSERT RFT NUMBER AND DESCRIPTION…]
References:
Note to drafters: Include any relevant references and authorisation documentation.
Contract Negotiation Directive (CND), signed […INSERT DATE…];
[…INSERT ADDITIONAL REFERENCES AS APPLICABLE…]
A.
B.
To:
[…INSERT TITLE OF SECTION 44 DELEGATE…]
Purpose
1.
This Contract Negotiation Report (CNR) details the outcomes of contract negotiations with
the authorised representative of […INSERT PREFERRED TENDERER…] for […INSERT
DESCRIPTION OF SUPPLIES…].
2.
This document is prepared in accordance with the requirements of the Contract Negotiation
Directive (CND) at reference A, which is to prepare a report:
a.
showing the position reached;
b.
highlighting any significant differences with the draft contracts, pre-negotiation
expectations or relevant aspects of the CND; and
c.
recommending further actions deemed necessary to conclude satisfactory contractual
arrangements.
Process
3.
Contract negotiations were conducted in accordance with the CND. Face-to-face
negotiations took place over the following dates at […INSERT LOCATION…]:
a.
Session 1: […INSERT DETAILS…]
b.
[…ETC…]
Participation
4.
The Commonwealth negotiation team, as authorised in the CND (para 4), was:
c.
Lead negotiator and authorised representative – […INSERT NAME AND TITLE…]
(present at all sessions)
COMMERCIAL-IN-CONFIDENCE
1
COMMERCIAL-IN-CONFIDENCE
5.
106729826
d.
Technical Adviser Team Leader – […INSERT NAME AND TITLE OR DELETE IF
NOT ASSIGNED…] (present at all sessions)
e.
Contracting Adviser Team Leader – […INSERT NAME AND TITLE OR DELETE IF
NOT ASSIGNED …] (present at all sessions)
f.
Legal Adviser Team Leader – […INSERT NAME AND TITLE OR DELETE IF NOT
ASSIGNED …] (present at all sessions)
g.
[…ETC…] […INSERT SESSIONS ATTENDED…]
h.
Secretariat – […INSERT NAME AND TITLE…] (present at all sessions)
The […INSERT PREFERRED TENDERER…] negotiation team comprised:
a.
Lead negotiator & authorised representative – […INSERT NAME AND TITLE…]
(present at all sessions)
b.
[…ETC…] […INSERT SESSIONS ATTENDED…]
c.
[…ETC…] […INSERT SESSIONS ATTENDED…]
Referral of Negotiation Issues to the Delegate
6.
Consultation with the Section 44 Delegate on issues outside the scope of the CND
[…INSERT “was” OR “was not”…] required. The delegate provided the following guidance:
[…DELETE LAST SENTENCE IF NOT APPLICABLE…]
Offers of Employment
7.
To the best of my knowledge, there were no offers of employment made to any
Commonwealth team members. […IF OFFERS OF EMPLOYMENT WERE MADE
PROVIDE DETAILS AND DELETE THE PREVIOUS SENTENCE…]
Conduct
8.
There were no actual or potential conflicts of interest apparent or brought to my attention. To
the best of my knowledge, there were no offers of hospitality or gifts to the Commonwealth
negotiation team members. […IF CONDUCT ISSUES AROSE PROVIDE DETAILS AND
DELETE THE PREVIOUS SENTENCE…]
Objective
9.
The objective of negotiations was to formally agree to finalise and recommend for signature,
a draft contract between the Commonwealth and […INSERT PREFERRED TENDERER…]
for the acquisition of […INSERT DESCRIPTION OF SUPPLIES…].
10.
This objective was achieved by the conclusion of face-to-face negotiations on […INSERT
DATE…].
Limitation of Authority
11.
The Commonwealth lead negotiator adhered to the limitation of authority requirements of the
CND.
Security & Confidentiality
12.
Normal Departmental security provisions were observed.
NEGOTIATION OUTCOMES
Position reached
13.
The position reached on each of the negotiations issues is presented below.
Issues flagged as ‘Significant’ in the CND
14.
A summary of negotiation outcomes for those issues identified as ‘Significant’ in the CND is
now presented, mapped to each of the subject groupings listed in the CND.
COMMERCIAL-IN-CONFIDENCE
2
COMMERCIAL-IN-CONFIDENCE
15.
106729826
Further information on each of the negotiated changes is provided in a Contract Negotiation
Report Matrix at Annex A.
The “Savings Target” and “Profit” examples below may be applicable to sole source tender
processes and other tender processes where cost investigation or negotiation on price takes
place. For further information on cost investigation refer to the Conditions of Tender specific to
the procurement, DPPM Chapter 3.3, and for further information on negotiating on price refer to
DPPM Chapter 5.7.
a.
Pricing Issues
Example:

Savings target: The lead negotiator was able to achieve a price reduction of […INSERT
PRICE REDUCTION…] equating to a […INSERT PERCENTAGE…] saving. The revised
contract price is […INSERT PRICE…] The price reduction was achieved due to both parties
agreeing to use reduced cost estimates for labour in the price build-up. Refer to Annex A
Reference 3.

Profit: The lead negotiator was not able to achieve a reduction in the tendered profit
margin. During negotiations the tenderer demonstrated to the negotiation team how the
profit margin has been applied in the revised contract price. FIS have reviewed the revised
contract price and have advised that the profit margin is […INSERT PERCENTAGE…]
which falls within the range suitable for a project of this complexity. Refer to Annex A
Reference 4.

Price Adjustment: The negotiation teams agreed on the use of the […INSERT PRICE
BASE INDEX…] published by […INSERT SUITABLE AUTHORITY…] which is considered
suitable by FIS for the work being conducted under the proposed Contract. Refer to Annex
A Reference 5.

