Negotiate Agreements animation

Projects are people-driven and we need project agreements to help ensure the various groups of stakeholders operate successfully.

Projects engage multiple sets of stakeholders; these groups include:

  • Sponsors and executives who envision and commission new products and services, or fund changes to existing ones
  • Team members who help analyze the work, define what is required, then build and deliver the project outcomes
  • Business representative who explain what is required and provide feedback on work products
  • Customers and users of the new or modified products and services who use it
  • Vendors and suppliers who help deliver portions or significant components of the solution
  • Other stakeholders such as advisors, reviewers, subject matter experts and third party contributors


While these stakeholders act as their own communities, projects bring them together as a single ecosystem.


Project Stakeholders

These groups have different motivations and objectives. Getting everyone to operate in a way that produces the desired end goals requires a variety of informal and formal agreements.  The Process domain task “2.11 Plan and Manage Procurement” explains the mechanics of the procurement process. This People domain task: “1.8 Negotiate Project Agreement” deals more with the human dynamics of agreements.

It includes creating agreements around topics such as:

  • How are we going to communicate and collaborate within our own community?
  • How are we going to coordinate with the other groups in the project?


The answers to these questions about collaboration and coordination are through project agreements.

One of the first project agreement documents often created for a project is the Project Charter. The project charter sets out definitions of high-level objectives, who will be involved, and the project’s general approach. For more information about what is included in a project charter and how to create one, see here.

Then, as we define the project, build teams, and come together to kick it off and start work, many other agreements are created. Some are formal, such as statements of work, or definitions of done. Others might be less formal, such as meeting norms, that depend on the project team, the organization and the bounds of the agreement. 

We negotiate to ensure there is a mutual understanding and agreement between parties before starting work. Agreement documents vary in detail and formality, but typically include:

  • A Statement of Work (SOW)
  • A schedule with milestones and dates
  • Team norms
  • Team charter
  • Pricing and payment terms with incentives and penalties
  • Inspection, quality requirements, and acceptance criteria
  • Definition of Ready
  • Definition of Done
  • Contract terms and conditions
  • Change request procedures
  • Performance reporting expectations
  • Go live agreement
  • Termination clauses and dispute resolution
  • Warranty and support agreements, including Service Level Agreements (SLAs)


1.8.1 Analyze the bounds of the negotiations for the agreement

(Examine the possible outcomes and scope of the agreement)

Before getting into any kind of negotiation, it is worth understanding how and when people agree. That way, we can approach the process better prepared and more likely to achieve a positive outcome.

The conference paper Negotiating for Success: Are You Prepared? Provides some useful guidance for understanding and conducting negotiations. These include:


Be patient

Be patient – Develop rapport, carefully answer questions that come up, take time to reach satisfactory agreements.


be positive

Be positive – People want to deal with those they like. A positive attitude builds confidence and credibility. People are more likely to want to come to an agreement with someone they can get along with.


Gather information – Ask probing questions. Find out as much as you can about deadlines, goals, costs etc. When you show a genuine interest in people and are positive, people will be much more willing to share information.



Float trial balloons – Ask questions such as “What if we could provide key features in release 1 and the others later?” These questions make no commitments but explore reactions about options the other party may be willing to consider.



Know your opening offer, but ask theirs – If you estimate the project will take between 4 to 6 months. Ask the customer when they want it, and they may respond in 8 months, in which case you have a cushion.


Bottom Line

Know your bottom line – When negotiating, knowing these limits determines whether you should continue or walk away.


1.8.2 Assess Priorities and Determine Ultimate Objective(s)

(Understand the priorities at play and what is critical right now)

We do not need to make all the agreements upfront. Some agreements, such as service level agreements, might be better made closer to the point of use when we know more about the product or service in question. Likewise, we should agree about team norms and communications early in a project, but maybe warranty and support agreements can come later.

Once we have the timings of the necessary agreements established, we then look to the priorities and objectives of the arrangements themselves. For instance, there are many ways to negotiate agreements on the scope.


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On a traditional project, we might check for conformance to requirement specifications, statements of work, quality reports or inspection statements.


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When using an agile approach, we might look for Product Owner approval and features meeting the Definition of Done.


