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Contract Negotiation in a Multi‐objective Scenario using the Concept of Dynamic Shared Negotiation‐ Spaces and Soft vs. Hard Affordability Limits

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In today’s business environment, a shift in the competitiveness paradigm “Business that Manufacture” is becoming essential. It covers the whole bandwidth from designing for performance to designing for affordability and finally delivering a cost effective product with added value that the Buyer is willing to pay for. Making the decision as to whether it is most cost effective to procure or to manufacture for reasons of affordability requires analysis of alternatives to achieve a convincing compromised solution that satisfies Seller and Buyer. Historical data verification or tacit experiences of Seller and Buyer tend to be the norm but often decision makers miss the choice of the best possible solution. Decision making for affordability is a critical and a difficult process due to the many known and unknown factors and anticipated associated risks. The wrong choices between alternatives can lead to an unprecedented over run to budgeted costs and therefore a reduced profit to the business.

Given the complexity of the problem that is recognised at the acquisition stage there is a definite appeal for “getting your money’s worth”. In this scenario, the “Satisfycing” concept of Compromise Theory is a useful approach to achieve satisfied value for money for the product that would be capable of the required functionality requested by the Buyer.

Negotiating in the region of the Pareto Front is the anticipated goal of any optimal and objective negotiation. The following paper focuses on optimal objective negotiations for affordability in the region of Pareto Front where the anticipated real affordability limits of the Seller and Buyer can be decisive, taking subjective “soft” real-world aspirations into account. “Soft” affordability limits depend on personal aspiration of the benefit of a negotiated deal thus influencing the outcome of a negotiation significantly. Affordability imposes “hard” objective limits, restricting the range of the negotiation space. However, in reality, in negotiations these hard limits may not be perfectly known. Soft, i.e. subjective limits are used instead. Negotiations test, challenge and influence these soft limits. Negotiations also take place because certain solutions more desirable than others. Changing and reducing the objectives to those relevant to both partners is a natural behaviour during negotiations. The use of a “dynamic shared negotiation space” with shared objectives makes negotiations a lot more effective. Effective negotiations try to find this shared negotiation space and the best compromise solutions within this space while compromising on the contradicting soft limits of each partner.

An easy-to-use technique to find value oriented non-dominated compromise solutions for affordability in a shared negotiation space will be demonstrated by using a scalarisation method based on the TOPSIS technique (Technique for Order Preference by Similarity). The efficiency of this technique will be demonstrated via a real world negotiation case study from the aerospace industry.


Anil Ray
Cost Engineering Consultant – Independent
Anil Ray is at present a Cost Engineering consultant. His working experience spans in the Public sector and Oil Industry as Management Services officer and in the Aerospace Industry as Commercial systems coordinating manager. Over the last thirty fife years of work he has primarily been involved in Costing and Pricing and improving organization methodology in bidding, cost estimating and contract negotiation. During the last three years he was appointed as a Cost Engineering Consultant at Cranfield University, Bedford UK at the department of Decision Engineering Centre.
While employed at the Aerospace Industry, in Belfast he gained his Master Degree (MSc) in Manufacturing technology and Management and there after M.Phil from Queens University, Belfast UK. He is a Charter Engineer (C Eng) and a Member of the Association of Cost Engineers (A Cost E) UK and also a member of International Society of Parametric Association (ISPA).

Jorn Mehnen
Senior Lecturer, Cranfield University
Dr. Mehnen joined Cranfield University in 2007 at the Decision Engineering Centre as a Senior Lecturer. He has a vast background in Computational Intelligence – encompassing Evolutionary Computation (Evolution Strategy (ES), Genetic Programming (GP), and Genetic Algorithms (GA) etc), Neural Networks and Fuzzy Logic as well as modern Meta-Heuristics such as Particle Swarm Optimisation (PSO), Differential Evolution (DE) etc. – and Mathematical Modeling as well as Statistics and their application in engineering applications. Before coming to Cranfield University he worked at Dortmund University, Department of Machining Technology (ISF), Germany, lastly as a Privatdozent. His success in winning the IMRC/EPSRC RUAM project (£2m funding), an EPSRC project on Business Process Mining, a two years industrial project with Rolls-Royce on efficient mathematical modeling of Life Cycle Costing, and several major German SFB grants is a clear demonstration of his outstanding research quality. Dr. Mehnen has published extensively in his research career: 2 authored books on Applied Computational Intelligence, 1 edited book on Applied Soft Computing, 7 book chapters, 21 accepted research papers in refereed journals, 36 refereed conference papers and 12 technical reports. Dr Jörn Mehnen is member of IEEE. He is in the review panels of many well recognised journals such as the IEEE Transactions on Evolutionary Computation, ACM Computing Surveys and Applied Soft Computing Journal from Elsevier.

Paul Shields
Business Consultant, C.I. Consultants Ltd
Paul Shields is a business consultant whose career in the aerospace industry spans over thirty years. After studying mechanical engineering and then management at post-graduate level he has held management positions in various disciplines including cost estimating, commercial and contracts, programme management and customer support.
He is presently a director of C.I. Consultants Ltd, on behalf of which Paul services the aerospace and defence sector in all areas of strategic development, supply chain management, bidding, cost estimating and contract negotiation, including specialist training in each of these areas. C.I.C. has a client base in UK, France, Canada and US.
Paul is a regular guest lecturer in Cost Engineering, Systems Engineering, Cost and Schedule Risk Analysis and Affordability at Cranfield University, England and at Queens University Belfast, Northern Ireland and is also an undergraduate external examiner. He is a member of the Association of Cost Engineers (A Cost E), the Institute of Business Consultants (IBC) and the Independent Consultants and Advisors Group – Northern Ireland (ICAGNI).