Price Increases: The negotiation team agreed to an increase in price due to […INSERT
REASONS eg. technical scope change, commercial risk profile change…]. The negotiation
team has reviewed the Source Evaluation Report (SER) […INSERT SER REFERENCE…]
and confirms that the negotiated offer still represents value for money compared to other
tenders that were evaluated.
b.

Technical Issues
Specification: Clause 1.3.4 has been modified to the effect that the sensors must be
operable in a temperature range between -15 and 55 degrees Celsius rather than the RFT
requirement of -10 to 60 degrees. Advice has been obtained from the Chief Engineer and
the end-user representative that this change is suitable and does not have any adverse
implications for the end-user. Refer to Annex A Reference 7.
c.
Contracting/Legal Issues

Intellectual Property: The tenderer has agreed to use the RFT clause which allows
sublicensing. Amendments to the IP Plan place restrictions on the Commonwealth using the
Contractor’s Background IP to manufacture the Supplies. The draft IP Plan has been
reviewed by Contracting Services, and input has been sought from the end-user
representative. The limitations placed on manufacture are appropriately drafted and have
been evaluated as appropriate from an end-user perspective. Refer to Annex A Reference
1.

Limitation of Liability: In accordance with the Liability Risk Management Process both the
[…INSERT PREFERRED TENDERER…] and the Commonwealth have conducted Liability
Risk Assessments to determine reasonable liability caps. Although the tendered caps for
each liability head were lower than the figures approved in the Commonwealth Liability Risk
COMMERCIAL-IN-CONFIDENCE
3
COMMERCIAL-IN-CONFIDENCE
106729826
Assessment, the negotiation teams agreed to recommend the following liability caps for
each head of liability: […INSERT LIABILITY CAPS…]. Refer to Annex A Reference 2.

Attachment M (Glossary) Definitions. The tenderer agreed that the standard definitions
will be used. The changes required by the […INSERT PREFERRED TENDERER…] were
addressed by more accurately describing the required limitations on the Commonwealth’s
right to manufacture the Supplies. Refer to Annex A Reference 6.
d.
[…INSERT OTHER CATEGORIES AS REQUIRED…]
Other changes to the draft contract
16.
In addition to the issues identified above, the following outcomes (not addressed in the CND)
were negotiated:
[…INSERT DETAILS AS REQUIRED OR DELETE PARAGRAPH IF NOT
REQUIRED…]
a.
Example:

The GFM list was reviewed during negotiations and rationalised. The changes have resulted
in an overall reduction of GFM and update of model numbers for specific items.

The delivery locations were re-ordered in accordance with a request from the
Commonwealth. The […INSERT PREFERRED TENDERER…] was able to agree to
modified delivery locations without a cost increase. The change of delivery locations does
not affect the overall schedule and has been made to respond to a request from the enduser.
FUNDING
Note to drafters: This section allows the delegate to consider the achieved negotiation position
in comparison to the funding identified in the Regulation 9 Approval. This section may only
require a brief statement identifying the available funding, and a reference to other
documentation identifying the source of the funding. Alternatively, for more complex
submissions it may be necessary to identify whether there has been conditional Regulation 9
Approval, whether contingency funds may be required, or if more complex funding
arrangements exist.
17.
[…INSERT DETAILS AS REQUIRED…]
SUMMARY
18.
The Commonwealth negotiation team achieved at least the minimum fallback position for
each of the issues set out in the CND, except for:
a.
19.
[…INSERT DETAILS OF ANY EXCEPTIONS OR DELETE “except for” AND
SUBPARAGRAPH A …]
In addition to those issues identified in the CND, the Commonwealth team negotiated some
changes to the contractual documents that will improve the Commonwealth’s position; most
notably:
a.
[…INSERT ANY IMPROVEMENTS TO COMMONWEALTH POSITION OR DELETE
PARAGRAPH 19 AND SUBPARAGRAPH …]
Recommendation
20.
Based upon the outcomes of negotiations, I recommend the following course of action:
a.
Final proof read of draft contract by […INSERT PREFERRED TENDERER…] and
COMMERCIAL-IN-CONFIDENCE
4
COMMERCIAL-IN-CONFIDENCE
106729826
the Commonwealth and correction of any errors identified and assemble final contract
for signature.
b.
Seek from […SECTION 44 DELEGATE…] endorsement for the full value of the
proposed contract.
c.
[…INSERT ANY OTHER REQUIRED STEPS REQUIRING APPROVAL …]
Note to drafters: DMO Personnel refer to DMI(PROC) 13-0-001 for further information on steps
required prior to Contract execution.
21.
I seek your endorsement of this Contract Negotiation Report and authorisation to proceed as
recommended.
[…INSERT ADDRESS BLOCK OF LEAD NEGOTIATOR…]
[…INSERT DATE…]
Endorsement
I endorse this Contract Negotiation Report acknowledging
a.
the variations from the CND as noted at paragraph […INSERT PARAGRAPH…]
above. […DELETE IF NOT REQUIRED…];
b.
the outcomes negotiated for those issues not covered by the CND and specified at
paragraph […INSERT PARAGRAPH…] onwards; […DELETE IF NOT REQUIRED…]
and
I authorise you to proceed as recommended at paragraph […INSERT PARAGRAPH…]
Signed
………………..
………………………..
(Signature)
(Printed Name)
Annexes:
A.
B.
………………….
(Appointment)
….………………
(Date)
Negotiation Report Matrix
[…INSERT OTHERS AS REQUIRED SUCH AS “Limitation of liability risk assessment”
ETC...]
COMMERCIAL-IN-CONFIDENCE
5