The above examples focus on project scope, but agreements can be set and priorities negotiated on any project constraint. Some typical project constraints are depicted in the Gold and Silver triangles. The gold triangle shows the classic triple constraint of cost, schedule and scope. The silver triangle reminds us of the secondary, but still critical, constraints of quality, risks and resources.


Project Constraints

We need to assess which constraints are priorities to our sponsors and other important stakeholders. Sometimes the budget is the primary constraint and project priority. Other times it might be schedule, such as having something to demo by the trade show. Other groups might prioritize quality or risk reduction.

Understanding the priorities for various stakeholder groups helps achieve acceptance and agreement that we have met their objectives.


1.8.3 Verify Objective(s) of the Project Agreement is Met

Verify objectives
(Inspect the outcomes and verify the objectives have been met)

As the project progresses, we should ensure project agreements are being met. This relates to the emerging product or service being created or modified and our internal and interim agreements. For instance:

  • Are we following our team agreements about meeting etiquette?
  • Are we communicating issues as well as achievements?
  • Are reviews, inspections and signoffs occurring within the timeframes agreed to?


For the project outcomes and deliverables, there are many ways of verifying the objectives of the project agreements are being met.

  • Phase gate reviews
  • Product demonstrations
  • Acceptance criteria sign-offs

1.8.4 Participate in Agreement Negotiations

Participate in negotiations
(Undertake negotiations)

The agreement lifecycle starts with determining if we need to create and negotiate an agreement at all. Sometimes after examining the issue we might decide not to engage, or to just acquiesce to the other party. Assuming we do engage and want to form an agreement, the next step is understanding the problem further and defining the goals.

Building cooperative relationships helps the agreement process even if it seems win/lose in nature. In any negotiation, we need to understand our best alternative and try to present it positively. We also need to be on the lookout for any negative implications of counteroffers.

We should generate and review alternatives, selecting the best option and capture it in writing or via a photo of a whiteboard for less formal team agreements. It is a good idea to create an action plan for what happens next and what happens if the deal is broken in the future.

Finally, execute on the agreement, nurturing the relationship and checking compliance. The agreement negotiation lifecycle is depicted below:


Negotiation Lifecycle

1.8.5 Determine a Negotiation Strategy

Choose the best strategy for the situation
(Choose the best strategy for the situation)

When it comes to actually negotiating project agreements, having a strategy is critical. Internal and external agreements will likely be very different in their nature.

Trust tends to diminish as distance and stakes increase. As a result, inside our own group, agreements might be informal and verbal, then as we start dealing with other departments, they get documented, and finally, for external parties, we use very formal, legal agreements.


Agreement Formality

External agreements with vendors, suppliers and 3rd parties are typically legal documents signed off by both parties and subject to legal review and strict change control. Some internal agreements might also be quite formal, such as service level agreements that have high impacts. We need to ensure the rigor we employ is suitable for the (worst case) scenario.

Negotiation strategies aim to find a mutually acceptable solution to a shared problem. We can employ one of a few approaches:


Hard (controlling) – Adversarial, assuming that the other party is the enemy and the only way for us to win is if they lose. Negotiation is aggressive and competitive.



Soft (giving in) – Conceding to maintain a good relationship. Here we can get taken advantage of in our effort to please. While the agreement is quickly reached, it is usually a poor one.



Principled – Separate the people from the problem, focus on the interests, not positions and generate options for mutual gain. Then select the best alternatives based on understanding each group’s objectives.


People are repeatedly conditioned to think relationships are win or lose. However, there is a third alternative where nobody loses – a win-win or synergy. It usually takes longer to find, but is worth the effort and leads to more collaboration in the future.

When negotiating agreements, remember to:

  • Develop good working relationships with the people you are negotiating with
  • Listen and understand their interests
  • Explore suggestions to find an elegant option
  • Using external standards and benchmarks for ideas
  • Develop Best Alternative options for discussion
  • Make carefully crafted commitments explaining what you will do, not do.


Using these guidelines, we can create project agreements suitable for the factors under review and fit for purpose in terms of speed, rigor and control.


Deliverables and Tools

  • Support contracts
  • Service Level Agreements
  • Go-Live blackout periods
  • Performance reports
  • Resource calendars
  • Negotiation skills
  • Expert judgment
  • Lessons learned


Related Topics


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